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Commercial

Funders Ponder Hedge Fund Claim vs Rio Tinto

Mining company Rio Tinto finds itself under threat of legal action from a US hedge fund. Pentwater Capital Management is threatening an oppression order to gain an extension of debt in order to expand the Oyu Tolgoi mine project into the Gobi desert. The expansion is controversial, in that it requires the destruction of a sacred Aboriginal site. Financial Times details that the minority owners, Pentwater, feel they’re being treated as pawns, not partners. This provides an option for litigation funders to fund the claim by Pentwater, or even Rio Tinto’s defense, should the struggling corporate require support. After all, the mine itself is expected to produce billions in gold and copper for decades to come; this could provide funders with the possibility of remuneration for defense-side funding--through a percentage of future mining profits.  It’s been suggested that Rio Tinto would do well to refinance the entire Oyu Tolgoi project—their largest and most potentially profitable project. This expansion is currently over a year behind schedule and a billion dollars over budget. Oyu Tolgoi LLC is funding an independent review at the behest of the Mongolian government—which owns a minority share in the project as well.  Rio Tinto stated they wouldn’t allow TRQ (Turquoise Hill Resources) to take on more than half a billion dollars more in debt, suggesting that they raise equity themselves. Meanwhile, Rio Tinto is seeking a new chief executive.
Commercial

Lowering the Cost of Legal Finance through Portfolio Funding

When looking for help via legal finance, it makes sense to want the best deal possible. With that in mind, portfolio funding might be worth a look. Single-case funding represents the highest risk for funders—because the non-recourse nature of litigation funding means there’s no remuneration for funders unless the case is successful. Burford Capital points out that portfolio funding allows risk to be diversified. This presents a more attractive level of risk for funders while allowing for flexible funding allocation. This lowers risk and lowers the need for any single case to provide an award. Law firms also benefit from a portfolio funding model. Portfolio cases collectively cost less than funding for individual cases, while having the added benefit of being adjustable if new cases fitting the original agreement parameters are found. Pricing for legal funding depends largely on risk—so reducing risks leads to better prices for everyone.
Commercial

Analysts are Bullish on LCM

Litigation Capital Management, a prominent face in litigation funding, makes a profit on nearly 90% of the cases in which it invests. This gives the funder an IRR of 78%. LCM largely operates in the UK and Australia, funding cases in exchange for a share of awards. Over the last decade, LCM boasts an ROIC of 134%. Proactive Investors explains that the success of LCM may be credited to the following factors:
  • Decades of industry experience dating back to 1998
  • A well-funded capital base that allows for growth and investment
  • Due diligence in vetting and case selection
  • Well-managed control of risks
Along with many litigation funders, LCM believes that eschewing the larger market in favor of alternative assets is essential during times of financial uncertainty. Asset management, including monetizing litigation and past awards, is an essential focus at LCM. This is demonstrated largely through an emphasis on portfolio investments. Still, the investment cycle for funding litigation is long—with 25 months being typical from investment to payout. That’s one reason due diligence in case selection is so important. LCM considers many factors when assessing a potential case for funding, and the size of the investment compared to the award is paramount, as there must be a clear legal principle at play—not a vague one or one that tests a previous ruling. There should be clear evidence, written if possible. The lawyers in question must be experienced and capable—which is generally more feasible when funding is not an issue for plaintiffs. Recoverability is the final factor; whether or not a defendant will be able to pay an award. In general, analysts consider LCM a strong investment based on past performance and future goals. The pipeline of new case referrals and funding requests indicate a vibrant business strategy and an enviable reputation within the industry.
Commercial

Are Class Actions Pushing Businesses into Insolvency?

