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Commercial Regulatory Issues

DAF Appeal in UK Supreme Court Could Endanger Third-Party Funding

As the European Union considers proposals for enhanced regulation and oversight of third-party litigation funding on the continent, there has been much speculation that the UK’s litigation finance industry could benefit from representing a more welcoming market. However, an ongoing appeal by the defendant in two group claims has the potential to disrupt the status quo of litigation funding in the UK, and create major problems for funders operating in the country. An article by Reuters provides an update on the appeal by truck manufacturer DAF, which is now set to be decided by the UK’s Supreme Court. DAF’s has been appealing two lawsuits brought by two groups of truck owners at the Competition Appeal Tribunal (CAT), which allege that that company took part in a cartel that fixed prices and slowed the progress of engine technology that reduced harmful emissions. DAF’s appeal centers around the argument that the claimant groups engaged in funding agreements that fail to comply with regulations that outline the parameters of damages-based agreements. DAF’s lawyer, Bankim Thanki, argued that the Supreme Court should not consider any effects on the wider litigation finance industry, as they are irrelevant to the validity of the appeal. However, the Association of Litigation Funders (ALF) has argued that if the court upheld the appeal on these grounds, then it would put the UK litigation funding industry “in a state of disarray”. The Royal Haulage Association (RHA), which brought one of the original cases against DAF, has highlighted that by permitting the defendant’s appeal, the court would seriously endanger every single collective proceeding in the UK, which all involve funding agreements.
Commercial Deals

Westfleet Advisors Release 2022 Litigation Finance Market Report

As noted in the recent GAO report, there is a distinct lack of publicly available data about the litigation funding industry, which has contributed to the lack of awareness and understanding of the practice by policymakers and legal professionals outside of the industry. However, a new report by Westfleet Advisors provides new insights into the most recent state of the market, and offers some interesting takeaways as to the current direction of litigation finance in the U.S. Westfleet Advisors’ 2022 Litigation Finance Market Report provides an overview of the American third-party funding industry, highlighting that the market continues to demonstrate strong growth, as new capital commitments from funders grew by 16% last year, to reach a total of $3.2 billion. Not only has the scale of new commitments continued to grow, but the average size of these investments has also risen to $8.6 million per transaction. Interestingly, the percentage of client-directed deals has dropped down to 31%, as lawyer-directed deals have become the dominant deal type, reversing the trend of 2021 which saw a near 50/50 split between client and lawyer-directed deals. Given the regularity with which patent litigation dominates the headlines for litigation funding, 2022 actually saw a decline of that market share down from 29% in 2021 to 21% last year. Westfleet suggests that this outsized representation of patent litigation cases being funded in 2021 may have been the result of several portfolio funding deals for patent lawsuits. More insights into the U.S. litigation finance market can be found in the full report.
Commercial

Funding Industry Faces Challenges Ahead

With the two high-profile examples of Lionfish and Novitas Loans having recently made headlines for their struggles, industry analysts and leaders are offering a cautionary perspective on those who see the practice as a guaranteed path to success. A new article by The Times features senior leaders from law firms and funders discussing the potential pitfalls that the funding industry could face, as well as the measures existing funders can take to stay ahead.  Martyn Day, managing partner at Leigh Day, suggests that the determining factor for success will be whether funders can find the right level of risk versus reward, and that in order for a funder to have long-term viability, it needs to have a sufficient level of capital to absorb any losses whilst still backing future cases. David Mann, managing partner of Mann Roberts Solicitors, goes a step further and argues that the industry may be suffering from an oversupply of funders without an equal volume of both valuable and meritorious cases, although the current economic instability may spur an increase in suitable cases to support these service providers. Factor Risk Management’s co-founder, Mohsin Patel, suggests that some parties have incorrectly seen litigation funding as a “pot of gold”, but emphasizes that established funders will be able to continually develop a track record and grow their expertise to offer more favorable investment opportunities. Ellora MacPherson, chief investment officer at Harbour, also points to the fact that successful funders are engaging in broader partnerships with law firms and providing capital to support these firms’ growth, without having to exclusively rely on high-risk investments in individual cases.
Commercial Deals

