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Commercial

London Legal System Attracts Super-Rich from Russia and Kazakhstan

The legal services industry in the UK is one of the largest on Earth. One side effect is that commercial courts are often used in cases involving no British citizens. The super-rich are largely coming from the Soviet Union. Some may be avoiding taxes or political persecution, while others have kept their ties to the Kremlin. The Bureau of Investigative Journalism reports that a spike in cases from parties outside the UK is not necessarily a negative. In fact, it sends a message that English courts are fair and equitable, which many do not claim about Russian courts. Kompromat—embarrassing or scandalous information intended to destroy credibility—can be used in Russian civil cases. Now there’s talk of this concept finding its way into British courts. In order for the UK to continue its role as a leading jurisdiction for foreign cases, the legal system there must get its house in order. UK courts have a reputation for granting global asset freezing orders in some instances—often referred to as a ‘nuclear option.’ Michael Redman of Burford Capital states that courts might have been better off not granting worldwide freezing orders. British courts weathered the difficulties of Brexit, but may not overcome the impression that they’re allowing undemocratic systems to infiltrate their jurisdiction. Boris Johnson has proclaimed a push toward a ‘global Britain’ that maintains good standing in the global theatre. A successful legal services industry aligns with the economic strength of Britain, leading to a safer and more prosperous UK. Yet, Johnson is said to have delayed the release of a parliamentary report on Russia’s impact on the legal system. Legal services professionals agree that London must take care not to lower its integrity in the interests of attracting foreign litigants.
Commercial

Insurers Launch Class Action Against Claimants—Yes, Really!

When we think of a class action, we think of ordinary citizens seeking compensation for wrongdoing by a large, often commercial or governmental entity—usually with the support of third-party funders. So what led to a group of insurers filing suit against the owners of a cargo vessel? Mills Oakley details that the APL England, a cargo ship traveling from China to Australia, lost valuable goods after encountering rough waters. More than 80 containers were lost or damaged. After a failed attempt at negotiation, the insurers who covered the cargo filed suit against the owners and charterers of the APL England. Thus far, it’s practically unheard of for insurers to become plaintiffs in such a case. Courts were unsure how to proceed in this largely unprecedented situation that requires keeping policyholders informed and protected. Perhaps even more striking is that litigation funding, a common feature in modern class actions, is not being utilized in this action. No doubt, this case will be watched closely by insurers, policyholders, and those in shipping and logistics. While it’s possible that insurers will not be compensated for their losses, it’s equally possible that this case will set a stunning precedent for insurers when an untoward incident triggers a claim.
Commercial

UK Funder Fenchurch Legal Joins Mintos

Investment specialist Mintos is joining forces with UK litigation funder Fenchurch Legal. This is expected to create new opportunities for investors, particularly those looking to enter the legal funding arena. Mintos explains that Fenchurch Legal offers a unique product that emphasizes aiding ordinary consumers as opposed to the massive corporates many funders focus on. Fenchurch’s main clients are firms that take on cases such as pension mis-selling, personal injury, and housing disrepair claims. By focusing on smaller, socially relevant claims, more cases can be funded—diversifying risk. Fenchurch launched in 2020 with a deliberate focus on ‘After the Event’ claims. All Fenchurch disbursements are backed by an ATE policy. It fills a gap in the addressable market for small-ticket cases in the UK, where the legal funding market has more than doubled over the last three years—even before COVID changed the legal landscape. The cases that Fenchurch funds result in one of two outcomes: Winning claims see the loan repaid by the defendant, while losing claims are covered by ATE insurance. This creates an extremely attractive opportunity for funders and those who invest in them. The funding market is expected to continue its growth, particularly in the UK and US. In fact, the market is predicted to reach EU 18.3 billion by 2027. Managing Director of Fenchurch, Louisa Klouda, expressed delight at joining the Mintos platform. She is confident that the venture will help Fenchurch achieve its goal of becoming the leading expert in third-party funding in the UK.
Commercial

ASIC Addresses Concerns of Third-Party Legal Funders

A new consultation paper from ASIC details multiple areas likely to change in response to concerns from the litigation funding industry. Does this indicate a relaxation of governmental attempts to hobble the legal funding industry? Investor Daily explains that while a requirement for litigation funders to hold an AFSL became law in 2020, not all provisions were upheld immediately. This relief is scheduled to expire in April of next year. A total of 31 recommendations have been made, including relief from equal treatment duty in MIS distributions, and from requiring disclosure in some commercial cases. The government has expressed that it will consult on the new recommendations this year. The expectation from ASIC is that their paper will establish definitions for oft-used terms within MIS regulations.
Commercial

