An alternative investment class: Where returns meet access to justice
Legal finance (third party litigation funding, TPLF) AS asset class
Arrangement where an outside party finances some or all of a plaintiff’s legal costs in return for a share of the proceeds from the case resolution
(Source: Swiss Re, Litigation Finance expected to play increasingly important role, Insights Publication, Zurich, Switzerland)
Example of a Legal Finance process (Litigation Funding) – Simplified view without insurance
To enlarge you can click with your mouse on the graph
Deal flow of various established Legal Financing types with law firms:
- No volatility and no correlation with traditional markets
- Manager: Selection, Software (LegalTech), Settlement
- Law firms: Acknowledged, established and regulated (SRA)
- Investor: More expected return, with Social Impact (Videos)
- Plaintiff: Expected precondition alternative insurance (ATE)
Video: What is ATE-Insurance? (Priala Law Firm, Brisbane Coast, Australia)
Video: Was ist Litigation Funding? (Osborne Clarke Law Firm, London, seit 1748)
History of Legal Finance as alternative to legaL AID - "David & Goliath"
Allows lawsuits to be decided on their merits, and not based on which party has deeper pockets or stronger appetite for protracted litigation
(Quote Eileen Bransten, retired justice of the New York Supreme Court, since 1691)
In 1999 with The “Access to Justice” Act in mainly England and Wales as the intention was originally to offer alternatives to traditional litigation funding, which had been before just conditionally Legal Aid:
- Chap. 22, Para. 3: „..replaces the legal aid system with 2 new schemes
and makes private methods provision of funding litigation..“ - Chap. 22, Para. 32: „The Act reforms the law relating to conditional fees
and “after the event” legal expenses insurance..“
Ref: Access to Justice Act, A. Funding of Legal Services (Parts III, sections 1-34)
Thus following this huge game change in the legal landscape the Litigation Funding industry was born and started to grow to a multi-billion asset class mainly at UK, USA, Canada, and Australia.
with Legal Finance as asset class Investing like Harvard University (since 1636)
Cases known from the media involving Legal Finance include among others the VW diesel scandal from Germany, the virtual online casinos in Europe, the Wirecard equity scandal on the German stock exchange, Credit Suisse AT1 bond in Switzerland, dam collapses of mining companies in Latin America, Africa or Asia or like oil pollution at the sea. In both, litigation finance and litigation funding, there are numerous combination options and variants for the individual needs of the plaintiffs, law firms and investors. These include increasingly foundations, pension funds, insurances, banks, Family Offices, asset managers or as the Harvard University with the Harvard Law School. Various legal areas, settlements predominate with up to over 95%. An investment universe of the potential settlements or the judgments worth worldwide estimated hundreds of billions per year enables selected fine alternative investments.