Big Law in the U.S. Remains Hesitant to Engage in Litigation Funding Deals

Litigation funders and law firms have produced powerful partnerships by combining the legal resources and capital needed to provide access to justice for many plaintiffs. However, despite this often mutually beneficial relationship, data from Westfleet Advisors’ latest research on the industry suggests that many of the big U.S. law firms are still taking a cautious and wary approach to engaging with third-party funding arrangements. An article from Bloomberg Law highlights the findings of Westfleet Advisors’ 2022 industry report, which states that the proportion of cases involving America’s 200 largest law firms has dropped from 41% to 28% between 2021 and 2022. Westfleet’s CEO, Charles Agee, suggests that part of this hesitancy from the big legal players stems from these firms being uncomfortable with the “cross-collateralized” pricing in portfolio funding that can lead to law firms having to pay back the invested capital after only one or two successful cases. Agee goes on to point out that due to this reluctance from some law firms to engage in portfolio funding with traditional funders, some have turned to more standard loan deals with hedge funds and alternative asset managers that offer comparatively lower interest rates. However, Agee stresses that this is not replacing the majority of deals that funders would engage in, and that the usual funder-law firm relationship still remains attractive to those outfits who would rather avoid traditional loan structures.
Commercial Regulatory Issues

Partner Resistance and Regulatory Uncertainty Remain Hurdles for Adoption of Alternative Business Structures

In recent years, we have experienced the relaxation of rules governing ownership of law firms in a small number of states, beginning with Utah in 2020 and Arizona in 2021. However, despite these developments, there has yet to be a wider adoption of Alternative Business Structures (ABS), with industry commentators suggesting that resistance to change among law firms stems from an unwillingness to divert from the traditional partnership model. A new article from The American Lawyer provides an overview of the current attitude towards ABS adoption in the U.S., highlighting both the resistance within the current leadership of law firms and the lack of regulatory unity within the country. Allen Fagin, senior adviser to Validity Finance, argues that control is the determining reason behind law firms’ hesitancy to changing ownership models, and that the possibility of partners losing their individual financial returns to outside investors is a major stumbling block. Despite the ongoing opposition to the practice from many law firms, litigation funders are looking for opportunities to make such investments, with Validity’s CEO Ralph Sutton stating that these align with the industry’s overall goal, which is to provide the capital needed to widen access to justice. Burford Capital has already made one such investment in PBC Litigation in the UK, with Burford’s co-founder Jonathan Molot pointing out that funders and law firms are really “natural partners”. However, the lack of regulatory cohesion between states in the U.S. will no doubt continue to present issues, and David Perla, co-COO at Burford, suggests that it will take time for all parties to become more comfortable with the new regulatory structure before there is wider adoption.
Announcements Commercial

LegalPay announces the exit of its First Litigation Financing SPV, generating more than 27% returns

