A recent judgment from the Court of Justice of the European Union (CJEU) ruled that EU member states can block law firms from accepting external investment in order to protect lawyers’ independence and comply with their professional obligations. The court found that EU directives governing the freedom of establishment and free movement of capital, “must be interpreted as not precluding national legislation” that prohibits third-party ownership of law firms.

Reporting in Legal Futures explains that the ruling arose following preliminary questions submitted by a German court which was overseeing a dispute between law firm Halmer Rechtsanwaltsgesellschaft and the Rechtsanwaltskammer München (Munich Bar Association). Halmer had informed the Munich Bar Association that it had sold 51 of its 100 shares to an Austrian company called SIVE Beratung und Beteiligung GmbH (SIVE). The bar association responded by informing HR that the transfer of shares was prohibited under the German Federal Lawyers’ Code, and subsequently revoked Halmer’s registration with the bar association. 

The Court of Justice’s ruling on these questions found that it was permissible for member states to block this kind of outside investment, noting that “economic considerations focused on a purely financial investor’s short-term profit could prevail over considerations guided exclusively by the defence of the interests of the law firm’s clients.” André Haug, vice-president of Germany’s Federal Bar Association, welcomed the European court’s decision and highlighted that its ruling concurred with the German government’s position that “the ban on third-party ownership is justified in order to guarantee the independence of lawyers.”

The case that came before the court was of sufficient significance that it attracted attention from member states across the continent, with observations submitted on behalf of the German, Spanish, French, Croatian, Austrian and Slovenian Governments.

The CJEU’s full judgment can be found here.

As LFJ reported yesterday, funders and law firms alike are looking to the Competition Appeal Tribunal (CAT) as one of the most influential factors for the future of the UK litigation market in 2025 and beyond. A judgment released by the CAT yesterday that found in favour of Britain’s largest telecommunications business may provide a warning to industry leaders of the uncertainty around funding these high value collective proceedings.

An article in The Global Legal Post provides an overview of the judgment handed down by the CAT in Justin Le Patourel v BT Group PLC, as the Tribunal dismissed the claim against the telecoms company following the trial in March of this year. The opt-out claim valued at around £1.3 billion, was first brought before the Tribunal in 2021 and sought compensation for BT customers who had allegedly been overcharged for landline services from October 2015.

In the executive summary of the judgment, the CAT found “that just because a price is excessive does not mean that it was also unfair”, with the Tribunal concluding that “there was no abuse of dominant position” by BT.

The proceedings which were led by class representative Justin Le Patourel, founder of Collective Action on Land Lines (CALL), were financed with Harbour Litigation Funding. When the application for a Collective Proceedings Order (CPO) was granted in 2021, Harbour highlighted the claim as having originally been worth up to £600 million with the potential for customers to receive up to £500 if the case had been successful.

In a statement, Le Patourel said that he was “disappointed that it [the CAT] did not agree that these prices were unfair”, but said that they would now consider “whether the next step will be an appeal to the Court of Appeal to challenge this verdict”. The claimants have been represented by Mishcon de Reya in the case.

Commenting on the impact of the judgment, Tim West, disputes partner at Ashurst, said that it could have a “dampening effect, at least in the short term, on the availability of capital to fund the more novel or unusual claims in the CAT moving forward”. Similarly, Mohsin Patel, director and co-founder of Factor Risk Management, described the outcome as “a bitter pill to swallow” for both the claimants and for the law firm and funder who backed the case.

The CAT’s full judgment and executive summary can be accessed on the Tribunal’s website.

Sandfield Capital, a Liverpool-based litigation funder, has reached an agreement for a £600 million facility with Perspective Investments. The investment, which is conditional on the identification of suitable claims that can be funded, has been secured to allow Sandfield Capital to strategically expand its operations and the number of claims it can fund. 

An article in Insider Media covers the the fourth capital raise in the last 12 months for Sandfield Capital, with LFJ having previously covered the most recent £10.5 million funding facility that was secured last month. Since its founding in 2020, Sandfield Capital has already expanded from its original office in Liverpool with a footprint established in London as well. 

Steven D'Ambrosio, chief executive of Sandfield Capital, celebrated the announced by saying:  “This new facility presents significant opportunities for Sandfield and is testament to our business model. Key to our strategy to deploy the facility is expanding our legal panel. There's no shortage of quality law firms specialising in this area and we are keen to develop further strong and symbiotic relationships. Perspective Investments see considerable opportunities and bring a wealth of experience in institutional investment with a strong track record.”

