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Commercial Regulatory Issues

Chief Justice of Ireland Discusses Litigation Investment Access 

Ireland’s population has experienced a long history of affordability challenges when accessing the Irish court system. The Chief Justice of Ireland’s Supreme Court has issued new guidance that hints at an open-minded approach to innovating third party funding facilities as tools in accessing the rule of law. This new perspective is a product of a conference held last year by the Chief Justice’s Working Group on Access to Justice.  Independent.ie reports that Chief Justice Mr. Donal O’Donnell has suggested that reforming access to third party funding and litigation investment is a top priority for Ireland’s regulatory innovation. Chief Justice O’Donnell appeared to signal a fresh approach to implementing improvements in facilitating access to justice. The Chief Justice urged a mindful approach to evolution in the industry, calling for careful inspection of regulatory innovation systems and processes now in place.   Scholars in Ireland also support broader access to litigation funding instruments in business, including insurance firms, bankruptcy managers, liquidators and trustees who seek innovative ways of boosting asset liquidity and the general bandwidth available to creditors.  
Case Developments Commercial

Canada’s Supreme Court Considers Advancing Award Costs 

Canada’s Supreme Court (SCC) issued historic guidance for First Nation Indian tribes, ruling that the Beaver Lake Nation’s “pressing needs” may include not having adequate capital for litigation. SCC’s ruling further includes a provision for Beaver Lake to qualify for advance costs to finance litigation fees as necessary. The SCC decision signals pathways to reconciliation between tribes and governments who potentially may stand to navigate complicated, lengthy negotiations and millions of dollars in litigation investment.  BLG.com reports that Beaver Lake questioned if the government of Canada along with the province of Alberta compromised the tribe's capacity to enjoy their traditional way of life. Various government factions of Canada are accused of pillaging Beaver Lake tribal lands with industrial resource projects that forever tarnished hunting and fishing ecosystems. Having already spent $3M on litigation fees, SCC estimates that Beaver Lake will need to invest $5M more in litigation costs for the trial.  The contentious question of whether Beaver Lake had adequate capital to fund litigation was first approached by a case management judge, who ruled the impoverished First Nation lacked adequate funds for quality litigation. Alberta’s Court of Appeal overruled the trial judge’s assessment. The SCC effectively ruled in favor of the case management judge’s assessment.   
Commercial Fundraising

Tracking Third Party Funding Partnerships 

Big Law litigation fees have a solid tradition of generating sticker shock for clients and spectators alike. To help mitigate such surprise, Fortune 100 firms have started to consider bundling litigation assets into portfolios with the hope of leveraging third party investment as a finance vehicle that generates profitable returns. Meanwhile, modern entrepreneurial strategy has begun to embrace third party funding partnerships as a tool beyond fear and the financial burden(s) associated with litigation.  Attorney at Law Magazine (AALM) reports that investment in the United States litigation finance marketplace totals more than $11B. AALM’s insights unpack statistical Bloomberg Law data to track a positive outlook for third party funding market sentiments. AALM suggests that Big Law is starting to track third party funding as an innovative business development exercise, allowing for greater firm successes over the near and long terms.  Furthermore, AALM signals that third party funding powers greater associate and partner success stories, which provides ancillary talent retention benefits for Big Law associates and partners alike.  
Commercial

Key Takeaways from the LITFINCON Event

LITFINCON’s inaugural conference kicked off last week at the Post Oak Hotel in Houston, Texas, with attendees flying in from all over the globe. Guests had a front-row seat to several thought-provoking conversations about the growing asset class from a variety of industry experts.

The LITFINCON event featured a variety of timely and insightful panel discussions. Below are some key takeaways from the two-day conference:

Day 1 highlighted current trends, the state of the industry, best strategies when seeking litigation finance, and the relationship between corporate legal departments and litigation finance.

