New York Times Article On Investing In Lawsuits

The New York Times recently published an article on investing in lawsuits entitled “Should You Be Allowed to Invest in a Lawsuit?”, available here: http://www.nytimes.com/2015/10/25/magazine/should-you-be-allowed-to-invest-in-a-lawsuit.html

The article explains the significant increase in investing in lawsuits over the past two decades in common law countries, although the New York Times is apparently not aware that litigation funding also exists in France, Germany, Holland and many other civil law countries. (In fact, since anyone can invest in a lawsuit on Invest4Justice, it is open to investors in all nations already.)

It also provides interesting statistics. Between 2013 and 2014, Burford Capital, a public company traded in Britain, increased its lawsuit investments from $150 million to $500 million, with a 61 percent net profit margin. The two-year-old Gerchen Keller, one of the industry’s youngest funds, also raised $475 million in private capital. Like equities and mortgages, lawsuits are making a transition from a private arrangement to a fully monetized asset class and the ‘‘portfolio’’ held by IMF Bentham, an Australia-based funder, consists of 39 cases, which the firm values at over $2 billion.

Is investing in lawsuits new? Not at all, according to the New York Times, since Athenian political clubs used to back each other in lawsuits against their rivals. The Romans also allowed the practice, although it was banned by Emperor Anastasisus in the sixth century after the fall of Rome. The taboo on litigation finance apparently came from the Roman idea that a controversy only concerned the individuals involved in the original dispute. After the fall of the Roman Empire, however, litigants could still hire champions to represent them in “trial by battle.” During the Middle Ages, however, this idea of “champerty” (having a champion assisting in a lawsuit in return for proceeds) was scorned by the church as a form of usury. Philosophers such as Bentham mocked the ecclesiastic prohibitions of championing a lawsuit as a holdover from feudal days, however.

Is championing a lawsuit a good thing, as Bentham argued? Access to justice is itself supposedly a fundamental human right set out in Article 8 of the Universal Declaration of Human Rights: “Everyone has the right to an effective remedy by the competent national tribunals for acts violating the fundamental rights granted him by the constitution or by law.” The truth is that not everyone has the right to an effective remedy, since lawsuits are very expensive.

There are three main options today for allowing an effective remedy to all litigants: (1) to reduce the cost of good lawyers (very hard to achieve, but worth considering for instance by removing State monopolies on the provision of legal services), (2) to have the State intervene as a champion (which is what States do with legal aid, which is sadly inadequate in almost every country in the world and rarely produces good results) or (3) to allow private investors to invest in lawsuits. In reality, the options are not mutually exclusive, but there is every reason to encourage private investors to invest in a strong lawsuit if they are willing to do so.

Anyone can try their hand in investing in lawsuits on Invest4Justice. Not all cases win, but the returns can be tremendous when they do, and regardless of whether or not the case wins, they are helping to enable access to justice.

Invest in a lawsuit on Invest4Justice today!

New York Times Article On Investing In Lawsuits