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Commercial

Is India Ready to Embrace Litigation Finance?

Litigation Finance has exploded in popularity over the last decade. This was caused by a number of factors, and cemented by the impact of COVID. Litigation Finance is now a powerful industry with major financial strength behind it. But it hasn’t yet reached every corner of the globe. Could India be the next frontier? India Legal Live explains that Indian law expressly prohibits advocates from funding litigation or arbitration. While funders do lack decision making powers in the cases they fund elsewhere, India’s existing laws may frown on funders looking for contingency fees when deciding which cases to bankroll. Some refer to India’s current financial climate as a ‘liberalization’ of policy, as foreign investors are welcomed and India moves toward becoming a destination for international arbitration. Still, the use of third-party litigation funding is scarce. Current contract law in India contains provisions to prevent lopsided bargains. It may be assumed that claimants have greater financial need than defendants, and may therefore be more likely to be exploited by funders. Contract law might then have to be updated or clarified before litigation funding can gain more mainstream acceptance. A recent court case determined that litigation funding agreements must be carefully scrutinized to ensure fairness. This came after an affirmation that litigation funding does increase access to justice for those who cannot otherwise afford it. There are already countries in which litigation funding arrangements must be approved by courts. India may adopt similar legislation. Confidentiality is another contentious issue. Every nation holds confidentiality to be a necessary part of lawyer/client relations. It’s vital to ensure that confidentiality is maintained even as courts maintain a close eye on funding arrangements. Omni Bridgeway’s Tom Glasgow is optimistic about the future of Litigation Finance in India, saying that opportunities to aid in de-risking litigation are plentiful. As part of the ILFA Working Group, Omni Bridgeway hopes to be instrumental in bringing international best practices to India.
Commercial

Sarah Tsou Speaks About Patent Litigation Funding

Sarah Tsou is an investment manager with funding leader Omni Bridgeway, where she specializes in patent litigation. In IP Watchdog’s recent podcast, Tsou explains the modus operandi most commonly used to defend against patent suits. Well-monied defendants can drag out even a meritorious patent suit for years—depleting the resources of patent owners. The proliferation of litigation funding now means that patient owners with strong cases can enter into funding agreements—increasing the chances of seeing justice done. Tsou also expounds on:
  • Finding and vetting cases
  • Tips for building a patent portfolio
  • Patent litigation funding for in-house legal teams
  • Risk sharing
Below are some highlights from the podcast. Tsou: My experience taught me that having a really good understanding of remedies, so not just damages, but also injunctive relief and the kinds of pressure those remedies can put on litigants is really important. Tsou: Across the company, our rejection rate might be something like 99% on the patent cases that we get. I think our philosophy is that we have to find the good cases. It takes time, it takes in-house experience, it takes trusted relationships from good law firms that we know, who are showing us good cases and good companies that we know have valuable assets—and it’s just putting in the work upfront. Because one common saying in funding is that in patent cases, ‘there are a million ways to die.’ Tsou: One of the important requirements for our funding is that the law firm needs to be able to take some risk. And that usually means some kind of contingency arrangement or hybrid arrangement where they only get a portion of their fees, say 50%, along the way. In exchange for that risk, they get a substantial percentage of the reward. That way we know we’re working with a law firm that’s just as aligned and sharing in the risk as we are. Tsou: Be prepared for litigation and the things that can come up beyond cost. Have realistic expectations. The more that a company can start thinking about patent litigation as something that’s not going to be a billion dollar claim, because there are very few claims that result in a billion dollars, or having a realistic expectation for the time it’s going to take, and how much money could actually be received at the end of the day...the better off they’ll be.
Commercial