The day kicked off with the “Views From The Judiciary On All Things Litigation Finance” panel, which was certainly a crowd favorite. Three distinguished judges shared their insights: The Honorable Charles R. Eskridge, III, of the United States District Court for the Southern District Court of Texas, The Honorable Andrew M. Edison, of the United States District Court for the Southern District of Texas, and The Honorable Lauren Reeder of the 234th Judicial District, Harris County. They offered their unique views, as only active judges can, on a variety of issues affecting litigators, funders, and plaintiffs.

Day 2 highlighted what investors should know about this asset class, when and how to use a broker when looking for funding, technology trends in the legal field, and expert insights on fund formation. Day 2's lunch break was something special, as it featured Chief Comedic Officer of Making Lawyers Laugh, LLC Sheng Weng, who most recently was seen touring with Ali Wong and was a featured stand-up on HBO’s “2 Dope Queens” special. Sheng also wrote for the ABC show “Fresh Off the Boat.” He kept guests entertained and roaring with laughter - a unique addition to the conference agenda.

Guests enjoyed rare in-person networking opportunities, and the opportunity to establish new business relationships. The attendee list included industry-leading firms, such as: Omni Bridgeway, Yieldstreet, Liti Capital, Law Finance Group, Polsinelli, Schulte Roth & Zabel, CAC Speciality, Parker Poe, 4 Rivers Legal, Critchfield, Critchfield & Johnston, Roche Freedman, Women of Litigation Finance (WOLF), Global Litigation Consultants, D. E. Shaw & Co., Arran Capital, Law Office of Philip A. Reale, Dunning Rievman, and Kerberos Capital Management.

Overall, attendees were delighted by how the event turned out. We received some sparkling reviews, a smattering of which is offered for you here:

“LITFINCON was a very positive experience. The range of speakers and panelists was impressive and a great deal of ground relating to the current trends in the industry was covered. The attendees were a good representation of the main industry players, namely funders, attorneys and advisors/brokers. Texas is still a relatively nascent third-party funding market and there are without doubt some exciting opportunities there, particularly in the energy and IP sectors. Siltstone did a great job in setting this up and I am already looking forward to the 2023 renewal!”

  • Peter Petyt (CEO and Co‑Founder, 4 Rivers)

“It was a pleasure to discuss how corporate legal departments can utilize litigation funding at the inaugural LITFINCON. The diversity of viewpoints and experiences of my distinguished co-panelists really contributed to a candid, free-flowing discussion of what more can be done to acclimate corporate legal departments to the exciting possibilities offered by litigation finance.”

  • Gaston Kroub (Partner, Markman Advisors)

"The litigation finance industry is growing rapidly, which makes networking at events like LITFINCON both important and exciting. We are building something together. It is particularly important that we share best practices and that we find ways to communicate those to stakeholders who may not be knowledgeable about them, such as litigation clients and members of the judiciary. LITFINCON did a great job of convening a diverse group and sharing that information.

I particularly enjoyed the “Crypto” panel, “How Will Blockchain, Cryptocurrency, And Other Technological Innovations Impact Litigation and the Legal Field.” It is nice to attend a conference that offers new information and perspectives."

  • Lauren Harrison (Vice President/Investment Counselor, Law Finance Group)
According to Siltstone Capital, the organizer of the event, LITFINCON was such a rousing success that the second installation is already being planned.

“Our entire Siltstone Capital team was humbled to host industry leaders at our inaugural LITFINCON. LITFINCON attracted a global array of speakers and attendees to help promote best practices for the growing and still malleable field of legal private credit. Hosting the conference in Houston, Texas also helped advance the legal private credit field to one of the biggest legal markets in the country. We can’t wait to host LITFINCON II in March 2023.”

  • Mani Walia (Managing Director & General Counsel, Siltstone Capital)

“The inaugural LITFINCON was a tremendous success. It received rave reviews. I want to thank all the sponsors, panelists, and attendees, who came in from all over the world – London, Geneva, New York, Miami, San Francisco, and Austin. LITFINCON highlighted the growing field of litigation finance and the importance of Texas as a hub that unites all participants in the legal field. Siltstone Capital is excited about continuing the momentum and advancing the litigation finance field by hosting LITFINCON II in March 2023. We expect the event to be two to three times bigger!”

