2023 Legal finance research highlights
In 2023, we commissioned three independent research reports, all of them drawing on the perspectives of GCs and senior in-house lawyers responsible for commercial litigation and arbitration. With the year now in our rearview mirror, we share below key insights from the reports—insights that will continue to impact the business of law in 2024.
With the world economy facing a period of sustained uncertainty, the economics of litigation remain a concern for many businesses. Based on interviews with 66 GCs, heads of litigation and other senior lawyers responsible for litigation at companies in the US, Europe, Asia and Australia, the research revealed that clients expect litigation to increase in the years ahead and are increasingly seeking cost- and risk-sharing solutions from their partners.
- Nearly three in four (74%) senior in-house lawyers expect to see an increase in the volume of disputes over the next two years because of the current geopolitical, economic and regulatory environment.
- In-house lawyers agree that the economy is exacerbating the challenges businesses face in paying for litigation and arbitration.
- As economic pressures increase, GCs expect their law firms to offer more cost- and risk-sharing solutions—62% of senior in-house lawyers expect their law firms to offer more creative pricing solutions, such as alternative fees.
- Legal finance is cited as an important part of the decision-making process when considering potential disputes. As the corporate counsel of a global retail company stated: “I have explored the use of legal finance and would do so again. The liquidity aspect is a big needle-mover for many companies, especially because it could provoke a settlement earlier, bring in money earlier and de-risks litigation.”
How are GCs and other senior in-house lawyers optimizing the value of pending claims, judgments and unenforced awards without adding cost to their legal budgets? Based on a survey of 350 GCs, head of litigation and senior in-house lawyers in the US, Europe, Asia, Australia and the Middle East, the research probed best practices.
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Although 44% of senior in-house lawyers say they are likely to implement cost-saving measures to mitigate economic impacts, in-house lawyers seem to favor cost-shifting over cost-cutting.
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Vanishingly few senior in-house lawyers (2%) say they recovered 100% of the value of their judgments and awards over the last five years and a clear majority (61%) say that their opponents voluntarily pay their outstanding judgments and awards less than 50% of the time.
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Against this background, cost- and risk-sharing are increasingly important: 61% of senior in-house lawyers say that uncertain or challenging conditions would impact their likeliness to consider legal finance solutions.
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Aside from relevant legal expertise, the top attributes in-house lawyers seek in outside counsel are efficiency and speed (89%), the ability to provide accurate budgets (87%) and familiarity with legal finance (69%).
The businesses that hire law firms to represent them in significant litigation and arbitration matters have an important role to play in advancing diversity in the legal profession. Interviews with 66 GCs, heads of litigation and other senior lawyers responsible for litigation at global companies shed light on how senior in-house lawyers are exercising their considerable influence in this area.
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GCs expect diversity from external counsel, but do not consistently apply these expectations to the composition of their litigation and arbitration teams, with fewer than half (44%) saying they apply formal requirements for diversity to the law firm teams that represent them in court.
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Many in-house lawyers feel more diverse litigation teams gave them an advantage in court, especially for matters before a jury. As one General Counsel of a technology company said: “It is straight survival in court to have talented, diverse lawyers representing you in a leadership role. You can lose jurors if your diverse team members are simply in supporting roles.”
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A commonly cited hurdle is that senior in-house lawyers are comfortable with existing relationships and are reluctant to work with unfamiliar counsel, which is perceived to add risk. Nearly half (47%) cite their lack of relationships with diverse outside counsel in their networks as an obstacle to appointing more diverse litigation teams.
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Over three quarters (76%) of senior in-house lawyers say they would benefit from being exposed to recommended female and racially diverse litigation and arbitration lawyers from a trusted source, such as a law firm, in-house counsel organization or another partner.
