‘It’s always a fight’ – US and UK funders on a busy year battling Davids, Goliaths and regulation

After a turbulent 2023 that at times saw the future of the funding industry called into question things are looking up for litigation funders. There may still be uncertainty but the easing of the post-Covid courts gridlock and an increase in litigation means there’s now a sense of optimism going into 2025.

But while it may be a better time to be a litigation funder, rapid growth brings growing pains. And, with the litigation funding market still developing, funders face issues around regulation, shifting perceptions, and ever-increasing costs.

US hostility

As an industry that increasingly finds itself facing the court of public opinion, there are naturally questions about how the litigation funding sector can and should be regulated.

In the US, ‘there’s always a push to regulate the industry’, says Matthew Harrison, managing director and CIO of Omni Bridgeway – and ‘it’s always a fight’. However, the push isn’t actively coming from the regulators so much as what Harrison refers to as ‘detractors of the industry’.

Neil Purslow, CIO, co-founder and director of Therium, cites corporates as key culprits: ‘it’s not formal regulation, it’s just a hostile approach to the industry from US corporates that want to prevent funding’.

But US funders have so far managed to stay on top in this particular battle, with pushes to regulate having little impact. As Dai Wai Chin Feman, managing director at Parabellum, points out: ‘there is a lot of noise but there is always noise’ around regulation, yet the regulatory landscape still looks much the same. ‘It doesn’t change the underlying business’, argues Feman.

 

‘Everybody really has put their heads down to assess their own portfolio, consider any risks and then just got on with the usual business of litigation funding.’
Ellora MacPherson, Harbour Litigation Funding

Harrison agrees that conversations around regulation look unlikely to gain much traction: ‘litigation funding is such a good solution that I can’t imagine it’s going to be impacted in any material way,’ he says.

UK hopes

While US funders are keen to fight against more regulation, funders in the UK are actively seeking policy change. Or at least confirmation that it’s coming.

The UK Supreme Court’s 2023 PACCAR decision effectively rendered many litigation funding agreements (LFAs) unenforceable, ruling that they are in fact damages-based agreements (DBAs). Following the ruling, it was expected that the Litigation Funding Agreements (Enforceability) Bill, which would mitigate against the impact of PACCAR and protect funding, would be included in the legislative programme contained in the King’s Speech in July 2024. But not only was the Bill missing from the list of 40 mentioned, the Government has also since announced that it plans to delay any concrete decisions around legislation until summer 2025, pending the Civil Justice Council’s review into litigation funding.

‘The Government will take a more comprehensive view of any legislation to address issues in the round once that review is concluded’, stated Justice Minister Lord Ponsonby in a written response to a question in Parliament in August 2023.

UK funders aren’t happy. Purslow cites the delay as ‘unnecessary’ and ‘undesirable’, while Oliver Hayes, a partner at Balance Legal Capital, points out that the lack of clarity around the PACCAR ruling ‘could be quite painful for funders’.

The 2023 decision left funders scrambling to renegotiate existing agreements, with Purslow arguing that without measures to mitigate against it the PACCAR ruling ‘could make the UK less attractive as a place for funders’.

He stresses that the solution is readily available – enacting the previous Conservative government’s Litigation Funding Bill. ‘There was a fix available and it could and should be done,’ says Purslow.

Despite the uncertainty under Labour, most funders remain positive that the change will happen. Hayes says he is ‘hopeful that the government provides a fix which clarifies the position and resolves the questionable challenges being run by defendants around the legality of funding agreements’.

Access to justice

According to Purslow, the PACCAR ruling ‘wasn’t an issue about regulation at all – it was just a decision that reflected the poor drafting of the DBA regulations.’

Instead, he argues that the discussion around regulation, in both the UK and the US, should be framed by the question of access to justice, which Purslow argues is one of the purposes of funding.

There does need to be a balance, however with Feman pointing out that funders ‘have duties first and foremost to our investors,’ making restrictions to the way funders run as businesses unappealing.

‘Legal budgets get more expensive each year.’
Oliver Hayes, Balance Legal Capital

Purslow himself is quick to add that ‘funders are not legal aid funds’. He maintains that regulation needs to be approached ‘in a way that enables litigation funders to invest and generate the return that they need. Our purpose is to deliver access to justice, and this is how we are able to do that.’

After all, funders are ‘using money for a purpose, but the money isn’t free’, he says.

Davids vs Goliaths

His point is backed by the fact that funding isn’t just about helping relatively small litigants. More and more bigger corporates are seeking access to litigation funding, something both UK and US funders seem keen to encourage.

