Although the use of legal finance has increased by 105% between 2017 and 2020, according to the 2020 Legal Finance Report, there remains a significant knowledge gap between companies that have used legal finance and those that have not.
It’s not surprising that use of legal finance leads to understanding and support. Companies that lack experience with legal finance may fear that it is “harder” than sticking to the status quo—but in 2022, many legal teams cannot afford the status quo. In fact, legal finance is arguably not only easier to secure and use than those without experience might think—it also has substantial advantages that specifically benefit corporate legal departments.
How does legal finance remove litigation costs?
The most obvious way in which legal finance eases the pressures faced by the legal team is by removing the burden of litigation expense and risk. Burford’s financing arrangements are non-recourse, meaning that we assume the downside risk for pending litigations. This is achieved either through fees and expenses funding (where we cover the cost to pursue a matter), monetizations (where we advance a portion of an expected award, cash that the company retains regardless of the outcome). Financing can be provided either on a single case basis or through a portfolio of cases.
- Portfolio finance: Portfolio-based capital facilities are particularly efficient since matters are gathered in a single funding vehicle. For companies with multiple claims, portfolio-based capital facilities relieve the considerable burdens placed on in-house counsel who must otherwise evaluate competing proposals from law firms or legal finance providers for every new case. Further, these portfolios can include both affirmative recoveries as well as defense matters.
- Financed recovery programs: Legal finance can also be particularly helpful in the context of recovery programs, which are growing in importance given the emphasis on finding value in every corner of the corporation. According to Burford's 2022 Affirmative Recovery Programs Report, 2 out of 3 GCs interviewed say their companies have an affirmative recovery program. Legal finance offers a solution to companies that wish to achieve the value-generation of recovery programs without adding cost. A legal finance provider like Burford is an expert in valuing legal risk, helping legal departments seamlessly transition from cost centers to value generators.
How do companies secure legal finance?
The process of securing legal finance is straightforward. Companies should seek out a legal finance provider with institutional-quality processes and the ability to conduct the entirety of the diligence and investment process in-house, as this accelerates the process. The financier will first ask the client to sign an NDA that protects both counterparties. Burford has evaluated thousands of matters over the past 10+ years and has laid out simple steps companies can take to prepare and secure legal finance.
How can legal finance help prioritize litigation matters?
Although the legal team may be prompted to pursue financing because of one high-value claim, they should leverage the expertise of their legal finance partner to gain insight into those meritorious matters most likely to yield the most benefit for the company most quickly. Burford routinely provides companies with strategic plans to prioritize and pursue their valuable meritorious matters—thereby offsetting the legal department’s costs.
How does legal finance add value after the initial investment?
Burford is a passive capital provider. Therefore, our financing does not alter the client’s control of litigation or settlement.* However, clients may nonetheless benefit from our expertise after an investment is made, as we devote significant resources to monitoring that investment to help maximize value for our clients.
We can provide legal teams with additional resources, including monitoring of legal spend and reviewing court documents and briefs. Some of our counterparties prefer the minimum engagement required by our agreements while others actively seek out and benefit from more involved assistance.
The bottom line: Legal finance isn’t hard if you’re working with a partner equipped to relieve companies of administrative challenges by providing expertise in managing litigation budgets and prioritizing legal assets within the corporate portfolio. With our scale, team and track record, Burford has the experience and expertise to help those new to legal finance understand the process and ultimately, reduce the administrative burden of diligence and merit review from companies.
This article was originally published on Burford’s website on 24 Feb 2021 and was updated on 14 Sept 2022.
* Except in limited circumstances unrelated to law firm financing, and only when agreed to in advance by the underlying client.