Four Hot Litigation Finance Trends for the Coming Year

This year has been unique in terms of obstacles, uncertainty, and hardship. Record layoffs and business closures have caused disruption around the globe, and the legal world is beset by delays juxtaposed with a tidal wave of new litigation. Thankfully, it has also brought about a rise in the use of litigation funding. Law.com details four vital trends in Litigation Finance to keep an eye on in 2021. The first of these concerns transparency. Right now, there’s a disconnect between the right to confidentiality and the need to keep third-party funding transparent and above board. We can expect new legislation and recommendations that outline clear guidelines and legal expectations that apply to funders, lawyers, plaintiffs, and courtrooms. At present, laws regarding the use of third-party legal funding lack cohesiveness. Different countries, and indeed, different US states will have their own laws governing funding, how it may be used, who can be involved, and what disclosures must be made. Standardization is desired, and 2021 will likely show progress toward that aim—even though such moves are currently in legislative limbo. As more funding entities emerge, consolidation becomes likely. The recent merger of IMF Bentham with Omni Bridgeway turned industry heads. New, specialized firms may find themselves acquired by bigger, monied entities. This may be an overall advantage to an industry that is still a mystery to much of the public. Court delays are still ongoing, and the increase in court matters will only make the backlogs worse. As such, it’s expected that settlements, mediation, and out-of-court arbitration will become more commonplace. Remote working is likely to continue even after the pandemic as employers see that productivity goals can be met from home. Litigation Finance proves to be a game-changer in the legal world. It’s also got the financial backing it needs to meet the increasing demand.
Commercial

Is Covid-19 an Impetus for Litigation Finance in India?

India is currently one of the world’s top five economies. That’s good news. But like most top economies, Covid is causing disruption and discord. The pandemic may also lead to a flurry of new litigation as it has in much of the developed world. Will India be joining the likes of Germany, Australia, UK, Singapore, and others in their acceptance of litigation funding? Bar and Bench explains that with trying financial times comes a need for creative solutions. Litigation Finance is not as well established in India as it is elsewhere, but the practice is poised to catch on. The recent success of the Indian economy has made it a desirable destination for international investors. In 2016, the Indian Government was involved in over $9 billion in arbitration disputes relating to infrastructure. As businesses find themselves with dwindling resources and limited access to credit, the idea of third party funding becomes increasingly attractive. Indian courts seem to be moving ever-closer to widespread acceptance of litigation funding. In one case, the Privy Council approved the practice of one party funding a case for another in exchange for a share of the reward. This is predicated on the arrangement being fair and the case being meritorious. A later case established that champerty rules did not apply in India, and that there was no public policy prohibition against the practice. Still, the acceptance and use of the practice in India promises to be complex. Public policy, for example, is not a written law, but a generally understood set of principles. The ‘right to sue’ is more complicated in India, and issues of conflict of interest and even confidentiality are more convoluted. This may impede or slow the widespread use of litigation funding as legal precedents are set to refine the practice. Finally, there’s the question of qualifications for third-party funders. Australia and elsewhere have stringent rules about who can provide funding and how they must conduct themselves. India seems headed toward a similar regulatory path.
Commercial

Does the Japanese Legal Landscape Herald the Coming of Litigation Finance?

A recent announcement from Anderson Mori & Tomotsune indicates the formation of a “foreign law joint enterprise.” In essence, the firm is taking on partners who are registered lawyers from the US, UK, and Mainland China. All are fluent in Japanese. LawFuel details that this is expected to enhance and strengthen the ability of the firm to take on cross-jurisdictional cases. This push toward globalization and inclusivity is a bold step forward for the firm, which has been in business since 1952. As client needs become more complicated and far-reaching, firms are evolving to keep up. Might this mean that other western practices are on the rise in Japan? Litigation funding has yet to be adopted by the Japanese legal system. But the increase in globalization may well bring about a rise in third-party litigation finance. Only time will tell. 
Commercial

Litigation Finance: Experiencing is Believing

Litigation Finance is increasing in use and acceptance as an innovative, ethical option when money is scarce. According to the 2020 Legal Finance Report, use of third-party litigation funding is up 105% since 2017. Burford Capital explains that as more firms and companies utilize litigation funding, the more folks are talking about the good it can do. In just a few short years, the practice has evolved from a niche option to a widely sought solution for a variety of common financial woes. One thing is certain: the need for education. While use of litigation funding is up, lawyers are increasingly admitting that they know very little about the practice. Third party funding isn’t just for class actions against deep-pockets. Modern benefits of legal finance include monetizing legal assets to offset the impact of the pandemic, or to fund a portfolio of cases without adding to balance sheets. Are legal professionals, as they claim, largely ignorant of all that litigation funding can do? Or do they recognize the need for education so they can make the most of this evolving option?
Commercial