 The phrase “new normal” can be unsettling, especially when it foretells an unwelcome change. Will rampant class actions lead to a glut of insolvency cases levied by shareholders? Some are predicting that as many as 50 new claims each year could be the new normal. Financial Review details that between 2019-2020, at least 35 class-action cases were settled, which is more than $1 billion in settlement funds. Does this indicate that class action numbers have leveled off? Or will they continue to rise as the pandemic continues impacting consumer spending? This year has seen 28 class actions filed in the time period between July 1st-October 31, 2020. These included financial products, securities, consumer claims, claims against governments, and a few employment claims as well. Some have speculated that new restrictions and requirements impacting litigation funders would lead to fewer class action filings. So far, this has not come to pass. An impending ruling on competing class actions is expected early next year. That may also impact class action filings since courts have long held that all class actions are harmed by multiple class actions for the same offense. This is being meted out in a trio of cases filed against RCR Tomlinson—with Burford Capital and Omni Bridgeway not backing down.
Commercial

Litigation Funding and Security for Costs

Security for costs is frequently asked for in international arbitration cases, but almost never granted. In fact, the common thinking is that security for costs should only be granted in certain rare and specific instances. Notably, one of the main things spurring requests for security for costs is litigation funding. Many defendants are more likely to ask for this when plaintiffs utilize third-party-funding. Burford Capital explains that granting security for costs carries specific risks that are best avoided. These include the possibility of reducing access to justice and the risk of making determinations on a case’s merit before adjudication can begin. Reimbursement rights depend on who wins the case, and who will be asked to cover legal costs. Those things cannot be known with certainty until the case is over. Further, mandating upfront security may disallow plaintiffs from filing their case at all. Ideally, there should be no financial barriers to the pursuit of justice. At least, courts can ensure that they aren’t a party to putting up financial barriers. In the case of Eugene Kazmin v Republic of Latvia, security for costs was granted upon request by the state. This happened because the claimant was under criminal investigation and their assets had been seized. Accusations of tax evasion and money-laundering factored in as well. The court determined that the claimant’s behavior reasonably predicted the potential for non-compliance. A key point here is that the claimant did demonstrate that he had the means to cover costs—but past deeds suggested a propensity to leave financial obligations unfulfilled. Courts seem to have decided that the use of third-party litigation funding is not reason enough to grant an order of security for costs. But there may always be exceptions. If you have concerns about such requests, discussing them with an experienced funder is a good place to start.
Commercial

Reducing Risk and Uncertainty with Legal Finance

Economic uncertainty is plaguing industries around the globe. Between the COVID pandemic, bizarre political circumstances, and ongoing international market turbulence—unpredictability is everywhere. Investors are seeking new investment types that are uncorrelated with the rest of the marketplace. For some, third-party legal funding meets all the requirements. Omni Bridgeway explains that Litigation Finance can be a key factor in reducing risk, pursuing expensive litigation, or keeping balance sheets in line. How? There are three main ways: --Enforcement. Monetizing judgments that have not yet been collected can be an excellent way to utilize litigation funding. When a case is successful, but funds haven’t been fully recovered, some firms merely accept it as a loss. Pursuing the funds might require asset tracing, seizure across international lines, or could involve complications like state-owned companies or multinationals. Even defendants with large bank accounts may prove themselves immune to collections. But a litigation funder can pursue collection of awards in exchange for a share.  --Portfolio funding. Often times, third-party litigation involves one large case, such as a class action or a case against a huge company or government. But portfolio funding—providing funds for an array of smaller cases—is gaining in popularity. This funding style diversifies risk while allowing for partial contingency funding. This increases access to justice for plaintiffs while keeping the risk for investors low. Portfolio funding is a boon to investors, and also to law firms. --Monetizing claims. We know that many companies choose not to pursue litigation even when its merits are obvious. It can simply cost too much and take too long. But what if firms could finance litigation without adding pressure to balance sheets or risking the expense? That’s what litigation funding accomplishes. It can allow firms to free up assets, adding liquidity when it’s needed, all for the promise of a share of future recovery.
Commercial

