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Commercial Deals

Navigating the Complex Challenges Faced by Litigation Funders Today

In the dynamic landscape of litigation finance, funders are constantly navigating various challenges that impact their operations and profitability. This article delves into three key challenges faced by litigation funders today: high interest rates, the potential of a global recession, and the geopolitical issues stemming from escalating tensions between Western countries and Russia and/or China. Challenges from High Interest Rates One of the primary challenges faced by litigation funders is the impact of high interest rates. Litigation finance involves providing funding to claimants in exchange for a share of the potential settlement or award. The return on investment for funders largely depends on the successful outcome of the litigation. However, high interest rates can erode the profitability of these investments, especially in cases with prolonged litigation timelines. Litigation funders have benefits from a climate of low interest rates for years now. However those days are long gone. When interest rates are high, funders face the dilemma of balancing their desire for a reasonable return with the affordability of financing for claimants. Excessive interest rates can discourage claimants from seeking litigation finance, thereby reducing the pool of potential cases for funders to consider. Striking the right balance becomes crucial to maintaining a sustainable business model. Challenges from a Potential Global Recession The specter of a global recession poses significant challenges for litigation funders. During economic downturns, businesses and individuals often face financial constraints, leading to a surge in legal disputes. While this surge may present an opportunity for litigation funders to invest in potential claims, it also exposes them to increased risk. In a recessionary environment, the financial viability of potential defendants may be compromised, impacting the recoverability of potential judgments or settlements. Moreover, increased financial distress can lead to a rise in opportunistic claims or frivolous litigation, requiring thorough due diligence by litigation funders to identify viable cases. Furthermore, in times of economic uncertainty, funding sources for litigation finance may become scarcer and more expensive. This scarcity can limit the availability of capital for funders and make it harder for them to maintain a diversified portfolio of investments. Effective risk management and careful selection of cases become vital in navigating the challenges posed by a potential global recession. Challenges from Geopolitical Issues Caused by Increasing Tensions The escalating tensions between Western countries and Russia and China present unique challenges for litigation funders. Geopolitical issues, such as trade disputes, sanctions, or diplomatic conflicts, can directly impact the outcome of cross-border litigation cases, potentially hindering the enforcement of judgments or settlements. Litigation funders must navigate the complexities of different legal systems, regulatory frameworks, and political dynamics when investing in international cases. Tensions between countries can result in uncertainties and delays in the resolution of disputes, affecting the potential return on investment for funders. Additionally, geopolitical tensions can influence the perception of risk associated with investing in certain jurisdictions. Investors may become hesitant to finance litigation in regions where the rule of law is perceived to be weak or where political volatility raises concerns about the enforceability of judgments. Litigation funders must carefully assess these risks and employ robust risk mitigation strategies when considering international investments. Conclusion Litigation funders face a myriad of challenges in today's evolving landscape. High interest rates, the potential of a global recession, and geopolitical issues arising from escalating tensions between Western countries and Russia / China all pose significant obstacles to the success of litigation finance.  To overcome these challenges, funders must exercise prudence in their investment strategies, diligently assess risks, and adapt to the changing dynamics of the legal and geopolitical environments. By doing so, litigation funders can navigate these challenges and continue to play a crucial role in supporting access to justice and driving the growth of the litigation finance industry.
Commercial Legal Innovation

