Stefan Kirsten is the founder of KRD, an award-winning boutique firm offering dispute resolution and legal finance advisory. Having practiced in one of the world’s foremost litigation groups for many years, Stefan was among the first seasoned counsel to advise on third-party funding in continental Europe. He continued to build from scratch the German and Nordic operations of a now top-ranked litigation funder and subsequently headed its global origination activities before returning to private practice.

How has the role of third-party funding and legal finance changed since you started your career?

The amazing thing is that it never stops changing. When I first encountered legal finance years ago, it was exclusively about funding solutions for clients with profound liquidity needs. While these classic “David versus Goliath” settings certainly remain prominent (particularly in the ESG context), “David” does not need to be a claimant anymore – in fact, there are exciting examples of successful defence funding (although reciting them would probably go beyond the scope of this interview). At the same time and particularly in the wake of the pandemic, even financially strong corporates (our “Goliaths”) have started to use legal finance as an innovative tool to manage the costs, risks and chances of their disputes. Besides traditional funding of legal expenses, this entails the procurement of additional working capital through monetisation in order to improve a company’s KPIs. Even more importantly, dispute funding is increasingly supplemented by dispute hedging, i.e. insurance solutions to mitigate litigation risks. These novel products are not only sought after by claimants and defendants but also by funders themselves as a means of risk transfer and collateral. As a result, the legal finance market is increasingly evolving beyond traditional third-party funding and remains extremely dynamic.

Why did you decide to set up your own boutique firm KRD?

Because of a pronounced demand from clients for independent and comprehensive legal finance advice. When I was a funder myself, I often encountered claimants and defendants who had a good case but no clue of how to present it to sophisticated risk carriers – let alone negotiate terms. At best, these parties lost significant time, at worst they could not obtain funding at all. KRD’s purpose is to help clients overcome these obstacles and explore the full potential of their dispute as an asset. This potential also comprises the opportunity to hedge a dispute’s inherent downside risks through litigation risk insurance – a product line on which a traditional funder would have difficulties to advise.

What makes KRD stand out from its competitors in the market?

To be honest, there are not so many competitors out there. The supply of independent advisors with seasoned expertise in both dispute funding and dispute hedging is strongly limited, with most of them operating in the US and the UK. Of the very few remaining providers with a civil law focus, no one except KRD offers the best of both worlds: dispute resolution and legal finance advisory.

What do clients look for in an effective legal finance advisor?

For the vast majority of clients, time is of the essence – which is why they seek to obtain funding and hedging solutions as soon as possible. To help them achieve this goal and get the deal done, it is critical to rapidly identify those case elements that are essential from a funder’s or an insurer’s perspective. In addition, an effective advisor must maintain a vast and diversified network of various risk carriers in order to offer comprehensive solutions and suitable alternatives in case of need.

How do you approach a new funding or hedging request?

First of all, with an open mind. The needs of clients vary immensely and for many of them, legal finance is still unchartered territory. In order to help them navigate quickly, it is key to learn their individual motives at the very start – ideally by brainstorming ideas that might sound “crazy” at first glance.

As AI continues to develop, how will this affect the nature of the cases you work on?

The impact of AI cannot be overstated and will certainly lead to an even greater increase in well-founded collective redress cases. For the development and management of these cases, accurate data is crucial in order to determine each claimant’s chances of success and AI is critical to improving the quality of such data. At the same time, funders and insurers using AI-driven tools can significantly speed up their underwriting process, thereby addressing a key demand of clients. In consequence, AI will lead not only to better cases but also to better investment decisions, thereby promoting access to justice.

You have enjoyed a very distinguished career so far. What would you like to achieve that you have not yet accomplished?

To see legal finance become universally recognised as the outstanding and versatile tool it truly is.

What is the best piece of advice you’ve ever received?

“The secret to happiness is freedom. And the secret to freedom is courage.” (Pericles)