Within a few years, litigation finance might become one major part of the commercial litigation landscape. There are various numbers of lawyers with general counsel services who said that their firms have used litigation finance, jumped right from four-fold between 2013 and 2016. According to the 2016 survey as presented, around 75% of the in-house counsel has predicted the proficient use of the litigation finance and it is stated to grow for sure.
But, then you have a general counsel attorney who is a bit skeptical of the practice involved in this stage. For these people, this disinterest seems to be a bit rational in nature. Most of the GCs will still perceive litigation finance to be nothing more than a basic tool, used for helping the undercapitalized claimants to pay some legal fees and expenses. Most of the people will serve companies that will face no immediate cash storage and even litigate more often as the defendants than that of plaintiffs.
The observations of the outside general counsel services are mostly based on the limited and even outdated definition of the field of litigation finance. Broader understanding will definitely help in revealing around 5 ways in which general counsel services might get benefitted from the field of litigation finance.
1. Financing can help hedge against rate increases and other risk factors in the future
The financial market will be sure that the council will raise interest rate in next month and even twice sometimes. Even though it is a probably a safe bet that rates might remain low in the short term, the interest rates might rise longer to make any form of corporate finance, which is not based on interest a far more appealing option. For the general counsel litigation, it means any increased use of the legal finance will move risk off the corporate balance sheets by offering capital which is to be repaid if underlying matters are unsuccessful.
2. Litigation finance proves to be corporate finance for the laws
The main concept of litigation finance is mainly to recognize legal asset as the collateral for financing. It forms a major part of the outsourced general counsel services. A firm with the legal asset can secure the financing at this stage by exchanging for the portion of proceeds from that asset in future, mainly on a nonrecourse basis. Businesses aim to perform this task on a daily basis while working on some of the budgetary and strategic choices on when you need to spend own cash versus asking for some outside monetary help. It takes place with all kinds of assets, right from office buildings to airplanes. Litigation finance will help the GC to secure the capital depending on corporate legalized assets just as C-suite collages do across other business areas.
3. Legal finance will apply to defense matters and transactional law area
Legal finance can offer capital in defense as well as within the plaintiff matters, along with some other contexts, which are not related to litigation. So, even though many businesses bring lawsuit rarely, most of them are defendants in litigation and more often they might like it. Whenever a company remains a defendant under GC Services, the litigation finance can enable one alternative fee arrangement with the Inhouse Legal Services. These arrangements are stated to be more flexible than any option that defense oriented law firms might provide. The portfolio based financing can offer options for the defense side clients too.
4. Finance changes the current accounting area of litigation spends
The general counsel based services India, which are working closely with the CEO of the company for controlling the legal spend will be able to recognize the accounting problems, associated with litigation. Without proper financing, litigation can impair the financial performances permanently depending on the accounting rules associated with litigation expenses. On top of that, litigation recoveries are mainly recorded below the line as extraordinary or non-recurring items. It can form one unhappy result for the businesses. The accounting result of any successful claim from In-house legal Services can prove to be permanent reduction as the legal expenses will reduce but the recoveries will not increase it.
5. Finance can always convert the litigation department of a firm into a profit center
The general counsel lawyer known to use legal finance in a straightforward manner can always pursue profit-enhancing claims without adding risk or cost of business. But the GC using legal finance in an ambitious manner can potentially address zero out of the cost of litigation. By just leveraging the litigation finance under portfolio basis, GC gets the chance to procure nonrecourse financing for covering multiple matters. They might be defense side or plaintiff, anticipated or existing matters, from as few as two to the entire portfolio of the company. The idea of portfolio financing is always flexible in nature. The capital can be well used for financing matters within the portfolio for broader business based purposes. The pricing remains lower as the risk is diversified.
As the legal matter seems to be increasingly in scrutinizing the financial options for improving risk management and boosting efficiency, the general counsel will need greater understanding of stated benefits of the current litigation finances. These examples are just a few ways in which the corporate legal department can harness the power of the legal finance tools for generating results and improving the final result in this regard. Experts are always there to be your guide for the same in here.
Author: Amy Jones