Exton Advisors provide in-house perspective on litigation funding

Exton Advisors have partnered with Crafty Counsel to conduct research on how UK legal departments manage disputes and their understanding and use of litigation funding. Exton Advisors were keen to uncover, without making assumptions, what the real perception is of utilising litigation funding to pay for their disputes and the extent to which litigation is managed strategically in contrast to a purely reactive exercise.

They have published their report, which presents a comprehensive summary of the following topics:

  • the approach taken by in-house teams to dispute management including how litigation features in their priorities, current best practices to manage litigation and how litigation funding is utilised;

  • how legal teams would like their external partners to support them; and

  • the tools required to create a litigation strategy, including an explanation of litigation funding products and a step-by-step guide to securing funding.

We asked Exton Advisors about the results of their research. Their answers are below.

How is value defined by legal teams?

  • Value has rarely translated to the ability of the legal department to actively drive profit to the business. In fact, only a small minority of legal teams have revenue targets. The vast majority do not track commercial metrics, such as revenue or profitability targets regarding their disputes. It is apparent that legal departments do not perceive commercial opportunities that a commercial claim may present. Value is still very much about risk management and protecting business interests.

To what extent are legal teams thinking about litigation as an asset?

  • When asked the question directly more than three quarters of legal teams do not consider a commercial claim to be a company asset.

  • The key reason for this amounts to a lack of knowledge and understanding of the opportunities presented by litigation funding: legal teams do not understand the different funding products and how they can be utilised and as a consequence lack the tools with which to convince the CFO or other stakeholders of the value.

  • The use of litigation funding in the UK by legal teams is a largely unexploited opportunity.

What is the perception and knowledge of litigation funding amongst in-house counsel?

  • The broad perception of litigation funding is negative and in particular there is a strong perception that funders will take control of the cases in which they invest and that having a case funded would suggest that the business is struggling and in need of funds.

  • The majority of legal teams were unclear on what the criteria is for obtaining funding and how they could present a claim as an investment opportunity.

  • Interestingly, the greatest barrier to pursuing funding options is company culture and internal politics. There are many competing interests to consider, especially in larger businesses, making the decision to utilise funding less straightforward.

How do law firms fit into the picture?

  • Claimants are keen for their lawyers to be more strategic by suggesting potential claims that they can pursue in their industry. They would like to rely on their legal advisors to take a more commercial approach to engaging with them.

  • A significant majority of legal departments would like their law firms to discuss different possible fee structures with them and to talk them through the available funding options.

  • Only half of legal teams were aware of the way in which a Damages Bases Agreement operates and were still in the main working on a standard hourly rate model.