In a new article, Legal Dive explores the notion that litigation portfolios can become a revenue driver for legacy gain. According to Legal Dive, investors are 'plowing' funds into legal finance products and services looking to avoid cyclical market events. As a revenue driver, investors are looking at returns up to 4x their contribution. With such figures, Legal Dive suggests that strategic partnership with legal funders should be a topic for every modern general counsel's office. The growing acceptance of litigation finance is widely considered to be an opportunity for innovators in the legal arena. Legal Dive also focuses on monetization of potential awards, in that if a general counsel's office is relentless, the firm can profit from various business lines of litigation portfolio case assets.
The vibrant and growing litigation finance market in Australia continues to expand, with the launch of a new funder in Juel Litigation Finance. With a goal to shake-up the industry, Juel is aiming to operate as a traditional litigation funder, and also bring a more holistic approach to legal financing that considers the individual behind the case as important as the case itself.Speaking with Lawyers Weekly, founder and executive director Mark Paton explained that Juel wants to be a partner to litigants and support them with any costs incurred during litigation – not simply legal fees. Mr Paton stresses that the new funder will not just focus on providing the legal financing, but rebalance the whole equation in favour of individuals and businesses who will already be under immense pressure during the litigation process.This innovative approach will allow Juel to support a wide range of cases, from personal injury disputes to insolvency matters, ensuring that their clients have a partner during proceedings from beginning to end.
The role of superannuation funds in litigation finance (specifically in funding class action claims) has been highlighted by industry insiders in Australia, who point to it as a benefit to the funds themselves and also an encouragement of good corporate governance. The recent example of HESTA, a super fund based in Sydney, taking part in a class action lawsuit against multiple financial service companies, has demonstrated both the appetite and the potential benefits of such engagements.In an article by Super Review, vice president and managing director of Financial Recovery Technologies, Sean Cookson, spoke about this more active approach to investment, and highlighted HESTA as a super fund that has been able to leverage its capital to apply pressure through this alternative avenue. Mr Cookson pointed to the fact that apart from the US, Australia represented one of the lowest risk countries for funds to join class action claims when compared to jurisdictions such as Germany and the UK.Mary Delahunty, the former head of impact at HESTA, went a step further and stated that it was incumbent upon super funds to recover losses through class actions where corporates have failed in their fiduciary duty to shareholders. However, both Cookson and Delahunty warned that in order for this to be effective, the Australian government will need to reverse course and place an emphasis on regulating corporate behaviour.
In a high-profile dispute between litigant and litigation funder, a mining investor who successfully sued the Egyptian government has refused to compensate Buttonwood Legal Capital after claiming the funding agreement is invalid. Mohamed Abdel Raouf Bahgat, who was the beneficiary of a $99.5 million award in 2021, defended his position to the High Court by arguing that the agreement’s terms were invalid due to extraordinarily high fees combined with an additionally large rate of interest.According to reporting in Law360, Bhagat claims that Buttonwood was not legitimately positioned as a litigation funder, and that the agreement itself was not properly concluded. Buttonwood, who supported Mr Bhagat with £2.3 million in funding, argues that he is in breach of the initial 2017 settlement agreement and is owed over £16 million in unpaid fees.
Investment in litigation finance does not come without risks, however, few investors would expect to see these funds taken for personal and criminal gain by the lawyers they were meant to support. This is exactly what is alleged to have happened in the recent case of Timothy Schools, who took over £19.5 million from Axiom Legal Financing Fund starting in 2009, and then allegedly proceeded to funnel this money to himself and to two other individuals who are also accused of fraudulent behaviour.Examined in reporting by The Law Society Gazette and Law 360, the charges leveled by the Serious Fraud Office (SFO) outline how Schools used his law firm, ATM Solicitors, to take the loans from Axiom only to enrich himself by funneling the money to a network of offshore companies. His co-defendants include solicitor Richard Emmett and independent financial adviser David Kennedy, who are accused of receiving over £1 million and £5 million of fraudulent funds respectively.This alleged deception of Axiom led to its collapse in October 2012, as auditors unearthed the catastrophic information that the fund was owed £60 million from loans to law firms. Prosecuting for the SFO, Miranda Moore QC, argued that the defendants were skimming commission off these loans without informing Axiom, and that they willfully misused these investors’ funds to profit themselves. Moore stated that these actions not only led to the collapse of Axiom and loss of investor capital, it also deprived the claimants who the loans were intended for, of their representation and access to justice.The three defendants have denied the charges and the trial is expected to come to a close on Monday with the court’s judgement.
Poland has seen tremendous economic growth in recent decades, and now stands out as one of the business powerhouses within Europe. However, unlike other major economies within the region (UK, Germany and the Netherlands) we have not seen a commensurate rise in the adoption of litigation funding and investment that one might expect.In the first part of a series of analysis forAugusta Ventures, investment manager Greg Beres outlines some of the unique considerations that may cause hesitancy for those looking to invest in Polish litigation finance. The main concern for potential funders is the often slow and protracted nature of the country’s courts, with the majority of litigation taking several years to reach completion. This is further compounded by legislation that mandates the right to appeal, leading to cases having extended lifespans and delaying return on investment.Beres suggests that while funders shouldn’t write off investment in Poland completely, any engagements need to be low-risk cases and have realistic expectations about the time it will take to see those returns.
