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Commercial Legal Innovation

Highlights from Burford Capital’s 2023 Research Reports

A post from Burford Capital’s chief marketing officer, Liz Bigham, looks back at the trio of research reports that the funder commissioned in 2023, picking out the key insights uncovered from the surveys. In all three reports, Burford surveyed GCs and senior in-house counsel, looking at their attitudes, priorities, and concerns across commercial litigation and arbitration. In the litigation economics survey, Burford found that 74% of the in-house lawyers surveyed expected ‘an increase in the volume of disputes over the next two years because of the current geopolitical, economic and regulatory environment.’ In the face of the increasing financial burden from these disputes, 62% of respondents expressed their desire for ‘law firms to offer more creative pricing solutions, such as alternative fees.’ Burford’s commercial dispute & enforcement economics survey switched focus to examine how these legal teams were ‘optimizing the value of pending claims, judgments and unenforced awards without adding cost to their legal budgets.’ Judgement enforcement and collection proved to be a major pain point for these lawyers, with 2% of those surveyed reporting that ‘they recovered 100% of the value of their judgments and awards over the last five years.’ Encouragingly for litigation funders, when in-house counsel were asked what they were looking for in outside law firms, 69% included ‘familiarity with legal finance’ as a key attribute. Finally, Burford’s survey on ‘the commercial disputes leadership diversity gap’ explored the work that in-house lawyers are doing to improve diversity in the profession. The results showed an interesting gap between expectations and formal guidelines around diversity, with only 44% of respondents confirming that ‘they apply formal requirements for diversity to the law firm teams that represent them in court.’ In terms of making progress on this issue, 76% said ‘they would benefit from being exposed to recommended female and racially diverse litigation and arbitration lawyers from a trusted source.’
Commercial Regulatory Issues

The Potential Benefits of Standardizing Litigation Funding Agreements

As the size and influence of the global litigation finance industry has grown, so too has the frequency and intensity of criticism leveled at the practice. To combat these critiques, litigation finance leaders continue to explore different avenues to reinforce the credibility of third-party funding. In an opinion piece published on Bloomberg Law, Tets Ishikawa, managing director at LionFish Litigation Finance, has suggested that implementing some form of standardization across litigation funding contracts could bolster these efforts to improve the industry’s reputation. He argues that ‘standardized agreements can play a pivotal role in improving transparency in litigation funding,’ thereby offering a solution to one of the most commonly voiced critiques of third-party funding. Ishikawa begins his piece by comparing litigation finance to the derivatives market, explaining how the introduction of a master agreement by the International Swaps and Derivatives Association (ISDA) ‘reaped enormous gains in market efficiency and transparency.’ He argues that for documentation used in both litigation funding and litigation insurance, introducing some form of standardization could ‘enhance the market’s global credibility, legitimacy, and transparency.’ Looking at what areas of litigation funding documents could be standardized, Ishikawa identifies several ‘key basic concepts’ that could benefit from global uniformity. These concepts include proceedings, funder profits, termination events and default provisions, drawdown processes, and waterfalls/priorities agreements. As Ishikawa points out, ‘as the market evolves, more concepts will become obvious candidates for standardization.’ As for the specific benefits that standardization of litigation funding agreements could offer, Ishikawa argues that it would immediately result in ‘execution efficiencies’, with the ‘savings passed onto plaintiffs.’ He also suggests that another important upside from standardization would be its encouragement of ‘openness and transparency’, which Ishikawa believes could be ‘a major tool in removing rogue funders.’ An additional benefit identified is that standardization would ‘bring a level of maturity that brings the market structurally closer to other financial markets’, something that Ishikawa highlights as one way to tackle fears of foreign interference through litigation funding.
Announcements Commercial

