The industry's performance will be dependent on any changes in the regulatory environment
Melbourne, Australia (PRWEB) August 02, 2014
Litigation Funding in Australia has been around for more than a decade, but in terms of legal history it is an extremely new development in western law. Historically, champerty – an agreement by a third party to fund a lawsuit in return for a share of the plaintiff's proceeds – has been outlawed. However, over the 20th century, this ruling was abolished throughout Australia. As a result, litigation funding is no longer unlawful, and a new type of legal financier has emerged. Companies operating in the industry have similar characteristics to financial intermediaries, in that they source funds from capital markets for investment into lawsuits. According to IBISWorld industry analyst Andrei Ivanov, “the high industry value added indicates that there is significant demand for industry services, assuming industry operators can reach critical mass and make operations economically viable.”
The highly concentrated industry is dominated by IMF, a litigation funder listed on the ASX. The company reports that is has funded 149 cases, 95 of which resulted in settlements and a further 14 of which were won in court. “Claims over $50 million made up the largest portion of estimated claim value in 2012-13,” says Ivanov. The majority of claims are class action suits. Industry revenue jumped in 2011-12 due to a stellar performance by IMF. Overall, industry revenue is forecast to grow at an annualised 5.7% over the five years through 2014-15, to reach $50.7 million. In 2014-15, industry revenue is forecast to grow by a further 6.7%.
The regulatory environment surrounding the Litigation Funding industry is currently very ambiguous. Companies operating in the industry could technically be considered managed investment schemes. However, a ruling made by the High Court of Australia in 2012 stated that litigation funders are not required to hold a financial licence. Furthermore, no current regulations exist pertaining to what types of cases can be funded, how the funds are to be sourced and what consumer protections should be in place. Given this lack of clarity, there is potential for conflicts of interest to arise between lenders, plaintiffs and lawyers. The industry's performance over the next five years will be dependent on any changes in the regulatory environment, and the awareness among consumers of industry services.
For more information, visit IBISWorld’s Litigation Funding report in Australia industry page.
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IBISWorld industry Report Key Topics
Firms in this industry fund litigation and earn a commission, which is a portion of the settlement or judgment proceeds. The industry excludes lawyers and any companies providing legal services.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Basis of Competition
Barriers to Entry
Technology & Systems
Regulation & Policy
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