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Commercial

The State of the Litigation Finance Industry in 3Q20

Investor interest is high and funders are raising massive capital even amid the global COVID crisis. That’s a great sign for an industry that barely existed 15 years ago. The pandemic has brought with it massive shutdowns, layoffs, court delays, and lockdowns all over the world. Yet, litigation funding continues to prove its worth. LexShares details that in addition to changes brought about by COVID, other factors are helping the industry evolve. The elimination of Ethics Rule 5.4 in Arizona may lead to a formal rebuke of outdated champerty laws. It negates the idea that only lawyers should profit from the practice of law. The formation of the ILFA, a professional organization for the Litigation Finance industry, was welcomed by the legal world. Court closures were expected to reduce the need for third-party funding. But in fact, arbitration outside the courtroom has skyrocketed in popularity. This has led to remote arbitrations progressing even faster than normal. Clearly, arbitration will remain popular for the foreseeable future. One cannot deny the impact of an industry that has raised a billion dollars in capital in a single year. Some may believe this a singular occurrence, while savvy investors understand that the industry will continue to blossom, as the broader Legal Services market remains robust.  The emergence of publicly traded legal firms in the UK may herald similar arrangements on the US side of the pond. Should this happen, the use of third-party legal funding is expected to become even more prominent.
Commercial

Preparing for the Coming Litigation Wave

The rise in litigation owing to the COVID-19 pandemic cannot be overstated. A spike in claims relating to the virus, as well as renewed interest from litigation funders has led to widespread changes in the legal and business world. This trend follows a previous drop in litigation as courts scrambled to adapt to remote work, Zoom meetings, and other COVOD-related factors.

The Lawyer details that the trends seen in the industry today are similar to those of the 2008 financial crisis. Specifically, a rise in claims spurred by financial urgency. Cash poor businesses can use third-party funding to take cases off of balance sheets. Yet businesses are also wary of legal funding because it arms class action suits that can cost time and money.

Sean Upson, a partner at Stewarts, explains that budget planning has taken center stage at many companies—which to some means forgoing litigation regardless of its merits. But Upson suggests making litigation part of a company’s profit plan. Virtual trials can be less time-consuming in terms of staff hours and require no travel.

Some companies are reticent to utilize litigation funding. This is not, as one might think, related to a lack of control over the litigation. In fact, funders are not permitted to make decisions regarding litigation or potential settlements. Likely this is due to administrative requirements regarding disclosure and cooperation, PR, and other burdensome regulatory requirements.

Litigation funding is merely one of many tools that in-house legal teams can use to balance budgets—but it’s a solid option that all companies should consider.

Announcements Commercial

Dampier Gold Secures $730,000 in Litigation Funding; Shares Up 5%

Dampier Gold (ASX:DAU) secured A$1 million ($730,000) in funding for its legal proceedings against Vango Mining (ASX:VAN) in the Supreme Court. Auracle Group agreed to subscribe for an initial share placement of A$300,000 and provide a loan of up to a further A$700,000, subject to the approval by Dampier Gold shareholders, according to a Wednesday news release. The proceedings, which started May 26, included claims for Dampier Gold’s beneficial interest in the K2 gold project in Western Australia, a joint venture between the company and Vango Mining. If the dispute cannot be resolved through mediation, Dampier Gold said it will seek to have the proceedings listed for trial in 2021. Dampier Gold shares closed 5% higher Wednesday. Price (AUD): $0.07, Change: $0.00, Percent Change: +4.84%
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The LFJ Podcast
Hosted By Cormac Leech |
Our guest today is Cormac Leech, founder of AxiaFunder. AxiaFunder is a UK-based funding platform that provides institutional and high net worth investors the opportunity to invest in commercial litigation claims. Cormac discusses his company's success thus far both in attracting investors and sourcing strong claims, how crowdfunding platforms should be considered in the context of FCA rulings and ALF guidelines, some disclosure concerns for litigation funders, and what AxiaFunder's priorities are going forward. [podcast_episode episode="6758" content="title,player,details"]
Commercial

Will Litigation Funding Regulations Make Legal Action Harder on Claimants?

The battle between regulating litigation funding and ensuring that those who need it are not deterred is ongoing. New rules adopted in Australia require litigation funders to obtain Australian Financial Services Licensing.   An article in the Australian Financial Review details that new regulations on the practice may make it more difficult for private citizens to pursue damages when they have a grievance. The Labor Party seeks to strike down the regulations, while Senator Perin Davey believes that the intention of the rules is honorable and should be preserved. Still another leader suggested that the license requirements could be waived if the funder commits to giving 70% of the award to class participants. The goal seems to be recognizing the value and necessity of litigation funding, while ensuring a fair outcome to litigants.
Commercial

