What’s the fallout from “watershed event in litigation funding industry”?

28th Dec 2016

Kevin LaCroix of the D&O Diary highlights the significance of Burford’s acquisition of Gerchen Keller and explores the concerns surrounding the third party litigation funding industry’s growth in a recent article.

LaCroix notes that the impressive returns on investment by sophisticated players in the industry, such as Burford, could lead to the entry of new players in the industry with less capital and capacity to perform thorough due diligence. Fewer resources could result in funding claims that are not as well-grounded, as demonstrated in a case earlier this year.

Additionally, LaCroix points out that the availability of third party litigation funding can lead to more litigation. In both Canada and Australia, “the growth of class action securities litigation followed on the growth of litigation funding in those countries”.

Furthermore, LaCroix explores disclosure of funding, the age old principles of champerty and maintenance, and the liability funders faces if the cases they financed do not go as planned.

To address these concerns, the U.S. Chamber Institute for Legal Reform recently released critical research that examines the ethical and practical concerns that are emerging from the significant expansion of third party litigation funding in the UK, and underscores the need for government oversight of the practice.