It cannot be denied that insurance for directors and officers is skyrocketing, whether it’s for private or public companies or even non-profits. The market is expected to remain hardened, as pressure to raise rates grows exponentially. COVID and its impact are only adding to the problem. What can be done?Insurance Business Mag suggests that a rise in securities class actions as well as reliance on litigation funding has led to insurers offering less coverage, while making underwriting guidelines more stringent. The effects of COVID reach around the globe, necessitating greater disclosures from companies who now may need to detail how their business will deal effectively with the pandemic.Prolonged work stoppages and shutdowns have created widespread financial stress. As expected, service-based and entertainment-related businesses have been hit hardest. Even following CDC best practices guidelines may not be enough to reopen safely.Adding lines of credit or utilizing legal funding has worked for many companies, while others continue to struggle. Ultimately, communication is a key aspect of survival in a COVID landscape. Frank and open discussions with employees, shareholders, suppliers, and customers can go a long way toward putting people at ease and finding solutions before financial woes become insurmountable.
Global litigation funder, Therium Capital Management, announced today that Ben Smyth has joined the firm’s investment team as an Investment Officer. Ben joins Therium following a decade at UBS Investment Bank, where he was most recently Head of Benelux and Nordics within the bank’s Financial Institutions Debt Capital Markets (DCM) advisory group. In this role, Ben advised some of the largest Banks and Insurance companies in Northern Europe, on optimisation of their liability profile. Prior to UBS, Ben was an Associate Director at ABN AMRO Bank N.V, where he was responsible for DCM across Benelux, UK and Ireland. His career to date has seen Ben originate, structure, and execute multiple credit transactions globally, spanning Europe, North America and Asia Pacific. Ben was awarded a distinction, Graduate Diploma in Law from BPP University and graduated with a first class (BA Hons) degree in Economics from Durham University. Neil Purslow, Co-Founder and Chief Investment Officer of Therium, said: “We are delighted that Ben is joining our high calibre investment team. Ben’s investment banking experience and strong financial knowledge will complement our highly experienced investment team who each handle all aspects of the funding process.” Ben Smyth said: “I am very excited about joining Therium’s top quality investment team. My role will encompass origination, negotiation, due diligence and case management – which is unique amongst the leading global litigation funders. This approach accounts for Therium’s high standing in the market and the low rate of turnover of staff in its investment team, and it will allow me to build enduring relationships with clients. I look forward to helping Therium build on the firm’s impressive track record and strong reputation, with the support of a fantastic leadership team whose focus on top quality execution is relentless.” About Therium Capital Management: Therium is a leading provider of investment capital to the legal industry and one of the largest, having raised over $1 bn since 2009. With investment teams in the UK, USA, Australia, Germany and Norway, Therium has funded litigation and arbitration claims exceeding $40 billion including many of the largest and most high profile funded cases in the UK and internationally, including arbitrations under rules of the LCIA, ICC, UNCITRAL, LMAA, AAA, CIETAC, ICSID, Stockholm Chamber of Commerce and the Energy Charter Treaty. Therium has been Top Ranked by Chambers and Partners and Leaders League with investment officers across the UK, Europe, USA and Asia Pac recognised as leading individuals in litigation finance. Last year to mark the firm’s tenth anniversary, Therium Access was launched as a not-for-profit venture to fund a wide range of access to justice projects and cases – supporting the most vulnerable in our society and helping to bridge the widening justice gap. With its own board composed of eminent figures from the legal community and a dedicated grants officer, Therium Access has made over £1.3 m in financial commitments over the last 18 months to over 26 different organisations. As the first initiative of its kind, Therium has been shortlisted for several awards for launching this ground-breaking initiative, including the FT Innovative Lawyer Awards 2019 and the Lexis Nexis Awards 2020. Therium also invests in AI and software projects to accelerate the advancement of the industry. As a founding member of both the ALF, ILFA and the Litigation Funding Working Group, Therium is also committed to shaping the future of legal finance and setting high standards for the industry.
