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.
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.
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.
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.
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.
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.
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.
Corporate insolvencies are up globally, with many countries seeing a >30% increase.
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.
Aviva Will is Co-Chief Operating Officer with overall responsibility for Burford’s global marketing, origination and underwriting activities, and a member of Burford's Management and Commitments Committees.
David Perla is Co-Chief Operating Officer with overall responsibility for Burford’s global marketing, origination and underwriting activities and is a member of the Management Committee.