While we regularly invest in largescale litigation matters, at Erso we’ve always recognised the lack of available capital in the litigation funding market to support commercial disputes that require relatively small funding commitments (e.g., those requiring between £100k – £500k, or USD $130K- $655k of funding). The need for funding at this level is becoming more evident as companies turn to litigation in the wake of the pandemic, whilst still suffering from impact. Non-recourse funding has a more important role to play than ever before, particularly where it can be achieved at a competitive rate.
The challenge with smaller commitment funding:
Of course, funding of smaller value disputes is not without challenges. For example, time and transactional costs can make such opportunities uneconomic for a funder to diligence and manage. Moreover, many funders opt to concentrate solely on ‘big-ticket’ disputes because the potential headroom in the claim value allows for attractive returns. Smaller cases provide less margin for error because deviations in the costs budget or the predicted recovery amounts can lead to outcomes where the funder takes the lion’s share of the proceeds – which has knock-on challenges.
Erso’s new SME funding facility: Overcoming challenges
Notwithstanding these challenges, it has been evident from enquiries from both large city law firms as well as regional and boutique practices, that there remains a gap in the market. We are delighted to announce following months of structural work, we’ve approved with our investors a separate allocation of capital specifically for cases requiring smaller commitments of funding.
This “SME” capital facility will target disputes that require a funding commitment between £100,000 to £500,000 and will initially be accessible to SMEs and individuals acting in connection with commercial activities, who are pursuing cases in the UK, US and Canada.
We’ve taken measures to streamline our processes to meet the transactional efficiency required for such cases in the aforementioned territories. The team can also consider similar cases from other common law jurisdictions albeit they may be subject to additional thresholds. For cases being pursued in England & Wales and Canada, where cost-shifting is prevalent, Erso’s SME facility will operate in close collaboration with the team at our insurance affiliate, TheJudge.
Strength through affiliates
TheJudge Group, which was acquired by Thomas Miller in late 2019, is a leading specialist broker operating exclusively in the provision of litigation insurance products including adverse costs insurance and security for costs solutions; contingency fee/DBA insurance (coverage for law firms that share in the own side’s costs risk), and judgment/award preservation insurance designed to cover damages awards against the prospect of appeal or annulments.
Erso’s SME capital facility will operate in conjunction with TheJudge’s newly established SME disputes team, which includes Donna Nortcliffe, a former commercial litigation lawyer from Irwin Mitchell and Kyle Hunter, an experienced ATE insurance professional. The team is led by Emily Thomas, also a commercial disputes lawyer.
Erso’s SME facility is currently available for claimants whose cases meet the following criteria:
- Have a commercial claim with realistic damages vs likely quantum ratio of at least 1:6 (markedly lower than the traditional 1:10 minimum associated with larger value cases).
- Have good prospects of success.
- Are more than 6 months from trial and have a realistic likelihood of achieving a final award within 4 years.
- Have a creditworthy opponent(s), against whom an award can be enforced.
Early-stage funding or bridging the gap for claimants experiencing cost fatigue in larger value disputes.
While we expect many applications will be from claimants seeking to arrange funding from the outset of their claim, we’ve deliberately left the door open to claimants who may well be involved in a larger case, where a funding gap has developed in order to see the case through to conclusion, perhaps as the result of a cost overrun or the onset of costs fatigue by the claimant. Provided the case is less than 6 months from trial then we’re happy to consider it.
Erso’s continued evolution
We hope this effort to help bridge a gap in the market will be welcomed by litigators in the UK, Canada and US and indeed other territories where we can support good quality claims in this way. This represents a further expansion of Erso’s footprint in the global funding market and will shortly be followed by another significant announcement in the coming few months.
We look forward to working with you.
The Erso Team.
UK & Canada: Matthew Amey: email@example.com
US: Caroline Parker-Beaudrias: firstname.lastname@example.org