The Future of Litigation Funding
Hong Kong recently acknowledged that litigation funding should be made lawful in arbitration. That, to the writer, depicts that dispute resolution centres across the globe are now becoming alive to the significance of financing to their industries.’ According to the latest survey of 500 litigators, more than 40% have first-hand experience accessing litigation funding. Financiers are also playing a growing role in assisting class actions, as demonstrated by Bentham Europe’s announcement in 2017 that it is financing a shareholder action against Volkswagen in Germany, over the emissions controversy.
Also in Germany, financier Burford has struck a €30 million deal with claimant firm Hausfeld, renowned for its class actions work, to finance German competition claims through an office in Berlin. In the United Kingdom, the new ‘opt-out’ regime for competition claims is expected to lead to more financed claims in this area. It should be mentioned that Burford’s deal with Hausfeld exemplifies a new development in commercial litigation funding, with a cluster of funders now investing in a portfolio of cases, rather than just individual claims.
As the market changes so does the risk profile of the funders and how they assess cases on a singular or scheme basis. Many are adopting a more sophisticated approach in their examination of potential claims pools with some adopting technological advancements to assist in their assessment. In recent times clients who approach third-party funders are often aware of specific funders who have shown interest in their type of claim and the basic structure of their offering. Whereas a few years ago, a general understanding of the existence of financing as a concept, and perhaps the names of a few big players, was considered the norm. The sharing of information, resources and knowledge is advancing this marketplace which has long term benefits for all concerned.
The Future is Analytics
Admittedly, data analytics is a novelty in the field of commercial litigation funding. However, big data and artificial intelligence (AI) are already in use in several legal arenas. Legal analytics start-ups like Judicata and Ravel Law are making sense of the colossal legal record for historic cases, and with Bloomberg Law’s release of Litigation Analytics in 2016, legal analytics is now mainstream. Through these legal analytics engines, solicitors, funders, insurers and claimants can now obtain a case’s probability of winning a specific motion or determine an opposing counsel’s likely approach in the legal strategy.
The leading legal analytics engines have the capacity to collect and analyse millions of court cases. Today, these analytics are in use to assist in the underwrite of cases from a litigation funding perspective. The algorithm effectively compares the fundamentals of each new financing application against the millions of records in its archive and provides an assessment on its likelihood of success. Whilst AI & data analytics at this time cannot adequately factor in human interaction it is enabling law firms and funders to assign cases a quantitative risk score, instead of just a set of qualitative impressions.
The management and processing of regular legal tasks using Artificial Intelligence and advanced CRM solutions is only expected to gather more momentum as time progresses. From contract management to e-discovery, the automation of functions and processes once discharged by specialists is slowly but surely becoming the norm. For litigation funding, AI is expected to combine human intelligence and analytics to completely automate the tasks of underwriting and diligence in the coming years. These are ground breaking advancements in the litigation funding sector and with time will only lead to more technological breakthroughs.