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ESG and Litigation Funding

June 7, 2023

ESG and Litigation Funding

Are ESG initiatives and regulations creating more tension between companies and their suppliers? Are we seeing an uptick in disputes that are arising out of ESG initiative and regulations? What impacts and pressures are ESG matters having on companies, funders, attorneys and governments? These topics and more were covered on IMN’s panel discussion “ESG Initiatives: Challenges and Opportunities.” Panelists included Viren Mascarenhas, Partner at Milbank, Nikos Asimakopoulos, Director of Disputes at Alaco, and Rebecca Berrebi, Founder and CEO of Avenue 33, LLC. The panel was moderated by Collin Cox, Partner at Gibson Dunn. Rebecca Berrebi began the discussion by noting that ESG is a huge space. Even with firms concerned about ‘green-washing,’ and not classifying every type of investment as ESG, the space is still enormous. One area she sees a strong ESG connection with is whistleblower claims—she has seen bundles of SEC whistleblower claims get underwritten by funders, despite the fact that the case type is a bit of a black box with limited visibility into the details of the case. Yet funders are pursuing these types of claims, which have a strong ESG component. Collin Cox noted how particular these types of cases are, which must make the diligence extremely difficult. Berrebi concurred, explaining she has seen cases where the whistleblower is actively involved, which of course is a huge help, but otherwise there is a large diligence hurdle to overcome. The flipside is that these are not expensive cases, and when bundled, can become a worthwhile investment. Viren Mascarenhas highlighted the arbitration space. On the commercial front, he noted that he is getting calls from corporate partners, and there is concern about how to address the human rights principles of the U.N., which are becoming more popular with the public-private partnerships on offer. On the investor-state front, issues are arising in investor treaties which have carve-outs, or provisions where parties must comply with national laws and with U.N. principles. These are examples where an ESG focus is having an impact. Nikos Asimakopoulos spoke to obscure issues such as claims against foreign supply chain operators. He has a claim in an African state, where the claimant must demonstrate that the government behaved improperly. This is very difficult, of course. You must go to the specific locale and investigate the exact regulations in place at a local level, because this is what is driving the decision making. Zooming out, the theme of this panel seemed to be how ESG clearly affords opportunities to litigation funders, but is not a panacea. The emerging sector also presents diligence challenges and confusion around how multinational ESG initiatives might impact state and local laws. So right now we appear to be in a gray area where there is much uncertainty around the intersection of ESG and litigation funding.

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Commercial

Perpetual Lifts Omni Bridgeway Stake to 15.4% After Months of Buying

Perpetual Limited has increased its holding in litigation funder Omni Bridgeway to 15.403%, according to a substantial holding notice lodged with the ASX, consolidating its position as one of the funder's largest institutional shareholders.

As reported by Kalkine Media, the Form 604 shows Perpetual and its related bodies corporate now control 44,613,540 ordinary shares carrying 15.403% of voting power in Omni Bridgeway, up from 41,291,970 shares and 14.256% at the time of the previous notice in April 2026. The change in relevant interest was recorded on September 18, and company secretary Sylvie Dimarco signed the notice on September 22.

The annexure to the filing sets out a two-stage pattern of trading by Perpetual Investment Management Limited between June 12 and September 18. Perpetual was a net seller through June and July, with disposals executed via custodians Citicorp Nominees and HSBC Custody Nominees (Australia). From late July onward the direction reversed, with purchases recorded on multiple dates including August 27 and 28 and across September 15 to 18, executed through both custodians.

The accumulation comes during a period of pronounced volatility for the ASX-listed funder. Omni Bridgeway reported record FY26 commitments and investment proceeds alongside a 89% fall in net profit, and was recently dropped from the S&P Global BMI index. A sizeable institutional shareholder adding to its position against that backdrop is a notable signal for a sector where public-market sentiment has lagged operational performance.

Omni Bridgeway has not commented on the change in Perpetual's holding.

Commercial

Funder’s 20% to 25% Cut Draws Scrutiny in Macquarie Shield Class Action

A funded class action filed against Macquarie Investment Management over the collapse of the Shield Master Fund is drawing criticism from within the Australian advice industry, with questions being raised over whether litigation funding is the right route for investors who have already been partially compensated.

As reported by ifa, the action was served on September 17 on behalf of Rachelle Dessent and roughly 2,800 account holders who lost superannuation in the Shield collapse. Gordon Legal, which is running the case, alleges investors have not been fully compensated despite the $321 million Macquarie paid out last year covering total amounts invested, after the firm admitted failures related to Shield. The claim seeks the growth those savings might have achieved had they remained invested elsewhere, together with damages for distress. Netwealth was served with draft documents for a separate potential class action on September 21.

Central to the criticism is the cost of the funded route. Save Our Super advocate Melinda Kee, who told ifa that Gordon Legal approached her last year and that she "wasn't interested," pointed to the firm's own disclosure that the litigation funder is entitled to between 20% and 25% of any settlement fund if the action succeeds, with legal costs also payable from the group's award subject to court approval.

Kee argued that pursuing claims through AFCA and the Compensation Scheme of Last Resort is free and delivers compensation directly to investors. With average losses around $120,000, and lower for many Macquarie and Netwealth investors following the return of capital, she suggested many residual claims could fall within the $150,000 CSLR cap.

The case turns in part on so-called "but for" losses. Financial Services Minister Daniel Mulino recently confirmed that only actual losses will be compensated through the CSLR from July 1, 2027.

Commercial

Court of Appeal Rules Clients Cannot Force Disclosure of Secret ATE Commissions

The Court of Appeal has ruled that former clients have no mechanism under the Solicitors Act to compel their solicitors to reveal commissions earned on after-the-event insurance, even while criticising firms that refuse to answer the question as behaving unwisely.

As reported by The Law Society Gazette, the judgment in Turner v Coupland Cavendish upheld a challenge brought by the solicitors and found there is no route through a Part 18 request for further information to force disclosure in a Solicitors Act costs assessment. Lady Justice Andrews, giving the lead judgment, said there was no "shortcut" for former clients seeking information about secret commissions on ATE premiums.

Andrews nonetheless made clear her discomfort with the position. As a fiduciary, she said, a solicitor ought to tell a client about any commission if asked, and where a firm refuses there appears to be no easy or cost-effective remedy. She described the solicitors' conduct as "unattractive," "unwise" and "unedifying," and acknowledged the unfairness of requiring a client to produce evidence that a commission was paid in order to obtain the evidence needed to prove it, when that evidence sits with the solicitor. She stopped short of proposing a fix, flagging it instead for those able to change the rules or the law.

The sums at stake in the underlying matter were modest. The ATE premium on the original personal injury claim was £245, with any commission likely to be no more than £25. Andrews observed that the principal beneficiaries of a successful challenge would be those who have built an industry out of challenging solicitors' costs. The claim was led by Leeds firm JG Solicitors.

At first instance, Costs Judge Rowley refused the Part 18 request. Mr Justice Sweeting reversed that decision in the High Court, and the Court of Appeal has now restored the original position.