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.
The ever-growing focus on ESG for companies around the world looks to be a double-edged sword, as investors may soon switch from rewarding companies pursuing ESG strategies with capital to instead funding litigation against those that fail to deliver on their promises. The increasing adoption of third party funding for legal recourse makes this strategy a much more compelling avenue for those seeking to pursue claims against industry giants, who otherwise might have been beyond the reach of smaller entities.Sarah Mills of FNArena outlines the growing potential of this industry, highlighting major players such as Burford Capital, Omni Bridgeway and Harbour Litigation Funding as some of those already taking advantage of these ESG-specific opportunities. Existing activity has the potential to be boosted by the fact that the SEC plans to enforce mandatory reporting of emissions for companies by the end of 2022.Those embedded in the industry already see a path to further expansion, with Ed Truant, CEO of Slingshot Capital, predicting that ESG-specific litigation could solidify as an individual asset class for investors. This is further reinforced as the industry is starting to see funders dedicate specialist funds towards ESG litigations, such as North Wall Capital’s £100 million investment in PGMBM to bring ESG claims, and Aristata Capital bringing in £40 million to drive its impact litigation fund.There are concerns that this type of litigation may not have staying power beyond the short-term. However, insiders like Mr Truant believe that as the wider litigation finance industry continues to grow, this will naturally be replicated in the ESG arena, as multinationals are held to account over their environmental promises.
The market-leader for litigation finance in India, LegalPay, is continuing to trail blaze with its latest funding for Just Deliveries to pursue claims against Coffee by Di Bella India. The cafe chain is being sued for unpaid invoices due to Just Deliveries, a logistics solutions company based in Mumbai, which provided the cafes with delivery logistic services for a monthly rate.CXOtoday reports that despite multiple demands for payment, Coffee by Di Bella India has still failed to fulfill these invoice requests. As a result, Just Deliveries enlisted the services of LegalPay in order to engage in arbitration actions in an effort to seek recovery of the payments. The case represents another major action for LegalPay, which remains the only homegrown third party legal funding provider in India.
Johnson and Johnson (J&J) has engaged a restructuring vehicle to leverage bankruptcy protection for its talcum claim awards. The 'Texas Two Step' is a legal investment strategy that limits overall financialloss due to class action and other corporate litigation. J&J has allocated $2B to a new company that will hold litigation liability. Litigation Finance Journal has collated 12 highlights to a Brief for Amici Law Professors on Support of Appellants of the J&J talcum business reorganization. Legal scholars are labeling J&J's approach as an extraordinary effort by wealthy and sophisticated individuals who aim to bypass bankruptcy court supervision. Authors of the brief summarize that J&J has leveraged Texas state law to organize a unique limited liability approach to talc claim exposure and corresponding expenses. Some say the total addressable market for talcum claims exceeds $10B, so it will be interesting to see how this plays out.
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