With companies working to shore up earnings prior to the end of Q2, we at Burford find ourselves answering a common question from corporates with outstanding commercial litigation judgments and international arbitrations awards: Can legal finance expedite our recovery? The short answer is yes—through a financial tool known as monetization.
The timing problem of awards and judgments, and how monetizations solve it
Companies often fight long and hard to get to a positive judgment or award in commercial litgations and arbitrations. But those judgments are only as valuable as the paper they’re written on if the other party doesn’t pay up—and that happens more than one would think. 59% of respondents to Burford’s 2018 Litigation Finance Survey report having uncollected recoveries/unenforced judgments of $10 million or more. Those that require enforcement can take years to collect and cost many millions more than a party has already spent getting to a positive judgment.
Companies are doubly harmed by these delays. First, the initial wrong a claimant suffered has yet to be rectified. Second, the claimant is forced to continue to spend money pursuing enforcement—money that is diverted from the business, leading to yet more lost opportunities. It may take several years for this company to make itself whole after suffering initial damages—an unacceptable outcome from both accounting and business perspectives.
Monetizations solve the “timing problem” by providing immediate liquidity to companies with judgments or awards. Burford can provide non-recourse capital to the judgment or award holder in a successful litigation or arbitration, in exchange for some portion of the final recovery. Because Burford’s capital is non-recourse, it is repaid only in the event of a successful ultimate outcome. Monetizations are always bespoke to the needs of the client, and thus clients may choose to monetize a portion or the entirety of an award or judgment—they may even choose to monetize an ongoing claim.
The benefits of monetizing arbitration awards
Monetizing an award or judgment is an easy, risk-free way for a company to realize that asset’s value without needless delay. Here are a few obvious benefits:
- Outside capital from a monetization allows the claimant to invest in its business, even as it waits to recover its award or enforce its judgment.
- Outside capital from a monetization mitigates risk. More specifically, companies can reduce their exposure to the risk of challenges to awards or judgments, whether in the form of a reduction of damages or a reversal or set aside of a judgment.
- Monetizations are cheaper than traditional legal finance. When companies seek to monetize outstanding awards or judgments, the risk tends to be lower, meaning that Burford seeks a smaller return on its capital than in conventional, single-case legal finance arrangements.
Burford is the leader in providing such solutions. We have more available capital than any of our competitors (see chart below), and our investment team of 55 lawyers—the largest of any legal finance provider—conducts all diligence in house, giving us unmatched speed.
In dispute resolution, timing is everything—monetizations eliminate the problem of timing, so that companies accelerate recoveries, leveraging risk-free capital to bolster cash and invest in their businesses. With the end of June fast approaching, companies don’t have time to wait—with monetizations, they don’t have to.