As LFJ reported last week, it is clear that litigation funders see the potential for partnerships with companies in the mining sector, who are often embroiled in disputes with nation states over projects, and must pursue costly legal proceedings to safeguard their investments.An announcement from AVZ Minerals reveals that the Australian mineral exploration company has signed a binding term sheet with Locke Capital for a litigation funding facility of up to $20 million. The funds will support AVZ’s corporate and legal costs as it pursues six arbitration proceedings connected to the Manono Lithium and Tin Project in the Democratic Republic of the Congo (DRC).The funding from Locke Capital is expected to cover all costs related to the arbitration matters as well as ‘provide significant working capital to ensure AVZ can continue defending its legal rights to its interests in the Manono Project and ultimately see its development.’ AVZ explained that it has now entered into ‘a phase of exclusive due diligence with Locke until, at latest, 31 March 2024, with the aim of executing a formal agreement for the Funding Facility as soon as practicably possibly.’Nigel Ferguson, CEO of AVZ, said that the company was ‘extremely pleased to have signed this Term Sheet with Locke, a global litigation funder with deep experience in funding complex litigation proceedings.’ He also said that the fact Locke had moved forward with the proposed funding, after completing its own rigorous due diligence on the proceedings, ‘validates AVZ’s strong position across all its legal disputes with a clear pathway to conclusion in AVZ’s favour.’AVZ is currently pursuing the following legal proceedings related to the Manono Project:
Three ICC arbitration proceedings involving La Congolaise d’Exploitation Minière and/or Jin Cheng Mining Company.
Two ICC arbitration proceedings involving Dathomir Mining Resources SARLU.
On March 6, 2024, Houston,Texas will host the third annual LITFINCON conference, convening some of litigation finance's top industry leaders, in an event sponsored by Siltstone Capital. Above The Law recently published Gaston Kroub's preview of LITFINCON’s planned agenda at the Post Oak Hotel in Houston. Kroub says he has attended the past two LITFINCON conferences and finds the conference's networking experience to be a premier highlight. LITFINCON is slated to hold several panel discussions on topics ranging from patent and intellectual property litigation investment law to regulatory compliance and ethical considerations for the international litigation finance community. Additionally, LITFINCON will host a roundtable composed of academic scholars who specialize in third party funding research. Kroub says LITFINCON will also include several events for litigation investment professionals who specialize in mass tort and international arbitration law.
As the UK funding industry continues to adapt to this post-PACCAR world, it is becoming increasingly important for industry leaders to take the temperature of the public on the role of funders in class actions.The fourth annual Class Action Report published by Portland Communications shows that whilst there is some stagnation in the UK public’s understanding of class actions in general, there is a growing public understanding and acceptance of litigation funding. The report’s dedicated section on funding explains that ‘those expressing a ‘low’ level of awareness of litigation funders has dropped from 57% in 2022 to 49% in 2023.’Part of this growth in awareness among the general public can be attributed to greater media coverage of the sector, with Portland finding that the volume of references to litigation funding by UK national news outlets grew by 65% from 2022 to 2023.One of the most intriguing areas explored by Portland was: ‘what return on a funder’s investment do the general public think is unfair?’ There was a wide variety of responses to this question, with ‘nothing is unfair so long as they still got their damages’ accounting for 28% of respondents, with another 28% saying that even ‘double investment is unfair’. Between these two polar opposite responses, the next highest answers were either ‘quadruple is unfair’ at 23% and ‘six times is unfair’ at 12%.Adrian Chopin, co-founder and managing director of Bench Walk Advisors, provides featured commentary within the report. He begins by noting that as “nearly half of respondents thought that a funder shouldn’t make more than double its money on an investment”, in order to comply with this standard whilst still breaking even, “a funder would have to win 50% of its cases on average.”Whilst Chopin acknowledges that on its own this “doesn’t sound so bad”, the economics of litigation funding make it a more challenging proposal. He points out that “the fact that funders’ investors must make a profit on their money, and the fact that the funder also has its own operating costs to cover out of those profits”, means that the win rate would need to be far higher. If this became reality, Chopin says that “the end result would certainly be far fewer funded claims.”The full Class Action Report from Portland can be downloaded here.
