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SIGNIFICANT MILESTONE IN ESG ACTION BROUGHT AGAINST AIRBUS IN AMSTERDAM

The District Court in Amsterdam has delivered a significant decision in a ground-breaking ESG action brought against Airbus. The action is organised and funded by the ESG team at Woodsford. Airbus SE is a European headquartered, multinational aerospace corporation. Airbus designs, manufactures and sells civil and military aerospace products worldwide. In one of the most egregious breakdowns of ESG in recent years, it came to light in the course of investigations by the French Parquet National Financier, the U.K. Serious Fraud Office, and the US Department of Justice that Airbus had engaged in bribery and corruption on a global scale. In January 2020, Airbus agreed to pay penalties of approximately US$4 billion plus interest and costs to resolve foreign bribery charges with US, French and UK authorities. These matters led to a significant drop in Airbus’ share price. Airbus investors who suffered significant losses as a result of these breakdowns in ESG, and Airbus’ failure to disclose them to the market in a timely manner, fall into two main categories - those who trade in Airbus securities within the US, and those who trade in Airbus securities in Europe (France, Germany and Spain). In May 2022, Airbus agreed a multimillion-dollar settlement (subject to U.S. court approval) in the US with investors who fall into the former category. However, the vast majority of affected investors fall into the latter category. Airbus has not yet settled with, and has therefore not yet been held accountable to, investors who trade Airbus securities in Europe. Woodsford brought the above ESG failings, and Airbus’ failure to disclose them to the market in a timely manner, to the attention of major international, institutional investors, and has organised them into a special purpose entity, called Airbus Investors Recovery Limited (AIRL), to engage with Airbus. AIRL has commenced legal proceedings against Airbus in Amsterdam. Woodsford also supports Airbus Investor Recovery Stichting (AIRS), which is also litigating against Airbus. AIRL and AIRS are advised and represented by the Amsterdam office of international law firm Scott+Scott. Unfortunately, it is common for big corporates to react to investor concerns by delaying and obfuscating ESG actions like this. In a move that would have delayed AIRL’s Dutch action, Airbus asked the District Court in Amsterdam to refer the case to the European Court of Justice (ECJ), and to stay (i.e. suspend) the Dutch action pending the outcome of the ECJ referral. Further, Airbus argued that, contrary to AIRL’s simple suggestion that Dutch law should apply to the case on the basis inter alia that Airbus has its statutory seat in The Netherlands, Airbus argued that some combination of French, German and Spanish law might apply. This could have led to delay and unnecessary complications in the resolution of the litigation. In a decision dated 27 July 2022, the Dutch court found against Airbus, and has agreed with AIRL, on these points. The matter will proceed before the Dutch court, and Dutch law will apply. There will not be a reference to the ECJ and there is no reason to otherwise stay the proceedings. Airbus was not granted leave to appeal the decision. The Dutch court therefore will now address the merits of the matter with Airbus being required to make substantive submissions later this year. Steven Friel of Woodsford commented: “This is an important milestone in AIRL’s efforts to hold Airbus to account for the losses suffered by investors due to catastrophic breakdowns in ESG at Airbus. I hope that Airbus takes the decision of the Amsterdam court as a prompt to engage seriously with AIRL with a view to settling these proceedings. It is in the interests of all concerned that this unfortunate episode in Airbus’ corporate history is finally brought to an end.” About Woodsford Since 2010 Woodsford has been helping to hold corporates to account for their egregious behaviour. Whether it is helping consumers achieve collective redress, ensuring that inventors and universities are properly compensated when Big Tech infringes intellectual property rights, or helping shareholders in collaborative, escalated engagement up to and including litigation with listed companies, Woodsford is committed to ESG and access to justice. Working with most of the world’s leading law firms, our strength lies in the combination of our legal experience, investment, business and technical expertise, together with significant financial resources.
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Commercial Deals

