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Commercial Regulatory Issues

Omni Bridgeway Analyzes Potential Pathways for Irish Legislative Reform

As reported by LFJ in September, the Irish government announced plans to introduce legislation permitting litigation funding for international arbitrations and disputes. However, the exact roadmap for what kind of regulatory system will be adopted is yet to be defined, as we wait to see which other jurisdiction Ireland will emulate. A recent piece of analysis by Camilla Godman, Investment Manager at Omni Bridgeway, outlined the various factors that may be at play in the formation of Ireland’s new regulatory regime. Godman suggests that beyond any initial legislation passed to define this new structure, it will be up to the Irish courts themselves to further refine and interpret how it is to be applied and which cases could benefit from the new rules. One significant question that Godman explores is to what extent the new legislation will detail requirements around third-party funding agreements and the operations of funders within the country. Godman contrasts the system in the UK where funders are mostly self-regulated, versus that of Singapore, which has specific guidelines for the types of organisations that can fund cases.  Finally, this analysis raises the added influence of the European Union, which may lead to Ireland legalising the use of litigation funding in a broader range of cases, but will also be affected by the ongoing regulatory developments since the approval of the Voss Report proposals, earlier this year.
Announcements Commercial Deals

M&A Dispute Volume Is Rising in Climate of Economic Uncertainty and Geopolitical Upheaval, BRG’s 2022 M&A Disputes Report Finds

Mergers and acquisitions disputes accelerated in 2022 even as deal activity slowed, with the darkening economic outlook expected to fuel further disagreements over deals in the coming year, according to the 2022 M&A Disputes Report from Berkeley Research Group (BRG) released today.

Now in its third year, the report examines the global M&A disputes landscape and features qualitative and quantitative research from some of the world’s leading deal and disputes experts. The latest survey found that macroeconomic concerns are surpassing COVID-19 disruptions as primary dispute catalysts, a trend that dealmakers, lawyers and private equity executives expect to extend into 2023.

Continuing last year’s global scope, the 2022 report examines M&A dispute activity and insights from the Europe, Middle East and Africa (EMEA), North America and Asia–Pacific (APAC) regions, investigating recurring themes while posing additional questions and revealing new trends as the pandemic’s effects begin to subside.

The report draws from a quantitative survey of 181 lawyers, private equity professionals and corporate finance advisors, with additional perspectives from more than 20 of the world's top lawyers and experts working in M&A, disputes and private equity. Outside contributors come from leading firms including Quinn Emanuel Urquhart & Sullivan, Jones Day, Hogan Lovells and Linklaters.

Key takeaways include:

  • The dispute pace likely will pick up in the coming year amid continued market volatility due to concerns over inflation and a possible recession, as well as geopolitical uncertainty and lingering effects of COVID-19.
  • Financial Technology (FinTech), Energy & Climate and Traditional Financial Services are the top-ranked sectors for increased dispute activity in 2022. Respondents expect the Construction & Real Estate sector to take the lead in 2023.
  • Environmental, social and governance (ESG) disputes are brewing as regulations take shape and businesses strive to meet evolving, multifaceted ESG criteria.
  • EMEA is the region expected to drive dispute activity in the coming year, with strict regulatory regimes and political strife seen as significant disruptive factors.

The report examines how rising concerns around the volatility of markets and political upheaval are influencing M&A deals and dispute behavior. BRG’s research found that the dramatic events of the past year—including the energy crisis in Europe and elsewhere, falling stock prices and real-estate market disruptions—have shifted the sectors experiencing the most disputes compared to 2021, when COVID-19’s effects heavily impacted hospitality, life sciences and technology. The report also tracks steps that lawyers and advisors are recommending to reduce the likelihood of disputes, such as a greater emphasis on conducting enhanced due diligence while deemphasizing material adverse change and material adverse effect clauses for sellers.

"With geopolitical tensions, macroeconomic concerns and lingering COVID-19 disruptions impacting increasingly complex M&A deals, this report emphasizes the need for a clear understanding of the fundamental issues driving disputes. A multidisciplinary approach will be required to address these challenges effectively," said BRG Managing Director Mustafa Hadi. “The data and expert analysis collected within the 2022 report offer deep insights on the volatility and uncertainty that will drive disputes in the months ahead.”

Download a copy of the 2022 BRG M&A Disputes Report.

About BRG Berkeley Research Group, LLC is a global consulting firm that helps leading organizations advance in three key areas: disputes and investigations, corporate finance, and performance improvement and advisory. Headquartered in California with offices around the world, we are an integrated group of experts, industry leaders, academics, data scientists and professionals working across borders and disciplines. We harness our collective expertise to deliver the inspired insights and practical strategies our clients need to stay ahead of what's next. Visit thinkbrg.com to learn more.

Commercial

Woodsford Outlines the Benefits of Litigation Finance for Corporates

An increasingly common talking point among litigation funders is that in-house counsels and CFOs are growing more open to using third-party funding when pursuing legal action. However, as LFJ recently reported, one of the biggest hurdles for funders to overcome when persuading corporates to consider outside financing is the difficulty in demonstrating what the tangible benefits are for these businesses beyond shifting legal costs off the balance books. In an article for Reuters, Bob Koneck and Alex Lempiner of Woodsford, outline what they see as the key advantages for corporates utilising third-party funding. Firstly, the authors highlight the ability to lower the risk of pursuing costly litigation in a time of financial strain, referencing a survey from Burford Capital that showed nearly 50% of companies avoided pursuing legal judgments in 2022 as a result of cost. Additionally, funders are often experienced in facilitating alternative fee arrangements with a company’s outside law firm, going beyond simply reducing flat costs as a reason for pursuing litigation. This reduction in costs is also beneficial as it frees up an in-house legal department’s budget to be spent on important operational modernisation, and in onboarding technological advancements.  Woodsford also raises the value of expertise a funder can bring when evaluating whether a claim is even worth bringing in the first place. Whilst litigation finance primarily assists by providing capital, this argument reinforces the idea that in order to demonstrate value to corporates, funders must move beyond their most direct value proposition.
Announcements Consumer

MedResolve Offers Unique and Innovative Personal Injury Legal and Medical Funding Products

Harrison, New York based Altuitive Partners LLC (Altuitive), an investment management company led by alternative investment veteran, Robert Cannon CFF, MBA, AIFA, announces the launch of MedResolve, a litigation financing company dedicated to providing funding solutions to personal injury plaintiffs, healthcare professionals and attorneys. The company was founded by a group of dedicated professionals with decades of experience in finance, law and health care services, resulting in an unrivaled offering of services. Spearheading the day to day operations of the Company is Richard Berman, who brings more than 15 years of experience, both in the legal field, and since 2016, as an underwriter and originator of nearly $100 million in personal injury litigation fundings on thousands of underlying cases. Being injured in an accident can be a life altering experience, causing disruptions such as lost time from work, long-term disability and the need for specialized medical care. MedResolve helps alleviate this burden and allows personal injury plaintiffs to turn a portion of their future settlement into cash by offering non-recourse advances for life needs, expenses and true to the company’s name, surgical advances to help uninsured patients fund the cost of surgery that is related to the ongoing case. Unlike traditional loans, these fundings are structured as purchases of the plaintiff’s future settlement or award. MedResolve also helps medical professionals who treat injured plaintiffs and the attorneys who represent such injured plaintiffs accelerate the collection of a portion of their medical bill or legal fee receivables by offering practice-specific factoring and revenue cycle management solutions to normalize income streams and help these professionals grow their business. To learn more about MedResolve and its personal injury funding solutions for plaintiffs, doctors and lawyers, please call (866) 744-5242 to speak with a funding representative. Or visit www.med-resolve.com.
Commercial Regulatory Issues

Chamber of Commerce Claims Litigation Funding Represents Threat to National Security

While litigation funding is seen by many as a vehicle for widening access to justice and changing the balance of power in favour of consumers and plaintiffs who lack the capital to seek legal redress, there are institutions who view it as a nefarious influence on the legal system. The U.S. Chamber of Commerce has recently reemphasised its opposition to third-party funding, with the release of a report questioning the national security risks of litigation finance. Outlined in an article by Reuters, the report produced by the Chamber’s Institute for Legal Reform, claims that the intrusion of third-party funding into American litigation could allow foreign adversaries to damage the United States through funded litigation. In particular, the report suggests that foreign funders could influence litigation designed to sow division in the country, or gain access to confidential corporate information through these lawsuits. The report, which was written by four attorneys at Skadden, Arps, Slate, Meagher & Flom, proposes that foreign funders be required to register under the Foreign Agents Registration Act (FARA). The Chamber also continues to seek wider regulation of the industry with a focus on increasing disclosure requirements for all funders.
Commercial Regulatory Issues

ICSID’s Secretary-General Reflects on Developments and Rule Changes for Third-Party Funding