As LFJ reported last week, in the wake of the Supreme Court’s PACCAR decision, many advocates for the litigation funding industry have suggested that only the government can rectify the situation through new legislation that would more clearly define the place of litigation funding agreements (LFA). However, it appears that an initial attempt to manufacture a legislative shortcut through an amendment to the proposed bill will not be successful.An article by The Law Society Gazette canvasses the opinions of legal experts regarding the amendment to the Digital Markets, Competition and Consumers Bill, which is due to enter the ‘report stage’ next week. The amendment, listed as NC8, is described as a response to the PACCAR decision and ‘provides that a damages-based agreement is only unenforceable in opt-out collective proceedings before the Competition Appeal Tribunal if the agreement is with a provider of advocacy or litigation services.’According to the industry leaders and experts that are quoted in the Gazette article, the current version of the amendment is not a complete solution to the issue of LFAs being classed as DBAs. Richard Pike, partner at Fieldfisher, explained that the amendment would only solve the problem for funding agreements in opt-out collective proceedings but not ‘any other type of proceedings.'Jonathan Barnes, director of the Association of Litigation Funders, also described the amendment as ‘a partial fix to the problem’. He expressed appreciation that the government had made an effort to address these issues that would limit access to justice, but emphasised that the amendment ‘does not address cases heard outside of the Competition Appeal Tribunal.’
With the numbers of insolvencies on the rise in the aftermath of the pandemic, insolvency litigation funders are seeing the market begin to shift in their favour, as reflected in new financial reporting from one of the UK’s leading funders of insolvency litigation.Manolete Partners released its unaudited half-year results for the six months up to 30 September 2023, reporting that the business has seen significant increases in case completions, new case investments and total revenues.According to the H1 FY24 results, Manolete recorded 116 case completions during this period, which marked a 21% increase from the 95 cases completed during H1 FY23. Across these cases, the average duration dropped from 14.9 months in FY23 to only 11.5 months in FY24. Manolete suggested that ‘this signifies a return to the Company's long established case duration of around 12.7 months, which had expanded temporarily due to the challenges presented by Covid.’The funder also confirmed that it ended H1 FY24 with 417 cases that are still ongoing, which once again represented a significant increase of 58% over the same period in FY23.Moving on to Manolete’s investments, the funder reported a total of 179 new case investments in H1 FY24, representing a 116% rise from last year’s H1 total of 83 new investments. Manolete explained this increase, stating that ‘the higher level of insolvencies in the economy translated to higher new cases signed as well as the impact of the Barclay Bounce Back Loan Pilot (BBLs).’Regarding the BBL pilot scheme, Manolete reported that since the start of the calendar year it has signed 80 of these cases and has already achieved completion on 27 cases. As LFJ reported in October, Manolete confirmed that it ‘is hopeful to shortly commence a separate BBL pilot with another well-known bank.’Overall, Manolete recorded a 104% increase in total revenues, achieving £11.2m in H1 FY24 compared to £5.5m in H1 FY23In his statement on the results, Steven Cooklin, Chief Executive Officer, highlighted the importance of the return of large company insolvencies “back to pre-pandemic levels”, which is now filtering down to create increased opportunities for funders focusing on insolvency litigation. He explained that “as the insolvency market develops through the current business cycle, the Directors anticipate a return to higher average case sizes, reflecting a greater mix of larger company insolvencies.”