  • Robert Le (Founder & Managing Partner, Siltstone Capital)
We are equally excited for the 2023 version, and look forward to bringing you a recap of that event next year as well!
Commercial People Moves

Burford Capital Welcomes Patrick Dempsey as Director

Patrick Dempsey has joined Burford Capital’s New York office as a Director, with a focus on growing new business with law firms and corporations across the United States.   Burford Capital notes that prior to joining the funder, Dempsey served as Therium Capital Management's United States Chief Investment Officer, where he also served as a Board Member. At Therium, Dempsey developed single case financial structures while also architecting portfolio compositions for a range of clientele. Dempsey also served as a litigator at Proskauer Rose LLP and Hogan Lovells.  Mr. Dempsey graduated with a bachelor’s degree from the University of New Orleans, and earned his law degree from Tulane University Law School.
Commercial

Key Takeaways From LFJ’s Podcast With Tony Webster 

On the latest episode of the LFJ Podcast, Tony Webster, CEO of UK-based litigation funding and ATE insurance portal, Sentry Funding, discussed his personal access-to-justice story which led him into the litigation funding industry. Webster outlined how Sentry’s portal works, and the advantages it provides both funders and solicitors in need of funding.  LFJ: Why don't you explain to us how the Sentry portal works? It is pretty unique. How does the whole thing operate?  TW: Because of our background in lending, we thought we could introduce technology to speed up the process. We started initially to be a funder, and then we started to build the software. In 2015, the growth in the UK hit hundreds of millions, if not close to a billion in assets under management in litigation funding.  We do a lot of research, with over 100 law firms. It was through those conversations and the growth in the market that we thought the benefit of just another funder coming in was not good enough. We thought we could adapt our technology and rather than be a funder, why don't we offer a portal where we could have lots of funders and insurers.  LFJ: There is a value in a portal that links to a variety of funders. You mentioned a speedy, quick response time. Is that your Rapid Raise, Fast Track product?  TW: We used to call it Fast Track, we brought that across from our banking backgrounds. It had nothing to do with the court system in the UK. It was a Fast Track to money.  We have now rebranded that to Rapid Raise, because there was some confusion with the different tracks you have with the UK courts.  With Rapid Raise, there are three products. The first is for one off commercials for those who need funding between 50,000 and 500,000. Then you have Rapid Rase Two, scheme funding where there is established case law and that is between 5,000 and 20,000 of funding. And then you have Rapid Raise Three for things like housing disrepair that comes in at less than 5,000 in funding. Because of the tech we can process the volume. We can provide a proper value under 500,000.  LFJ: Can you explain the reason you chose to focus on this end of the market?  TW: The vast majority of funders do not want to do less than £500,000 cases. That is why we came up with Rapid Raise. I think the issue that a funder has, is they treat a case they are underwriting for £2,000,000 or £200,000 exactly the same. It is not exactly the same, the risk is different. If you are putting £2,000,000 in a case, you are going to take a long time looking at it. But if you put in £200,000 in a case and can do 10 of them, then you are aggregating your risk across a group of cases. You have to expect you will lose a couple, but on the whole you will win. But, you need technology to do it.  LFJ: I want to ask about regulation. This has become an industry hot topic. But, it has recently kicked off with Australia passing some large impactful regulation. I wonder if you are concerned about impending regulation in the UK? What is on the horizon there?   TW: I come from a regulation background. We are not scared of regulation. When we built the portal, we built it for regulation. So, everything is dated and timestamped. Everything is transparent, every document fits into an encrypted file. It is all there for everybody to see. What I think regulation brings to the industry is just the process. You have to do things at certain times and disclose certain documents. So we are not scared of regulation.  Now, I don’t think regulation will come into litigation funding, because it falls under the banner of consumer lending. Consumer lending UK is not regulated. Personally, I think it should be. If you are touching money or investment, it should be regulated. Lawyers are regulated, but funders are not. I think we should close that gap. I don't think anyone should be scared of it. I think it is a good thing.  LFJ: What are your expansion plans? How do you plan to scale this business? Are you looking at any global jurisdictions? Could you move into the EU or US?  TW: We want to get much bigger in the UK. The market in the UK is big, right now, it is about a £2B market. We want to be the go-to place for the smaller cases. If you have under a 500,000 pound funding requirement, come to us. We have processed over 2,500 cases in the last two years. And that is increasing month over month. Canada and New Zealand are our next jurisdictions we want to go into. And then ultimately go into the States, because it is such a big market.    Click here to listen to the entire episode.
Commercial Regulatory Issues

