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Commercial

Changes in Disclosure Laws Threaten Class Actions

Treasurer Josh Frydenberg continues his assault on class actions by making permanent what was meant to be a temporary regulatory shield. The extension of the COVID-inspired policy means that corporations breaching their disclosure obligations may now only be subjected to civil penalties in situations where they acted knowingly and with negligence or recklessness. Financial Review details that before COVID, disclosure rules were more strict. A shareholder lawsuit could be pursued when company officers did not disclose relevant information—regardless of the intent. This makes sense, as the intent doesn’t negate shareholder losses. ASIC is still able to prosecute criminal breaches when they occur, but unless malicious intent can be established, shareholders are unlikely to see their day in court. Meanwhile, Frydenberg claims that these are necessary changes needed to ensure that litigation funders face even more regulatory scrutiny. The treasurer also suggested that class actions backed by third-party funding should register as managed investment schemes.   As one might expect, big business is strongly in favor of the new policy. It was also recommended by the Parliamentary Joint Committee for Corporations and Financial Services. Frydenberg claims that this puts Australia’s policies more in line with those in the UK and US courts. Opponents of the measure suggest that it’s another in a long line of ways in which Frydenberg besmirches litigation funders with accusations of ‘opportunistic’ or even ‘frivolous’ class actions. Essentially, companies and officers will not be held liable for conduct that is deceptive or misleading, unless “fault” is also proven. Without the realistic threat of shareholder class actions, what’s to stop companies from engaging in deception or misleading shareholders? Still, the recent parliamentary inquiry was not complimentary toward legal funding, asserting that it “uses” the justice system to generate a return on investment.
Commercial

Law Firm Panels and General Counsel

More often than not, corporate legal departments have their own preferred provider network of law firm partners. Periodically, these networks are reevaluated and updated to streamline strategy or control costs. These occasional reviews have become more frequent, and requests for proposals (RFPs) are up 25% from where they were in 2017. As restructuring and budget shortfalls are becoming increasingly common thanks to COVID, these panel reviews are likely to continue.

Burford Capital explains that while corporate legal departments are retooling and adapting, partnering with a legal finance company may make a lot of sense. Risk-sharing, for example, by entering a portfolio funding arrangement—can help buttress otherwise stressed balance sheets.

In-house lawyers often say that they’ve chosen not to pursue valid, promising legal claims due to cost. By leveraging legal finance, firms in that situation could simply use non-recourse funding to increase liquidity at the same time they lower their own risk.

Legal finance may help achieve many of the goals GCs pursue, as they review their legal networks. The expertise of established litigation funders is a boon to any legal team. Their experience is more likely to lie in vetting cases, possibly filling a knowledge gap within the existing team.

Legal finance makes budgeting easier by increasing the certainty of incoming funds. Funders can be utilized not just for the funds themselves, but for strategic purposes as well. In addition to expertise and a winning track record, funders should be well-financed and open to transparency. Scale is also important, so it’s vital to choose a funder that can meet your legal finance needs.

Establishing and evaluating legal partner relationships should be a regular occurrence for GCs. The time to reevaluate isn’t after a meritorious case emerges. The key is to be ready to strike when the opportunity presents itself.

Commercial

COVID is Spurring Litigation Funding in India

As COVID continues to ravage businesses, insolvencies and breach of contract lawsuits have skyrocketed. In India, businesses are enduring a crash in sales and revenue. They also lack the mechanisms needed to effectively address the sharp rise in litigation. Legal Desire explains that when a business wants to pursue a valid legal claim, but doesn’t want to invest resources—third-party funding can be beneficial. The pandemic is one of the reasons Litigation Finance is gaining in popularity in India, which has an enormous legal market. Investors outside the country are now looking at India as a new horizon within which their investments might come to fruition. Until recently, India was focused on whether or not existing laws covering champerty and similar concepts forbade the practice. Over the last few years, litigation funding has been determined by top legal minds to be permissible. Now, the legal world will examine how the practice will be regulated. Some legal firms in India have already embraced third-party legal funding thanks to their international clients. Funders like Vannin Capital and Augusta have already funded cases in Indian courts. The founding of the Indian Association for Litigation Finance is another big step forward for the industry. Like similar groups around the world, including the ILFA, the organization is poised to increase confidence in the industry and to self-regulate, while working to educate clients and firms about the practice. Due to the havoc caused by COVID, litigation funding has become a highly attractive concept for investors, because it’s not correlated with the rest of the market. Global investors seem ready to put their money in India, as they have in the past with funders in the US, UK, and Australia, among others. This promises increased opportunities within the industry, as well as a sharp rise in access to justice for those who need it most.
Commercial

Plaintiffs Settle in Kiwifruit Vine Disease Case

A settlement between kiwifruit growers and the Crown has finally been reached. Ray Smith, director of the Ministry for Primary Industries has stated that all parties agreed to move forward and bring the case—which has been running since 2014—to a close. Fresh Plaza details that the case revolves around what plaintiffs described as ‘actionable negligence’ connected to the government allowing Psa into the country in 2010. Psa is a vine disease that impacts kiwifruit. Smith went on to say that it makes sense to settle, given the claimant’s legal costs and those of litigation funders. In his opinion, the settlement does acknowledge the losses of those in the kiwifruit sector. The settlement means the planned Supreme Court trial will not take place. Since Psa was identified, New Zealand has improved its import process dramatically.
Commercial

Mastercard Class Action Back in Court in March

Roughly 45 million Mastercard holders are represented in a class action against the credit giant. Accused of using ‘interchange fees’ to charge unreasonably high prices, Mastercard faces a claim that could be worth GBP 14 billion. Law Gazette explains that a remote certification hearing is scheduled for March 25-26, and will determine whether a collective proceedings order will be granted. The case, funded by Innsworth, is the first to be brought under the collective action regime found in the Consumer Rights Act 2015.
Commercial

