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Case Developments Commercial

Lansdowne Appoints Lawyers, Continues Search for Funding in ECT Claim Against Ireland

The energy sector is often pinpointed by funders as one of the top targets for investments in litigation and arbitration proceedings, with mechanisms like the Energy Charter Treaty (ECT) creating high value claims that require outside financing. One such claim being brought by an oil and gas company appears to be moving forward, with the claimant still in search of third-party funding. Reporting from Alliance News, shared by Morningstar, provides an update on Lansdowne Oil & Gas efforts to bring a claim against the Irish government. The company announced that it has appointed Mantle Law to lead the legal proceedings, saying that the law firm has “the best dispute and arbitration lawyers in the construction, infrastructure and energy sectors.” The claim is focused on allegations that the Irish government failed to act in a fair and reasonable manner under the ECT when it withdrew an exploration license for the Barryroe prospect. Lansdowne had already invested $20 million in the project. Whilst the focus of the announcement is that Lansdowne has appointed lawyers for the case, it also included the detail that the oil and gas company is still ‘in the process of contacting litigation funders to finance the ECT claim and subsequent arbitration process.’ This is particularly interesting given LFJ’s reporting from July last year that Lansdowne was already in talks with litigation funders to obtain financing for the proceedings. This would suggest that Lansdowne appears to still be in the same position, with regards to securing funding, as it was over seven months ago. As part of the announcement, Lansdowne explained its reasoning for moving forward with the claim, stating: "Given the lack of engagement or any ability to have a respectful and frank conversation with the Irish Government, the company believes it now has no alternative other than to pursue vigorously its ECT claim."
Case Developments Commercial

NSW Supreme Court Rules Funder’s Commission is Not Recoverable as Damages

At the core of any litigation funding arrangement is the principle that if the funded party reaches a successful outcome, then the funder will receive a return on their investment out of whatever monetary award is given to the plaintiff. However, a recent judgement in Australia offered an interesting insight into a case where the plaintiff had attempted to argue that it was the defendant who should cover the costs of the funder’s commission. Reporting by the Australian Associated Press, and published by Yahoo News, highlights a recent judgement handed down in the Supreme Court of New South Wales, which found that a litigation funder’s commission was not ‘recoverable as damages payable to the plaintiffs.’ Justice Richard Cavanagh’s ruling in the case of Hunt Leather Pty Ltd v Transport for NSW found that there was no precedent for the court to make such a ruling, stating clearly that there has been no prior case ‘in which the funder’s commission has been allowed as a component of the damages awarded.’  The background to this latest ruling from the NSW Supreme Court is a case that saw local businesses sue Transport for NSW over its construction of the Sydney light rail project, in which they argued that they had suffered losses due to extended disruptions to the area in which the businesses are based. Last year, a court found that Transport for NSW was liable for damages, with Hunt Leather and Kensington restaurants and coffee cart being awarded $3,693,164 and $317,773 respectively. Following the award of damages, the plaintiffs argued that ‘they have suffered loss as a result of the tortious conduct of the defendant and that they are entitled to be put back into the position they would have been but for that tortious conduct.’ The plaintiffs argued that this should include the 40% funder’s commission, which the parties had agreed to when they entered into a funding agreement with International Litigation Partners (ILP). In his judgement, Justice Cavanagh reasoned that the plaintiffs had reduced the amount of profit they would see from the award, as a result of ‘the plaintiffs’ own conduct or decision to pursue the litigation on a risk free basis.’ Therefore, their claim that the defendant should cover the costs of the funder’s commission did not follow, as the plaintiffs ‘have not otherwise reduced their loss of profits flowing from the defendant’s conduct.’ Justice Cavanagh explained that if he had agreed with the plaintiffs’ reasoning, then the effect would be ‘to visit upon the defendant not just the consequences of its own conduct but the consequences of a decision taken by the plaintiffs, freely and willingly, to share the proceeds of the litigation in return for a benefit to them.’ Justice Cavanagh’s full judgement can be read here.
Commercial