UK Startup Funder Seeks to Meet Regional Demand for Small Cap Funding

Litigation funding in the UK has been largely dominated by national or even global firms based out of London, who have traditionally focused on the lucrative market within the capital and surrounding regions. However, a new funder is seeking to widen access to financing for underserved regions in the country, with Thaxted Capital launching its new service out of Manchester. Speaking with the University of Cambridge’s Judge Business School, Jack Bradley-Seddon, founder of Thaxted Capital, described the need for wider regional representation, as well as funders who cater to the small-cap funding cases that require under £1 million in commitment. Thaxted has already secured £25 million in funding from Sandton Capital Partners, which singled out the new firm as a much-needed entrant into the market that can bring a unique approach. Mr Bradley-Seddon is also an alumnus of the Judge Business School, where he was awarded an EMBA in 2020, and has previously worked as an associate at both Akin Gump Strauss Hauer & Feld and Bench Walk Advisors.
Commercial Legal Innovation

New Italian Funder Promises To Combine Experience With Technology

As LFJ has been reporting, the European litigation funding market is continuing to grow and is predicted to see rapid expansion in the forthcoming years. This is reflected in the wave of new startup funders launching throughout the region. Just this week, a new Italian funder has arrived on the market: Lexcapital. In an article for Legal Community, one of the founders of Lexcapital, Giuseppe Farchione, spoke about the company’s innovative approach, which will combine the founders’ many years of experience, as well as the harnessing of new technologies to accurately assess the likelihood of a successful claim. At the heart of this proposition is a proprietary algorithm, Litigation Assessment, which the funder claims will save time and resources when evaluating the probability of a profitable return when engaging in a case. Mr Farchione comes from RSM, where he was a partner leading their special situations team, and is joined in the management of Lexcapital by Francesco D’Addario, Manuel Caccone and Giovanni Latorre.
Announcements Commercial People Moves

Therium Adds Four Investment Managers To Its Transatlantic Investment Team In London And New York

Therium Capital Management, the world’s leading global provider of legal finance, today announced that it has added four investment managers to its transatlantic investment team, Chris Wilkins and Charlie Temperley in London and Corey Banks and Joshua Card in New York.

Neil Purslow, Founder and Chief Investment Officer at Therium said: “We are delighted to welcome these four investment managers to our transatlantic investment team. Their strong legal know-how and experience of high-value litigation and arbitration across jurisdictions will add to our high-calibre investment team, as we continue to invest in a broad range of cases across the legal sector.

Alongside our investment team, they will work on cases right through from origination to completion. This unique approach allows our investment managers to build strong and enduring relationships with clients,get under the skin of the complex matters, be incredibly responsive and deliver top quality execution.”

Therium has now added five investment managers to date this year, including Fred Bowman who joined in January. The new investment managers will provide legal finance to meritorious cases, law firms and corporates through a range of innovative financing structures.

Corey Banks who will be based in New York has over five years’ experience as a commercial disputes associate at prominent New York law firm Wachtell, Lipton, Rosen & Katz, where he worked on a broad range of funded commercial disputes, including corporate and financial matters, breach of contract, antitrust/ competition and bankruptcy litigation. Previous roles include clerking at a US District Court and the Second Circuit US Court of Appeals. Corey also worked as an Associate at Clearly Gottlieb Steen & Hamilton. He graduated magna cum laude from Harvard Law School and holds a BA in International Relations and Japanese from Tufts University, Massachusetts.

Joshua Card, also based in New York joins from Sidley Austin’s where he was a senior managing associate in the Commercial Litigation and Disputes and Securities and Shareholder Litigation practices. Prior to this, Josh worked at Wachtell, Lipton, Rosen & Katz. He has experience of M&A cases, corporate governance litigation, white collar criminal matters and other corporate and securities matters, including commercial arbitration. Josh has also been a law clerk at a US District Court and the Second Circuit US Court of Appeals. He holds a BA in Political Science from Amherst College and obtained a Juris Doctor, magna cum laude from Brooklyn Law School.