LegalPay, India’s largest legal financier, has announced the exit of its commercial litigation financing SPV (Special Purpose Vehicle), delivering 27% IRR over a tenure of less than 2 years. LegalPay currently manages INR 2,500 crores in claims under management and looks to add additional INR 5,000 crores in calendar year 2023.  LegalPay, India’s leading legal financier, has announced the full exit of its Litigation Financing fund that it had started in August 2021. The Company funded late-stage commercial and arbitration litigations across India through this fund.  Under the supervision of its experienced leadership team, LegalPay uses an in-house proprietary technology using decision trees and scoring algorithms to screen and fund these commercial litigations. Such above-par returns are a testament to the Company’s robust technology-based screening, sourcing, and diligence infrastructure.  LegalPay was founded in 2019 by Kundan Shahi with the aim of financing legal expenses. LegalPay is India’s first and largest litigation and interim finance provider. It is backed by investors such as 9Unicorns. LegalPay finances dispute across sectors such as logistics, EPC, Saas, and financial services. Businesses are using litigation financing as a way to offload the cost and risk by paying a portion of the recovery only in the case of a successful outcome. In addition to the capital infusion to the dispute, LegalPay provides massive intangible value such as strategic expertise and legal professional network.  “We are proud to have generated such a high IRRs on our commercial disputes litigation financing fund, while demonstrating our expertise and strength of our technology infrastructure,” said Kundan Shahi, CEO of LegalPay. “We remain committed to solve the problem of legal financing and make such product an absolute necessity for businesses, regardless of their financial prowess.”  LegalPay has established itself as a market leader in litigation finance, and its strong performance as demonstrated by its fund closure reinforces its position as a market leader. The fund’s high IRRs is a positive development for the company and its stakeholders, highlighting LegalPay’s commitment to delivering value to its customers and shareholders.  LegalPay has also provided similar exit to its investors through their Health Care SPV where investors were able to make 26%+ IRRs in less than 9 months.  Currently, investors can diversify their portfolio on LegalPay’s platform and enjoy such benefits. They can invest in Interim Financing Bonds on LegalPay’s website. These bonds are fixed-income instruments to finance the expenses of companies undergoing the Corporate Insolvency Resolution Process (CIRP) which are linked to an individual’s DEMAT account. These diversified bonds are live on the website with a minimum investment of Rs.10,000/- and provide attractive and high-yielding returns between 14-16% on your investments.
Commercial Deals

Request for Funding in Irish Breach of NDA Case

A new request for funding by an Irish law firm seeks financing for commercial proceedings in the London High Court on behalf of a private company and two of its directors. The claim is being brought against an unnamed European Union state authority in relation to the alleged breach of a non-disclosure agreement which then led to the alleged theft of the plaintiff’s intellectual property. The EU state authority is reportedly one with “delegated responsibility for motorway infrastructure”, whilst the claimant’s intellectual property is described as “a patented micropayment solution”. The proposed defendants reportedly engaged in anti-competitive behavior and abused their power with regards to the “toll road collection business”, leading to the plaintiffs losing profits whilst the defendants gained. Interested parties should contact: doran@doranwotoole.com +353 1 204 2990 Doran W. OToole & Co Solicitors Bray Office County Wicklow Ireland
Announcements Case Developments Commercial

Winshear Gold Commences Arbitration Proceedings Against the Government of Tanzania for the Expropriation of Its SMP Gold Project

Winshear Gold Corp. (TSXV: WINS) (‘Winshear’, the ‘Company’, or the ‘Claimant’), formerly Helio Resource Corp., provides the following update on the dispute with the United Republic of Tanzania (“Tanzania”) which is the subject of arbitration through the International Centre for Settlement of Investments Disputes (“ICSID”), a member of the World Bank.

The Company reports that the evidentiary hearing commences today in Washington D.C.. A three-person tribunal panel is presiding over the court hearings, which are expected to conclude on or before the close of business on Friday February 17th, 2023.

The ICSID Convention has been ratified by 158 States, including Tanzania. An award issued by an ICSID tribunal is enforceable in any one of those 158 member States as if it were a judgment of one of their own courts.

Winshear is represented by the international law firms LALIVE and Boies Schiller Flexner in the arbitration process. Both firms specialise in international arbitration with the Claimant seeking compensation of in excess of CDN$130M for the loss of its investment in Tanzania (including interest which continues to accrue). In addition, the Claimant seeks reimbursement of its arbitration costs and fees by Tanzania.

A litigation funding facility for US$3.3M is in place with Delta Capital Partners Management (“DELTA”), a firm out of headquartered in Chicago Illinois that specializes in litigation funding. This funding facility covers all legal costs associated with arbitration and is only repayable in the event of a successful award that is recovered from the United Republic of Tanzania.

Background to Claim

In July 2017, the Government of Tanzania amended the Mining Act 2010 by, inter alia, abolishing the Retention Licence classification. The Company’s SMP Mineral Resource was wholly contained within four Retention Licences.