Whilst intellectual property and patent lawsuits remain one of the top target areas for litigation funders, questions around these funders’ level of control and interference in the litigation process have come to the fore over the last year.In a piece for TheRecorder, Keith Zullow and Yoko Bian from Goodwin Procter interviewed Brendan Dyer, funding director at Law Finance Group (LFG). The interview covers a wide range of topics including LFG’s evolution from its beginnings in 1994, the nuances of case selection and LFG’s involvement in the litigation process beyond the provision of capital.Dyer begins the interview by highlighting LFG’s pedigree as “the oldest litigation funder in the U.S.”, and with nearly three decades of experience in legal funding, LFG is able to provide “unique and creative capital solutions that go above and beyond merely funding costs and a percentage of legal fees.”Addressing the contentious issue of funder control over lawsuits, Dyer pointedly states that “reputable commercial funders like LFG remain passive in disputes in which they have invested.” Whilst Dyer acknowledges that funders can often provide valuable expertise when it is requested by the client, he reinforces his initial point that “the claimant retains complete control over all decision-making.”Dyer also discusses the parameters which LFG uses when considering potential litigants or cases to engage with, stating that it primarily looks to identify “high-value commercial and IP claims that can benefit from our investment.” Speaking to the particular factors that are important in evaluating patent lawsuits, Dyer says that LFG “like to see at least two patents involved in the case along with a compelling invention story”, and also prefer cases that involve “open patent families.”
As LFJ reported last month, the news that a Chinese company was funding multiple intellectual property lawsuits has reignited debates around expanding regulations of litigation finance. However, representatives for the funding industry continue to argue that the campaign driving these calls for a crackdown is not resting on a solid foundation of evidence.In an interview with Bloomberg Law, Gary Barnett, executive director of the International Legal Finance Association (ILFA), argues that increased disclosure requirements for litigation funding are neither necessary nor are they a reform that has widespread popular support. Barnett suggests that much of the narrative around the need for heightened disclosure stems from lobbying by the Chamber of Commerce, arguing that we shouldn’t “confuse [Chamber’s] interest in it with the overall direction that more disclosure is the way things are headed.” Building on this argument, Barnett claims that the ‘Protecting Our Courts from Foreign Manipulation Act of 2023’ which was introduced in Congress “is based on a false premise.” He goes on to say: “The genesis of it is a commissioned paper that was paid for by the Chamber of Commerce that posits, based on no evidence and it’s pure speculation, that the legal finance industry poses a national security risk.”Barnett does not discount the idea that there is room for reform in funding regulations, explaining that “we’re not opposed to disclosure, we just think that requiring disclosure in every case causes more problems than it’s worth.”Addressing the Chamber of Commerce report’s specific claim that litigation funding provides an avenue for malign actors to interfere with US businesses, Barnett says that “foreign adversaries aren’t able to manipulate the legal system through legal finance providers.”However, Nathan Morris, senior vice president, legal reform advocacy at the U.S. Chamber Institute for Legal Reform, argues that their research shows “that there’s an incentive for geopolitical actors to use funding to engage in America.” Morris acknowledges that this foreign engagement may sometimes be about gathering information rather than damaging US businesses but emphasises that “if there’s no check on the ability for it to occur, it is exceedingly likely it will happen.”