Insights from ILFA’s Annual European Conference

Last week saw the return of ILFA’s annual litigation finance conference, as leaders from the top funders, law firms, investors and insurers gathered to discuss the most-pressing issues in the industry. An article from CDR provides a recap of some of the key takeaways from the conference, particularly highlighting comments from Chris Bogart, Burford Capital’s chief executive, who criticized the Solicitors Regulation Authority (SRA) for hindering efforts by funders to take a more active stake the ownership of law firms. Bogart offered a scorching rebuke of the UK’s inability to adapt following the passage of the Legal Services Act in 2007, arguing that any progress “has been completely stymied by the bureaucratic ineptitude of the regulators here.” Neil Purslow spoke to the current environment of a stagnant economy and high inflation, Therium’s chief investment officer pointed out that the funding industry had previously benefited from “historically low interest rates” and must now adapt to the new normal.. Omni Bridgeway’s Andrew Saker argued that there were both benefits and risks in the current market, suggesting that whilst defendants may look at “the possibility of resolving measures more expeditiously”, funders would still be faced with the rising cost of capital impacting their business models. Meanwhile, independent litigation funding adviser Mikołaj Burzec provided insights on a new paper published by ILFA: “Resourcing the Rule of Law in Europe”, which analyses and critiques the European Union’s proposed regulations for the litigation finance industry. Burzec highlighted ILFA’s argument that the EU should wait for the full implementation of the Representative Actions Directive (RAD) and assess the resulting impact, before imposing further regulations on third-party funding.
Commercial Deals

Litigation Funding as a Powerful Tool for ESG Progress

The intersection of litigation finance and the drive towards progress in the ESG arena are often discussed as a great opportunity for the former, with numerous litigation opportunities arising from society’s shift towards a more responsible business culture. However, it can also be argued that litigation funding may prove to be one of the best tools available to realize a positive impact in terms of encouraging businesses to adhere to their proclaimed ESG strategies. An article in Reuters examines the utility of litigation finance in pursuing an ESG agenda, with insights from Lucy Glyn, director at Exton Advisors. Glyn highlights that funders are already engaged in ESG investments through a number of cases, with this provision of outside capital allowing claimants to pursue cases they usually couldn’t finance themselves, and thereby “enabling them to ultimately to hold companies to account for ESG failures.” Glyn points to investor-led lawsuits as a particularly strong avenue for ESG litigation funding, as investors recognise that it can be used to pressure unwilling boardrooms to make changes and at a strategic level, litigation funding can “serve as a catalyst for changes to promote responsible business practices.” Outside of targeting businesses who are not meeting ESG standards, third-party funding will also hopefully be an asset for those groups who wish to see meaningful changes from governments on a policy or regulatory level through targeted litigation.
Announcements Case Developments

LegalPay announces 2nd interim finance exits with 23% returns in SARE Gurugram

LegalPay, India’s first and largest third party litigation funding platform, has announced its second successful exit in the interim finance segment in last one year with 23% IRR (internal rate of returns).
The interim financier based in Delhi-NCR has achieved a successful exit from its investment in SARE Gurugram Pvt Limited (Sare Gurugram) within a short span of 11 months. In August of the previous year, the financier had provided undisclosed interim finance to the debt-laden real estate company.
Interim finance is a short-term lending granted  granted to the debt-ridden companies undergoing corporate insolvency resolution process (CIRP). Sare Gurugram, the unit of Sare Homes, had defaulted on dues to creditors for a construction of a township in outskirts of Delhi.
SARE Gurugram was admitted under Corporate Insolvency Resolution Process (CIRP) in March 2021 following a petition filed by Asset Care and Reconstruction Enterprises Limited. In April of this year, the National Company Law Tribunal (NCLT) approved a debt resolution plan to revive SARE Gurugram Private Limited, located in the NCR region. The plan was proposed by a consortium consisting of KGK Realty (India) Private Limited and Dhoot Infrastructure Projects Ltd.
Commenting on the exit, Kundan Shahi, Founder and CEO of LegalPay said, “This successful resolution of SARE Gurugram underlines LegalPay's commitment to providing innovative financial solutions that not only revive such businesses under insolvency but also contribute to the growth and development of the legal & insolvency industry.”
“We are grateful for the trust and collaboration of all stakeholders involved, and we remain dedicated to driving positive change and creating a thriving ecosystem for all,” he added.
LegalPay's ability to deliver exceptional returns while safeguarding the corporate debtor’s interest underscores the company's meticulous due diligence, comprehensive risk assessment, and strategic decision-making.
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Founded by Kundan Shahi in 2019, LegalPay is a leading player in the insolvency financing domain & India’s largest provider of litigation financing. It consistently navigates the complexities of the legal financing landscape to generate impressive results for its investors and helping such companies maximize their asset value.
Backed by 9Unicorns, Ambarish Gupta and well-known entrepreneur-turned-investor and global philanthropist Ashwini Kakkar, LegalPay operates on a ‘No Win No fee model’ which means that parties are only required to pay upon successful realization of the claim amount.
At present, the company manages over ₹ 2,500 crores in claims under management through its AI and technology-enabled platform and expects to raise it to ₹ 5,000 crores in CY 2024.
It's first interim finance exit was from Yashomati Hospitals in February last year.
Announcements Commercial People Moves