Why CFOs Should Look to Legal Funding—Without Delay

In these trying and potentially volatile economic times, CFOs may have every reason to worry. They also have reason to innovate, adapt, and find creative solutions to maintaining balance sheets. Global Bank and Finance explains that with job losses hitting record highs (over 800,000 jobs lost during the pandemic), insolvencies and liquidations are also way up. Some suggest that nearly 2/3 of businesses are currently at risk of folding. Nearly 15% of UK businesses have suspended trading. Still, it doesn’t have to be that way for everyone. CFOs should be looking for assets that can be liquidated. Unrealized litigation, for example, can be monetized. Breach of contract, lack of payment, fraud—any viable claim can be turned into a liquid asset with help from funders. By covering the costs of bringing a vetted claim, funders create solutions that let litigation move forward without tying up capital. Successful cases make money for funders, while unsuccessfully funded cases do not impact the firm—because funding is provided on a non-recourse basis. While funders seek out meritorious cases with a good chance of recovery, the right commercial dispute can be worth millions. Savvy CFOs would do well to seek out potentially profitable claims that can be monetized. Economically tenuous times don’t impact Litigation Finance as one might expect, because this asset class is uncorrelated to the market. Currently, funders are well-monied and looking for cases to fund.
Commercial

Australian Joint Committee Seeks Further Regulation of Litigation Funders

Massive new oversight is needed to reign in the litigation funding industry—that’s the conclusion according to a report from the parliamentary joint committee on corporations and financial services. An array of recommendations has been suggested, though it did not include Frydenburg’s most severe requirements. Independent Financial Advisor details some of the recommendations suggested by the committee. These include the appointment of independent fee assessors to vet fees and agreements involving firms, funders, and class participants. Oversight is also recommended with regard to who may fund cases, and what percentages they will be allowed to take before a settlement can be accepted by the court. Essentially, the new regulations are meant to stem what the committee sees as excessive, unreasonable, or disproportionate fees to funders—often at the expense of those who were actually wronged. It’s also meant to reduce the desirability of Australia as a hot spot for international or cross-jurisdictional litigation. As of now, no regulator has taken legal action against a funder. But that may change if the committee gets its way and new regulations are adopted. Many believe there is a lack of symmetry that needs to be addressed in order to maintain public confidence in litigation funding.
Announcements Commercial

Odyssey Marine Exploration Prepared for Strong 2021 with Increased NAFTA Funding and 2020 Successes

Odyssey Marine Exploration, Inc. (NASDAQ:OMEX), a deep-ocean exploration pioneer engaged in the discovery, development and extraction of deep-ocean minerals, has secured up to an additional $10 million to support its pending North American Free Trade Agreement (NAFTA) claim against Mexico and provided an update on the successful execution of Odyssey’s 2020 business plan objectives.

The NAFTA claim relates to the unlawful denial of the environmental permit for subsidiary Exploraciones Oceanicas’ (ExO’s) offshore phosphate project. Odyssey’s existing litigation funder, Poplar Grove, LLC, has agreed to provide up to an additional $10 million to fully support the NAFTA claim under substantially the same terms as our prior agreement. Poplar Grove is managed by Drumcliffe LLC, a private investment management firm that oversees a high-value litigation funding portfolio representing more than $14 billion in claims.

“Drumcliffe’s sole focus is to finance and support the recovery of value for the victims of global fraud, corruption and wrongdoing. The strength of the First Memorial filed by Odyssey in this case reinforces our belief in a successful outcome and supports our decision to invest additional capital to fund the case through the hearing and anticipated award,” explained James C. Little, CEO of Drumcliffe.

“One of our key objectives for 2020 was advancing the realization of value from the significant investment we have made in our ExO Phosphate Project in Mexico,” stated Mark D. Gordon, Chairman and CEO of Odyssey. In September, we filed a strong and compelling First Memorial in the NAFTA case. It was the culmination of many months of work by our legal team at Cooley, supported by our internal project development and research team, to gather documentary evidence and 20 expert reports and witness statements that demonstrate the merits of the case, the strategic size and grade of the resource, the operational viability of the project, and the project’s value. We are extremely confident in our case and, with the addition of the expanded funding commitment from Poplar Grove, we are prepared to take the case through to its final conclusion to realize the more than $2 billion value of this asset.

“In addition to making substantial progress on the ExO Phosphate Project, the Odyssey team has continued to move the business forward by advancing the development and value of our diversified mineral project portfolio and positioning the company for significant successes in the coming 18 months. Our achievements, despite being in the middle of a once-in-a-century worldwide pandemic, are a tribute to our dedicated team of professionals who tirelessly work to live our core values and achieve the ambitious goals we set for ourselves. Investors’ confidence in our business plan and the progress we continue to demonstrate enabled us to achieve a major goal of securing multi-year operational funding,” added Gordon.