Insurers Remain Wary of Third-Party Litigation Funding

Litigation funders and insurers may never see eye to eye. After all, third-party litigation funders make it their business to hold insurers accountable—literally. By funding cases for average citizens against corporations, legal funding helps average citizens who would not otherwise have their day in court. Business Insurance explains that insurers insist that funding leads to larger claims and higher premiums. Funders, some say, are often allowed to fund cases surreptitiously, leading to potentials for conflicts of interest. Funding is similar to contingency fee arrangements, with one distinct difference. Plaintiffs don’t pay if a case loses in either situation, but if a case is successful, funders are repaid and given a share of the recovery. Funding is helpful to plaintiffs, and also to law firms who may be unable to take on meritorious cases due to lack of available resources. Third-party funding is gaining popularity around the world, and many insurers are not pleased. One director at AM Best explains that funding drives the size of awards and settlements, creating an untenable situation for insurers and those seeking new policies. If funders have direct control over the cases they fund, this problem can become exponentially worse. Laura Lazarczyk, EVP at Zurich North America, refers to ‘abusive practices’ by funders, including funding frivolous litigation. To avoid conflicts of interest, some US courts now require third-party funding to always be disclosed. Efforts to expand this requirement nationwide have not picked up much traction. Funders claim that funding is not relevant in all cases, and no jurisdiction openly permits funders to retain control over decision-making in the cases they fund.
Announcements Commercial

Liti Capital Announces New $5 Million Investment to Acquire New Assets

Liti Capital SA , the blockchain litigation finance company, announces an investment of $5 Million. This $5m will be used to purchase assets worth up to a potential $50m. Of the initial private raise of $12m, $10m was used to secure assets worth up to $100m of potential asset value. Once this new $5m is deployed in an asset purchase, the combined $150m potential value dwarfs the current market cap of $25m. Those assets are what back the LITI equity token. Litigation finance is the practice of purchasing a percentage of a lawsuit to help fund the effort and then helping to win the case in order to collect that same percentage of the award. The $5M investment will be used to purchase these litigation assets. As one of the highest ROIs of any asset class, the returns are not dependent on the state of the financial markets. This short video illustrates the value proposition. “Liti Capital is a company, not a cryptocurrency. Therefore, increasing our Market Cap is a good thing for our investors because it means we are putting new money to work to buy assets and create profits,” says CIO David Kay.“We were able to invest our first $10M and turn it into assets valued around $100M. We expect to use this new investment to produce similar results.” Liti Capital launched its LITI equity token on June 24th and it wrapped LITI token, the wLITI, on June 29th. LITI tokens are available on liticapital.com and wLITI on uniswap.org. Liti Capital tokenized its equity shares with the goal of providing retail investors with investment opportunities previously only available to the top 1% of investors. Tokens lower the barrier of entry for smaller investments and reduce costs and increase security for both investors and the company. Additionally, tokens provide liquidity to an asset class that has traditionally been firmly illiquid. Liti Capital's belief is“private equity for all.” Additional long-term goals include helping to protect the crypto community, prosecute scammers, and return the lost funds to the token holders with the hopes of preventing these activities in the future and ensuring a safe environment for investment and innovation. Liti Capital will spend between 5 and 10% of its investment capital investigating and funding litigation against these crypto con artists and scammers. Join the company's Telegram Channel, t.me/Liti_Capital_Official , for updates and live chats. About Liti Capital Liti Capital is a Swiss Limited Liability company specializing in Litigation Finance and FinTech based out of Switzerland. Liti Capital buys litigation assets to fund lawsuits and then helps the plaintiff win the case. By tokenizing shares, the company lowers the barrier of entry for retail investors, gives token holders a vote in the decision-making process, and distributes dividends to token holders upon the success of the plaintiff. Co-Founder Jonas Rey heads one of the most successful intelligence agencies in Switzerland, Athena Intelligence. His two co-founders, Andy Christen and Jaime Delgado bring innovation entrepreneur experience and blockchain expertise to round out the leadership team. David Kay, CIO, ran a billion-dollar private equity litigation finance firm before joining Liti Capital.
Commercial

Pure Funders vs Professional Funders – What’s the Difference?