Omni Bridgeway announces U.S. legal industry leaders appointed to its Investment Committee

Omni Bridgeway is pleased to welcome Leora Ben-Ami and the Honorable Winifred Y. Smith (Ret.) to its Investment Committee. These nationally regarded legal industry professionals bring decades of experience and a wealth of knowledge to Omni Bridgeway's investment process. Ms. Ben-Ami will leverage her extensive background in intellectual property to review and evaluate cases relevant to the company's global IP portfolio. Judge Smith joins the US Investment Committee, where she will consider a variety of complex commercial cases. Ms. Ben-Ami is a renowned intellectual property attorney with a focus on biotechnology, life sciences and pharmaceuticals. She has extensive trial experience as lead counsel including arguing before the U.S. Court of Appeals and within the Federal Circuit. In addition to taking on leadership roles at various AmLaw Global 200 firms, Ms. Ben-Ami sits on the board of the New York Intellectual Property Law Association. The Honorable Winifred Y. Smith (Ret.) is a distinguished jurist, having served on the bench of the Alameda County Superior Court for over two decades adjudicating complex civil litigation matters and numerous questions of first impression. She was selected as Presiding Judge in 2015-2016 and later retired following her service in the Complex Civil Litigation division. Judge Smith also lent her experience as a Justice Pro Tem for the California Court of Appeal, First Appellate District, Division Four. In 2021, she was awarded Trial Judge of the Year by the American Board of Trial Advocates. Prior to her career on the bench, Judge Smith was a Deputy Attorney General with the California Department of Justice's Office of the Attorney General for 26 years. "We are thrilled to have these top legal minds on our Investment Committee," said Matt Harrison, Managing Director and co-Chief Investment Officer for the US. "With the addition of Ms. Ben-Ami and Judge Smith, claimants, sophisticated litigators, and companies seeking dispute and litigation funding can be confident our investment process continues to establish the highest standards in the industry." Managing Director and co-Chief Investment Officer for the US, Jim Batson, said "We are delighted to welcome the decades of experience from Ms. Ben-Ami and Judge Smith. It is important to continue to add members to the Investment Committee who bring diversity of thought from a range of experiences and backgrounds." "Ms. Ben-Ami has the ideal background for our global portfolio of intellectual property matters. Her experiences as a practice leader and trial attorney give her a unique perspective which will be invaluable to our internal and external stakeholders," commented Sarah Tsou, Portfolio Manager - Global Intellectual Property and Senior Investment Manager.
Commercial Deals

