Disclosure of litigation funding remains one of the most discussed industry topics as we head into the end of the year, with disclosure requirements and disputes occurring in jurisdictions around the world. In the realm of international arbitration, one funder argues that disclosure should not be viewed as a negative, but as a useful tool for strengthening the client’s claim. Outlined in a new piece of analysis by William Panlilio, an investment manager at Litigation Capital Management (LCM), the issue of disclosure in international arbitration is reframed to focus on its benefits for funders. Mr Panlilio points out that while there are no formal rules around disclosure in this area, it is generally accepted that both the presence as well as the identity of litigation funders in international arbitration should be discoverable. Panlilio argues that this should not be seen as undesirable, as the existence of a funding arrangement can act as a strong signal to all parties concerned that the claim is supported by a third-party who has assessed it as being substantial and likely to succeed. Additionally, it can dissuade the opposite party from engaging in stalling tactics in the hope of draining a claimant’s financial resources. Panlilio does specify that discoverability should not be exhaustive, as the details and exact nature of a funding arrangement should not play any role in a tribunal’s decision-making, nor is it relevant to the merits of a claim.

Litigation funding is perhaps at its most impactful when it can be used by individuals or groups of citizens to hold their government to account. A new class action in Australia is once again demonstrating this impact, as a leading funder is supporting a new action by Aboriginal communities against the regional authorities. Detailed in an article by National Indigenous Times, the Northern Territory’s public housing body is facing a class action suit brought by Aboriginal remote community residents who allege that the regional government has failed to ensure that local housing meets safety standards. The class action brought by residents of Gunbalanya is being funded by CASL, and takes aim at both the Territory and Commonwealth governments for failing to resolve tenant complaints about the quality of housing. Madeline White, a senior associate at law firm Phi Finney McDonald, which is leading the case, argued that this class action is not only about securing compensation for those residents involved in this lawsuit, but also for the wide array of remote Aboriginal communities throughout Australia. This is also not the first case of its kind, with similar lawsuits being brought in 2016 and 2019 by communities in Santa Teresa and Laramba.

Regulatory developments are at the front of mind for funders around the world, with significant proposals being discussed to place restrictions on third-party funding in the European Union, whilst other jurisdictions look to open their legal systems to increased involvement from funders. In a welcome development for funders in Australia, the government has made good on its commitment to reverse litigation funding restrictions put in place by the prior administration. In an announcement by the Department of the Treasury, the Australian government announced that its plans to exempt funders from investment regulations have now come into force. This reversal of the previous government’s position, which LFJ reported on in September, means that funders will once again be exempt from regulations including the managed investment scheme and Australian financial services licensing, according to a release by the Australian Securities & Investment Commission. Stephen Jones, the Assistant Treasurer and Minister for Financial Services, said in the statement that litigation funders play a crucial role in the government’s broader aim to widen access to justice. He also stated that the Treasury would continue to evaluate the Australian Law Reform Commission’s wider recommendations, to ensure that the country’s class action regime would produce ‘fair and reasonable outcomes’.

This Sunday’s “60 Minutes” featured a segment on the growth of litigation funding. Host Leslie Stahl highlighted the industry’s important role within the Legal Services sector, but also pointed out the lack of regulatory oversight which can lead to ethical concerns. “Litigation funding can help in cases where otherwise the little guy who’s suing would just get crushed or lowballed by defendants with deep pockets,” Stahl explained as part of her opener on the necessity of the funding industry. “The problem is, this market is exploding, with almost no rules or oversight.” Stahl profiled a litigation funding claimant: Craig Underwood’s family farm. Underwood had one customer—a hot sauce maker. When that customer pulled out of a contractual obligation, Underwood faced financial ruin. He sued his former client and won a breach of contract claim.  But the hot sauce maker appealed, and Underwood couldn’t afford to keep fighting. That’s when he heard of litigation funding, and found Burford Capital. Underwood took $4MM from Burford to continue fighting, and won the appeal and the $23MM. When it was all said and done, Underwood still had to pay his attorneys, and then compensate Burford to the tune of $8MM. Asked whether he thought that payment amount was predatory, Underwood emphatically said no, given that Burford stepped in and funded his case when no one else would. “They basically rescued us.” Christopher Bogart, co-founder and CEO of Burford, noted that on average, the funder will double its money on a successful outcome, explaining that funders take enormous risk, given the non-recourse nature of their investments. He emphasized that Burford has a roughly 90% success rate. Stahl then interviewed Maya Steinitz, law professor at University of Iowa, who pointed out the ethical considerations at play here. Steinitz explains that although funders like Burford claim not to interfere in how a case is managed, there is nothing legally stopping a funder from compelling a client to settle. Consumer Legal Funding was also featured prominently in the program, where Stahl explained that the funding helps poor people pursue their legal claims. Yet she also pointed out how claimants are routinely charged very high interest rates by funders, highlighting RD Legal Funding’s alleged ‘predatory behavior’ in the 9/11 victims’ compensation fund case. The program concluded by pointing out how essential litigation funding is to American society. “Accessing the courts in a civil process is a luxury good in America” explained Maya Steinitz.  “It’s simply too expensive to bring your case in a court.”  That said, Steinitz is calling for more oversight of this largely unregulated industry.