Omni Bridgeway Releases Investment Portfolio Report at 31 December 2023

Omni Bridgeway Limited (ASX: OBL) (Omni Bridgeway, OBL, Group) announces its investment performance for the three months ended 31 December 2023 (2Q24, Quarter) and for the financial year to date (FYTD, 1H24). Summary:
  • First close of Fund 4 and Fund 5 series II capital raise on improved cost coverage terms.
  • Investment income of A$187 million in 1H24; A$32 million provisionally attributable to OBL.
  • 10 full completions, 4 partial completions, and a secondary market transaction with an overall
  • MOIC of 2.2x, and an IRR of 56% in 2Q24.
  • A$260 million of new commitments in 1H24 with a corresponding A$4.5 billion in new EPV.
  • Materially improved pricing on new commitments; 38% up on FY23.
  • Strong pipeline of new investment opportunities.
  • OBL cash and receivables of A$121 million plus A$60 million in undrawn debt.
  • A$5.1 billion of possible EPV completions over the next 12 months.
  • Review and simplification of communications and disclosures; working towards replacing EPV with a Fair Value measure.
The full investment portfolio report can be read here.
Community Spotlights
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Member Spotlight: Nick Wood

Nick Wood has 30+ years of private client advisory investment management and private equity experience, including implementation of tax planning strategies for a wide range of globally mobile clients. He has successfully built several specialist advisory and consulting businesses. Nick's first involvement in Litigation Finance in 2016; establishing, building, and successfully sourcing finance for a high-profile and high-value case against a global bank for fraudulent misrepresentation (see Upham & Others v HSBC UK Bank PLC). He was involved in establishing many similar projects since; acting for claimants, law firms, and investors with funding placed for over £1 billion of claims in 8 years. Company Name and Description:  Audley Capital Ltd. In its short life, Audley has created and developed a rapidly growing advisory, consulting, and broking business, utilising and developing groundbreaking technology. Audley aims to disrupt historic litigation finance and legal processes, ensuring investment capital, legal expertise, and claimants benefit from Audley’s experience, expertise, legal tech, and AI offerings. Audley is focused on facilitating access to justice for those unable or too risk-averse to fund it themselves. Utilising our in-depth knowledge of litigation funding, technology, and our ever-growing network of key players we aim to make the process efficient, cost-effective, and swift, facilitating successful outcomes for our mutual clients. InvestorHub, LawfirmHub, and IntroducerHub are focused on specific service provision via our website. AudleyHub+ gives access to a wide (and rapidly growing) range of AI tools and consulting services. Company Website: www.audleycapital.co.uk Contact Information: nick@audleycap.com Year Founded:  2023 Headquarters:  Notionally London, in practice Global. Area of Focus:  Case funding, strategy, legal consulting, risk analysis, claims valuation and management consulting, secondary market valuation strategies, AI consulting, and bespoke program provision. Member Quote: Litigation finance is the cornerstone of access to justice; however, the process can be cumbersome, unfocused, opaque, and too often frustrating. Through a combination of knowledge, experience, networking, and the implementation of technology Audley aims to reduce timescales, improve communication, and monitor performance; ultimately providing much-needed efficiencies and ensuring that money, legal expertise, and deal flow dynamically converge to create exceptional outcomes for all concerned. Our team is growing rapidly and we are actively seeking to build further our network of like-minded people and organisations in the investment, legal, and origination space.
Commercial Special Features

An LFJ Conversation with Chris Baildon, Co-Founder and Chief Operating Officer of Lex Ferenda