Arno Kitts, founder and chief investment officer of Perspective Investments, also provided the following statement:  “Sandfield Capital's business model includes a bespoke lending platform with the ability to integrate seamlessly with law firms' systems to ensure compliance with regulatory and underwriting standards.  This technology enables claims to be processed rapidly whilst all loans are fully insured so that if a claim is unsuccessful, the individual claimant has nothing to pay. This is an excellent investment proposition for Perspective Investments and we are looking forward to working with the management team who have a track record of continuously evolving the business to meet growing client needs.”

Omni Bridgeway has entered into an agreement with Ares Management Corporation, for the alternative investment manager to acquire a stake over 150 of Omni Bridgeway’s ongoing investments. The agreement will see the creation of ‘Fund 9’ as a continuation fund to contain these investments, with Ares investing A$310 million for a 70% interest in the fund whilst Omni Bridgeway will retain a 30% interest.

An article in Bloomberg Law covers the news that “Ares has the option to acquire up to a A$35m equity stake in Omni Bridgeway through the issuance of warrants at an agreed strike price.”

Raymond van Hulst, Managing Director and CEO of Omni Bridgeway stated: “I am very pleased with this transaction as it delivers on all of our stated strategic objectives at once: validating the fair value of our book and the quality of our underwriting and valuation methodologies, improving the cost coverage rate, reducing debt to zero, and enforcing our position as the leading and institutional grade funds management platform for legal assets.”

Jan-Paul Kobarg, Partner at Ares Management added: “Leveraging our scale, structuring capabilities and flexible capital base, we are pleased to invest alongside OBL in this innovative structure for the asset class. During our due diligence process, we were impressed with the experience and quality of the OBL team. We believe this transaction accelerates OBL’s transition to a capital light funds management model in a growing asset class where it is a recognised global leader.”

More detail about the agreement between Omni Bridgeway and Ares can be found in the full announcement.

Omni Bridgeway’s Gian Kull and Simon Latham explore the topic of ‘funding structures in opt-out CAT proceedings’, identifying key methods to improve alignment between litigation funders and claimants whilst ensuring a sustainable future for UK litigation funding.

In their LinkedIn post, Kull and Latham frame their analysis by stating that an optimal funding structure is one that “must balance the interests of funders, legal representatives and claimants, as well as consider the perspectives of defendants such that settlement is not impeded or overcomplicated.” 

The article lays out the following three options that funders could explore to improve this alignment:

1. The Case for Funders Charging a Percentage of Damages
2. Introducing Damages-Based Agreements in the CAT
3. Making Invested Capital and Contingent ATE Premia Recoverable from Defendants

Kull and Latham explain not only the differing advantages of each of these options, but also suggest areas where safeguards or additional requirements could be introduced to ensure efficiency and protect claimants. With these options detailed, the authors conclude that a “hybrid approach, combining capped percentage-based funding with DBAs for legal fees and third-party funding for ancillary costs, alongside the recovery of invested capital and contingent premia from defendants, may offer the most balanced solution.”

The full analysis from Kull and Latham can be read here.

An article in CDR looks ahead to the UK litigation landscape in 2025, speaking with funders, litigators and barristers to see what these industry insiders view as the most likely trends for the upcoming calendar year. When it comes to funding, the issues highlighted were the Competition Appeal Tribunal (CAT), the funding of group actions and the highly-anticipated Civil Justice Council (CJC) review into third-party funding which is expected to be completed in the summer of next year.

Gian Kull, investment manager at Omni Bridgeway, noted the headwinds around the “availability of capital in the UK has reduced because several funders have stopped funding new cases.” He also explained that the ongoing impact of the Supreme Court’s PACCAR decision is that funding has become more expensive, due to the required “change of pricing structures”. Moving forward, Kull emphasised that the most important thing was to gain “clarity from the CAT” through judgments handed down next year, which he suggests will “confirm whether it is a fundable pathway”. 

Sarina Williams, partner at Linklaters, described the CJC review as “the single biggest driver of how class actions develop in the UK”, with the CJC’s recommendations set to shape the government’s legislative approach to the PACCAR issue. Williams argues that if funders get their way and the CJC “says that self-regulation is working well”, then it is likely that the UK will continue to be “an attractive jurisdiction for funders.”