Evaluating Common Criticisms of Litigation Funding

The growth of the global litigation finance industry and the success stories from market leaders continues to generate an equally prominent strain of harsh criticism. However, it is always useful to look past the bold statements and fierce condemnations to analyse whether the most frequently voiced critiques are based in reality. An article from UK law firm Shepherd and Wedderburn reviews some of the most common criticisms of third-party litigation funding, examining whether these arguments have real substance and whether critics of the industry are right to claim, ‘that litigation funding is a malign influence on litigation in this country, rather than an aid to access justice.’ The first criticism that the article addresses is the idea that litigation funding promotes meritless claims, with funders portrayed as a driving force behind frivolous lawsuits in pursuit of financial gain. The authors argue that the structure of the UK legal system provides serious disincentives to filing meritless claims, with the principles of ‘costs shifting and punitive damages’ making it a costly endeavour to back lawsuits that have little chance of success. The article acknowledges that whilst weak claims do still exist, funders have little reason to back them and cites the case of Excalibur Ventures v Texas Keystone, where the ‘funders were required to contribute over £20 million towards the defendants’ costs.’ The second argument against litigation funding that is analysed is the claim that ‘funders wrongfully gain control of the claim and that as such, the integrity of the proceedings will be threatened.’ The authors point out that although funders ‘hold the purse strings of litigation’, not only do they not have control over the litigation proceedings, it would also not even be in their interest to exert this level of control. They highlight that ‘control requires monitoring, and monitoring requires personnel’, meaning that there is little reason for funders to want to take on the burden of additional manpower and expenditure to do this, especially when the business model is based on generating solid returns on investments. Finally, the article deals with the critique that funders are profiteering off legitimate attempts to seek justice, pointing out that the scale of the funder’s return in the Post Office litigation caused many outside observers to question why the victims’ share of the award was so reduced. In response, the authors argue that ‘these figures must not be interpreted in isolation’ and must be considered in the context of the myriad of costs that funders cover during the duration of the case.   Shepherd and Wedderburn’s article concludes by arguing that despite these common criticisms, ‘litigation funding can enable voices to be heard, articulated, and judged in a way that results in a monetary pay-out for their losses, but also vindication.’
Announcements Commercial Legal Innovation

KWS Litigation Shapes The Future with Low-Risk Investments and Substantial Returns

KWS Litigation, a pioneering, British litigation funding investment company, is revolutionising the legal and investment landscape by offering a unique opportunity where justice aligns with intelligent portfolio diversification. Creating a realm where justice and investments intertwine, KWS Litigation champions the cause of consumers who have fallen victim to mis-sold loan agreements and business energy claims through deceptive and fraudulent sales practices. Their disruptive approach, rooted in fundamental legal principles upheld by the High Court, introduces innovative solutions that break new ground. Inviting individual investors to finance legal cases in exchange for a share of the proceeds and substantial pro-rata returns, investor capital with KWS Litigation is not only low-risk but also shielded by an FCA-regulated broker insurance bond. This opportunity isn't just smart; it generates a positive social impact, shaping a future where justice prevails and investments flourish. Following a recent landmark judicial review, KWS Law Limited transformed into a Special Purpose Vehicle (SPV) to facilitate the High Court verdict for mis-sold consumers. Out of this restructuring, KWS Litigation emerged as a trading style of KWS Law—an Alternative Business Structure, providing more choices, innovation and transparency. Regulated by the Solicitors Regulation Authority (SRA: 830165), KWS Litigation operates as an agile and client-centric law firm with a laser focus on identifying legitimate litigation claims. Headed by Neil Berkeley, his team of seasoned legal professionals ensures success in various fields of litigation while prioritising investor risk management. “Our commitment is unwavering—to bridge the gap between individuals and powerful entities, championing a legal system where justice is accessible to all.” — Neil Davis-Berkeley, Managing Director at KWS Law KWS Litigation's mission is to equalise the legal landscape by offering financial support and legal expertise to claimants. By rectifying the imbalance between individuals and large corporations in the courtroom, they empower individual investors to achieve outstanding returns, disrupting the dominance of major funders supporting large enterprises. In the UK consumer litigation investment market, characterised by dynamic growth and evolving regulations, KWS Litigation strategically positions itself as a formidable player. Their specialised expertise, robust track record and meticulous approach make them well-suited to attract a diverse array of litigation funders and professional investors. Furthermore, KWS Litigation recently announced a new equity partnership with a leading claims management firm. Facilitating case acquisition, Addlington-West Group seamlessly pairs its clients—everyday people with meritorious cases—for KWS Litigation. The consumer litigation investment sector has experienced significant growth, driven by increased compensation pursuits. Moreover, research conducted by law firm Reynolds Porter Chamberlain LLP reveals the top 15 UK litigation funders reported record assets of £2.2 billion on their balance sheets in 2020/21, signifying an 11% increase from the preceding year. KWS Litigation specialises in distinct categories of consumer litigation cases, including financial services mis-selling. Their rigorous risk assessment and due diligence processes, compliant with litigation and consumer protection regulations, attract investors of all scales, including individual and institutional investors seeking low-risk alternatives with exceptional returns. The innovative investment model offered by KWS Litigation provides low-risk opportunities with no direct correlation to conventional financial markets. Rigorous selection processes, compliance with regulatory requirements and unique features such as FCA-regulated broker insurance bonds, set a precedent, ensuring a higher potential for returns compared to other asset classes.
Case Developments Commercial