ESG financier and litigation investor Woodsford is proud to announce a new class of team members joining the firm's global enterprise.  Amar Singh Mann, David Haighan and Jordan Howells will join Woodsford's London, United Kingdom office. Cody Nguyen is slated to enter Woodsford's Brisbane, Australia office. Additionally, Woodsford announced that former Australian Federal Magistrate, the Honorable Neil McKerracher KC will join the firm's global investment advisory panel. Woodsford says that Australia continues to be an emerging market for litigation finance innovation. Woodsford's appointment of Howells as Senior Investment Manager is rooted in his wealth of experience, including 14 years of public and private organizational investigation, litigation and negotiation for ESG malfeasance. Woodsford plans to engage Howells' prosecutorial acumen that includes liaising with the United States Department of Justice, Securities and Exchange Commission and Serious Fraud Office. Steven Friel, Woodsford's Chief Executive Officer, says that the firm's new international appointments are indicative of cross border litigation investment innovation. Friel goes on to say that Woodsford's international footprint in ESG justice is expected to represent some of the highest standards in the world.

The nature of litigation funding means that it is often most sought after and most valuable in situations where unforeseen events lead to dire consequences for a wide array of parties. As a new piece of analysis suggests, the interconnected nature of the global economy and financial markets means that such situations could increase in frequency and trigger a higher volume of lawsuits requiring funding. This analysis by Jason Levine, investment manager and legal counsel at Omni Bridgeway, uses the example of the latest scandal in the cryptocurrency world: the collapse of FTX, to illustrate the danger of these ‘black swan’ events. Levine points out the unanticipated and massive financial losses that occur in such events, acting as a catalyst for a strong litigious response which can be enabled and bolstered by the use of third-party funding. Levine highlights that in situations where corporate plaintiffs are damaged by these black swan events, they may lack the liquidity to pursue litigation due to the financial strain imposed by the event. He also points to the fact that during these challenging times, taking on the costs of litigation may result in a hit to company valuation, and so, the use of litigation finance to shift these costs off the balance book can become particularly important. Levine concludes that if we do see an increase in the number and scale of these black swan events, particularly in the currently unstable financial markets, litigation funding will be a vital tool for corporates to seek redress and compensation through the legal system.

Although the issue of disclosure has primarily been discussed in recent months with relation to US plaintiffs being required to disclose details of their funding arrangements to the courts, a ruling in another jurisdiction appears to signal a victory for clients looking to disclose confidential information to their funders.  Detailed in a piece of analysis by Ogier, a law firm specializing in offshore matters, a new ruling by the Court of Appeal in the British Virgin Islands (BVI), affirmed the right of clients to disclose certain confidential case details to their funders where necessary. In the case of Fang Ankong v Green Elite Limited, the Court agreed with the precedent set by the English High Court, that the ability of funders to access such information does fall within the ‘purposes of proceedings.’ Ogier’s analysis noted that this is an important victory for funders and their clients, as it ensures they will be able to share information that could be used to assess the viability of future funding, thereby creating a more transparent process and one in which funders are less likely to be blindsided by information relevant to evaluating funding decisions. However, the analysis did note that this ruling only applies to cases within the BVI, and where cases involve proceedings in other jurisdictions, this guarantee is not automatically assured.