Jade Road Investments Limited (AIM: JADE), the London quoted company focused on seeking the best risk-adjusted returns globally, announces a new investment of $250,000 into Heirloom Litigation Funding 2022 SPV XI ("Heirloom Litigation Finance"). The investment was made in support of JADE's updated Investment Policy to invest in attractive, uncorrelated, risk adjusted return opportunities.This is the second investment made by JADE under its new Investment Policy approved in February 2023. Its first investment, in April 2023, was into an Alternatives fund which invests primarily in asset-backed and/or income-producing opportunities such as equipment leasing, agriculture and infrastructure, and that are highly uncorrelated to the general market. Heirloom Litigation Finance has issued JADE a 1-year, 14% cash interest debt note, that is backed by a diversified portfolio of disbursement fundings for small consumer litigation claims in the UK, all backed by insurance. Interest is paid quarterly. Unlike many litigation finance opportunities, these claims fall under established precedents or quasi-governmental compensation programs, which are expected to increase the chance of success and reduce the length of time to settlement. The investment is a related party transaction under the Aim rules for Companies as Heirloom Investment Management LLC is a substantial shareholder in the Company and Heirloom Litigation Finance is a self-managed Cayman Islands company wholly owned by Heirloom Holdings. The Directors of the Company consider, having consulted with WH Ireland Limited, the Company's nominated adviser, that the terms of the transactions are fair and reasonable insofar as its shareholders are concerned.JADE recognizes the importance of genuine diversification in this volatile market, and how alternative investing can reduce volatility and improve returns in an investment portfolio. JADE is pleased to add another investment that would be difficult for most investors to either access or diligence, and which aims to provide genuine diversification and risk-adjusted return enhancement to an investor's portfolio. John Croft, the Company's Executive Chairman, commented:"JADE's investment in Heirloom Litigation Funding 2022 SPV XI continues to build on our updated Investment Policy and our commitment to providing our shareholders with a portfolio of investments with solid risk-adjusted global returns. With its strong return profile, insurance -backing, short duration and high coupon, which is paid quarterly, the Heirloom Litigation Finance investment is another step forward in JADE's on-going transformation."
Aon is a global insurance brokerage and professional services firm with approximately 50,000 employees across 120 countries that offers a wide array of risk mitigation products and structured solutions. Aon’s Litigation Risk Group focuses on de-risking adverse outcomes in active and potential future litigation for corporate, private equity, hedge fund, law firm, and litigation finance clients through the use of insurance. Aon has spearheaded the rapid development of this insurance market over the past five years with pioneering solutions like judgment preservation insurance, insurance-backed judgment monetization, and portfolio-based “principal protection” coverage for funders and plaintiff-side law firms. Aon’s Litigation Risk Group is the dominant market leader in the litigation and contingent risk space, having placed nearly $5 billion in total limits over just the last several years, including over $1 billion in limits in 2023 alone. Website: https://www.aon.com/m-and-a-transaction/transactionsolutions/litigationsolutions.jsp Founded: 1982 HQ: London (Global) and Chicago (US), with Aon’s Litigation Risk Group being based in New York About Aon’s Litigation Risk Group: Aon’s Litigation Risk Group works with a wide variety of clients across all industries and sectors of the economy, but the fastest-growing appetite for insurance solutions by far comes from litigation funders and other similar investors in litigation-related assets. Aon helps these clients protect their downside in litigation-related investments in many different circumstances, whether protecting a judgment they have obtained in a case in which they invested at inception, wrapping a loan they are making to a plaintiff-side law firm with principal protection insurance, or insuring an entire portfolio of uncorrelated investments in cases at different stages of the litigation lifecycle. Aon has fostered strong partnerships with dozens of insurance markets to bring our clients the most creative bespoke insurance solutions for the most complex litigation-related risks on the best possible coverage terms. As the Director of Underwriting for a well-established litigation funder on whose behalf Aon has placed over $70 million in limits across a number of different investments put it: “We have worked with the Aon’s Litigation Risk Group on a number of insurance policies over the years, and I can say unequivocally that they are second to none. Besides being fantastic to work with, the team was also able to leverage their litigation know-how and strong relationships with insurers to obtain favorable terms for each of our policies. Even when we had to file a claim on a policy, they jumped on it right away, handling it quickly