Lex Ferenda is latin for “the law as it should be”. The firm includes a team of seasoned lawyers, financiers, general counsel, and retired jurists who bring value to every aspect of the cases they commit to, resulting in better outcomes for all. Below is our LFJ Conversation with Chris Baildon, Co-Founder and Chief Operating Officer of Lex Ferenda: Lex Ferenda recently announced the launch of its first fund. Tell us a little about the company, its focus, and what you’re investing in.  Lex Ferenda Litigation Funding’s (“LF2’s”) investment mandate is primarily geared towards commercial claims in the United States, with funding available for cases at any point in the dispute resolution timeline. We typically target funding towards single commercial cases averaging $1-10 million per investment, however the firm has the resources and capital to make substantially larger investments in a broad range of single cases, portfolio investments, and law firm financing. Our team consists of seasoned litigation funders, lawyers, and investors with substantial legal and financial expertise. LF2 was founded by Michael German and Chris Baildon. Michael is an experienced litigator, trial lawyer, and litigation funder with more than a decade of experience litigating, resolving, and investing in complex commercial litigation and arbitration matters. Chris has three decades of global investment banking and finance experience, with substantial capabilities in management, business development, and capital raising across investment verticals, including litigation finance. LF2’s investment underwriting is directed by Andrew Kelley, who has more than two decades of complex commercial litigation experience, both as head of commercial litigation for a large publicly traded company and as an external advisor at international law firms, where he created and led programs that resulted in recoveries of almost $1 billion for his clients. The Advisory Board consists of Honorable Vanessa Gilmore, who recently retired after serving over 25 years on the federal bench, and Scott Mozarsky, who is a former GC to a public company and former President of a major legal technology outfit, and as such adds substantial legal and technology expertise. Litigation Finance is quickly maturing into a mainstream alternative asset class. Where do you see the evolution of the industry from here?    The market for litigation finance is seeing a rapid expansion in both the number of active funds as well as the amount of committed capital from institutional investors. Additionally, the penetration of third-party funding in the US is still low compared to other global markets. Recent research from Westfleet Advisors and Research Nester predicts that cases funded in the U.S. will grow by 17% year over year to 2035. As the asset class matures, I believe you’ll see a far greater volume of high profile/high value lawsuits financed through litigation funding. Similarly, I believe you’ll continue to see increasing commitments from large asset managers who are weary of market volatility and attracted to impressive returns in an uncorrelated asset class. What makes Lex Ferenda different from other funds operating in this space? What can the industry expect to see from the firm going forward? LF2 is unique in that it’s anchored by institutional-grade capital from a leading global investment manager, with the discretion to invest within its target based on good judgment without the delay of seeking investor approval. This structure allows the firm to be incredibly nimble while still operating an investment platform and system of controls of the highest standard to satisfy all of our different investor groups. Our market focus on domestic commercial litigation/arbitration (within our investment target of $1-10 million per case) has allowed the firm to seize upon attractive funding opportunities with a growing pipeline. LF2 adds value before and after investment with strategic case advice available from experienced legal and finance professionals with a best-in-class track record. LF2 tries to live up to its exponent so-to-speak – we use the broad experience and capabilities of our day-to-day employees and the Advisory Board to offer insight and experience as the dispute resolution process progresses so that our clients can secure (hopefully exponentially) better outcomes. Of course, LF2 maintains the highest level of ethical standards in funding, and our clients retain control over the litigations they fund with us. The industry can expect to see LF2 make major advances in medium to large commercial case investments, while also serving as a thought leader in the litigation finance space through education and philanthropic initiatives. Speaking of those initiatives, you recently launched a pair of them—LF2 University and LF2 Gives.  Can you provide some background on each?   LF2 University is a first-of-its kind educational initiative that aims to provide a greater understanding of the litigation finance industry. The program offers educational seminars to law firms, attorneys, businesses, students, and individuals interested in learning more about this growing field. Recently, we’ve launched Lit Finance 101 which covers the fundamentals of legal finance, and we’ll soon be launching a seminar on Litigation Finance Ethics which will cover the rules and ethical considerations involved in litigation funding. We’re equally excited about LF2’s new philanthropic initiative, LF2 Gives, which seeks to make positive impacts in the communities in which LF2 operates through community action programs and legal service offerings. During multi-annual “Action Days”, LF2 personnel partner with local organizations to participate in various volunteer services. This past Summer, LF2 Gives had its first Action Day where LF2 members volunteered their time with the Food Brigade in New Jersey as well as the Food Bank of the Rockies. For those interested in learning more about (or participating in) these initiatives, we encourage you to visit our website (LF-2.com). We look forward to further collaborations with those who share our dedication to service and education as we grow.
The LFJ Podcast

Episode 83: Mani Walia

Hosted By Mani Walia |
In this episode, we sat down with Mani Walia, Manager Partner and General Counsel of Siltstone Capital. Mani discussed the 3rd annual LitFinCon conference, taking place in Houston, Texas on March 6th and 7th, 2024. Mani explains what we can expect at the conference, some of the creative agenda decisions, the networking potential, and how Siltstone Capital operates as a litigation funder in the broader market. [podcast_episode episode="12486" content="title,player,details"]
Announcements Commercial Fundraising

