In these challenging economic times, the workload faced by in-house legal departments is getting bigger, while legal budgets are failing to keep up. The result is that in-house lawyers in companies of all sizes are now feeling the pressure.
This trend was laid bare in research published by Thomson Reuters this month [insert link: https://legalsolutions.thomsonreuters.co.uk/content/dam/ewp-m/documents/legal/en/pdf/reports/legal-dept-operations-index_2022.pdf]. The Legal Department Operations Index Survey, based on responses from more than 1,500 corporate law departments globally, showed that 65% of in-house lawyers are seeing work levels increase. Only 27% reported a static workload, and just 8% had seen it fall.
But when it comes to legal budgets, only 41% of in-house lawyers said their department’s budget was going up to reflect their greater workload. Budgets were flat for 45% of legal departments, and the remaining 14% were experiencing budget cuts. So it is perhaps not surprising that for a sizeable 85% of all departments, the ‘number one priority’ was to get a grip on external legal spend.
So where does all this leave commercial litigation? Clearly general counsel have little control over how much litigation their company is involved in as a defendant – aside from deciding whether to fight or settle whatever claims are made against it. But when it comes to actively bringing litigation, GCs do have a choice; and they are often quite cautious about doing so.
Many companies are sitting on valid claims where they have suffered a detriment and could pursue damages through litigation or alternative dispute resolution, but they choose not to do so. Even at the best of times, GCs can be reluctant to set aside a chunk of their budget to bring a claim that might be very financially beneficial if they succeed, but extremely expensive if they lose. But when the legal budget is already being stretched to breaking point, then the decision to embark on pursuing litigation becomes even harder.
The good news for in-house legal teams is that litigation funding is now a well-established and credible solution to this problem, enabling corporations to safely offload the cost and risk of litigation onto a third party. In exchange, the litigation funder will receive a percentage of the damages secured, or a fee based on a multiple of the amount it invested in the case, which will be payable only if the claim is successful.
By using litigation funding to maximise potential claims without incurring risk, litigation can become a source of revenue for legal departments, rather than just a drain on resources.
As these uncertain economic times continue, the partnership between litigation funders and in-house legal departments looks set to become increasingly important, to the mutual benefit of both.
November 14, 2022
Insights
