A joint venture alternative business structure specialising in dispute resolution for SMEs is launching a new service for law firms which it compares to “a concession in a department store”.
Chris Clay, managing partner and co-founder of Escalate Law, told Legal Futures that seven law firms were preparing to offer the service – some of them with no existing litigation department.
He said Escalate would be creating a “completely new model within the legal industry”, one based neither on referral agreements nor on a white-label approach.
The service would be “more like a concession in a department store, with experts embedded in the client law firm but going to market using both the firm’s name and the Escalate-branded product”.
The ABS, based in Liverpool, is owned by the law firm Bermans and accountancy firm PKF Littlejohn, where Mr Clay is a partner. The other co-founder is Nick Harvey, head of litigation at Bermans.
The other law firm co-founder Moore Blatch, which became Moore Barlow following its merger with Barlow Robbins last spring, left the ABS in September 2020.
Escalate uses corporate recovery specialists to try and achieve a settlement in under three months. If not, the case moves on to litigation, which Escalate funds. Clients are guaranteed that they will keep at least 70% of any money recovered.
Clients have until now accessed Escalate through a network of over 75 regional accountancy firms, which filter cases and ensure they have sufficient merits. This time last year we reported how Escalate’s profits were soaring as the model took off.
Escalate has joined forces with Jonathon Bray, director of Jonathon Bray Legal Services and a specialist in regulation and compliance, in developing and delivering the concession model for law firms.
Mr Bray said he had been working with Escalate for “a number of years” and knew from conversations with clients that SMEs had been writing off even more in terms of debts in the pandemic.
“This new approach has the potential to hugely benefit law firms and their clients who are dealing with cash flow problems and commercial disputes.
“Working together, the legal profession has an opportunity to make a real difference during what is proving to be an exceptionally stressful time for SMEs.”
Mr Clay said the pandemic and first national lockdown had slowed the dispute resolution market, but it had “opened up” in the last quarter of 2020, with more case referrals to Escalate than in the previous two quarters combined.
He predicted that, bearing in mind the “pandemic-induced cash squeeze”, this could turn into a “surge in litigation” in 2021.
Mr Clay said the ABS had entered 2021 with a £6.5m pipeline of cases, which was projected to grow to £10m by the end of the year.
He said that while Escalate would take responsibility for “case delivery”, the law firm could be involved in client support throughout and participate in a fee-sharing arrangement “if wanted and appropriate”.
Mr Clay said geography had “never been an issue” for delivering the service, but post-lockdown it could mean having staff physically present in partner law firms’ offices.
He predicted that given the “fall-out from Covid” in terms of the supply chain, bad debts and squeeze on contracts, Escalate would be particularly attractive to SMEs.
“Access to new cash and government funding has been a big driver, but you’ve got to get your own house in order and recover your debts, which is where Escalate comes in.”