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Guide to Litigation Funding

Litigation Funding Investment

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Litigation Funding Market Overview

INTRODUCTION

Litigation funding is the financing of legal cases by third parties in return for a defined share of the proceeds (costs and damages). In this way legal claims can be regarded as a financial asset just like stocks, bond, property or commodities but with their own unique risk/ return profile.

Litigation funding offers investors the opportunity to diversify their portfolio by participating in a new asset class that is not correlated with traditional market instruments such as equities, bonds, property or commodities.

BRIEF HISTORY

Traditionally, litigation funding has been viewed as opaque under the law in many jurisdictions. In England the concepts of maintenance, champerty, and barratry – in essence third party financing of legal claims, were made illegal from medieval times to prevent them being exploited by the wealthy to fund frivolous claims against their adversaries.

However, in the past 30 years, litigation funding has started to gain widespread acceptance around the world with countries such as Australia, the US and UK, the leaders in this regard.

UK & US Markets for Litigation Funding

The addressable markets in the UK and US are large and still relatively under-penetrated. In the UK, the litigation funding market has quadrupled in size since 2013 with over 1bn of capital estimated as currently available to litigation finance and at least 12 players competing across different market segments.