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Commercial

Third-Party Funding Disclosures in Court—What’s at Stake?

As Litigation Finance permeates the mainstream and regulation catches up, the issue of disclosure remains contentious. At the time that a funding deal is created, there’s no real way to know whether or not courts will require disclosure of the agreement. Bloomberg Law explains that typically, this type of disclosure is not required by the courts. Funding, most judges rule, is not materially relevant. That said, determinations regarding disclosure are decided on a case-by-case basis. A recent survey on Litigation Finance shows that while legal professionals are feeling unsure—there’s nothing to suggest that disclosure will not be compelled in most instances. Recently, there have been several cases requiring disclosure of funding terms, but so far they’re few and far between.
Commercial

The Rush to Secure Funding by Year’s End

As 2020 nears its end, firms are straining to reduce the impact of Coronavirus on earnings—which for some means cutting staff even as they ensure that their best players won’t be recruited by other firms. Given that, it makes sense that firms holding strong litigation portfolios would want to consider dispute financing. Omni Bridgeway details that those who want to monetize their portfolio should not wait to get started. Portfolio funding arrangements are often large, detailed, and complex. Doing them well takes time. Waiting until December is risky, and can result in deals not being finalized by year’s end. However, beginning the process a few weeks earlier allows time to conduct due diligence, allowing funders to examine the cases in the portfolio while assessing risks against potential rewards. For many firms, portfolio funding carries less risk than funding individual cases. Overall, it allows firms to take more risks in terms of contingency casework—because the firm shares risk with funders. Non-recourse capital is provided and used to cover costs and fees, and can even be used to cover operational expenses in some circumstances. Awards are shared among plaintiffs, firms, and funders. The non-recourse nature of funding means that even if the entire portfolio is resolved unsuccessfully, the firm is not obligated to repay the funding. Dispute funding has many benefits to firms and partners—such as providing firms the ability to pay partner draws despite COVID-related losses. Funding can offer immediate cash flow when it’s needed most. Funding also gives firms more leeway in client selection and agreements. Contingency cases in particular become more viable with the inclusion of litigation funding. This means a larger pool of potential clients and cases. The advantages brought by funding provide an edge that could be used to expand staff and even recruit a rainmaker or two.
Commercial

Nanoco Shows Major Losses, Extends Cash Runway

A recent announcement from Nanoco reveals a sharp tumble in revenue. The Manchester-based tech business reported that revenue fell from GBP 7.132 million to GBP 3.856 million in the period ending July of this year. The Business Desk reports that despite these setbacks, Nanoco has managed to extend its cash runway to December of 2022. It’s hoped that this extension will allow the company to rebuild value. In July of this year, GBP 3.4 million was raised in a patent lawsuit against tech giant Samsung—thanks to support from a third-party litigation funder. A company-wide restructure is underway, which ultimately reduced monthly outlays by roughly 50%. Nanoco’s chairman, Dr. Christopher Richards, affirms that this year has been one of substantial change.
Commercial

Litigation Finance Pro Gian Kull Hired by SYZ Capital

Gian Kull has been appointed head of special situations at SYZ Capital. His investment experience spans more than a decade, making him an excellent choice to manage portfolios and handle private marketing investments. Wealth Adviser details that Kull’s past experience includes structured litigation investments at Multiplicity Partners AG, director of sourcing at Valtegra LLP, as well as opening a European office in Zurich for Brigade Capital Management. He began his career at Merrill Lynch as a research analyst. CEO of SYZ Capital, Marc Syz, explains that Kull’s contribution to the team will center on his expertise in private market investments, sourcing niche investments, and in portfolio construction. His experience with structuring litigation investments will be a boon to the team. As an investment, litigation funding is uncorrelated to the rest of the market. Kull’s expertise will be used to identify opportunities to find ways to generate capital within structural imbalances, specific niche access, or utilizing obscure information effectively.
Commercial Covid-19

Litigation Finance Evolves Through COVID and Beyond

It could be argued that Burford Capital is handling the pandemic better than most. The company transitioned to a remote working platform early on, and have adapted to what’s being called “the new normal” with aplomb. In the months that followed, courts, businesses, and even schools shifted to remote operations—meaning court cases could finally continue. Burford Capital explains that the importance of legal finance has only grown in the era of COVID. Litigation funding can make it possible for class actions, or any meritorious action, to proceed with help from investors. As the legal world forges ahead, there are three specific developments in the industry that all lawyers should be aware of. Solutions in legal finance. The idea of solutions, as opposed to mere transactions, is essential to understanding Litigation Finance. The process offers choices—far more than a simple loan/repayment structure. Litigation funding offers opportunity, peace of mind, and expertise to all parties involved. What’s more, experienced funders will provide an array of options that address specific client needs and concerns. The best funders offer more than funds, they offer years of industry knowledge and tech-fueled insights. The International Legal Finance Association. This organization recently launched as a way to protect the industry from overzealous regulation. It also informs the public about the benefits of litigation funding and does so with transparency and clarity. Welcoming the ILFA as a valuable resource is the right move for businesses, financial institutions, and legal professionals. Corporate partnerships. These are a vital part of what Burford does, especially now that interest in Litigation Finance has exploded. Because Burford is a publicly-traded company (currently on AIM, soon NYSE) functioning with obvious transparency, they’re a strong choice for in-house legal teams or finance departments that demand predictable capital and unparalleled compliance. Now that settlement activity is on the rise, and courts are slowly getting back up to speed—a relationship with an experienced funder is more vital than ever.
Commercial Covid-19