Global Class Actions Meet Corporate Governance

The legal landscape is always changing, and watching for trends is vital for savvy firms and investors. Currently, a convergence of two forces is leading to widespread changes in the industry. First, class actions and other types of collective redress cases are increasing in popularity and validity. Also, corporations are becoming increasingly responsible toward communities, the environment, and stewardship of investor interests. Omni Bridgeway explains that around the world, standard principles are being informally adopted by multiple markets. Now that collective redress and class action suits are more viable than ever, there’s an expectation of a rise in claimants and new cases surrounding environmental and social issues—as well as cases relating to a business’ responsibility to investors. For a long time, the United States was a leader in class action filings. The rest of the world is catching up quickly though, owing in no small part to third-party legal funding. The European Union released a proposal detailing provisions encouraging consumers and investors to address unlawful deeds even in cross-border situations. The Netherlands Collective Damages Act came into law. It allows for surrogates to bring damages on behalf of wronged parties in international class actions. The new law also allows courts to award damages without requiring a settlement to be reached. This means that the looming threat of court-awarded damages can be the impetus to get parties to the bargaining table. Class action cases involving the environment, social issues, or governance can be well-served by litigation funding. International class actions can be costly and take years to conclude. An influx of non-recourse funding may be exactly what’s needed to bring a case to completion without adding financial strain. As the legal industry develops and adapts to changing circumstances, it’s clear that the role of litigation funding will continue to change with it.
Announcements Commercial

Court Issues Carriage Decision in Ukraine Airlines Flight PS752 Class Action

The Ontario Superior Court of Justice has awarded carriage of the proposed class action to the Arsalani Plaintiffs. On January 8, 2020, UIA Flight PS752 took off hours after the IRGC fired and struck US bases in Iraq. Minutes after takeoff, IRGC missiles struck Flight PS752, causing it to crash to the ground. There were no survivors. The proposed class action is on behalf of the passengers and the passengers' families. It alleges the Islamic Republic of Iran, the Islamic Revolutionary Guard Corps (IRGC) (collectively the Iran Defendants) and Ukraine International Airlines PJSC (UIA) are liable in negligence: the Iran Defendants continued to operate and control the airport, aircraft and airspace in exchange for flyover fees after it launched missiles at the US military bases in Iraq and the UIA did not ground the Aircraft. Regarding state immunity of the Iran Defendants, the Court agreed that state immunity is not absolute, it can be lifted in this case through the commercial activity exception. In a lengthy and well reasoned decision, the Court reviewed the numerous carriage factors that favoured the Arsalani Plaintiffs. The Honourable Court awarded carriage to the Arsalani Plaintiffs finding "it is in the best interests of the class, having regard to access to justice, judicial economy, and behaviour modification." "We are grateful for this important court decision as we seek justice and compensation for our loved ones" said Omid Arsalani, whose sister, brother-in-law and niece perished on Flight PS752. "With the help of our team, we will continue to work through the courts to seek justice and compensation" said Tom Arndt, of TWA Law, a leading class action lawyer representing the class members. The Court found that third party litigation funding and indemnity were the most important factor favouring carriage to the Arsalani Action. The court previously approved the Galactic Funding Agreement in a decision released on September 21, 2020. "We are prepared to go the distance with TWA Law as they prosecute the Arsalani Action to completion" said Fred Schulman, Chairman and CEO of Galactic Litigation Partners LLC. Members of the proposed class action are encouraged to consult the case specific website regarding progress of the litigation: www.flightps752.ca
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Commercial

‘Chilling’ Precedent Overturned in Augusta Ventures Claim

Alleged underpayment was at the crux of a recently-overturned precedent ruling in Federal Court. UK-based legal funder Augusta Ventures had been ordered to pay more than $3 million in costs before it could proceed with a class action for underpayment at the Mount Arthur coal mine. Financial Review explains that the precedent might have impacted six or more class actions relating to the conduct of industrialists. If upheld, it could have been detrimental to much litigation based around the Fair Work Act. Chief Justice James Allsop determined that the claims in question were merely speculative. The ruling detailed that requiring funders to pay security upfront was contrary to the best interest of workers and to the public good. This clashed with an earlier decision by Justice Michael Lee, who held that securing costs was a necessary step. These rulings are of obvious interest to litigation funders as they impact how class actions can move forward under the terms of the Fair Work Act. Ultimately, a precedent that funders and claimants are not engaged in a ‘joint venture’ was set.
Commercial

The Effective Use of Monetization

Pending legal claims and potential awards are considered uncertain. They lack liquidity and a surety of success, but they’re also vital corporate assets. With the effective use of monetization capital, these assets can be used to access quick cash. Burford Capital explains that monetization is a growing type of legal finance that allows businesses to liquidate pending judgments, arbitration claims, and pending litigation. The process is simple—a legal financier offers a lump sum of non-recourse capital to cover expenses until the matter is resolved. The benefits of monetization are threefold:
  • Brings an immediate influx of cash when it’s needed most.
  • Allows companies to access capital when it’s needed rather than waiting for cases to be resolved.
  • Mitigating the company’s exposure to risk.
In-house lawyers also find benefits in the monetization of claims. The practice is seen as an innovative and creative solution to financial stress. Better still, monetization allows companies to pursue serious claims without worrying about how the expense will impact the bottom line. This makes pursuing litigation profitable even before a resolution can be reached.