Realizing the Value from the ExO Project:

Odyssey’s most significant project is the ExO Phosphate Project in Mexico, which is one of the largest and highest quality phosphate sands deposits in the world. It is currently the subject of $2.36 billion claim against Mexico under NAFTA. In early September, Odyssey’s legal team filed the First Memorial in the case alleging that Mexico’s prior political administration wrongfully denied environmental approval of the ExO Phosphate Project in breach of NAFTA.

In 2012, ExO was granted a 50-year mining license by Mexico (extendable for another 50 years at ExO’s option) for the deposit that lies 25-40 km offshore in Baja California Sur. The company spent more than three years preparing an environmentally sustainable development plan with the assistance of experts in marine dredging and leading environmental scientists from around the world. Key features of the environmental plan included:

  • No chemicals would be used in the dredging process or released into the sea
  • A specialized return down pipe that exceeds international best practices to manage the return of dredged sands close to the seabed, limiting plume or impact to the water column and marine ecosystem (including primary production)
  • The seabed would be restored after dredging in such a way as to promote rapid regeneration of seabed organisms in dredged areas
  • Ecotoxicology tests demonstrated that the dredging and return of sediment to the seabed would not have toxic effects on organisms
  • Sound propagation studies concluded that noise levels generated during dredging would be similar to whale-watching vessels, merchant ships and fisherman’s ships that already regularly transit this area, proving the system is not a threat to marine mammals
  • Dredging limited to less than one square kilometer each year, which means the project would operate in only a tiny proportion of the concession area each year
  • Proven turtle protection measures were incorporated even though the deposit and the dredging activity are much deeper and colder than where turtles feed and live, making material harm to the species unfeasible
  • There will be no material impact on local fisheries as fishermen have historically avoided the water column directly above the deposit due to the naturally low occurrence of fish there
  • The project would not be visible from the shoreline and would not impact tourism or coastal activities
  • Precautionary mitigation measures were incorporated into the development plan in line with best-practice global operational standards
  • The technology proposed to recover the phosphate sands has been safely used in Mexican waters for over 20 years on more than 200 projects by ExO’s operating partner, illustrating the hypocrisy of the denial of the environmental permit for the project, especially when one considers that Mexico approved much higher impact dredging projects in areas that its own environmental agency deemed “environmentally sensitive areas” during this same time period.
Notwithstanding the factors stated above, the Mexican Ministry of the Environment and Natural Resources (SEMARNAT) unlawfully rejected the permission to move forward with the project, even after the Federal Court of Administrative Justice (TFJA) unanimously ruled that this rejection was unlawful and ordered SEMARNAT to re-take its decision in 2018. To date, SEMARNAT has not been able to present any proof that supports a legal basis for rejecting this project, and its actions have deprived the Mexican people from realizing the tremendous societal and economic benefits this project would deliver. ExO is once again challenging the unlawful decision of the Peña Nieto administration before the TFJA. The case is being heard before the same tribunal that previously ruled that Mexico acted unlawfully in their rejection of the environmental approval of the ExO Phosphate Project. In addition, Mexico is facing an arbitration before an international tribunal for breaching the investment protection provisions under NAFTA. ExO is seeking compensation of over $2 billion on the basis that SEMARNAT’s wrongful repeated denial of authorization has destroyed the value of its investment in the country and is in violation of the following provisions of NAFTA:
  • Article 1102. National Treatment.
  • Article 1105. Minimum Standard of Treatment; and
  • Article 1110. Expropriation and compensation.

The First Memorial in the NAFTA case was filed in September. It is supported by documentary evidence and 20 expert reports and witness statements.  In summary, this evidence includes:

  • MERITS:  Testimony from independent environmental experts that the environmental impact of ExO’s phosphate project is minimal and readily mitigated by the mitigation measures proposed by ExO.  Witnesses also testified that Mexico’s denial of environmental approval by the prior administration was politically motivated and not justified on environmental grounds, and that Mexico granted environmental permits to similar dredging projects in areas that are considered more environmentally sensitive than ExO’s project location.
  • RESOURCE:  An independent certified marine geologist testified as to the size and character of the resource.
  • OPERATIONAL VIABILITY:  Engineering experts testified that the project uses established dredging and processing technology, and the project’s anticipated CAPEX and OPEX was reasonable.
  • VALUE:  A Phosphate market analyst testified that the project’s projected CAPEX and OPEX would make the project one of the lowest cost phosphate rock resources in the world, and damages experts testified the project would be commercially viable and profitable.