Charlie Temperley, based in London, previously worked at Michelmores and Womble Bond Dickinson, where his practice encompassed a broad range of commercial litigation including high value, multi-jurisdictional disputes and enforcement actions. He has experience working on commercial contract claims, group actions, civil fraud and asset tracing, trusts and probate disputes, shareholder disputes, professional negligence, property litigation and joint venture breakdowns. Charlie holds a First-Class Joint Honours degree in Mathematics and Philosophy from the University of Nottingham and an MPhil in Philosophy from the University of Cambridge. He completed a Graduate Diploma in Law and Legal Practice Course at the University of Law, Guildford.

Chris Wilkins, also based in London, joins after nine years as a solicitor at Slaughter and May. In the Disputes and Investigations Group, his practice focused on resolving large-scale, complex and often multi-jurisdictional disputes for large corporates, including FTSE 100 companies, across a wide range of industry sectors. He has advised on cases in the High Court and Competition Appeal Tribunal, as well as international arbitrations. Chris holds a First Class Honours degree in History from King’s College London and a Master’s degree with Distinction in International Relations from the London School of Economics. Chris completed a Graduate LLB at the University of London and a Legal Practice Course at BPP Law School.

 About Therium Capital Management:

Therium is a leading provider of investment capital to the legal industry and one of the largest, having raised over $1bn since 2009. With investment teams in the UK, USA, Australia, Germany and Norway, Therium has funded litigation and arbitration claims exceeding $40 billion, including many of the largest and most high profile funded cases in the UK and internationally and arbitrations under rules of the LCIA, ICC, UNCITRAL, LMAA, AAA, CIETAC, ICSID, Stockholm Chamber of Commerce and the Energy Charter Treaty. Therium has been Top Ranked by Chambers and Partners and Leaders League with investment officers across the UK, Europe, USA and Asia Pacific recognised as leading individuals in litigation finance.

To mark the firm’s tenth anniversary, Therium Access was launched in 2019 as a not-for-profit venture to fund a wide range of access to justice projects and cases – supporting the most vulnerable in our society and helping to bridge the widening justice gap. With its own board composed of eminent figures from the legal community and a dedicated grants officer, Therium Access has made over £1.3 m in financial commitments over the last 18 months to over 26 different organisations. As the first initiative of its kind, Therium has been shortlisted for several awards for launching this ground-breaking initiative, including the FT Innovative Lawyer Awards 2019, The Lawyer Awards 2021 and the Lexis Nexis Awards 2020 and 2022.

Therium also invests in AI and software projects to accelerate the advancement of the industry. As a founding member of ALF, ILFA and the Litigation Funding Working Group, Therium is also committed to shaping the future of legal finance and setting high standards for the industry.

