To mark the start of 2024—a year when Burford will celebrate our 15th anniversary—we share the key trends that we’re talking about with clients at FTSE 350 companies and leading law firms in Asia and around the world.
A perennial issue for GCs and CFOs is the difficulty to plan with certainty the cash flows tied to litigation, driving more to portfolio-based financing.
Legal teams can use portfolio-based financing, where multiple proactive litigations as well as defence matters are financed in a single capital facility, to create predictability across the litigation budget.
When budget certainty is at a premium, Burford can work with businesses to create a risk-sharing structure that leverages recoveries to offset uneven or unpredictable costs around proactive claims and defence matters.
Additionally, legal finance can be used to accelerate or “monetise” a portion of one or multiple pending claims, judgments or awards, effectively increasing certainty and (because finance is non-recourse) de-risking matters.
Lastly, the convergence of legal finance and insurance products such as judgment preservation insurance can transform risk profiles for high-stakes commercial disputes, and we see growing appetite from heads of litigation and especially CFOs in exploring the complementary use of legal finance and JPI.
In our experience, as businesses get accustomed to the benefits of funding high value commercial matters, they often take further steps to extend these benefits still further.
In 2023, a Fortune 500 company that had already worked with Burford sought further funding to extend the commercial impact of the legal department in line with the business’s need—with legal and finance leaders working together.
This is exemplary of the benefits of building and financing a proactive litigation program, at a time when research shows proactive litigation programs are an increasingly common phenomenon for businesses.
Although businesses almost always begin with funding a single high value case, we see more interest from GCs and CFOs in the benefits of financing their broader proactive and defensive matters in toto.
In the face of continuing economic uncertainty, GCs want outside counsel’s help with legal cost and risk management.
Recent research shows that 62% of senior in-house lawyers expect their law firms to offer more cost-and risk-sharing solutions, most want their law firms to be more creative with pricing and many are frustrated by the billable hour.
Over half of GCs say it’s important for law firms to be ready to advise them about legal finance solutions.
Embracing legal finance is thus inevitable for firms—whether to finance the expansion of their own risk-based practices or as a simpler means of providing clients the alternative fee solutions they so clearly want.
The high cost of debt in January 2024 means that CFOs are looking for non-debt solutions to their capital needs, including legal finance.
Some businesses took on a lot of debt when rates were low—and now face the challenge of raising more capital while servicing existing debt in a climate of stubbornly high interest rates and with banks tightening their terms for commercial lending.
CFOs are increasingly considering legal finance as a non-debt financing solution that leverages their businesses’ litigations and arbitrations. Banks and other traditional capital lenders aren’t equipped to value these assets, but Burford routinely works with CFOs to unlock their often significant value.
Legal finance capital is not debt and doesn’t come with debt covenants. It’s non-recourse capital, and thus a CFO can expect to repay any money advanced only after achieving a win in the underlying litigation. CFOs appreciate that we don’t get paid until they do.
AI was the unavoidable buzzword of 2023, but its relevance to litigation and arbitration in 2024 and beyond requires hard-to-find data—data that Burford has.
Data analytics is the missing link needed for AI to do anything more than streamline mundane tasks like parsing documents and generating first drafts for routinised content.
About 90% of disputes settle, making data about the terms and economics of final resolution confidential to all but the parties involved as litigants, insurers or legal finance providers.
Burford has almost 15 years of economic data about the costs and outcomes of high value commercial disputes—data that’s incredibly valuable to clients in prioritising their most high value matters and predicting budgets and recoveries.
As we predicted and as confirmed by the 2024 Citi-Hildebrandt Client Advisory, law firms that prioritised high demand practices did well in 2023—and finance has a role to play.
The countercyclical nature of disputes means there will be no shortage of commercial claims—indeed recent research confirms that 74% of senior in-house lawyers expect to see an increase in the volume of disputes over the next two years.
More and more law firms are now expanding their risk-based, plaintiff-side litigation practices, including large, brand-name, traditionally defence-oriented firms.
Legal finance can help law firms grow out their litigation practices through capital facilities tied to a pool of existing or future matters.
Companies (including very large name brands) are increasingly monetising their patents through a range of structures from holding companies that operate at an arm’s length relationship to full divestiture.
This process requires substantial capital and expertise, and choosing the appropriate financial strategy is a crucial step, regardless of whether a company chooses to enforce its patents directly or partially or fully divest them.
Burford has helped name brand companies develop and fund their patent monetisation strategies; legal finance mitigates the risk associated with both direct enforcement through litigation and various divestiture options.
With the EU’s Digital Markets Act now fully in force, digital “gatekeepers” must begin complying or face fines of up to 10% of annual global sales.
We expect a further increase in meritorious claims to be brought against Big Tech via follow-on claims from companies impacted in the marketplace.
The 2024 US presidential election could upend federal enforcement priorities; erosion of federal administrative power, divergent laws and antitrust enforcement priorities among different states adds potential complexity for business.
We see more and more businesses choosing to monetise claims in antitrust and competition litigation, thereby converting a portion of a pending claim into cash and freeing up capital that companies can use for growth or for other business purposes.
We expect a significant increase in arbitrations in various sectors, relating for example to nationalisation of lithium projects in Latin American jurisdictions, market volatility around oil, gas and liquefied natural gas prices, and the $1.7 trillion of investment in energy, mining and construction connected to the global energy transition.
With the inevitable rise in disputes relating to these issues, businesses are increasingly leveraging monetisation financing arrangements to advance capital against the future value of pending arbitration claims.
Arbitration finance has truly become part of the fabric of international commercial arbitration and investor–state arbitration; in 2023, GAR tracked over 200 funded arbitrations.
Following years of inflation, supply chain disruption, a pullback on commercial lending and the cumulative impacts of the Covid-19 pandemic, the long-predicted wave of insolvencies arrived in 2023 and will carry on in 2024.
Alongside this trend, we see increased demand for funding so that liquidity constrained creditors and insolvency practitioners can pursue claims held by insolvent estates, which can represent a critical source of recovery for creditors.
We have increasingly helped trustees generate cash through the monetisation of a claim or, alternatively, helped those with a basket of claims and counterclaims against the estate or against debtors or equity holders of the estate to fund legal fees on both proactive and defensive claims.
In 2024, we expect it to become increasingly evident that very large companies are using legal finance at scale—leading to further bifurcation in the marketplace.
Sophisticated companies and law firms increasingly turn to large and established legal finance partners that have the scale and stature to provide service at the same level as those large businesses’ other institutional-quality partners.
Already, in-house lawyers are most likely to cite reputation and experience as the most important factors in choosing a legal finance partner.
Burford has shown year after year that we are operating at an institutional-quality level, and we have earned our status as the best-known brand in the space.
Hong Kong
Emily Tillett
