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Legal finance, the unwritten story

  • Christopher Bogart

Legal finance is an increasingly hot topic. A quick Google search is instructive: The number of stories written about it in 2017 nearly equaled the number written between 2009 and 2016, Burford’s first seven years of operation. Even more telling, the number of stories published in just the first month of 2018 approaches nearly half the number written in the entire prior calendar year.

Even with all that’s been written, there’s arguably a story about legal finance that still hasn’t been adequately addressed. It’s what I would call “the demand story.”

Here’s a data point that speaks volumes: In 2017, Burford committed $1.3 billion to commercial litigation and arbitration around the world. That’s three times the amount of capital we committed in the prior year.

In any business, it’s a big story when demand triples in one year. Yet in legal finance, attention still tends to emphasize the supply of capital rather than demand for it. Story after story emphasizes the amount of money available from companies like Burford and all the new entrants to the space, rather than the value of that capital to corporations and law firms—value that’s clearly seen by the litigators and legal teams that are putting Burford’s $1.3 billion to use.

There are three obvious reasons this matters.

First, law firms need to be aware of the competitive reality: Even if they are not yet using legal finance, their competitors are. They are winning new clients with it, and educating existing ones about it. Telling the demand story makes this clear.

Second, clients and law firms need to have a realistic understanding of the marketplace, which boasts an increasingly diverse and nuanced range of partners, products and pricing. Burford acts more like an investment bank for law, offering expertise as well as capital and matching solution and pricing to our counterparties’ unique needs. Dwelling on the availability of cash and painting all providers with a broad brush limits lawyers’ understanding of their options.

Third, and perhaps most obviously, lawyers and clients need to be clear that capital providers are not under pressure to lower their investment standards. This obviously matters to investors in the space—but it should matter as much to law firms and litigants seeking confidence that their finance partners are built on a stable foundation and able to commit for the long cycles necessitated by commercial litigation and arbitration.

Finally, it would be disingenuous for me to neglect to say that I’m eager for the demand story to be written as a commentary on Burford’s own success. I am fiercely proud of our extraordinary team, and 2017 provides still more evidence of their success in serving our clients and counterparties.