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Commercial Special Features

Key Takeaways from LFJs Special Event: How Investors Approach Litigation Finance

On Thursday, July 14th, Litigation Finance Journal hosted a digital event, “How Investors Approach Litigation Finance.” The event featured a unique cross-section of investor types, including David Gallagher, Co-Head of Litigation Investing at The D.E. Shaw Group, CJ Wei, Vice President of Private Credit at Northleaf Capital, Benjamin Blum, Managing Director at Flexpoint Ford, LLC, David Demeter, Director of Investment at Davidson College, and Kendra Corbett, Partner at Cloverlay. The event was moderated by Ed Truant, Founder of Slingshot Capital. Below are some key highlights from the discussion: ET: How did you start investing in Litigation Finance? What types of results did you focus on, and how has your strategy changed over time? DG: It takes time to obtain a meaningful number of results from litigation finance investments, and you can learn a lot along the way, even before the results come in. And because you invest in such a small proportion of the opportunities you look at, you try to learn from the investments you don’t make, as well as the investments you do make. And one of the lessons I’ve learned as it relates to deployment strategy, is that good deals are so hard to come by, and are a product of so many variables outside of your control, that it’s better to be responsive to the opportunity set in front of you, than to be wedded to the abstract ideas of portfolio construction or deal structuring. I think adaptiveness is key. KC: We’ve been active in deploying capital in litigation finance for over six years now, and I wouldn’t say our approach has changed dramatically. We’ve been laser-focused on maintaining diversification across cases to avoid binary risks, and finding alignment across all of the involved parties. I think we’ve looked for market specialists, and we haven’t necessarily tried to find litigation finance beta, and instead we’ve looked for partners with a demonstrable value-add and strategic advantage. ET:  For those panelists more interested in credit opportunities in the legal finance space, why did you decide to focus on credit? DG: At the D.E. Shaw Group, the litigation investing team works closely with the Private Credit group, which I like to think broadens the types of deals we do. So, in addition to investing in litigation finance deals with a more typical risk/reward profile, we also invest in less volatile opportunities that are less about litigation risk, and more about timing risk and basic credit risk. BB: There are a few ways to create a credit-like opportunity in litigation finance. In addition, the way David was describing, the other way is to create a credit-like product by lending against a diverse portfolio of individual case fundings. So the asset is a little bit less credit-like, but the investment structure creates a credit-like investment. Both areas are of interest to us, especially when there is strong alignment with the borrower and downside protection through underwriting, to justify accepting a return profile that is either capped or has limited upside. CW: At Northleaf, we have many different funds with many different return hurdles, so we view ourselves as a capital solutions provider to litigation finance businesses. That being said, our thesis around the asset class is akin to a type of Private Credit approach strategy. Principal protection is our priority. We not only have asset coverage of the legal assets, but additional covenants and protections, and bespoke structures where we have guardrails against any downside scenario. ET: From an equity perspective, how is litigation finance the same as, or different from, other equity assets in which you invest? DD: If you suspend disbelief a bit, I would equate it with early venture investing. Liquidity cycles tend to be uncorrelated in the long run, you’re generally creating milestones for capital, outcomes can be pretty skewed, where large winners make up the majority of profit (although it’s certainly more skewed in venture than in litigation finance), and the investment strategy isn’t all that scalable—managers have to be cognizant of all that they’re trying to deploy. DG: I’ll focus on some of the differences. First, a litigation finance investor has no control over the litigation, while an equity investor or investors that own the majority of the company—they do control the company. So the closest analogy is to a class of shares that has no voting rights. Second, LitFin investments are typically illiquid. Equity investments are typically liquid. Another difference is that case outcomes are typically more binary than business outcomes.  And one last difference is that a company you might invest in can pivot and respond as needed to market opportunities, a case you invest in—it pretty much is what it is, and there’s only so much that even the most talented lawyers can do, with the facts and the law involved. ET: One of the common criticisms I hear from fund managers, at least early on in the life cycle, is that investors are not willing to pay management fees to fund their operations. How does the panel respond to this criticism, given that the average litigation finance claim is small—around $3-5MM—and there is a lot of relatively sophisticated operations needed to be conducted by investment managers?   DD: I think there are ways of paying someone a full fee and making sure deployment is there. And that is my primary concern, and I think most LPs primary concern, when it comes to paying a management fee. We’re also concerned about misalignment. At the fund level, people should really be making a large amount of their compensation from performance fees, not salary. KC: It’s definitely a difficult issue. The fee drag that comes with charging investors on committed capital becomes pretty untenable when you’re comparing gross returns to net returns. So from our perspective, at a minimum, fees need to be on an as-committed basis. We’ve also seen scenarios where there is a lower management fee on committed capital that steps up once it’s drawn. It’s just really difficult with some of the commercial litigation strategies to have a full freight fee—2%--committed from investors.
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Commercial Deals