Lansdowne Oil & Gas Exploring Funding for Claim Against Irish Government

Litigation and arbitration pursued against national governments has a mixed history, with successful claims brought where governments have harmed companies’ interests through unlawful action, such as the ongoing Sulu dispute. However, what is clear in many of these cases, is that litigation funders can play a powerful role in supporting individuals or companies to seek legal redress against the otherwise immense power of the state. An article in The Times highlights another potential example of litigation funders backing claims against national governments, as the exploration company Lansdowne Oil & Gas announced that it is in talks with funders over the possibility of financing a case against the Irish Government. The claim, which is being brought through international arbitration, alleges that the Irish government “failed to act in a fair and reasonable manner” under the Energy Charter Treaty (ECT), when it withdrew an exploration license for the Barryroe prospect. Lansdowne, which owns a 20 per cent stake in the prospect, announced that it had been approached by several funders and that early discussions were met “with positive feedback”. Lansdowne has enlisted Ashurst to lead the arbitration proceedings, with the law firm having provided a settlement offer that the Irish government must respond to within three months.  Eamon Ryan, Minister for the Environment, Climate and Communications, stated that the government had concerns about the “financial capability” of Lansdowne and Barryroe Offshore Energy, with the latter controlling the other 80 per cent stake in the prospect.
Case Developments Commercial

Legal Battle Between Burford and Sysco Ends as Both Parties Dismiss All Claims

Whilst funders and claimants almost always have a harmonious and mutually beneficial relationship, there are rare occasions where that partnership breaks down and contentious disputes emerge during the course of litigation. One such dispute that broke out in March of this year between Burford Capital and its client Sysco Corp has come to an end, with both parties mutually agreeing to drop all litigation and arbitration against one another. Reporting by Bloomberg Law provides insight into new court filings which have revealed that Burford and Sysco have dismissed all claims with prejudice, with neither party providing a comment or statement on this development. As for the original antitrust lawsuits Sysco had brought against poultry suppliers, the court filings reveal that all these claims have been assigned to Carina Ventures LLC, a Burford affiliate. The ongoing dispute between Burford and Sysco had proven to be a lightning rod for critics of litigation finance, as Sysco had alleged that Burford had blocked settlements in two lawsuits and seemingly accused the funder of unduly controlling the litigation. Burford had refuted these allegations and asserted that Sysco had violated the terms of the original funding agreement, thereby giving the funder the power of veto over the settlements.
Commercial Deals

TikTok Confirms it is Funding Users’ Lawsuit Against Montana

There are occasions when we see novel approaches to litigation financing, as has been demonstrated by a global social media company providing the financial backing for a lawsuit brought by its own users against the government. An article by The New York Times outlines a development in the case of five TikTok creators who filed a lawsuit against the state of Montana last month, alleging that Montana’s legislation banning TikTok violated their First Amendment rights. However, it has now been revealed in a statement by TikTok, that the company is covering the costs for this lawsuit, with spokeswoman Jodi Seth stating: “We support our creators in fighting for their constitutional rights.” The TikTok creators were approached by lawyers from Davis Wright Tremaine, who are now representing the claimants, and informed the individuals that TikTok would support them in both filing and funding the lawsuit. Ambika Kumar, partner and co-chair of Davis Wright Tremaine’s media law practice, pushed back on any suggestions that the social media giant’s involvement was an issue, arguing that “the fact that TikTok is paying for the suit is irrelevant to the legal merits of the case.”
Commercial

Chambers & Partners Release its Litigation Support Guide for 2023

The Chambers & Partners rankings provide an annual guide to the top firms in each region and practice area, as well as highlighting the established industry leaders alongside the rising stars to watch in these companies. This week, Chambers & Partners released its Chambers Litigation Support Guide for 2023, which includes rankings for over 250 individual practitioners and more than 340 firms, including practice areas such as litigation funding, forensic accounting, business intelligence and investigations, and PR and communications. In the Global-wide ranking covering litigation funding for international arbitration, Chambers ranked Harbour, LCM, Therium, Burford Capital, Fortress Investment Group and Omni Bridgeway as Band 1 firms. Nivalion, Parabellum Capital, and Profile Investment were also recognized as strong funders in Band 2. Chambers also provided rankings by region with guides available for Australia, Canada, Europe, Latin America, the Middle East, South-East Asia, the United Kingdom, and the United States. Within the most active markets such as the UK and US, Chambers provides guides to firms specifically involved with litigation funding for insolvency or for litigation funding brokers. All the rankings can be accessed through the Chambers Litigation Support Guide hub.