UK Government Announces Plans for Legislation to Overturn Convictions for Post Office Scandal Victims

The Post Office scandal has dominated the headlines in UK media over recent months, highlighting the vast scale of the injustice suffered by the sub-postmasters, and the role that third-party funding played in allowing these victims to seek justice. In another positive step for the victims, the government has now announced plans for a new law that would accelerate the process for overturning many of the sub-postmasters’ convictions. An article by BBC News covers the UK government’s announcement of new legislation that will overturn convictions for the sub-postmasters who were victims of the Horizon Post Office scandal. The new law intends to clear the convictions for the majority of the over 900 sub-postmasters who were wrongfully convicted for false accounting and theft, with the legislation expected to come into effect by the end of July. The legislation sets out specific criteria for the types of convictions that would be overturned, with the law covering those convictions made by the Post Office and Crown Prosecution Service (CPS) in England and Wales. However, those convictions from the Department for Work and Pensions (DWP) are not covered by the bill, nor are any convictions that resulted from cases in Scotland and Northern Ireland. The government stated its intention to work with local governments in those regions to ensure that their own plans for quashing convictions are “compatible with the UK compensation scheme.” As part of the announcement of the planned legislation, Post Office Minister Kevin Hollindrake stated that "the scale and circumstances of this prosecutorial misconduct demands an exceptional response.” Hollindrake acknowledged that whilst the new law may “exonerate a number of people who were, in fact, guilty of a crime”, the UK government considers this “a price worth paying in order to ensure that many innocent people are exonerated.”
Announcements Commercial People Moves

QANLEX hires lawyers Marina Gouveia and Alejandro Arias as Investment Managers

QANLEX, a litigation finance technology fund, founded in Argentina and currently operating in Europe and Latin America, recently incorporated two lawyers as Investment Managers to its international team, Marina Gouveia and Alejandro Arias. Marina Gouveia is a lawyer licensed in both Brazil and Portugal, graduated from Universidade Presbiteriana Mackenzie, with a Master's Degree in Mediation, Negotiation and Alternative Dispute Resolution from Universidad Carlos III de Madrid. She is a mediator for the Centro Brasileiro de Mediação e Arbitragem and the Centro de Arbitragem e Mediação. In addition, she has participated as a volunteer in numerous international arbitration, mediation, and negotiation competitions, acting regularly as a judge and arbitrator. Gouveia joins the office from Paris, France. Alejandro Arias has a law degree from Universidad Panamericana and a Master's degree in International and Comparative Dispute Resolution from Queen Mary University of London. Prior to joining QANLEX, he worked as an international lawyer at firms such as Dechert and Hogan Lovells. He joins the office from Mexico City. With these two additions in key continental law markets for the firm, such as Mexico and France, QANLEX seeks to strengthen its international presence and expand its operational capacity. In addition, Gouveia's experience and training in both Brazil and Portugal will support the development of these markets. Yago Zavalia Gahan, co-founder of the firm, highlights these signings as very significant for the firm: "The addition of these two legal professionals marks a significant milestone in our commitment to strengthen our international team. We are confident that they will help us successfully navigate legal challenges as we continue to grow and expand into new markets. Their passion for innovation and excellence aligns perfectly with our mission and values." Fernando Folgueiro, co-founder of QANLEX, emphasizes: "The arrival of Marina and Alejandro at QANLEX brings a fresh perspective that is vital to our strategy. Their commitment to our project reinforces our presence in two key countries such as Mexico and France, in addition to supporting the Portuguese-speaking market, taking into account Marina's experience in Brazil and Portugal". About QANLEX QANLEX is the first litigation finance technology fund operating in Europe and Latin America, created by an interdisciplinary team of lawyers and engineers with a holistic view of law, finance and technology. Its mission is to provide capital to pursue meritorious lawsuits with an exclusive focus on continental law countries.
Commercial Legal Innovation

Using Data Analytics to Maximize Efficiency in Litigation Funding Proposals

As in-house counsel and corporate legal departments grow more comfortable with the prospect of utilizing third-party funding, litigation funders are keen to provide education about best practices for securing funding.  In a blog post from Omni Bridgeway, Matt Leland and Carrie B. Freed examine the use of in-house data analytics for companies who are looking to secure third-party funding for their litigation strategy. As the authors explain, for in-house counsel who are seeking litigation funding ‘it is imperative to assess the economics of a case with clear eyes’, and this can be best achieved ‘partnering with their business analytics colleagues.’  By collaborating with their data analytics team, Leland and Freed argued that corporate legal teams can create ‘several efficiencies when preparing the litigation funding proposal.’ The five efficiencies that can be achieved are as follows:
  • Pressure-test damages evidence
  • Avoid discovery emergencies
  • Familiarize personnel with the litigation
  • Foster collaboration with colleagues
  • Generate reliable budget forecasting
Leland and Freed highlight that as ‘businesses accumulate copious amounts of data’, they already have a wealth of information that can be used to produce accurate quantitative analyses of potential losses and also build predictive models for likely outcomes. Whilst this use of data analytics will not be able to provide foolproof assessments, ‘the company can better demonstrate to a litigation funder where the recovery risks lie and what resources might be necessary to strengthen the business’s litigation position.’
Commercial Legal Innovation