Litigation Funders Find Fewer Sure Bets Due to COVID

One of the most attractive aspects of Litigation Finance as an investment is that it’s uncorrelated with the rest of the market. Even as the Coronavirus pandemic became increasingly impactful, funders assured investors that returns would remain high. Bloomberg Law explains that while investment opportunities in Litigation Finance are plentiful, it hasn’t become the big money generator that legal professionals anticipated. Insurance disputes make up a large percentage of new litigation since the pandemic began. While these cases are plentiful, they don’t offer investors the kind of certainty they’re looking for. Rather than seeing nuclear verdicts in favor of plaintiffs, a number of significant rulings have come down in favor of insurers. This has led to even more caution among investors. Burford Capital, one of the largest funders, endured a sharp decline in business in the first part of this year. At the same time, Burford had a smaller cash outlay this year due to fewer new cases and ongoing court delays. Burford’s Christopher Bogart has stated that it’s impossible to know with certainty what’s coming. Speculation changes every week. In contrast, Ralph Sutton of Validity Finance, is encouraged by the 40% increase in investment opportunity his firm has shown this year.
Commercial

Claim Dismissed Against Russian Oligarch Over Superyacht

A claim of over $115 million in damages, filed by Russian oligarch Farkhad Akhmedov (along with owner Straight Establishment) has been dismissed by the high court of Dubai. The claim revolved around a 115-meter superyacht, the MV Luna, which had been held as part of a divorce settlement. The National details that Mr. Akhmedov sought to recover lost earnings he would have made had he been able to charter the superyacht. However, this contradicted Akhmedov’s earlier assertion that the boat was not a commercial vessel and was not being used as a means to profit. The dismissal is considered a final decision by the courts and is not subject to appeal. The former Mrs. Akhmedova’s case was funded by Burford Capital. Akhmedov’s claim for damages was brought specifically to prevent Akhmedova and Burford representatives from taking possession of the MV Luna. However, the court prevented Akhmedova from taking the yacht—which means that this recent dismissal is a hollow victory. The ongoing injunctions mean that the superyacht is still in Port Rashid while proceedings continue to determine its rightful owner. To date, it has been in dry dock for two years—since London’s high court ruled that Akhmedov must pay 40% of his fortune to his ex-wife.
Commercial

Polish Government Sought for Arbitration in Coal Mine Action

Australian coal giant Prairie Mining has begun international arbitration proceedings that assert a breach of bilateral treaties. The action centers around Poland’s decision to block investment in the Jan Karski and Debiensko mines. The Economic Times reports that Prairie Mining secured roughly $12 million from a litigation funder in July of this year. Still, the company stated it is willing to engage in good faith discussions to resolve the dispute. As yet, the Polish government has opted not to engage. Exact amounts sought in the action have not been released. It’s unclear whether purported losses will include lost profits, damages, costs spent developing the mines, and costs associated with arbitration.
Commercial

ABA Best Practices for Litigation Finance Have Mixed Reception

When Litigation Finance was still making a name for itself, the American Bar Association was among the first organizations to write researched commentary on it. The white paper published by the ACA Commission on Ethics remains influential today. Above the Law details that simply publishing a best practices guide legitimizes Litigation Finance and affirms its widespread importance and acceptance. According to the introduction, the best practices guide is just that—guidance. It details what it considers to be the most pressing issues to consider before utilizing litigation funding for any of its most common purposes. Much of what can be found in ABA’s best practices guide is already standard operating procedure in many firms. For example, funders staying out of material decisions regarding the cases they fund is typical. Being aware of responsibilities regarding privilege, safe document handling, and the construction of litigation funding agreements are all commonplace. Some have suggested that the recommendations in the guide are too conservative and do not factor in current trends or commercial realities. For example, the guide cautions against lawyers and funders discussing the viability of a case. It’s outlandish to think such a thing wouldn’t be discussed, or that it would be in any way inappropriate to do so. Investors require information in order to make sound investment decisions, and the merits of a case are certainly relevant to that. One thing the ABA guide does well is differentiate the different types of Litigation Finance currently in use—client funding versus lawyer funding, for example. As the industry adapts to changing circumstances, these distinctions will grow in relevance. It also advises that lawyers presume that litigation funding agreements will be made public. This is not always true, but specific types of arbitration require it. Overall, the guideline recommendations are expected to lend legitimacy to an already entrenched part of the legal world.