‘Initially people thought the smaller ‘David versus Goliath’ propositions were what litigation funding solved, but nowadays many CFOs, GCs, and big firms understand that litigation finance is a very valuable risk and cost mitigation tool,’ says Harrison.

‘There are still plenty of David vs Goliath cases to invest in’, according to Feman, but the industry is also interested in funding the Goliaths. It’s ‘rewarding to be able to help companies – even if they are well-resourced’, Harrison maintains.

And with bigger corporates and law firms entering the space, the perception of litigation funding is shifting. According to David Perla, Vice Chair in Burford’s New York office, it is becoming ‘much more accepted as a common cost of doing business; as corporate finance for law’.

The problem corporates big and small are facing both in the UK and US is simply the cost of litigation. ‘Legal budgets get more expensive each year’, according to Hayes. Harrison adds: ‘when interest rates go up, that makes the cost of capital higher and so the cost of funding also goes up’.

What’s left, says Perla, is ‘this unique dynamic where litigation is widely accepted: everyone understands they’re going to litigate, but no one has eased the budget’.

Looking forward

Despite the uncertainty and rising costs, funders on both sides of the Atlantic have remained busy.

In the UK, the market bounced back relatively quickly from the PACCAR ruling. Gian Kull, UK regional portfolio manager and senior investment manager at Omni Bridgeway, says that the sector ‘adjusted to PACCAR through pricing: the now exclusively multiples-based pricing steadied itself and became firmer and, in many cases, increased.’

Ayse Yazir, global head of origination at Bench Walk Advisors, seconds this, maintaining that the decision ‘didn’t affect the practice of litigation funding – funders just changed their pricing’.

Ellora MacPherson, managing director and CIO at Harbour Litigation Funding, adds that ‘everybody really has put their heads down to assess their own portfolio, consider any risks and then just got on with the usual business of litigation funding’.

In both the UK and the US, courts are back in full swing. According to Mike Redman, managing director at Burford, the global litigation market has now fully emerged from the ‘gridlock in the court system’ post-COVID. Perla emphasises that ‘capital is now being deployed in earnest both from older and new cases’ across jurisdictions.

‘Funders are not legal aid funds.’
Neil Purslow, Therium

UK vs US

With business booming, funders are expanding and diversifying their portfolios, although the UK perhaps has a little catching up to do.

Litigation funding in the US has much more emphasis on credit and portfolio-based funding, ‘and you just don’t see that to the same degree in the UK’, says Purlow.

It may be slightly behind, but this is also becoming more prevalent in the UK. ‘We are seeing an increased interest in credit finance facilities with law firms’, says Mark King, head of asset management at Harbour.

The number of secondary market transactions also continues to grow. Funders are increasingly looking to sell their portfolios, often to focus on larger investments. Feman highlights the rise of secondary market transactions: ‘it’s slow but there is progress in the development of a secondary market’.

But with the trend leaning towards larger transactions, someone has to fund smaller claims. Feman points out that this particular trend ‘means there’s a gap in the market for smaller disputes’.

And there are sectors in both the US and the UK that churn out huge numbers of disputes. In the UK, activity is being driven by competition cases. Meanwhile, the US continues to see a strong focus on the intellectual property (IP) sector. As Purslow concludes: ‘you can’t ignore the flow of money that’s gone into that area’.

isabel.caine@legal500.com

The UK Funders:

Tier 1:

Bench Walk Advisors

Bench Walk Advisors’ global portfolio spans an impressive range of disputes. The team notes a steady increase in competition cases and class actions, boasting a strong background funding cases against large, global corporations. The company continues to diversify its offering, with the provision of transactional funding to non-contentious teams and law firms. It also provides seed funding to new law firms and legal services businesses, in addition to offering facilities to service providers outside the legal industry. Managing director Adrian Chopin has an extensive track record in commercial litigation. Based in London, Ayse Yazir is global head of origination, and her funding expertise encompasses international and commercial arbitration, insolvency and class actions, as well as defence funding. Hasan Tahsin Azizagaoglu’s experience spans various jurisdictions and includes international arbitration, commercial litigation and class actions.

Harbour Litigation Funding

Operating at the forefront of the market, Harbour Litigation Funding has a successful track record in both single case and portfolio funding, and in facilities and law firm financing. With a particular focus on the UK, US, Canada, Australia and Hong Kong, the company funds both litigation and arbitration on an international basis. Cases of note include a CAT claim against Apple and a competition class action in the CAT against BT. As part of its alternative financing solutions, the company provides credit facilities to law firms. It also demonstrates prowess in claim and award acquisition and insuring litigation costs. Managing director and CIO Ellora MacPherson spearheads the company’s investment work, alongside co-founder Susan Dunn. Mark King is head of asset management, and Stephen O’Dowd, Oliver Way and Maurice MacSweeney are other names to note.