The Role of ATE Insurance in the Post Office Scandal

The Post Office scandal has brought the role of litigation funding in opening access to justice to the fore, with the media coverage generating fresh opportunities for funders to talk about their vital role in supporting victims of a miscarriage of justice. However, it is equally important to recognise the role that litigation insurance played in supporting the sub-postmasters legal campaign. In an article for Insurance Post, Alan Pratten, chair of M&A, litigation and tax insurance solutions at Gallagher, provides new insights into the use of after-the event (ATE) insurance in the postmasters litigation. Pratten goes into the nuances and challenges that were overcome as an insurance broker, working in tandem the postmasters legal team which was led by James Hartley, partner at Freeths. Pratten explains that the claimants’ legal teams had struggled to secure ATE initially, with one of the primary issues being that ‘many of the claimants, owing to the findings of the Horizon software, had criminal records, having been convicted of fraud, theft and false accounting.’ Insurers were therefore naturally averse to involving themselves with a case involving fraud, which was compounded by the fact that ‘the majority of existing ATE policies would have been nullified due to some claimants having previous convictions.’ Pratten goes on to detail how Gallagher worked with a panel of UK and US insurers to craft sufficient ATE insurance cover for the sub-postmasters, which involved ‘working with a panel of insurers and reinsurers and tailoring the policy wording in 85 different areas.’ He describes the case as setting ‘a new precedent for ATE in the industry’, and emphasised that the bespoke nature of this policy shows ‘that standardised policies are rarely the best fit and that clients need an insurance broker that understands, and can cater to, their unique circumstances.’
Announcements Commercial

Omni Bridgeway Releases Market Update

Omni Bridgeway Limited (Omni Bridgeway, OBL) (ASX:OBL) announces an update on income and income yet to be recognised (IYTBR) from matter completions as well as provisional impairments of certain investments. Positive developments[1]
  • Following the 31 December 2023 period end, approximately A$48.9 million investment income has been generated, with A$18.4 million provisionally attributable to OBL (excluding performance fees on these completions):
  • Completion of three investments generating approximately A$28.1 million of income recognised (MOIC of 2.02x; IRR of 125%).
  • In principle settlement of three investments resulting in approximately A$20.8 million IYTBR.
  • This is incremental to the 2Q24 Investment Portfolio Report disclosures of A$187 million investment income generated in 1H24 from A$147.9 million income recognised and A$39.1 million IYTBR, with A$32.0 million provisionally attributable to OBL (excluding performance fees on these completions).
  • The A$289.7 million cash and receivables balance at 31 December 2023 does not include any cash proceeds from the additional matters stated above.
Negative developments
  • Case developments during the financial year to date (FYTD24) in OBL’s investments in associates have resulted in a A$14.9 million reduction of the carrying value of the OBL residual share. This mainly relates to a positive judgment for a Fund 1 investment, but at a significantly lower than expected amount. The judgment is subject to various appeal proceedings.
  • Case developments during FYTD24 in litigation investments classified as intangible assets have resulted in a A$33.2 million (A$12.9 million attributable to OBL) reduction of the carrying value. This mainly relates to adverse milestones associated with a funded law firm portfolio for which returns are cross collateralised. While OBL’s investment in this portfolio has achieved a positive return on invested capital overall, the remaining carrying amount is considered impaired under OBL’s accounting policies. Appeals are being pursued and may result in a reversal of the full impairment due to the cross collateralisation.
  • Case developments during FYTD24 in litigation investments classified as purchased claims have resulted in a A$6.3million (A$1.1million attributable to OBL) reduction of the carrying value. This mainly relates to two litigation investments for which the anticipated income is lower than expected or the anticipated duration has extended.
  • The above reductions in the carrying value of the investments are non-cash items.
The amounts stated above are subject to completion of the audit process and will be confirmed in the 1H24 Group Consolidated Financial Statements which will be released on 29 February 2024.  
  1. Fund 5 is not consolidated within the Group Consolidated Financial Statements, but the aggregate income figures in this section include 100% of any Fund 5 income recognised/IYTBR.