Chairman’s Address Explains Details of LCM-Funded Claim

In its most recent general meeting, Bronwyn Brown’s chairman’s address laid out the most noteworthy actions and accomplishments of the year. The talk was attended by non-executive directors, the company secretary, several auditors, and of course, the Executive Chair. Market Screener details the contents of the address, which begins with an explanation of a case involving the Tanzanian government and arrangements for the Ntaka Nickel Project. This action centered around the lapse of retention rights caused by unexpected changes in legislation and exacerbated by the pandemic. Compensation of nearly $100 million is being sought over what’s being called the illegal expropriation of the Ntaka Hill Nickel Project. In January of this year, a six-month time frame was initiated in which the involved parties could reach an amicable agreement. However, the Tanzanian government declined to participate. This led to an international arbitration firm taking on the case. Lalive is an experienced investment firm now taking over the case against the Tanzanian government. Legal funds are being covered to the tune of over $4.5 million by noted funders Litigation Capital Management. The non-recourse funding arrangement with LCM is expected to cover all legal costs associated with taking the case to completion. Much like the projects in question, the case is experiencing disruption and delay due to COVID. Also mentioned in the address were plans to acquire two Patron Resources subsidiaries. These are expected to further gold mining interests in Australia. While global deals are especially challenging now, Brown expresses confidence in these future exploration opportunities. Drilling is also expected to commence in South Australia before the end of the year--even as Indiana Resources Limited continues to pursue compensation for damages relating to the Tanzanian mine deal collapse. Brown concluded by thanking the board and the company shareholders. Directors at IRL have deferred fees this year, though the firm is still confident in its current slate of projects.
Commercial

Google Ordered to Disclose Emails in Russian Divorce Case

A record-setting divorce settlement is still in contention as Google is ordered to turn over the emails of a private citizen. Temur Akhmedov, son of a late oligarch Farkhad Akhmedov, has been fighting the release of funds from his step-mother’s divorce settlement of about $600 million. Her case is being funded by Burford Capital. Bloomberg News explains that Akhmedova, the ex-wife of the late Akhmedov, has alleged that her ex-husband illegally transferred assets to the son in order to avoid paying a judgment made by a London divorce court. US Magistrate Judge DeMarchi agreed to comply with the ruling, while stipulating that any information released should be directly related to the litigation at hand. Google fought the release of the emails, saying that US law does not allow them to release email contents without the express consent of the user. Lawyers for the younger Akhmedov accuse Akhmedova of seeking evidence that does not exist. Meanwhile, some allege that Google may face legal liability if they disclose the information—and that the implications brought up by this case will have far-reaching consequences for anyone who relies on email privacy.
Commercial

Navigating the Ethics of Third-Party Legal Funding

Geraldine Clark, former president of the Law Society in Ireland, has a lot to say about navigating the professional ethics of litigation funding. Referring to the resurgence and growth of the practice as “the wild west,” Clark focuses on the obligations of those attorneys who would encourage or facilitate utilizing the practice. Law Society details the various aspects to consider according to Ms. Clark. First and foremost is the duty to one’s client. Obviously, a lawyer is responsible to the client before anyone else—including third parties who put up funding in support of a case. This can mean assuring transparency of funding terms, preventing funders from attempts to influence decisions, or allowing clients to seek out independent advice. It may also mean assuaging a funder who is opposed to settling even though a client is ready to do so. Contingency fees are often a sticking point, and Irish law requires that assessed fees be commensurate with hours spent and case difficulty or complexity. Also required in Ireland are claimants putting their own name on a writ—thus taking responsibility for claims made. Because third-party funding is not yet permitted in Ireland, contingency arrangements are sought by clients of modest means. This is even more true in class action cases, which can be costly and time-consuming. Australia’s more progressive take on litigation funding may be influencing other countries—including Ireland. While some in Ireland express concern about conflicts of interest or ethical quandaries presented by the use of third-party funding—others, like Geraldine Clark, are coming around to the realization that access to justice is a fundamental human right. Australia allows litigation funding, but has enacted strict guidelines and requirements for its practice. Ultimately, legal professionals agree that people should be able to bring meritorious lawsuits without financial barriers. This is especially true in the US where litigation funding is booming.