It’s been over 20 years since a law was passed allowing litigation funding. While many are still ambivalent about this form of funding, citing recent industry scandals and anxieties about becoming a more litigious society, each year thousands of claimants secure compensation for their losses, thanks largely to this route.

So how did litigation funding come to be such a part of everyday law?

Talk to any claimant in the 1980s and they will speak in dark tones about how difficult getting representation for certain cases used to be.

It was a different time. Just getting an audience with law firms was no simple matter, if you didn’t have the right sort of connections or social background. Wigs were routinely worn for non-criminal trials and the law didn’t feel accessible for most people, certainly not an environment in which you might bring an action against your superiors.

If getting your case started was difficult, then finding the money to pursue it was near impossible. Whilst the value of damages awarded was rising, so were the costs of seeking redress. Many litigants needed to find multi-millions of pounds to be able to take a case anywhere.

Over in the US, though, capital was easier to source and here a growth in litigation through the 80s and 90s saw an increase in civil cases, which could and did, win funding. In the UK, however, a number of essentially medieval laws meant your chances pre 2000 of obtaining finance were remote.

At the core of English law are prohibitions on someone who doesn’t have a direct interest in your case from supporting it. The terms for this are champerty, livery and maintenance, and they all stem from a feudal law aimed at preserving the purity of a case.

In its medieval conception, you were prohibited from giving your feudal lord a proportion of your land’s produce in return for him arguing your case. The premise wasn’t dissimilar, in the modern idiom, of ambulance chasing only applied to unscrupulous members of the nobility. That royal officials, for example could lend their names to bolster the credibility of fraudulent claims gain a share of the winnings, and that would destabilize the feudal society they lived in.

But when the 2009 Jackson reform of civil litigation advocated litigation funding, all that was largely consigned to the history books and a new era was brought in.

More than money

When litigation funding first came onto the scene, the legal profession regarded it with deep suspicion. Susan Dunn of Harbour recalls regular rebuffs from leading law firms and one barrister, who now works with many funders today exclaiming “but what about the poor defendants?”

In those early years, funding really was just about the money. It was used by claimants that had no other option open to them but to use the capital of a funder. Most law firms were reluctant to use funders, and indeed most funders were just financiers with little interaction with, or understanding of, a law firm beyond paying the bills.

Within a few years though, it became clear for law firms and claimants that funders had to be more than just money people. They were going to be put in front of a solicitor’s trusted clients to discuss law, and they had to understand the nuances of the legal processes that were going to unfold.

As Richard Leedham of Mischon de Reya puts it, “In many instances, this person needs a close working relationship with you and your client. They need to be able to quickly get to grips with the legal issues, have good commercial instincts, and remain a professional counterparty for everyone throughout the case, which also means staying calm when the case has its inevitable ups and downs.”

The cost gap

For some time now, the funds required to pursue a claim, and the payouts awarded in the courts have continued to climb to levels well beyond the means of the ordinary citizen, or even the ordinary corporation.

With the rise of the price tag of going to law, it’s never been more important to have a long hard think about what such an action means and whether the benefits outweigh the costs and risks.

“The process of litigation finance, especially in the beginning is one of much reflection and probing. You would never just jump into financing an action, it’s important to follow an established process to assess a case. This is a big value add in a world where costs and rewards have never been higher.” Says Ellora MacPherson, Harbour Litigation.

But increasingly, large companies now regularly use litigation funding for a number of reasons that have nothing to do with just money; or indeed anything to do with being the small guy”, MacPherson adds.

For one thing, a company can have several different cases that it would like to pursue but the sheer bandwidth of time and attention they require might be too much to bear for the typical General Counsel.

Take a tech company that is regularly suffering patent infringements which it either could choose to let pass or alternatively call out as foul play. Such a predicament is very common for such players, who often have a low appetite, but a high need, for protecting their patents. The legal brains needed to resolve this are precise and exacting with a large amount of technical expertise required too.

In these circumstances the peripheral support that litigation funding often brings can be vital. It removes shareholder grumblings about lack of focus or intent. In short, like any well outsourced piece of work it helps a company concentrate on its core business.

There are numerous other scenarios where you find a cash rich company looking toward a litigation finance company for support. Each of these has meant that litigation funding has had to evolve from its traditional role.

In one celebrated case, a large investment consultancy found itself having to take on one of its longest serving supplier banks. There was certainly no shortage of finance, but there wasn’t much appetite for a court case or the risk of incurring adverse costs if their action failed. There was, however, a sense that to fail to act was to let down its stakeholders.

In this instance the company had to be seen to be doing something. And, when it did, it was confronted with a slightly nerve-wracking situation. Many of its regular legal advisors would have to decline the case on the grounds of conflict of interest. Effectively the investment company had to recruit a whole slew of expert lawyers from a boutique law firm it had no previous experience of dealing with, and take on what was undoubtedly a goliath of its industry that it would want to continue to do business with in the future.

“No easy task and one that would require quite a lot of hand holding.” says Stephen O’Dowd at Harbour. “But anyone involved could see it was an important task and one that perhaps shows that getting the right level of support is nine tenths of success”

As litigation funding matures, it will have to serve and support those seeking redress in ever more complex forms.

The next twenty years are clearly going to see more change and more innovation.

For an industry that has only recently ditched wigs and an 18^th century dress code, these could be very welcome indeed.