Hong Kong and Singapore Litigation Investment Forecast  

International arbitration has experienced an uptick in activity over the past decade, with litigation finance driving increased accessibility to quality arbitration outcomes. Hong Kong and Singapore have both passed regulations to authorize third party funding in each jurisdiction.  New research sponsored by the Chinese University of Hong Kong, led by faculty of law professor Can Eken profiles Hong Kong and Singapore’s regulatory environment in granular detail. Eken compares and contrasts nuances between both markets, while asking what innovations Hong Kong and Singapore may embrace to further expand third party funding engagement across the international arbitration spectrum. Governments in Hong Kong and Singapore overwhelmingly embrace a ‘soft touch’ approach to litigation finance regulation. Forecasting the region’s growth prospects signal both Hong Kong and Singapore are in competition to be Asia’s arbitration capital, supported by friendly third party funding regulation.  Eken suggests that with the high cost associated with international arbitration, viability is often framed by financial capacity. With such need, Hong Kong and Singapore are recognized as having pioneered international arbitration regulation, legalizing the use of third party funding agreements.  As an added bonus, we have included 36 highlights to Eken’s 23 page essay for your general reference. 
Commercial Legal Innovation

The Future of Litigation Finance Tokenization 

Blockchain software technology and cryptocurrency innovation continues to evolve with intriguing potential to modernize legacy legal systems and processes. The potential for tokenizing legal assets continues to be a focus in building next generation litigation finance solutions.  KluwerArbitration.com recently profiled New York based Ryval’s mission to design a stock market for litigation finance. Traditionally, the litigation investment community has been tough to break into. Future endeavors in expanding access to litigation investment aim to apply tokenization of litigation claims as a crowdfunding exercise.  Ryval’s goal is to offer a platform to buy, sell and trade crypto tokens that represent partial ownership of litigation assets. Ryval’s tokenization concept for litigation investment aims to provide non-accredited investors the ability to access third party funding investment opportunities. Ryval’s funding agreements are still evolving, given various factors specific to jurisdictional regulations, but the firm’s vision seems to support an extremely fluid and highly liquid token ecosystem.   Blockchain software technology is being engaged by many in the industry to support tokenization of litigation assets. Firms like Ryval employ blockchain as a tool to efficiently scale platform operations and facilitate investor diversification, while mitigating risk. Ryval suggests thousands of individuals could invest in shares of claims. If the claim is successful, blockchain technology offers seamless access to payouts. 
Commercial Deals

Insurance Firms Engage Dispute Funding Solutions 

Traditionally, insurance firms have made an effort to forgo dispute funding as a finance tool, operating under the assumption that claim investment would increase case risk. With greater public awareness of third party investment solutions, many insurance firms are beginning to broaden their approach to dispute funding agreements, engaging solutions to finance claim recovery.  OmniBridgeway.com recently published research on the value of litigation finance tools specific to the insurance industry. According to Omni’s insights, insurers are beginning to realize the benefits of working with funders to structure portfolio architectures, allowing for risk mitigation. Ultimately, the most innovative insurance companies are now building dispute portfolios that serve as legacy cash generating assets. Many insurers welcome the comfort of working with a large funder who has deep expertise in claim success. Furthermore, insurance companies are engaging various products to fit individual needs, such as recovery claims associated with warranty and indemnity policies.    Omni’s team of experts are successful portfolio builders, according to the report. As such, some insurers are selling whole portfolios to funders when regulation permits. Omni has prompted some insurance firms to conduct internal audits to unlock potential assets to be funded for a hopeful recovery.