This NAFTA arbitration is being administered by the International Centre for Settlement of Investment Disputes (ICSID) and it is expected that a redacted version of the First Memorial will be available to the public shortly. Once the Memorial is made available by ICSID, Odyssey will provide a link to the filing on its website, www.odysseymarine.com.

The NAFTA hearing is scheduled to take place in January 2022 unless settled earlier by the parties.

Increasing Portfolio Value

Odyssey increases the value of its mineral portfolio in multiple ways: adding new projects to the portfolio through development or acquisition, gaining or increasing equity ownership in mineral projects through investment or a leveraged contracting model, and by de-risking projects and moving them up the value curve toward full operating production.

During 2020, in addition to the ExO phosphate project, Odyssey worked on further developing the value of two highly prospective subsea mineral projects, CIC and Lihir Subsea Gold. The company is also actively developing new projects through its proprietary Global Prospectivity Program, with the goal of identifying new, highly valuable and societally significant subsea resources.

CIC: Odyssey is a member of the CIC Consortium, which is seeking an exploration license in an island nation’s Exclusive Economic Zone. The CIC Consortium was founded and is led by Odyssey co-founder and former CEO, Greg Stemm, and includes Royal Boskalis Westminster NV and Odyssey Marine Exploration.

Through a wholly owned subsidiary, Odyssey Marine Minerals, Odyssey has already acquired 15 million shares (representing approximately 12% of current outstanding shares of this project) through the provision of services related to resource assessment, project planning, research and project management, and Odyssey has an option to acquire an additional 5 million shares.

Lihir Subsea Gold: The project’s license area is adjacent to Lihir Island in Papua New Guinea where one of the world’s largest known terrestrial gold deposits is currently being mined and processed by Newcrest Mining. The license area includes at least five prospective exploration targets in two different mineralization types: seamount-related epithermal and modern placer gold. Odyssey owns approximately 80% of the Bismarck Mining Corporation, Ltd, the Papua New Guinea company that holds the exploration license.

While the COVID-19 pandemic delayed plans for additional offshore exploration work in 2020, presentations to the public were made in December 2020 in compliance with and in support of the regulatory process in PNG. Upon renewal of the exploration license, work will begin with the goal of conducting offshore validation work in 2021. “We are extremely excited to complete the exploration program to verify and quantify the mineralization of this potentially valuable resource and to fully understand the environmental setting in which it lies. We were on the cusp of executing this program in 2020 when the pandemic hit, making marine operations impossible to execute. The renewal will allow us to execute the same exploration program that was approved in the last license period,” said John Longley, President & COO of Odyssey.

About Odyssey Marine Exploration Odyssey Marine Exploration, Inc. (Nasdaq:OMEX) is engaged in deep-ocean exploration using innovative methods and state-of-the-art technology to provide access to critical resources worldwide. Our core focus is the discovery, development and extraction of deep-ocean minerals. Odyssey also provides marine services for private clients and governments. For additional details, please visit www.odysseymarine.com.

Forward Looking Information Odyssey Marine Exploration believes the information set forth in this Press Release may include "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934. Certain factors that could cause results to differ materially from those projected in the forward-looking statements are set forth in "Risk Factors" in Part I, Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the Securities and Exchange Commission on March 30, 2020. The financial and operating projections as well as estimates of mining assets are based solely on the assumptions developed by Odyssey that it believes are reasonable based upon information available to Odyssey as of the date of this release. All projections and estimates are subject to material uncertainties and should not be viewed as a prediction or an assurance of actual future performance. The validity and accuracy of Odyssey's projections will depend upon unpredictable future events, many of which are beyond Odyssey's control and, accordingly, no assurance can be given that Odyssey's assumptions will prove true or that its projected results will be achieved.

Cautionary Note to U.S. Investors The U.S. Securities and Exchange Commission (SEC) permits mining companies, in their filings with the SEC, to disclose only those mineral deposits that a company can economically and legally extract or produce. We use certain terms in this press release, such as "measured", "indicated," "inferred" and "resources," which the SEC guidelines strictly prohibit us from including in our filings with the SEC. "Inferred mineral resources" have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. U.S. investors are cautioned not to assume that part or all of the inferred mineral resource exists, or is economically or legally mineable, and are urged to consider closely the disclosures in our Form 10-K which may be secured from us or from the SEC's website at http://www.sec.gov/edgar.shtml.

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