Omni Bridgeway

Explosive growth in 2023 saw Omni Bridgeway’s UK team more than double in size, bolstering its capabilities across the spectrum of disputes. Gian Kull joined as senior investment manager and regional portfolio manager for the UK, alongside investment managers Simon Latham, Sean McGuiness, Andrew Roberts and Michael Taggart. Hannah van Roessel, Mark Wells, Alistair Croft and Camilla Godman are other names to note. The team enjoys an impressive record in funding arbitration, and a strong group actions practice that spans Europe. Its prolific enforcement team also sees the company handle a high volume of insolvency work, with a notable increase in activity in offshore jurisdictions. It is also well-placed to offer innovative funding arrangements, including a merits-plus-enforcement funding solution and a distressed asset recovery program.

Therium

Therium remains active in high-profile cases, including the Post Office scandal and the interchange fee litigation against Visa and Mastercard. The team demonstrates particular prowess in securities litigation and investor loss group claims. It handles competition claims, as well as consumer group litigation. International arbitration is another prolific area, along with enforcement and corporate portfolio funding. The company offers an advanced range of funding arrangements, from the funding of corporate portfolios to secondary transactions and law firm financing. John Byrne is co-founder and CEO alongside CIO, co-founder and director Neil Purslow, whose funding experience includes litigation and arbitration across various jurisdictions. Fred Bowman acts as senior investment manager, while Ben Smyth is head of secondary investment. Chris Wilkins is another name to note.

Tier 2:

Balance Legal Capital

Specialising in the funding of single cases, Balance Legal Capital excels in commercial disputes and class actions. The team boasts particular jurisdictional expertise in the UK and Australia. Managing partner and co-founder Robert Rothkopf focuses on funding insolvency matters, professional negligence, fraud cases and group actions. Simon Burnett spearheads the company’s work in Australasia, while Oliver Hayes handles funding matters across a wide range of claims in the UK. Other key investment managers include Kylie Ansbro, who focuses on Australia, Jeremy Humm, who specialises in fraud and professional negligence, and Lindsay Woods, an expert in securities litigation and group actions. Lord David Gold, Ian Terry and Donny Surtani are other names to note.

Burford

Its global reach sees Burford finance multi-jurisdictional matters in the UK and internationally, led by Michael Redman. The company is prominent in mass claims and anti-competitive claims, financing cases across Europe, particularly in Germany, the Netherlands and France. It also has a strong track record in contract, fraud, fiduciary duty, and business torts securities cases, on both a single case and portfolio basis. Business-to-business disputes are a particular area of expertise, as well as competition claims, international arbitration, and restructuring and insolvency matters. The company’s extensive offering extends to asset recovery and judgment enforcement, and insurance and risk management arrangements. Other key contacts include Craig Arnott, Philipp Leibfried and Jörn Eschment.

Woodsford

A leading funder in securities group actions, Woodsford is involved in litigation in the UK High Court, as well as Scotland and Europe; its portfolio spans English, Dutch, Japanese, Swiss and Australian securities actions. The company is also active in the international arbitration space, funding arbitrations seated in the UK, US, Europe and Africa. Opt-out class actions in the CAT are another prolific area. CEO Steven Friel spearheads the company’s branch into ESG actions, along with CIO Charlie Morris. Jonathan Barnes is COO and general counsel, while Mark Spiteri is also active in ESG-focused securities action, as finance and commercial director. Australian-qualified lawyer Hugh Tait acts as senior investment office.

Tier 3:

Asertis

Four pillars make up the core of Asertis’ funding practice: commercial disputes, group actions, enforcement, and insolvency. The company acquired Keller Postman UK in January 2024, now KP Law Limited, which has further expanded its group litigation portfolio, a particular area of expertise for CIO Harshiv Thakerer. Roger Dugan spearheads the company’s insolvency work, an area in which Philip Holden is also an expert. Founder and CEO Ian Madej is another key contact, and Chris Jones, David Brandwood and Ruth Kellet are names to note.

Litigation Capital Management

With offices in Australia, London and Singapore, its broad jurisdictional and sector focus sees Litigation Capital Management (LCM) provide funding on both a single-case and portfolio basis. Key areas of focus include class actions, commercial claims, arbitration and insolvency.

