Specialist Legal Finance Expertise
Optimising opportunities and solutions for business and investment
RiverFleet is a business consultancy company, specialising in the global Legal Finance market.
We are a highly experienced team, with specialist litigation, finance and structuring, and investment and portfolio management expertise.
Partnering with internal and external advisors, we provide expert perspectives, strategic advice, risk management and transaction management support, specialising in helping clients achieve their goals in respect of optimal legal finance solutions that are attractive business and investment opportunities.
Our Legal Finance repertoire
What is Legal Finance?
Legal finance (also known as litigation finance or third-party litigation funding) provides financial resources to parties involved in legal disputes in exchange for a share of the potential resolution proceeds.
It is also the mechanism enabling parties to litigation to use the prospect of recovery as a contingent asset to raise capital.
The legal finance market offers financial opportunities and solutions:
- for litigants to use the prospect of recovery as a litigation asset to access capital (whether to fund the legal costs or for other working capital purposes), and to mitigate the risks of litigation through risk sharing
- for law firms with alternative fee arrangements to use the prospect of contingency (success) fees as a litigation asset to access capital for cash flow and business expansion purposes, and to manage risk and profitability
- for investors and litigation finance funds to pursue financial returns through alternative investments in litigation assets
The market offers a diverse range of bespoke and innovative funding models, including single-case funding, portfolio financing, law firm financing, and hybrid structures combining equity and debt components.
Why RiverFleet?
Leveraging years of experience in:
- Litigation
- Finance and transaction structuring
- Investment and portfolio management
Along with strong relationships with law firms and capital sources, our core skillsets of case analysis of the merits of claims, transaction structuring, and portfolio management and risk analysis, are tailormade for clients seeking legal finance opportunities and solutions, across multiple jurisdictions.
Our services range from bespoke matters to complex transactions and projects.
What sets us apart?
These attributes should be a prerequisite for clients seeking optimal legal finance opportunities and solutions in a fast growing innovation based industry.
Legal Finance
FAQs
The legal finance market continues to have a pivotal role in providing access to justice and altering the power balance for claimants with meritorious claims who without funding would not otherwise be able to compete and meet the legal costs.
However, the market is rapidly evolving from single case “third-party litigation funding” for one off litigants into the use of bespoke legal finance solutions for a broader client base, including multinational corporations, law firms and insolvency practitioners with portfolios of multiple claims.
Legal finance is no longer perceived primarily as a means to fund legal costs. It is used by businesses as an important tool and financial solution to:
- Mitigate the risks of litigation through risk sharing
- Mitigate the detrimental effect of lengthy claims on cash flow
- Increase the capital available for other business purposes
- Remove legal fees as an operating expense from the balance sheet and improve net income and earnings metrics.
Traditionally, funding has been provided primarily on a non-recourse basis where returns are contingent upon a successful recovery, tending to carry more risk for funders but the potential for higher returns. Increasingly, funding is also provided on a recourse basis where less risk leads to lower returns.
Funding, whether as debt or equity, is now commonplace.
Businesses are now embracing the use of funding to unlock so-called “hidden” assets, monetising assets they would not ordinarily monetise. This accelerates into cash a portion of the value of an expected entitlement to recovery, whether from pending claims, or from court judgments and arbitration awards obtained which may be subject to an appeal or enforcement delay.
Litigation finance funds are increasingly using co-investment and syndication techniques to better manage their investment portfolios. This enables them to raise capital by unlocking their portfolios to co-investors, or to manage capital expenditure by pooling resources and sharing risk with other investors in respect of new and existing opportunities. It also has the added advantage of increasing the knowledge pool – more minds working on finding solutions.
There has also been a shift in the legal finance repertoire towards an increase in the adoption of insurance as a means of reducing litigation outcome risk which can make capital more accessible and cost efficient. The insurance policy can be pledged to the funder providing downside protection for the funder in the event the case is not successful. Additionally, companies and law firms are turning to insurance to protect work in progress and judgments which they may or may not seek to monetise.
This evolution creates greater opportunity for businesses to find innovative financial solutions that are tailored to their business needs, and for litigation funders to manage and diversify their portfolios more effectively from an investment management risk and reward perspective.
How the funding deal is structured depends on many different factors.
In its traditional form (where the funding is non-recourse, not debt), in exchange for funding the legal costs, the funder (i.e. investor) receives a share of the proceeds of a successful outcome, typically calculated as a percentage of the amount recovered (known as “damages-based”) or as a multiple of the amount invested.
For example, an investment of £5m in legal fees in a successful claim that recovers £50m by way of settlement or award would generate a return of £15m assuming a multiple of 3x the investment amount.
However, if the case loses, the funding is not repayable, and the funder suffers a complete loss on its investment. Accordingly, the price of the funding reflects the uncertainty inherent in litigation and the risk of an unsuccessful outcome.
Investing in cases which “win” is therefore a prerequisite for generating attractive returns for funders who adopt this funding model, which carries high risk, but the potential for significant returns.
Recourse capital is typically calculated by charging a specified interest rate.
These are arrangements between lawyer and client where the lawyer risks payment of some or all of the fees on a successful outcome of the claim.
Conditional fee arrangements (“CFAs”) are largely a UK phenomenon. Under a CFA, discounted fees instead of standard fees are applied, but in the event of a successful outcome, the lawyer can charge that balance (known as “conditional fees”) plus an uplift (known as a “success fee”) to compensate for the risk of an adverse outcome and for the deferred payment of the balance.
A “contingency fee” is the generic term used to describe fee arrangements where payment of the lawyer’s fees is dependent upon a successful outcome. Often the term “no win, no fee” is used to describe such arrangements.
A Damages-Based Agreement (“DBA”) is a “no win, no fee” agreement between a claimant and lawyer which entitles the lawyer to a share in the proceeds of a claim.
Many law firms operate as cash businesses with limited balance sheet capacity and need the steady stream of income that standard hourly fees provide. Increasingly, their clients are demanding alternative fee arrangements. The provision of capital to law firms helps bridge the gap in cash flow generated by alternative fee arrangements.
All legal finance investments essentially depend on an economic model similar to the one illustrated below, each with different risk/reward characteristics and outcomes depending on the market and strategy.
Example of a successful single case commercial investment:
