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Victims of Brazil’s ‘sinking city’ to have case heard in the Netherlands

Communities lost to damage caused by salt mines in Northern Brazil are celebrating after securing the right to sue petrochemical company Braskem in the Dutch courts.

The claimants, who have seen their homes collapse and neighbourhoods disappear beyond repair in the municipality of Maceió, Alagoas due to the nature of Braskem’s mining are one step closer to justice.

Represented by global law firm Pogust Goodhead and local co-counsel Lemstra Van der Korst, they will now have their case for compensation assessed in the Dutch courts after Braskem S.A, the largest petro-chemical company in Brazil, failed to offer adequate and fair redress.

Residents of the area have watched in horror as their community has been hit by small earthquakes caused by nearby mining for salt underground for over four decades. Many have been evacuated to escape the tumbling walls, buildings and businesses after the structures built on top of now unsafe land threaten to topple further. While few others remain – resolute not to accept small sums of money offered by Braskem to relocate.

The exodus and crumbling of buildings are now evident by the ghost-town like images of the neighbourhoods which were once home to hundreds of small businesses. Braskem have offered what lawyers say are unfair sums of compensation after being obliged to remove families from the ‘red’ danger zones in the area – but have failed to accept liability.

Furthermore, the company’s ‘moral damages’ offers have been made on a per-household rather than on a per person basis and have equated to the same as the value of lost luggage by an airline in Brazil or less, according to caselaw from Brazilian Courts.

Several of the claimants attended the hearing in May in Rotterdam where lawyers argued that it is necessary to litigate against Braskem in the Dutch courts where the company have their European headquarters.

Maria Rosangela Ferreria Da Silva, 58, attended and told the court she and her family had lost their sense of identity when her neighbourhood crumbled – and she and her family were forced to move away. She lost her mum shortly afterwards and has been fighting for justice ever since.

She said: “I would say justice has been done. Thank God, I wake up with this news; I will be the happiest woman in the world, it will be my best gift. After being alive, that's it. That the God I trust has never abandoned me. So, I would say 'justice has been done', and thank God.”

The ruling rejected all of Braskem’s arguments against jurisdiction in the Dutch Courts – and an application to appeal. The court stated: “The claims against both Braskem SA and the Braskem NL entities have a delictual basis. In the main proceedings, in addition to Braskem SA, the Braskem NL entities, as part of the Braskem group, were held jointly and severally liable for the (same) damaging consequences of the earthquakes (as a result of mining activities) on the basis of the environmental liability law in general and the doctrine of indirect polluter's liability in particular, according to plaintiffs in Brazil. In this sense, the claims against the Braskem NL entities on the one hand and Braskem SA on the other are inextricably linked.”

It held: “The Braskem group, and therewith Braskem SA as top-holding of the group, has chosen to locate the entities that take the financial decisions, and its European headquarters, in Rotterdam. Against this background, Braskem SA could reasonably foresee that, if not only these entities but also herself – as top-holding – were to be sued, this could happen before this Court.

The jurisdictional success is the latest in a run of cases for lawyers at Pogust Goodhead – who recently won an appeal to have the case of 200,000 victims of Brazil’s worst environmental disaster, the Mariana dam disaster, litigated in the UK courts. They have also secured settlements in relation to VW and British Airways claimants.

Now the claim has been accepted to be heard in the Netherlands, the case is expected to enter the merits phase where liability is established.

Partner at Pogust Goodhead Marc Krestin said: “Taking this case to the Dutch courts is about getting justice for the people who have lost everything as a result of the mining activities of Braskem. They have lost their homes, their community and their sense of identity due to this large corporation taking what it wants from the land and not giving a second thought to the environment and people around them that it may harm.

“We are here to see that this does not keep happening. We now urge Braskem to take note of this ruling, stop denying responsibility for its actions and do the right thing by all those that have been harmed.”

Pogust Goodhead pursues the case in partnership with law firms Neves Macieywski, Garcia e Advogados Associados, Omena Advocacia, Araújo e Máximo Advogados Associados, and Lemstra Van der Korst.

Latin America Represents a Strong Market for Arbitration Funding, Says Omni Bridgeway

While litigation funding is still most active in the well-established markets of North America, Europe and Australia; pockets of demand are starting to gain traction in other territories. One market that funders are keeping a careful eye on is Latin America, where firms are keen to take advantage of a new lucrative revenue stream. One such firm is Omni Bridgeway, who in an article for Latin Lawyer, offered an overview of the current state of third-party funding in the region. Omni argues that Latin America is perfectly placed to take advantage of dispute funding due to its strong legal industry, loose regulatory frameworks and legal systems that are frequently receptive to arbitration, yet have claimants with minimal capital to fund proceedings. Omni highlights that the primary area of interest for funders in the region is not in commercial litigation, with arbitration dispute financing being a much more beneficial opportunity with a lower risk margin. The firm also notes that interested parties should not just think of the LatAm market through an insular lens, but instead as another venue for selecting international or cross-border cases which may involve outside investment from clients in North America and further afield. 

LCM Reports Strong Financial Results with Increased Demand Expected

As the litigation funding market continues to experience growth in major markets, as well as potential growth in emerging markets, established funders at the top of the industry are reaping the benefits. Litigation Capital Management (LCM) is an example, having recently reported strong financial results for the year with a growth asset portfolio in hand. A new article by Proactive summarises LCM’s latest financial reporting, as the Australian funder stated it had seen assets under management grow by 23 per cent by the end of June, followed by a further rise to end September. With over A$452 million in assets, the company sees continued growth on the horizon, bolstered by profits of A$20.2 million for this financial year, once again an increase of 23 per cent. Patrick Moloney, chief executive at LCM, highlighted that despite the trailing difficulties of the pandemic, the funder has been pleased to see ongoing growth for the business and expects demand to only further increase in the coming year, as the industry is well-placed to benefit from the current economic climate. LCM also stated that its Global Alternatives Return Fund I has been totally committed, with fundraising continuing for the second of these funds.

Less Than 12% of Federal and State Case Filings Present Strong Opportunities for Litigation Funding, According to First-of-Its-Kind Market Intelligence Study

Though the U.S. litigation finance market continues to expand, less than 12% of federal and state cases filed in 2021 met the minimum threshold to be considered for investment, according to a new report issued today by tech-enabled litigation funder LexShares. This finding, detailed in the inaugural edition of LexShares' special report, "The Litigation Funding Barometer: A Data-Driven Analysis of What Litigation Funders Want," illustrates the high bar that law firms and plaintiffs must reach to attract valuable funding dollars for their cases.  The report analyzes more than 30,000 federal and state case filings from 2021, graded by LexShares' proprietary Diamond Mine origination software, to provide lawyers with a unique window into how attractive their matters might be to litigation funders. The Diamond Mine algorithm assesses each case based on numerous factors, such as damages alleged and the track record of plaintiff's counsel, before assigning a raw score ranging from 1-25.  In an industry first, "The Litigation Funding Barometer" breaks down cases across several claim types and dozens of jurisdictions, while also revealing which law firms filed the greatest number of cases with strong funding potential. Among the study's high-level findings, in 2021: Trade secrets, antitrust, and contract disputes filed in federal court represented some of the strongest funding opportunities across all jurisdictions.  Federal cases presented a higher percentage of strong funding opportunities than state cases.  Law firms appearing in the NLJ500, which we categorize as "Big Law," filed the cases with the strongest investment potential. In addition to this and other detailed insights, the report's findings are accompanied by insider commentary from members of the LexShares investments team, offering lawyers and law firms key context around the characteristics of claims that typically lend themselves to third-party funding arrangements, and why. "Critics of litigation funding have long pointed to the industry's lack of transparency," said Cayse Llorens, CEO of LexShares. "By publishing this groundbreaking report, we address a critical, unmet market need for closure of the knowledge gap that still exists between lawyers, clients, and third-party funders. Providing the market with more meaningful information not only equips users of litigation finance to make better business decisions, but also supports LexShares' mission of increasing access to justice for parties with meritorious claims."

Burford Funds Arbitration Settlement Claim Against Nigerian Government

Whilst litigation funding has been slow to find a stable footing in Africa, there are signs that it is becoming a more active market for funders to explore. This is underscored by the involvement of Burford Capital in a settlement arbitration case brought against the government of Nigeria. Outlined in an article by The Cable, Burford Capital is funding a settlement claim by Sunrise Power regarding a breach of contract claim for the proposed Mambilla power plant. After a failed settlement offer from the Nigerian government of $200 million, Sunrise was able to refile the settlement arbitration after securing funding from Burford, with the case set before the International Court of Arbitration in Paris. Burford is funding the case through its subsidiary, Sarmiento Investments. However, the case is not without controversy, as the initial contract award is the subject of a corruption investigation by Nigerian government officials, which is still ongoing. Burford has made no public comments about the case as of this time.
The LFJ Podcast
Hosted By Wendy Chou |
In this episode, we sit down with Wendy Chou, Founder and CEO of Dealmakers Forums. On September 28th and 29th, 2022, Dealmakers is producing its 5th annual LF Dealmakers event, where industry stakeholders will discuss the latest trends and developments in the sector, and enjoy unparalleled networking opportunities. [podcast_episode episode="10433" content="title,player,details"]

Law Firms and Funders Criticise Proposed EU Regulations

As LFJ reported last week, the EU parliament’s decision to adopt a report which proposes increased regulation across the litigation funding industry may be a defining moment for the European market. Unsurprisingly, since the announcement, we have seen funders and lawyers alike criticise the proposed reforms as a backwards step for those seeking to widen access to justice. Reporting by City A.M. highlights comments by industry figures who argue that the proposals in the Voss Report will be a net negative for the legal industry in Europe. The International Legal Finance Association’s (ILFA) executive director, Gary Barnett, claims that these new regulations would only increase the cost burden for those seeking funding and therefore limit its availability. Such concerns were echoed by legal professionals including David Greene, Edwin Coe’s head of finance litigation, who stated that a large portion of class action cases simply would never be brought without third-party funding, as these claimants often do not have access to capital to finance proceedings.  Managing director of Augusta Ventures, Robert Hanna, noted that if the EU does move forward with increased regulation for the industry, it will represent an opportunity for the UK to set itself apart as the prime jurisdiction for commercial litigation funding, as long as the UK does not also follow suit.

US Government Agencies look to Re-examine Disclosure Requirements for Litigation Funders

Recent court cases in the US have repeatedly raised the issue of disclosure for litigation funding, with growing calls across the judicial system to increase transparency in legal proceedings where third-party funding is present. The spotlight on disclosure is only set to intensify, with ongoing studies by federal agencies and requests by industry bodies for changes to disclosure requirements. An article by Bloomberg Law covers the latest developments in this area, highlighting the request by Lawyers for Civil Justice to the Advisory Committee on Appellate Rules to enable judges to seek further disclosure around case funding to ensure there are no conflicts of interest. In particular, this group highlights the dangers of judges themselves being party to conflicts of interests, where their personal investments may unknowingly include litigation funders Additionally, the Government Accountability Office (GAO) is looking to further its study into the role of funders in US litigation. In a conference call planned for this Tuesday, the GAO is aiming to speak with industry figures in order to gain a broader and more detailed understanding of the breadth and volume of cases funders are involved with, as well as the financial return they are receiving from these investments.

Irish Government set to Propose Legalising Third-Party Funding for Arbitration

As the demand for commercial legal funding continues to grow, more and more jurisdictions are looking to embrace it as an option for those seeking access to justice. In an encouraging sign within Europe, government officials are sending positive signals that Ireland may be the latest country to open up its legal system to third-party funding. Reporting from Business Post highlights recent remarks by Helen McEntee, Ireland’s Minister for Justice, indicating that the government would soon be introducing proposals to legalise this type of legal funding. McEntee raised the issue while on a visit to the US, stating that it was the government’s intention to allow third-party litigation funding for international arbitration proceedings taking place in Ireland. Whilst this move shows that Ireland is open to a more liberal approach to third-party funding, the proposed reforms would not legalise third-party financing for litigation. However, considering the previous blanket ban on third-party funding for legal matters, European funders will no doubt take this latest move as a step in the right direction for the Irish industry.