and professionally without any need to involve a separate claims team. We have been very happy with our partnership.”Points of Differentiation:Innovation – Aon is a leader in terms of pushing the limits of what litigation and contingent risk insurance policies can do. While this area of the insurance industry got its start on the defense side in the context of M&A transactions, where what is now refered to as “adverse judgment insurance” or “AJI” was used to ring-fence litigation risks that were getting in the way of an acquisition, they were the first to place insurance on plaintiff-side judgments, which led to Aon coining the term “judgment preservation insurance” or “JPI,” which is now used industry-wide and beyond. Aon was also the first to have the insight that once a judgment is insured, so long as the defendant is sufficiently creditworthy, the combination of “judgment plus JPI policy” can serve as collateral for a loan that can be made on more attractive terms than would be available without insurance. Aon was among the first broker in the insurance industry to facilitate loans against this combination of “judgment plus insurance,” a solution they named “insurance-backed judgment monetization,” and which has now also become widespread and provided a significant boost to the broader litigation and contingent risk insurance industry. Their team prides itself on finding new and unique uses for insurance to help our clients achieve their goals, and excels at using insurance capital to solve complex litigation-related issues. Pre-Underwriting – Aon’s team of former litigators has earned a reputation for submitting to insurers only the highest quality risks, after thoroughly analyzing their merits before submission to insurers. As one of the leading insurers in the litigation and contingent risk insurance space, Ambridge Partners, put it: “We’re always happy to receive contingent risk submissions from the Aon team. The deals are always pre-vetted and well-presented, and it’s clear that they’ve asked themselves ‘What would I want to see as an underwriter?’ – and then provide exactly that. It makes Aon’s deals very attractive easy for us to consider.” And per Alston & Bird litigation partner Steve Penaro, “As outside counsel working with underwriters in the contingent risk space, when we see a contingent risk submission from Aon, we immediately know that is has been thoroughly vetted and the issues meticulously scrutinized. And, once the underwriting process begins, Aon actively partners with us to ensure all relevant information is readily available and all questions have been answered allowing for a smooth close. From the initial submission to the binding of the policy, Aon is there every step of the way.” Given the explosive growth in this space, Aon values their underwriters’ scarce time, and enjoys a competitive advantage knowing that underwriters move Aon submissions to the top of their piles. Relationships with Insurers – Aon is not only a market leader in terms of litigation and contingent risk insurance, but also other lines of insurance written by the same carriers such as representations and warranties and tax insurance. As one lawyer we have worked with on policies for two different clients put it: “The Aon team did a magnificent job in placing adverse judgment insurance for one of my clients and judgment protection insurance for another. They have deep contacts with the insurance market, and it was apparent to me that insurers trust their expertise and judgment. I have not hesitated to recommend them to other attorneys.” Given the volume of business that Aon does in the broader transaction solutions insurance market, they maintain deep relationships with insurers, and that benefits their clients by helping them deliver the best possible coverage terms, pricing, and claims service. Key Metrics: Aon's Litigation Risk Group has placed billions of dollars in limits on litigation and contingent risks in the last several years, including ten separate insurance programs that each provided more than $100 million in coverage limits and four that provided at least $500 million in coverage limits. The policies placed by Aon have arisen in a variety of procedural contexts and run the gamut in terms of subject matter and types of claims – commercial litigation, breach of contract, patent infringement, trade secret misappropriation, and antitrust, just to name a few. Aon has placed adverse judgment insurance on the defense side and judgment preservation insurance on the plaintiff side, including pre-trial, pre-judgment insurance for litigation funders to protect the value created by important evidentiary rulings that were the subject of interlocutory appeals. Aon has also placed principal protection insurance on several hundred million dollars that have been invested into early stage, pre-complaint patent litigations across multiple unique patent families. They have procured insurance for defendants who have lost significant damages verdicts at trial against the risk that an appellate court will not reverse, and have insured against adverse outcomes related to regulatory processes. Put simply, as long as their team has access to sufficient underwritable information about the litigation risk to be insured, there are few limits on the kinds of cases or procedural postures that