Funding Lawsuits: Argentina, Latin, and South America

Funding Lawsuits: Argentina, Latin, and South America

Legal Financing in Argentina

Funding Lawsuits: Argentina & Latin-South America

Funding Lawsuits: Argentina, Latin and South America

Funding Lawsuits: Argentina, Latin, and South America

Law would seem to be the furthest thing from a growth industry these days. But a certain class of investors sees one aspect—big commercial lawsuits—as an increasingly good bet. Legal Financing in Argentina

A new generation of investors is plunging into “litigation finance,” putting up millions of dollars to fund lawsuits in hopes of collecting when verdicts come down. Established financiers are expanding into new areas, including loans to law firms, and finding clients among the biggest American companies.

Law firms themselves are starting to jump on the bandwagon, too. They are seeking funding arrangements for clients who need help going after opponents with deeper pockets or simply want to keep litigation costs off their balance sheets.

Critics complain that the trend will enable frivolous lawsuits and have argued—including at a congressional hearing last month—that the government should step in to regulate funders of litigation.

But as corporate legal budgets shrink, litigation-finance options are proliferating.

Legal Financing in Argentina

As a matter of fact, our Buenos Aires-based team includes former lawyers from a few different law firms in Argentina. The group says there is plenty of room for newcomers due to the size of the Argentine litigation market, which they put at more than US$2 billion, measuring the money the plaintiffs and defendants spent in litigation. Legal Financing in Argentina

Demand for alternative financing continues to grow. “One of the things we’re doing differently is investing in financing on both sides of litigation—both defendants and plaintiffs,” Mr. Limeres says.

Funding Lawsuits: Argentina, Latin, and South America

Funding Lawsuits: Argentina, Latin, and South America

On the defense side, the fund plans to advance money to companies fighting lawsuits to cover legal fees. The fund gets repaid, plus a bonus if the outcome is successful.

The new outfits are drawn by the prospect of netting millions off investments that range from $1 million to $18 million a lawsuit.

Last year, investment bank spun off its legal finance group, which has since raised millions.

Litigation funders say they help level the playing field by allowing litigants—mostly corporations—to pursue lawsuits against better-financed opponents. The investors assume the risk, and their money helps pay for high-priced lawyers or to keep a fight going instead of settling because the money has run out.

Plaintiffs’ lawyers have long taken cases on a contingency basis, offering their services free on the front end in exchange for a portion of the reward if they win the case. But some companies—even those that are short on cash—don’t want to use plaintiffs’ firms, whose lawyers they may have faced in previous lawsuits.

Legal Financing in Argentina

It is difficult to know how widespread the practice is. Third-party funding arrangements aren’t typically disclosed unless a dispute between the parties comes to light in court filings.

In one of the more prominent examples, a Litigation funder subsidiary provided $4 million for legal work on behalf of a plaintiff in a large and contentious environmental case against an Oil Company concerning an oil spill in Ecuador. The funder says it has since sold the interest to a third party. However, it retains a residual interest in the outcome.

The litigation funder also stepped in to provide financing in a 2010 suit against a developer in which case they ultimately prevailed.

Another funder has backed patent lawsuits brought by companies, universities, and investors, and provided a line of credit for the plaintiff in a contractual dispute between two hedge-fund managers.

Critics worry that third-party investors will exert undue control over legal decisions. They fear that the practice will drive up the overall cost of litigation.

“This turns the courts into a stock market of sorts,” say some lawyers.

“If investors are getting that sort of return, either defendant is paying a lot more or claimants are receiving a lot less.”

Those objections are brushed off by the lawyer-financiers behind the funds.

In recent months Funders in Argentina have branched out in new areas. For example, providing financing for law firms, the market for such services continues to grow.

“The world of litigation—which is a very large world economically—has historically been very badly underserved by capital,” he says. “What we are seeing now is that business wants solutions.”



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