The Court of Appeals recently upheld last year’s Supreme Court ruling regarding a litigation funding agreement in a case against the Gladstone Ports Corporation. That case is being funded by Litigation Capital Management. The SCQ ruling rebuffed allegations that litigation funding agreements may be unenforceable due to champerty restrictions, or because such agreements are contrary to existing public policy. Yesterday's appeals court ruling ensures that the judge’s order stands.LCM finance explains that the Supreme Court of Queensland held in their interlocutory decision that litigation funding agreements are not unenforceable. Champerty, a 13th-century law, forbids non-lawyers from purchasing an interest in a legal case. Modern third-party legal funding does not permit funders to hold sway over decisions in the cases they fund.LCM’s argument included the assertion that champerty is obsolete as a concept of law, and that the court should make that clear in its ruling. Much of Australia has already abolished champerty laws, but Queensland has yet to make it official.The plaintiff’s legal team advanced the idea that even if champerty was still the law, these laws don’t necessarily apply to whether or not a specific funding contract is enforceable. Modern courts, after all, can use their powers to prevent abuse of the legal process or to refuse to enforce any contract that goes against public policy.In order to reach his original decision, Justice Crow’s research led him to the underlying question: What specific malfeasance is meant to be avoided by disallowing the funding agreement? GCP asserted that the funding agreement gave funders LCM an improper amount of control over the case. Justice Crow did not agree. Ultimately, Justice Crow determined that funding agreements were not prejudicial, did not impede justice, and did not involve attempts at unlawful conduct.The upholding of this ruling is excellent news for litigation funders everywhere.
Even as the industry grows and adapts to changing times, some folks still question the staying power of Litigation Finance. It’s here to stay. Third-party legal finance is well-funded, having raised over a billion dollars in 2020. This may be because of its attractiveness to savvy investors seeking opportunities that are not correlated with the market at large.The Lawyer reports that the sophistication with which funders now choose cases is growing and evolving. Complex algorithms, teams of experts, and other methods of case selection have driven litigation funding forward and gained the attention of hedge funds managers and venture capitalists.Overseas funders are buying shares of small legal firms, allowing them to take more and larger cases on contingency. Legal professionals are expecting to see more situations like Burford Capital’s recent buyout of Keller Lenkner London’s fund.Litigation funding as an investment is insulated from the market and can lead to much larger payouts than more traditional investments. At the same time, there is more risk due to the non-recourse nature of the funding contracts. An investor in funded cases may accept a low potential success rate because even if only one in four cases ends in a payout—that award may be so large it covers the rest of the investments that didn’t pay at all.Mass litigation, AKA class actions, are also becoming more common. Backed by funders hoping for large paydays, the move toward mass litigation is well-funded and likely to keep unscrupulous corporations on their toes.As this all happens, there are concerns about ‘dirty money’ infiltrating the global economy using London courts as a battleground. Given London’s long reputation for fair adjudication, this is concerning for many in the industry. Legal pros share ongoing concerns over the perception of leniency.
Litigation Finance has exploded since the pandemic spurred massive shutdowns and kickstarted a flurry of litigation. The practice of third parties funding meritorious legal action in exchange for a share of the award is expected to become better understood and more utilized in 2021.Bloomberg Law explains that while much of the rest of the world is taking steps to regulate litigation funding, the United States has eschewed regulation, for the most part. We’ve seen guides for best practices, but very little in the way of state or federal law impacting the practice. In fact, what little legislation there has been, has embraced litigation funding rather than inhibited it—like striking down antiquated champerty laws, for example.That said, the industry, on the whole, is moving toward transparency and disclosure at all steps of the process. The International Litigation Finance Association is a newly formed group of prominent litigation funders dedicated to ensuring that the industry is well-understood and that its goals are clear.The main purpose of litigation funding as a concept is to increase access to justice by removing financial barriers for plaintiffs. COVID has amped up this need even more—as business closures, contract breaches, and other factors leave citizens in financial peril. Law firms are also making use of the practice, using funds to cover litigation fees and costs, in order to free up capital for expansion.As third-party funding grows in acceptance, it also has become more diverse. Portfolio funding allows law firms to monetize existing cases, diversify risk, and add more certainty to cash management plans. About 75% of legal finance practitioners have seen an increase in requests for funding. Of those who applied for funding, 61% were able to gain funding for their cases.
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.
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.
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%
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"]
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