Aon can insure. Jurisdictions and Sectors Served: Aon’s Litigation Risk Group has insurance broking teams not only in the United States, but also in the United Kingdom (which can insure risks across much of EMEA), Bermuda, and Southeast Asia, which enables them to deliver to our clients truly global solutions across myriad jurisdictions. While the core of Aon's business remains insuring the outcome of judicial proceedings in the United States, they understand where to go to find appetite to insure litigation in other domestic courts, as well as insuring the outcome of international arbitration proceedings.Key Stakeholders:Stephen Davidson is a Managing Director and both the Head of Aon’s Litigation Risk Group and Head of Claims for Aon’s broader Transaction Solutions team. As Head of the LRG, Stephen works with clients and insurance markets on the development of litigation and contingent risk insurance. As Head of Claims, Stephen manages transaction liability claims – which includes not only litigation and contingent risk insurance claims but also representation and warranty and tax insurance claims – and has overseen and helped negotiate the favorable resolution of hundreds of such claims in North America and around the world. Prior to joining Aon in 2016, Stephen was a commercial litigation partner in DLA Piper’s New York office, and he began his career at Schulte Roth & Zabel LLP, where he worked as a litigation associate for several years. Stephen Kyriacou is a Managing Director and Senior Lawyer in Aon’s Litigation Risk Group, and was the first insurance industry hire dedicated solely to the litigation and contingent risk insurance market, which he has been working to develop and grow since 2019. Stephen has twice received the designation of “Power Broker” from Risk & Insurance Magazine (in 2022 and 2023), which called him “a pioneer in judgment preservation insurance,” and is the only litigation and contingent risk insurance broker to have been so recognized. While Stephen places insurance across all of Aon’s solution lines, he specializes in single-case judgment preservation insurance and adverse judgment insurance placements. Prior to joining Aon, Stephen spent close to a decade as a complex commercial litigator at Boies, Schiller & Flexner, where he amassed significant trial, appellate, and arbitration experience representing both plaintiffs and defendants in the U.S. and abroad across a wide array of practice areas, and clerked in the U.S. District Court for the District of Columbia. Ed Conlon is a Managing Director in Aon’s Litigation Risk Group, and is the team’s resident insurance industry veteran, having been in the industry for over 15 years and having placed litigation and contingent risk insurance since 2015, when the market for such insurance was still in its embryonic stages. While Ed brokes across all of Aon’s litigation and contingent insurance lines, he focuses primarily on developing cutting edge bespoke portfolio-based coverage structures for law firms, litigation funders, and other investors in litigation. Ed also leverages his deep, battle-tested relationships across the broader insurance industry to bring new carriers into the growing litigation and contingent risk insurance market and to maximize limits and optimize coverage terms on Aon policies. Prior to his current role, Ed led Aon’s Financial Institutions Group and, before that, was a complex commercial litigator and ran a complex commercial claims desk at AIG. David Hodges is a Vice President and joined Aon’s Litigation Risk Group in 2021. David brokes across all of Aon’s litigation and contingent insurance lines, and focuses primarily on single-case judgment preservation and adverse judgment insurance placements. Prior to joining Aon, David was a complex commercial litigator at Boies, Schiller & Flexner and Lankler Siffert & Wohl, and was also a law clerk for federal judges on the Second Circuit and D.C. District Court. Bill Baker is a Managing Director in Aon’s Litigation Risk Group and joined the team in early 2020. Bill leads the team’s work on structured solutions, including loans that are collateralized by judgment preservation insurance policies and other financing solutions that are customized to meet the unique capital needs of our clients. Prior to joining Aon, Bill was an investment banker at various firms throughout a 15-year career, after which time he worked in private equity and corporate roles, including strategy, corporate development, and investor relations. Mike Kenny is a Director in Aon’s Litigation Risk Group and joined the team in 2021. Mike is responsible for the team’s structured finance solutions, including premium finance and judgment monetization. Mike works with clients to structure bespoke credit transactions, allowing them to leverage the combination of their judgments and insurance to access the capital markets and obtain liquidity. Mike uses his industry relationships and a broad network of investors to help clients find the best deal terms and structure for their specific needs. Mike is also a licensed investment banker with Aon Securities. Prior to joining Aon, Mike was an investment banker at BTIG, where he focused on M&A, public and private financing, and strategic advisory for software industry clients.
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