International arbitration and dispute resolution remains one of the most complex and wide-ranging areas which litigation funders are involved in. The International Centre for Settlement of Investment Disputes (ICSID) sits at the heart of this activity, and its leadership is well-placed to observe the latest developments and trends, as demonstrated by a recent interview with ICSID’s secretary general. On the latest episode of D.C. Bar Communities’ The Tea on International Arbitration podcast, Meg Kinnear, secretary-general of ICSID, was interviewed by Nicole Silver, investment manager at Validity Finance, and Gaela Gehring Flores, partner at Allen & Overy. Looking back on her tenure over the last 13 years, Kinnear points out that ICSID’s membership has grown from 143 to 158 states in that time, which has also been reflected in the volume of caseloads. Reflecting on backlash against ICSID from political figures in the US, Kinnear stated that most of these perspectives are a result of misinformation or a simple lack of information, especially with common myths such as states always being on the losing end of this type of arbitration. However, in recent years Kinnear believes that there has been somewhat of a change in broader opinions, and that while the system is continually evolving and improving, state perspectives are becoming more favourable. Discussing ICSID’s new rules, especially in regard to transparency and disclosure of third-party funding, Kinnear highlighted that having last been amended in 2006, these rules were overdue for a change. Litigation funding was a key area of consideration, with Kinnear making it clear that it was not ICSID’s role to condemn or endorse third-party funding. Kinnear also reiterated that the main focus for this rule was to avoid conflicts of interest, not to enhance disclosure or discovery.
Commercial Deals

Leading Indian Funder Promotes Utility of Litigation Finance for Homebuyers

Recent regulatory developments by the Insolvency and Bankruptcy Board of India (IBBI) have altered the legal status of homebuyers, to now be counted as ‘financial creditors’. As a result, those purchasing homes can go to the National Company Law Tribunal (NCLT) to seek resolution of any disputes with sellers or builders, opening a new avenue for litigation funding to provide support to consumers. Writing for the Financial Express, Kundan Shahi, CEO of LegalPay, highlights that homebuyers in India have traditionally faced a litany of legal issues when purchasing, but previously have not had the legal status or the capital to seek redress. However, under these reformed rules, Shahi believes that homebuyers should take advantage of third-party funding to resolve such disputes without incurring further expenses or additional risk. In particular, Shahi notes that in situations where there are ongoing delays due to real estate developments being behind schedule or facing further complications, buyers can seek compensation. Additionally, he raises the key point that even where buyers had legal redress previously, their lack of funds meant any chance of seeing an expedited resolution in the court system was slim. Yet with the help of funders, consumers can achieve a faster resolution.
Commercial Deals

Litigation Funding as an Antidote to Fraudulent Insolvency Practices

The ongoing fallout from the pandemic has seen a rise in insolvencies, and with that rise, there have been numerous examples of companies unlawfully restructuring in order to avoid compensating creditors. Litigation funders can provide a valuable antidote to this kind of fraudulent behavior and enable creditors to seek justice. Speaking with the Financial Times, Gwilym Jones, director at Henderson & Jones, highlights that liquidators are often left powerless in these situations and lack the capital to dedicate to an investigation. However, by bringing the option of third-party funding to the table, creditors can provide a tool to balance the equation and identify what assets can potentially be recovered. Jones points out that some liquidators may lack the experience, or may be initially hesitant to approach a funder, therefore it may be up to creditors to either suggest this approach or to contact the funder to reach out to the liquidator. However, Jones argues that the communication between creditors and funders should not end there, as they may be able to provide valuable insight and information that could guide potential future litigation.
Commercial Regulatory Issues

Patent Counsel Argues Litigation Finance is Exploiting Weak Patent Approvals

There has been plenty of commentary in recent months arguing that litigation financing has revolutionized the patent dispute market, providing an invaluable asset to inventors and patent holders who have been unjustifiably exploited by corporations. However, this viewpoint is not unanimously held, and some industry figures believe that the presence of third-party funding is doing more harm than good. In an opinion piece for Bloomberg Law, Joshua Landau, patent counsel for the Computer & Communications Industry Association, argues that the vast number of low-quality patents granted every year has created a fertile market to be exploited by ‘non-practicing entities’ (NPEs). He claims that funders and investors are able to use these overly broad patents to sue businesses, with the primary aim of securing a return on investment rather than protecting intellectual property. In Landau’s opinion, another major issue with these funded lawsuits is the lack of transparency, something that has become a regular topic in patent disputes in the US where funders are involved. He claims that where funders are not visible to the courts, it allows litigants to represent themselves as small inventors taking on large corporations, rather than being backed by equally large financiers.