International law firm Brown Rudnick has advised alternative investment firm North Wall Capital on a £100m litigation funding partnership with PGMBM, a law firm focused on environmental, social and corporate governance cases. The investment will be used by PGMBM to address the growing demand from consumers and other victims of injustice to seek recourse against corporates. FabianChrobog,FounderandChiefInvestmentOfficerofNorthWallCapitalsaid: “We are thrilled to announce this partnership with PGMBM as part of our ESG-focused legal assets strategy. We are incredibly grateful to Elena and the litigation funding team at Brown Rudnick for advising on this significant deal.” ElenaRey,PartneratBrownRudnickwholedthedealteamsaid: “This deal is thought to be the largest investment in a UK claimant law firm to date, strengthening Brown Rudnick’s leadership as the go-to advisor for litigation funding deals. This was a complex structure, which included a framework for the type of cases that this investment can be used to fund. We are delighted to have advised North Wall on this significant component of their ESG strategy.” As well as Elena Rey, the Brown Rudnick deal team included Counsel Tristan Dollie and Associates Natalie Grundy and Reena Patel. Brown Rudnick is the go-to law firm for litigation funding deals, thanks to their deep understanding of the industry and experience in structuring innovative and complex deals. In April 2021, Brown Rudnick advised on the multimillion-dollar funding agreement for a legal claim against social media giant TikTok and its parent company ByteDance. In November 2020, Brown Rudnick launched the Litigation Funding Working Group, which now has over 90 members to develop model documents. In May 2022, Brown Rudnick hosted London’s first ever Litigation Funding Conference, attended by over 300 funders, lawyers, brokers, investors and other entities from the litigation funding eco-system. London-based North Wall Capital provides private capital to Western European special situations and manages several funds on behalf of global institutional investors. This investment brings the total invested by North Wall in PGMBM to £150million. In March 2021, North Wall Capital and PGMBM announced a £45m funding partnership. PGMBM is a partnership between British, American, Brazilian, and Dutch lawyers passionate about championing justice for the victims of wrongdoing by large corporations. This month, the firm secured a landmark, unanimous judgment from the Court of Appeal that allows over 200,000 victims of the Mariana Dam disaster, Brazil’s worst ever environmental disaster, to seek redress against the world's largest mining company, BHP, in the Courts of England and Wales. The firm is at the cutting edge of international consumer claims, including historic settlements on behalf of over 15,000 claimants in the Volkswagen NOx Emissions Group Litigation in May 2022 and 16,000 victims of the British Airways Data Breach in 2021. AboutBrownRudnickLLP Brown Rudnick is an international law firm that serves clients around the world from offices in key financial centers across the United States and Europe. We combine ingenuity with experience to achieve great outcomes for our clients. We deliver partner-driven service; we incentivize our lawyers to collaborate in the client’s best interest; and we put excellence before scale, focusing on industry-driven, client-facing practices where we are recognized leaders.
While the litigation funding industry continues its rapid growth in many territories around the globe, we are starting to see similar patterns emerging in Africa. With the passage of Nigeria’s Arbitration and Mediation Bill, the country has opened the doors for wider adoption of third-party funding with these latest changes to the regulatory framework.Analysis by White & Case examines the ways in which this new legislation will not only make it easier for parties to engage in funding agreements, but also offer sensible oversight and scrutiny for this process. The new law allows for third-party funding in arbitration cases in the Nigerian court system, which White & Case notes is only the third case of a bill with such direct language, after similar legislation in Hong Kong and Singapore.As mentioned, the new law ensures that any funding agreements must be disclosed and covers situations where costs orders may be brought by respondents, providing much-needed guarantees in cases where the claimant would not have the capital to cover such costs.
The US remains the market with the highest volume of class action litigation, and has been the go-to market for investors looking to capitalize, but this does not mean they should restrict themselves to American cases. Whilst litigation financing in Europe and Asia may be less familiar territory to US investors, there are a plethora of opportunities within the UK, Australian, Dutch and German markets all offering tangible rewards for smart investing.In a recent feature for Funds Europe, director of business development at Broadridge, Trip Chong, outlines the potential opportunities and risks that need to be analyzed by US investors before diving in. She highlights that not only should stand-alone cases in other jurisdictions be considered, but also multi-jurisdictional cases that originate in the US could see investors reap significant gains. Key to engaging in these foreign markets, she emphasizes, is the ability to monitor a breadth of cases and to dive into the detail on each matter.Within this analysis, there are multiple factors that investors are urged to consider, from the individual jurisdiction’s nuances, the resources required to adequately fund a claim, and importantly, any reputational risk that may be at stake for aligning with a litigant. However, she also raises the important point that these markets may be seeing higher rates of successful and high-value settlements than in the US, and that ESG-specific cases are gaining particular traction in Europe.Investors should closely evaluate each funder’s proposition and ensure adequate risk-management through insurance provisions. Yet despite these necessary risk mitigants, it would be foolish for US investors to eschew exploring the many opportunities in other regions that may yield high returns on investment.
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