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Commercial Legal Innovation

The Opportunities and Limitations of AI for Litigation Finance

In December of last year, LFJ hosted a digital event on the topic of LegalTech and Litigation Finance, examining the variety of technology solutions that litigation funders are already using, and those technologies that may transform the future of the industry. New reporting provides additional insight into the adoption of emergent technology by funders, with many firms hoping to take advantage of AI tools to gain a competitive edge. An article in Bloomberg Law provides an in-depth look at the use of AI by litigation funders, highlighting how newer entrants to the market have adopted it to accelerate their growth, whilst also examining where the limits of this technology still exist. One of the most common applications for AI in the field of litigation finance is the discovery and identification of potential cases to fund, with Legalist and Qanlex recognised as two companies leading the way in this area. Legalist has created its own “truffle sniffer” algorithm to search for cases defined by a set of parameters, whilst Qanlex has built its own proprietary “Case Miner” software to both identify cases and contact those parties whose cases are most suitable. However, senior executives from both companies acknowledge that there are limits to what AI can do for their businesses. Legalist’s CEO, Eva Shang, emphasises that “there’s still a very important human component”, and that AI tools are not yet in a position to “do things that an underwriter would normally do.” Qanlex’s co-founder, Yago Zavalia Gahan said that whilst their Case Miner software allows the company to maximise the efficiency of its lead sourcing, litigation funding remains “a relationship-based business.” Apex Litigation Finance is another funder that utilises in-house AI tools, but according to its CEO, Maurice Power, it is only used in conjunction with human assessment of potential funding opportunities. Power says that AI’s limitations around creating accurate predictions of case outcomes largely stem from its data foundations, explaining that “for any AI predictive analytics model to be really effective, it’s only as good as the data that it has available to it.” For funders like Burford Capital and Parabellum Capital, AI can provide useful benefits in limited applications, but both funders are firm in their assertion that the human element cannot be so easily removed. David Perla, co-chief operating officer at Burford, firmly argues that AI is not a magic bullet and, at present, “no one’s got a tool where you could push a button and say, wow, this is an order of magnitude better—you still have to read the case.” Likewise, Parabellum’s managing director, Angela Ni identifies case management as an area where AI has been most useful to help track and analyse the vast amounts of information involved in a portfolio of cases.
Commercial Regulatory Issues

Ministry of Justice Announces New Law to Protect Litigation Funding

Ever since the Supreme Court’s ruling in PACCAR, litigation funders and legal professionals have been vocal in their desire to see the UK government act to protect access to third-party funding. After months of optimistic statements from ministers and MPs, the Ministry of Justice has revealed that it will soon be taking direct legislative action to reverse the Supreme Court’s judgement.  In an announcement released today, the Ministry of Justice (MOJ) said that the Lord Chancellor, Alex Chalk, will be introducing new legislation to ‘make it easier for members of the public to secure the financial backing of third parties when launching complex claims against moneyed corporations.’ The MoJ’s announcement states that the new law ‘will restore the position that existed before the Supreme Court’s ruling last year,’ effectively nullifying the impact of the PACCAR judgement. The announcement clarified that this new legislation will be introduced to Parliament shortly but will only apply to cases taking place in England and Wales. In addition to the planned legislation, the MOJ stated it was ‘considering options for a wider review of the sector and how third-party litigation funding is carried out.’ The review would examine ‘whether there is a need for increased regulation or safeguards for people bringing claims to court,’ with the government acknowledging the growing prevalence of third-party funding. Whilst there was no indication of when or how this review might be conducted, the MOJ said that ‘the next steps and any Terms of Reference of the review will be set out in due course.’ In a separate opinion piece for The Financial Times, Chalk explained the necessity of introducing this new legislation, citing the important role that litigation funding played in the Post Office case and arguing that it was crucial to ensure ‘that justice is available to all, and not merely the preserve of those with deep pockets.’ Referencing the potential review of litigation finance, Chalk highlighted the fact that the funders of the Post Office litigation ‘received £46MM of the £58MM awarded’, whilst the actual claimants were left with ‘a fraction of the total award.’ He emphasised that the government is aiming ‘to strike the right balance between access to justice and fairness for claimants.’
Announcements Commercial Deals