The subject of costs is a contentious and evolving topic. A recent ruling by Judge Marcus Smith has turned some heads in the funding community. It involves a third-party cost application brought against Colosseum Consulting, by Laser Trust. Colosseum was the funder of a case between Laser and CFL Finance—which had an outstanding costs order against it for nearly GBP 330,000. Colosseum faced an order for costs. Omni Bridgeway explains that according to the funding agreement, Colosseum had an inappropriately high degree of control over the case. Judge Smith called the agreement close to absolute control. It was not determined how much control was ultimately exercised by Colosseum, but the larger issue was that neither Colosseum nor CFL was forthcoming about the terms of the agreement. With that in mind, Colosseum was ordered to pay the assessed costs—without the Arkin cap. Some have suggested that removing the Arkin cap was excessive, even punitive. Part of the ruling relates to Colosseum’s status as a “pure funder,” as opposed to a “professional funder.” The difference here was determined in Hamilton v Al Fayed 2002, a Court of Appeal case. A “pure” funder does not seek to control the funded case, has no personal interest in the litigation at hand, and does not stand to benefit. Pure funders rarely have cost orders made against them. However, funders that exercise control or seek to increase their payout are far more likely to see costs orders. The facts of the case between Laser and CFL are highly complex. Suffice to say that everyone involved should have known it was not well-suited to a professional funder. Though it’s unclear how much control Colosseum exerted over the case, the agreement terms are evidence that Colosseum’s motive was financial gain rather than charity. As such, they were not a “pure funder,” and could therefore be ordered to pay costs.
Commercial

On the Use of Liquidator Documents in Funded Litigation

Litigation funders may purchase claims from liquidators, keeping a portion of the recovery. But there are practical questions that need answers here—such as whether funders may use evidence from previous examinations of the insolvent company’s affairs. In the instance of LCM Operations Pty Ltd; 316 Group Pty Ltd, LCM bought claims from a liquidator, who would receive 15% of any proceeds collected. According to an article published on LCM’s website, ASIC approved the funder’s request for examination documents. There were no objections or challenges. Armed with evidence, LCM filed suit against Rabah Enterprises. Rabah countered with a complaint alleging that the use of the examination documents was a breach of the Harman undertaking—which states that documents obtained in court proceedings must not be used in unconnected proceedings. LCM then applied to Federal Court to affirm that using the documents was not a breach of Harman. The court determined that there had been no breach—as the focus of the examination was to gather evidence for claims. Rabah’s assertion was that litigation funders and liquidators are not on an equal legal footing in the use of examination documents. He also claimed that the examination itself was a potential abuse of process under terms of the Corporations Act. Yet this act also allows liquidators to assign claims to other parties. Those other parties then enjoy similar standing to the liquidator, without court approval. Because the claim against Rabah could have totaled more than $14 million, it’s clear that the liquidator was poised to benefit financially. However, Rabah still maintained that LCM required leave that should not be given by the courts—because LCM’s predominant purpose was the 85% in the agreement. Ultimately Justice Stewart determined that ‘predominant purpose’ may include other goals, such as a partly private purpose. In this case, LCM benefited, but so did the liquidator. Rabah’s objectives were ultimately unconvincing, and Justice Stewart found for LCM.
Commercial

Litigation Funding in the Middle East & North Africa

It’s clear that the COVID pandemic has changed the way we communicate around the globe. Still, international disputes are still happening and need resolution. Third-party litigation funding is becoming an increasingly mainstream practice that addresses new and ongoing issues alike. Omni Bridgeway explains that the practice is gaining acceptance in the MENA region, which includes the middle east and north Africa. Abu Dhabi Global Markets and the Dubai International Financial Centre have embraced legal funding. The current growth in this region is necessitated by the high cost and complex nature of international arbitration, coupled with communication issues caused or exacerbated by COVID. While third-party legal funding is known for increasing access to justice for those who can afford it least, legal firms and corporates also use funding to manage costs and risks, while monetizing assets like IP or pending litigation. For businesses impacted by COVID, non-recourse funding makes a profound difference. Some businesses find that even if a funded case is unsuccessful, they were still better off taking the non-recourse funds and investing their own money back into operations. So far, the MENA region has been slower than expected to embrace third-party funding. This may be due to champerty concerns or misconceptions about the fairness or transparency of funding agreements. In time though, it’s likely that the value of litigation funding will demonstrate itself. This region has several well-established markets for litigation and arbitration. So it’s likely that the practice of third-party litigation funding will only expand—inviting new entrants into the market. With that will likely come new regulation, as it has with Europe, Australia, and the US among others.