European Funding Predicted To Account for 15% Of Global Market By 2025

While the US and UK are most often in the news for their high profile litigation funding cases, the European continent is seeing an equally impressive rise in the number of funding agreements, and there is plenty of reason to expect this upward momentum to continue. New research and analysis from Deminor, the global litigation funder, suggests that in the next five years, the European market alone could see annual growth of 8.3% and account for 16% of the world’s litigation funding market by 2025. In a feature for The Global Legal Post, Erik Bomans, the CEO of Deminor, speculated that this rise would be driven by a combination of factors including economic instability, a rise in shareholders holding companies to account over ESG targets, and human rights violation claims. Going beyond the growth in funding itself, Mr Bomans argues that this increased volume in the number of cases will likely be accompanied by a more significant proportion of successful claims by litigants, as the breadth of legal advice available is widened. In addition to this booming market share, it is also expected that we may see a broadening of the number of jurisdictions in Europe that will see an increased uptake in third-party funding. Lianne Craig, the managing partner of law firm Hausfeld’s London office, highlights that the firm has seen real interest and engagement from funders towards participating in previously underserved markets such as Italy, Portugal and Spain.
Commercial

Clarion Remains on Top for Litigation Costs Services

UK law firm Clarion is riding high in 2022, after being placed in the top tier of legal cost services by Chambers & Partners for a third year in a row. Having been highlighted for their breadth of knowledge, pragmatic approach and praised by clients for their responsive services; the firm remains a UK leader in the field of costs services and litigation funding. Speaking with Business Up North, Andrew McAulay, the partner at Clarion in charge of this practice area, highlighted the firm’s nationwide approach, and ability to work with London firms, as well as being able to assist on cases with a global scope. Mr McAulay’s team are regularly engaged by parties on either side of cost disputes, and have an experienced bench of professionals with expertise working alongside both small and large business entities, as well as lay clients. Mr McAulay and his colleague, Stephanie Kaye, were also both listed by Chambers & Partners in the top band for individual practitioners for Costs Lawyers, with McAulay having been recognised as such for three years consecutively.
Commercial

Claimant And Enforcement Require Equal Appraisal, Says Top Funder

When evaluating the potential of entering into a funding agreement with a prospective client, funders must weigh a number of factors, when evaluating the merit of a case and what any potential outcome could entail, whether that be financial return or loss. In the latest of a series of analysis, Glyn Rees of Augusta Ventures, has provided two new articles with insights into how funders should evaluate both a claimant’s legitimacy and what enforcement factors could affect the funder’s return on investment. When analysing the potential client’s merit, Mr Rees argues that any prospective funder should first consider whether the claimant has experience in pursuing proceedings, and if so, what their motivations are for this latest claim. Additionally, it is worth assessing the claimant’s financial situation in case there is a risk of insolvency, which could affect proceedings and what their expectations are for any final settlement. On the enforcement side, Mr Rees primarily focuses on the point that no funder should engage in a case where success would come with only symbolic return, rather than financial gain. Moreover, he highlights the need to undertake detailed inspection of the defendant’s resources and consider where the seat of arbitration is, as this may be the biggest factor in determining how enforceable any settlement is.
Case Developments Commercial

Therium Funds High-Profile Claim By Malaysian Royal Heirs

A litigation funding giant has found itself in opposition to the Malaysian government, by funding a lawsuit by the heirs to the Sultanate of Sulu, in a claim valued at $14.92 billion. Whilst high-profile cases are not foreign to the world of litigation finance, it is certainly a unique position for a funder to be involved in a dispute between a country’s royal family and the state’s government. Profiled in an in-depth feature by The Edge Markets, the claim by the heirs of the late Sultan Jamalul Kiram II comes as a result of an arbitration judgement by a French court, which ruled the Malaysian government was required to pay the nearly $15 billion in damages. This was a result of the state failing to make an annual payment agreed to in an 1878 accord over sovereign land rights, which the government ceased paying in 2013 due to armed militants occupying the area. When the government refused to compensate the heirs of the Sultan for those stated damages, bailiffs working on instruction from the plaintiffs seized two companies belonging to the state-run oil corporation Petroliam Nasional Bhd. While the Paris Court of Appeal has issued a temporary halt on the initial arbitration ruling, the heirs’ legal team led by Paul Cohen, of 4-5 Gray’s Inn Square chambers, have stated that the halt is only enforceable in Paris. While this matter is far from resolved, it is clear there is an appetite among high-profile funders to attach themselves to such cases where the opportunity to gain a significant financial return is available.