LegalPay aims to double litigation funding AUM to $1B by end of 2024

LegalPay, India's leading litigation funding company, today announced it has successfully managed claims worth USD 400 million since 2020 empowering over 1,000 businesses to recover their pending dues and navigate legal complexities. Building on this momentum, LegalPay aims to more than double the claims under management at USD 1 billion and add 4000 new cases every month by the end of calendar year 2024. “Reaching this significant milestone fills us with immense pride, and we are humbled by the positive impact we havemade on over 1,000 businesses and the 40,000 disputes wehave helped navigate. It reflects our commitment to empowering businesses with innovative financial solutions to manage their legal challenges,” said Kundan Shahi, Founder & CEO of LegalPay. Fueling this growth is LegalPay's unwavering commitment to technological advancements. The company's proprietary risk assessment algorithm fosters balanced risk management for funded cases, while the groundbreaking notice automation system allows for the effortless dispatch of up to 20,000 notices with a single click. LegalPay recently launched QuickSettle, a complimentary service to its core litigation funding offering. This innovative solution provides creditors with immediate access to their pending dues, bolstering their working capital and providing much-needed liquidity. At the same time, debtors benefit from the flexibility of no-cost EMIs, facilitating dispute resolution without compromising their financial stability. QuickSettle is proving to be a game-changer for MSMEs & SMEs, helping them streamline their collections and recovery issues. By avoiding litigation costs for businesses, QuickSettle is not only saving money but also time and resources. The user-friendly technology behind QuickSettle will play a crucial role in facilitating the pending dues for businesses and help them automate & digitalize their collections. Founder & CEO Kundan Shahi commented, "At LegalPay, our mission has always been to empower businesses and provide them with the tools they need to thrive. With QuickSettle, we're taking a giant leap forward in achieving this goal. By revolutionizing the debt recovery process and minimizing the financial strain on both creditors and debtors, QuickSettle epitomizes our commitment to innovation and client-centric solutions." LegalPay is committed to fostering a legal ecosystem where businesses can access justice and manage litigation effectively, ultimately contributing to a stronger and more equitable economic environment. About LegalPay LegalPay is India's leading litigation funding company, enabling businesses to recover their pending dues and manage legal challenges with innovative financial solutions and advanced technology. Through an unwavering commitment to innovation, LegalPay offers a suite of solutions, including traditional litigation funding and the recently launched QuickSettle, that enable businesses to recover pending dues and achieve sustainable growth. With $400 Million in claims under management, LegalPay is reshaping the way businesses approach and conquer legal challenges.
Commercial Regulatory Issues

Proposals for an ‘Ethically Sound And Financially Robust’ Future of Litigation Funding

As we look forward to the next decade of litigation funding, it appears that the loudest voices discussing what the industry might look like are coming from outside the sector. However, a new article from a European funder argues that the industry’s own leaders should take a proactive stance towards shaping the future of litigation finance. In a blog post on LinkedIn, Gabriel Olearnik, partner and head of special situations at LitFin, offers his thoughts on the future of litigation funding, and how the industry can continue to grow. Olearnik frames the article from his own personal perspective, suggesting that his views on the subject may be considered ‘heretical’ to some. He argues that in order for the funding industry to grow in a sustainable manner, ‘we must address the inherent challenges and ethical dilemmas it presents with clarity and dynamism.’ In the first of four proposals that Olearnik puts forward, he suggests that there should be a cap on funders’ returns that is equal to 50% of the total awarded damages. He argues that this is not suggested to stifle growth, but rather ‘ensure that the primary beneficiary of litigation funding is justice itself, not profit.’ Whilst Olearnik allows for the option for the cap to be non-binding, he believes that implementing such a measure would ‘maintain the integrity of the legal process.’ Olearnik’s second proposal is ‘the creation of specialised training and education programs’ designed to increase both the awareness and understanding of third-party funding in the next generation of legal and investment professionals. Moving beyond education for the existing legal industry workforce, he argues that these programs could ‘attract a new generation of ethical, socially conscious professionals to this vital industry.’ Moving from education to oversight, Olearnik recommends that the industry introduce ‘regulation of the senior management suite of litigation funders is crucial’, with these regulations being aligned ‘with the Approved Persons Regime under the Financial Services and Markets Act (FSMA)’. He points out that by adopting these standards, litigation funders can ‘safeguard the industry from potential abuses and foster a culture of integrity and accountability.’  Finally, Olearnik proposes the introduction of measures that would ‘avoid conflicts of interest and ensure capital adequacy’, arguing that these rules can not only ‘protect the interests of those seeking justice but also maintain the stability and reputation of the litigation funding sector.’
Commercial Legal Innovation