White & Case Advises on Burford’s Upsized $275 Million Senior Notes Offering

Global law firm White & Case LLP has advised a syndicate of leading financial institutions on an upsized offering by Burford Capital Global Finance LLC, an indirect wholly-owned subsidiary of Burford Capital Limited, of US$275 million aggregate principal amount of tack-on 9.250% senior notes due 2031. White & Case previously advised a syndicate of leading financial institutions on Burford Capital Global Finance's initial issuance of US$400 million aggregate principal amount of such senior notes due 2031 in June 2023. Burford intends to use the proceeds from the offering for general corporate purposes. The closing of the offering is expected to occur on January 30, 2024, subject to customary closing conditions. Burford is the leading global finance and asset management firm focused on law. Its businesses include litigation finance and risk management, asset recovery and a wide range of legal finance and advisory activities. Burford is publicly traded on the New York Stock Exchange (NYSE: BUR) and the London Stock Exchange (LSE: BUR). The White & Case team was led by partner Jonathan Michels, associates Elizabeth Mapelli, Joanna Heinz and Jacob Manzoor, and law clerk Heidi Ahmed (all in New York).
Commercial Regulatory Issues

An Overview of Dispute Funding Regulations in Hong Kong

Whilst regulations that govern litigation funding in the industry’s major jurisdictions are continually evolving, the established rules for countries such as Australia, the UK and US are well understood. For those funders looking to expand their footprint to other territories, such as Asia, it is important that newcomers to these markets understand the boundaries in which they can operate. An article in Financier Worldwide gives a detailed overview of the current state of third-party dispute funding in Hong Kong, with the insights provided by Brian Gilchrist, Elaine Chen, and Alex Wong from Gibson, Dunn & Crutcher. The authors begin by establishing the overriding principle that Hong Kong is still a jurisdiction that broadly prohibits the use of third-party funding, apart from three categories of disputes where its use is permitted. As the article explains, two of these categories are more simply defined. The first is described as ‘common interest’ cases, “where a third party has a legitimate interest in the outcome of someone else’s lawsuit, and is therefore justified in supporting it.” This is illustrated by the example of a vehicle rental company funding claims who had suffered accidents whilst driving the rented vehicles. The second category includes cases ‘where access to justice will be obstructed if a claimant is prevented from obtaining third-party funding’, such as situations where a plaintiff “has rightful title to property” but lacks the financial means to pursue the claim. Moving to the broader final category of cases where outside funding is permitted, the article’s authors outline the types of cases where third-party funding has been recognised as permissible either by the courts or through specific regulations. This includes funding for insolvency litigation and arbitration cases, with the latter group of disputes governed by the outcome-related fee structures arrangements (ORFSA) rules introduced in 2022. The full article then provides a detailed requirement of the types of fee arrangements permitted under ORFSA, as well as the requirements that funders must adhere to. As the experts from Gibson, Dunn & Crutcher summarise, whilst third-party funding for court litigation in Hong Kong is “generally unavailable, save in exceptional circumstances”, the rules for arbitration proceedings are much more receptive and allow for “various funding solutions.”
Commercial Regulatory Issues

Florida’s Senate Judiciary Committee Offers Unanimous Support for Increased Regulation of Litigation Funding

A trend in the US litigation finance industry over the past year has been the introduction and passage of bills in state legislatures designed to curtail the use of third-party funding through the imposition of more stringent rules governing its use. The beginning of 2024 indicates that this trend is not slowing down, as a bill that lays down a swathe of new rules for litigation funding has received unanimous support at the committee stage in the Florida State Senate.  An article in Insurance Journal covers the unanimous vote by Florida’s Senate Judiciary Committee to endorse and move forward with SB 1276: the ‘Litigation Investment Safeguards and Transparency Act’. The bill, which was sponsored by Sen. Jay Collins, looks to increase disclosure requirements for third-party litigation funding and codify limits on the level of control that funders can exert on a lawsuit. The current draft text of the bill requires: claimants and lawyers to disclose any financing agreements, funders to indemnify their clients against adverse costs, and allows courts to take funding arrangements into consideration when assessing any potential conflicts of interest. Furthermore, it lays out prohibitions on funders: taking control of decision-making during lawsuits, receiving a larger share of any award than the claimants, paying commissions or referral fees to other parties, assigning or securitizing any part of the funding agreement. The bill’s progress through the Florida Senate received praise from the American Property Casualty Insurance Association and the U.S. Chamber of Commerce Institute for Legal Reform. Critiquing the extent of the bill’s rules on the use of third-party funding, Rebecca Timmons from the Florida Justice Association, emphasized that Floridians “can’t go toe to toe when the other side has millions to spend on lawyers,” without the use of litigation financing.