On 10 January 2018, Tanzania published the new Mining (Mineral Rights) Regulations 2018, which cancelled all Retention Licences at which point they ceased to have any legal effect. The rights over all areas under Retention Licences, including the Retention Licences held for the SMP Gold Project, were immediately transferred to the Government of Tanzania.

During the time from January 2018 to December 2019, the Company actively engaged with the Tanzanian Ministry for Minerals and the Mining Commission in an effort to resolve a suitable tenure mechanism for the Project Licence to be reinstated, without success.

On 19 December 2019, the Mining Commission of Tanzania announced a public invitation to tender for the joint development of areas covered previously by Retention Licences. The invitation provided that the successful bidder should compensate the previous Retention Licence holder.

On 20 December 2019, the Mining Commission of Tanzania announced a revised public invitation to tender, which removed the condition that the successful bidder compensate the previous retention licence holder.

Through the measures described above, Tanzania has removed the ownership of the Project from the Claimant, and the Claimant alleges that Tanzania, in doing so, has breached its obligations to the Claimant under the Canadian-Tanzania BIT and international law. These include, but are not limited to:

  1. Tanzania’s obligation not to nationalise or expropriate the Claimant’s investments or subject them to measures having effect equivalent to nationalisation or expropriation without prompt, adequate and effective compensation under the BIT; and
  2. Tanzania’s obligation to accord fair and equitable treatment and full protection and security to the Claimant’s investment and not to impair by unreasonable or discriminatory measures the maintenance, use, enjoyment or disposal of the Claimant’s investment under the BIT.

Under the BIT the evidentiary hearing underway in Washington is being video recorded and will be made available to the public for review. Winshear will make this available to shareholders and the public on its website when it is available.

About Winshear Gold Corp.

Winshear Gold Corp. is a Canadian-based minerals exploration company advancing the Gaban Gold Project in the Puno region of Peru. Gaban is a possible hard-rock source for the modern-day alluvial gold rush underway in the Madre de Dios basin downstream.

The Company is in the process of concluding fully funded arbitration proceedings against the Tanzanian Government to recover its investment and damages for the expropriation of its SMP Gold Project in Tanzania.

For more information, please contact Irene Dorsman at +1 (604) 200 7874 or visit www.winshear.com

ON BEHALF OF THE BOARD OF DIRECTORS

“Richard D. Williams” Richard Williams, CEO

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Cautions Regarding Forward-Looking Statements

This news release includes certain statements and information that may contain forward-looking information within the meaning of applicable Canadian securities laws. All statements in this news release, other than statements of historical facts, are forward-looking statements and contain forward-looking information.

Generally, forward-looking information can be identified by the use of forward-looking terminology such as "intends" or "anticipates", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "should", "would" or "occur". Forward-looking statements are based on the opinions and estimates of management as of the date such statements are made and they are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking statements or forward-looking information, including the risks normally associated with arbitration cases. Although management of the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements or forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements and forward-looking information. The Company does not undertake to update any forward-looking statements or forward-looking information that are incorporated by reference herein, except in accordance with applicable securities laws.

Commercial Deals

Harbour Survey Shows UK Lawyers Are Eager to Launch New Firms

The legal sector is undergoing a period of dynamic change, with litigation practices experiencing high demand for their services, despite the strain placed on firms’ budgets amid global economic instability. New research suggests that experienced legal practitioners in the UK are now seeing opportunities to grow outside of the traditional system of legacy firms. The Law Society Gazette reports on a new survey produced by leading litigation funder, Harbour, which revealed that 50 percent of law firm partners interviewed are “seriously considering setting up their own practice.” The research commissioned by Harbour uncovered that this consideration of breaking away from their parent firms is being driven by a desire to gain independence, improve their working conditions, and retain a higher portion of profits. Harbour’s chief investment officer, Susan Dunn, stated that partners are attracted by the “flexibility and financial benefit” that is provided by launching their own outfit. Interestingly, this trend was not just seen among partners at the large household names of the legal industry but also among “smaller firms, and across the regions” of the UK.