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The State of Legal Finance in 2020
Given the shifting economy and related uncertainty in the legal community, my research may help leaders with their strategy and decision-making. From Aug. 14, 2019 through Sept. 11, 2019, I had the privilege of personally interviewing 32 lawyers from Finland, France, Hong Kong, Norway, Singapore, the UK and the U.S. about the evolution of legal finance. 16 worked in-house and 16 were senior attorneys in law firms. A year before, in August of 2018, I interviewed 20 in-house lawyers at Fortune 500 companies and 18 law firm lawyers from Australia, the Cayman Islands, France, Germany, Hong Kong, Italy, Singapore, Sweden, the UK, and the U.S. about emerging trends in legal finance. Below are some of my findings and what they indicate about the current state of the sector.
Use of Legal Finance is Increasing
In 2018, 32% of the respondents reported using legal finance, but in 2019, that number rose to 41%. "We have used it on behalf of clients for many years," advised a law firm leader. "I used it in a prior role at a prior company," added an in-house lawyer.
Of those who have not, a number reported that they are exploring its use for future matters. "We are looking to establish relationships with funders, but we have not sought funding for the firm itself," said one lawyer at a firm. "We are currently exploring the use of legal finance for a potentially appropriate matter in Singapore since our colleagues in the U.S. have leveraged it for an insolvency matter and others in Europe are considering a portfolio arrangement," added a peer. "We are not opposed to it, we just need to find the right opportunity," noted a third.
A Majority Think the Use of Legal Finance is Growing
Regardless of their own experience, most lawyers think others are using it: 56% said legal finance is growing. "It is particularly growing in Singapore in the context of international arbitration and is already successful in Australia," said one participant. "It certainly is growing in the UK and Europe," added a peer. Others agreed with the general view, but could not confirm. "I haven't seen evidence that it is growing, but it is definitely being discussed."
The Potential Users of Legal Finance Vary
The lawyers I interviewed are most likely to believe that the users of legal finance are underfunded companies, mid-to-small-sized plaintiffs' counsel and liquidators in bankruptcy matters. "Clients who may be reticent to litigate or arbitrate because they worry that they lack the funds to do so" may benefit from this type of financing, noted one law firm participant. "Those that have very good cases, but don't pursue them as a result of prospective funding or they knock their law firm's fees down so much that they cannot bring a properly prepared case," may also be candidates, the lawyer added.
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