Our research into litigation markets around the world has identified a range of factors that are driving increasing levels of litigation across a variety of jurisdictions. In China and the UAE, for example, practitioners comment that businesses and parties are “suffering from a liquidity problem”, with the UAE particularly affected by the drop in oil prices.
Our research into litigation markets around the world has identified a range of factors that are driving increasing levels of litigation across a variety of jurisdictions. In China and the UAE, for example, practitioners comment that businesses and parties are “suffering from a liquidity problem”, with the UAE in particular affected by the drop in oil prices.
Sources confirm that this is making it more difficult for parties to meet their obligations due to cash-flow issues, and is giving rise to a growing number of disputes. In Europe and the US, lawyers report that “banking and finance litigation has become stronger since the 2008 financial crisis” and continues to offer “big-ticket, complex work acting for hedge funds, private equity, corporates and financial institutions”. Furthermore, it is clear that in these traditional western markets “regulatory litigation is here to stay and it is growing”, with sources adding: “We see this as a growth area in litigation.”
Following in the wake of litigation’s rise is the growth of third-party funding, once a little-known funding mechanism for court action. Third-party funding now verges on entering the mainstream of the legal and business realms. Practitioners in Asia report “more activity with regards to third-party funders”, while according to those in the UAE, “Litigation funding is also making an appearance in the market.” The rise of third-party funders is particularly prevalent in the west, with American sources imparting the insight that there is an “increasing role being played by third-party funding in litigation, especially in investment funding cases”.
Third-party funders have been buoyed by the strong demand for litigation services, and are rapidly evolving into larger and more formal operations, with market leader Burford Capital being listed with the LSE AIM for over a decade, and is now considering listing on the NASDAQ or NYSE. However, as demonstrated by Muddy Waters’ incendiary investment report on Burford Capital, third-party funders remain complex businesses operating in an equally complex market – making it difficult to analyse performance, given the esoteric nature of litigation proceedings and the difficulty of valuing funder assets.
Perhaps the clearest conclusion to come from the public fallout between short investors and Burford Capital is that third-party funders have now matured into prominent businesses in the litigation market – Burford made $225 million profit after tax, up 36 per cent from last year – and they require oversight from regulators such as the Financial Conduct Authority. This seems increasingly necessary given that third-party funding, alongside procedural and regulatory changes, seems to be encouraging class actions in the UK, where class actions are now becoming ever more viable.