Funding Asia-Pacific Insolvency Claims

It’s no secret that an increase in insolvency filings looms on the horizon. Debt restructuring, government relief programs, and belt-tightening can only take a business so far. What many businesses don’t realize is that third-party legal funding can provide financial wiggle room. Omni Bridgeway shared a webinar panel discussion relating to insolvency claims across Asia-Pacific. It included Tom Glasgow and Heather Collins of Omni Bridgeway, Patrick Cowley of KPMG China, and David Walker of Allen & Overy. It was expected that an avalanche of insolvency would arrive in 2020. But thanks to government programs, that didn’t happen. However, global vaccination efforts may enable governments to scale back help to businesses—leading to more insolvencies.  Insolvency Practitioners are one group that can benefit from the use of legal funding. This can help cover legal expenses associated with recovery. Heather Collins explains that for an IP claim, a funder should be the third phone call made after the bank and lawyer. Funders can become involved at any point—but those in the know say earlier is better. Globally, the usage of third party funding will play out in different ways. In Hong Kong and Singapore, for example, lawyers are not permitted to work on contingency. This may mean that these territories will soon begin considering new types of funding.
Commercial

International Arbitration Trends

A global pandemic may have brought sweeping changes, but it hasn’t slowed the filing of new cases. Early numbers suggest that new cases are being filed at about the same levels as the previous year, or higher. ICSID reported 58 new ICSID Convention and Additional Facility arbitrations last year—the most ever. SIAC also reported a record-high number of new cases, topping 1,000 for the first time ever. Burford Capital details several new trends in international arbitration. Remote conferencing, document sharing, virtual signatures, and other tech advancements have led to challenges and even postponements. But overall, the industry has embraced technological advancements that mitigate the barriers put up by COVID. Corporate liquidity has been an ongoing concern during the pandemic. Interest in Litigation Finance, and portfolio funding, in particular, have skyrocketed since the impact of COVID. But the main source of contention with regard to third-party legal finance continues to be disclosure. ICC Rules of Arbitration went into effect in January, which will require that third-party funders be identified in the interest of avoiding conflicts of interest, or appearances thereof. Some speculate that this may lead to an uptick in frivolous applications for securities for costs. Meanwhile, the LCIAs updated rules took effect in October of last year, and do not require disclosure when third-party funding is used. An upcoming UNCITRAL Working Group is undertaking arbitration reform, with legal finance being one of several issues up for discussion. It is not expected that the Working Group recommendations will lead to new laws or reforms by the end of 2021. The Energy Charter Treaty will undergo another round of negotiations in the ongoing modernization process. After this, new provisions may be vetted to ensure that any updates comport with existing EU law. As funders continue to adapt to new circumstances, monetizations and other tools are sure to broaden their usage over the coming months.
Announcements Commercial

GLS Capital Co-Founders Named to IAM’s Strategy 300 Global Leader List for 2021 Read more: http://www.digitaljournal.com/pr/4970832#ixzz6mDg8sx9I

GLS Capital operates one of the world's largest private investment firms focused on litigation finance. The GLS team is comprised of investment professionals that provide financial solutions for complex legal matters, specializing in commercial litigation, arbitration, law firm financing and patent infringement litigation, including Hatch-Waxman litigation. Intellectual Asset Management ("IAM") is a leading publication covering intellectual property that  publishes the IAM Strategy 300 Global Leader List identifying the world's leading IP Strategists.  IAM has named GLS Capital partners Adam Gill and Jamie Lynch in their 2021 IAM Strategy 300 List of Global Leaders for Intellectual Asset Management, which is composed of leaders from the Americas, Europe, and Asia. Upon the recognition, Adam Gill, Managing Director of GLS Capital shared the following statement: "I am grateful to be named to IAM's Strategy 300 list for the 5th consecutive year. We appreciate this honor, which we view as a recognition of the entire GLS team's success in helping patent owners protect their IP and receive fair compensation for their technological contributions to the world." Adam and Jamie, along with David Spiegel are part of the founding team of GLS Capital. The partners have led and managed more than $600 million of litigation finance investments. The Team is focused on legal and regulatory risk management, and has become a trusted strategic partner and capital provider to top law firms and their corporate clients. To view IAM's 2021 Strategy 300 Global Leaders Guide, click here. For more information about GLS Capital, please visit the website, or call 312-900-0160.
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Commercial

Calls Continue for Farmers to Register in Fonterra Class Action

About 350 farmers have already registered in the class action suit against Fonterra, but attorney David Burstyner, says that’s not enough. The founding partner of Adley Burstyner has expressed concern that some farmers might be hoping to benefit from the case without attending meetings or becoming involved. The Courier explains that if the case doesn’t have enough registrations, it may not be able to move forward. Burstyner claims that at least 600 total registrations would be needed. An upcoming case management conference is scheduled for later this month. In it, ‘class closure’ may be discussed—defining who is included or excluded. Litigation Lending Services is funding the case, which means there’s no upfront cost for farmers who want to sign on. Litigation funding occurs on a no recourse basis with the expectation that funders will take a portion of any award or settlement in the case. Too few class members may mean a payoff too small for funders to consider the claim a good investment. As to the facts, the action asserts that Fonterra violated its contract with farmers by unleashing a step-down in milk price, deeply impacting farmers. The case also alleges misleading conduct that hurt many suppliers. Fonterra denies all of the points in the case—pointing to the recent formation of Fonterra Australia Suppliers Council as evidence of its strong relationship with farmers. The company further notes that the ACCC declined to take action against Fonterra after an investigation into the reduction in milk prices.