Spain is the latest emerging market for litigation funding

Posted Wednesday, April 6th 2022
Spain is the latest emerging market for litigation funding

Although litigation funding has been an established alternative in the Spanish legal market since the arrival of British firm Therium in 2016, it has yet to achieve the same popularity here as it has in other markets, particularly the US, UK, and Australia. This may be partly due to the lack of legislation regulating the sector, which has created some uncertainty for the practice in Spain, or to the relatively low cost of litigation here compared to other countries.

"We expect that 2022 will bring more regulatory developments," said Guido Demarco, Director and Head of Legal Assets at Stonward, a litigation funding firm active in Spain. "And although stakeholders usually welcome regulation to bring clear rules and transparency into the equation, there are concerns that over-regulation could affect the industry, including access to justice for the claimants."

Ignacio Delgado, a litigation finance professional who has worked for Therium Capital and ComClaims and now works for a hedge fund that invests in active litigation, does not see lack of regulation as an issue. “Regulation is not necessary given the small size of the industry in Spain, as well as the ignorance about its operation,” Delgado said. “The regulatory framework provided by the civil code, commercial code, and other applicable laws is more than enough, in my opinion.”

Regardless of any causes that have held it back in the past, litigation funding is becoming increasingly popular among companies looking for ways to improve their working capital and reduce financial risks.

“Spain is an emerging market for litigation financing. Lawsuits and arbitration in sectors such as renewable energy, competition law, and banking are of particular interest to investors,” said Cristina Soler, managing partner at Ramco Litigation Funding, a litigation finance firm that has been active in Spain since 2017. “The main attraction of the Spanish market is the quality of its professionals and the recent interest in lawsuits and arbitration. The main disadvantage is the lack of experience in litigation financing.”

For companies with liquidity issues, litigation funding can be a way to pursue valid lawsuits that they might otherwise have shied away from due to fears of excessive costs, regardless of the merits of the case.

“In Spain, there is more interest, except for a few areas, in the monetization or transfer of economic rights for litigation than in financing them,” Delgado said. “Litigation costs in Spain in most jurisdictions are not as significant for medium or large companies, but the idea of approaching ongoing lawsuits as a liquidity solution is very interesting and attractive for them.”

As the appetite for litigation funding has begun to increase, so too have the number of players in the country. Below we list a few of the more notable litigation funders in Spain:

 

Therium Capital Management

Stonward

PLA - Procurator Litigation Advisors

Arcano Partners

Ramco Litigation Funding

Harbour

Burford Capital

Fortress Investment Group

Omni Bridgeway

Legisfund