The US Funders:

Tier 1:

Burford

Prominent in the IP and patent sectors, Burford boasts a pre-eminent IP team; led by Katharine Wolanyk, the group funds the acquisition of patent portfolios, in addition to litigation in the sector. The company excels in the financing of high-value, complex disputes, including antitrust and competition claims, and bankruptcy and insolvency matters. Other active areas include contract, fraud, fiduciary duty, business torts and securities disputes. It also has an active asset recovery team, with clients ranging from law firms and multinational companies to sovereigns and government agencies. CEO Christopher Bogart is a co-founder alongside Jonathan Molot, who oversees the company’s global investment portfolio as CIO. Aviva Will and David Perla are the company’s former co-COOs, with Will promoted to President and Perla taking on the role of Vice Chair as of September 2024. Emily Slater is managing director and Eric Carlson is another name to note.

Omni Bridgeway

Omni Bridgeway provides both traditional and alternative funding arrangements across the full range of disputes. With Sarah Tsou as IP portfolio manager, the company’s IP service continues to go from strength-to-strength; the team boasts a global portfolio of IP investments and transactions, including a recent secondary market transaction with GLS Capital. In addition to its active international arbitration, antitrust and enforcement practices, the team notes a recent increase in work in the mass torts space. Jim Bateson left the company in April 2024, leaving Matt Harrison as sole managing partner and CIO. Senior investment managers Ken Epstein and Fiona Chaney, who also heads the LA office, are names to note. Lauren Alexander, Amy Geise, Jason Levine and Maryanne Woo are other key contacts.

Parabellum Capital

Parabellum is a market leader in portfolio investments, including the construction of both claimant and law firm portfolios. The company boasts a balanced single case and portfolio funding practice and remains at the forefront of class action funding, as well as insurance coverage and secondary markets transactions. Although it has a strong US focus, the company also funds both litigation and arbitration across the globe, including in offshore jurisdictions. Co-founder and CEO Howard Shams brings extensive legal experience to the team. Aaron Katz is co-founder and CIO and boasts litigation experience at both trial and appellate level. Dai Wai Chin Feman spearheads the company’s commercial litigation investment work, while Yvonne Lee, who joined in 2023, leads on IP matters. Sean Thompson, Angela Ni and Will Weisman are other names to note, along with Claudia Linares and Susie Kim.

Tier 2

Bench Walk Advisors

Secondary market transactions have been a recent area of focus for Bench Walk Advisors, placing it at the forefront of development within the industry. The company offers a diverse range of financing arrangements, including law firm and portfolio funding and defence funding. Arbitration is another particular area of expertise for the team, which provides facilities for mass arbitration funding. Co-founder and managing director Stuart Grant enjoys a leading reputation in the industry and brings to the team extensive experience in corporate governance matters and securities litigation. Nick Sage, vice president, is another key team member in the US and excels in internal due diligence and the negotiation of funding arrangements.

Therium

Therium’s US practice focuses on the funding of single cases, spanning competition class actions, bankruptcy and arbitration. Investor-state claims are another prolific area. The company’s expertise encompasses various sectors, from employment to IP to healthcare. In addition to single case funding, it also has experience in fund-to-fund investment and portfolio finance. Co-founder, CIO and director Neil Purslow demonstrates prowess in litigation-related portfolio funding and debt and equity financings. Joshua Card is a key contact in the US, bringing to the team broad expertise in pre-litigation disputes, internal investigations and white-collar criminal matters. Corey Banks is another name to note, and his strong background in the dispute resolution sector spans the full range of commercial disputes.

Tier 3:

Delta Capital

Funding cases across North America and on an international scale, Delta’s broad portfolio encompasses a range of commercial claims, arbitration, group actions and enforcement. In addition to law firms, the team’s clientele includes businesses, insolvency estates, investment funds and government agencies. CEO Christopher DeLise is also co-CIO alongside Peter Cornell. Jonathan Sablone oversees the company’s litigation portfolio, while CFO Jason Searfoss and David Temporal are key contacts, alongside Drew Kelly.

Statera Capital

Launched in 2018, Statera focuses its funding capabilities on the financing of single cases. The team handles the full range of commercial claims, as well as international arbitration, enforcement and bankruptcy cases. Andrew Woltman is managing director, alongside Chip Hodgkins. Director Matthew Blumenstein also serves as the company’s deputy general counsel. Stewart Ackerly is another name to note.

Firms to Watch:

Erso

Since its launch in 2021, Erso Capital funds disputes across the UK, US and Europe. It demonstrates particular expertise in the IP, technology and life sciences sectors, and excels in the financing of small and medium commercial disputes. James Delaney and James Blick are key contacts.