A Funder’s Perspective on Climate Litigation 

Although ESG investing is often viewed as a buzzword that lacks specificity and defined guidelines, it is clear that litigation funders have a growing appetite for lawsuits that tackle climate change and environmental impact issues. In a post on LinkedIn, Nivalion highlights the investor’s perspective on funding climate cases, examining both the challenges inherent to these lawsuits and the opportunities that they present for funders willing to back such claims. The funder begins by citing data from UNEP reporting which shows that the number of climate lawsuits being heard globally has risen from 900 in 2017, to nearly 2,200 in 2020. When it comes to jurisdiction, the majority of these cases are being brought in the United States, with less than 20% taking place in developing nations. In terms of the main challenges facing funders when assessing these cases, Nivalion states that there is often a lack of precedent for the claims being brought, especially in European courts. However, Nivalion cites a report from the London School of Economics that shows, when considered globally, ‘55% of cases brought have had a climate-positive ruling’. As a result, whilst there are plenty of cases for funders to consider, climate lawsuits in Europe represent an increased risk profile and are ‘more difficult to assess than the previous cases the Litigation Funding Industry has been funding.’ With this increased risk profile, Nivalion explains that funders may be able to commit to some of these climate lawsuits, as long as their overall portfolio structure is balanced and contains enough cases that have a higher probability of success. Similarly, funders are careful to consider the extended duration that climate litigation can entail, and may need to adjust their pricing terms when investing in these lawsuits.
Case Developments Commercial

Burford Capital Exploring Argentina’s Currency Swap Line with China to Satisfy $16 Billion Judgement

Ever since the landmark $16 billion judgement in the Argentina YPF case, the majority of commentary and discussion has focused on just one question: will it be possible to enforce a judgement of this size? With Burford Capital having previously pressured the court to begin the asset seizure process, it now appears the funder is exploring innovative routes to seeing the Argentine government satisfy its payment obligations. An article in Buenos Aires Times covers the latest developments in Burford Capital’s campaign to collect on the mammoth $16 billion judgement, as the funder is reportedly investigating using Argentina’s $18 billion currency swap line with China to satisfy the outstanding debt. No details are offered as to how this particular mechanism could be leveraged, but Burford filed an information request in federal court in New York on Tuesday, which ‘sought information on various overseas assets held by Argentina.’ Burford has reportedly filed at least 30 of these information requests and is seeking details around ‘YPF shares and dividends paid by the company, overseas commercial transactions and bank accounts, and reserves of gold and precious metals held abroad.’ Burford’s lawyers have stated that Argentina has refused to respond to any requests for information on assets held by the country’s Central Bank, with the governments stating these assets are ‘immune from attachment.’
Announcements Commercial

Omni Bridgeway Releases Interim Financial Report

The Directors present their report (referred to hereafter as the “Interim Financial Report”), together with the financial statements, on the consolidated entity (referred to hereafter as the "consolidated entity" or "the Group") consisting of Omni Bridgeway Limited (referred to hereafter as "OBL", "the Company" or "the Parent") and the entities it controlled at the end of, or during, the half year ended 31 December 2023. Directors The names of the Company's Directors in office during the half year ended 31 December 2023 and until the date of this report are as below. Unless stated otherwise, the Directors were in office for this entire period. Michael Kay - Non-Executive Chairman Andrew Saker - Managing Director & CEO (retired 26 October 2023) Raymond van Hulst - Managing Director & CEO (appointed 26 October 2023), former Executive Director and Co-Chief Investment Officer – EMEA Michael Green - Non-Executive Director Karen Phin - Non-Executive Director Christine Feldmanis - Non-Executive Director   Highlights for the half year ended 31 December 2023 Operational highlights1
  • US$485 million2 first close of Fund 4 and Fund 5 series II capital raise on improved cost coverage terms.
  • €135 million first tranche of debt capital raised for our €300 million Fund 8, focused on global enforcement investments.
  • Significant expansion of our capabilities in the UK, the world's second largest litigation finance market.
  • Investment income of $235.7 million, including income yet to be recognised, with $50.1 million provisionally attributable to OBL.
  • 12 full completions, 6 partial completions, and a secondary market transaction achieving an overall MOIC of 2.4x, and an IRR of 55%.
  • US$21.5 million cash proceeds from the sale of a 25% interest in a portfolio of 15 intellectual property (IP) investments in Fund 4.
  • $260 million of new investment commitments with 38% improved pricing on FY23.
  • $182 million strong pipeline of new investment opportunities representing a further 29% of our commitments target for the year ending 30 June 2024.
  • Possible investment completions with an estimated portfolio value (EPV) of $5.1 billion over the next 12 months (rolling period).
  • Total cash and receivables of $291.2 million; OBL only cash and receivables of $122.4 million ($80.9 million in OBL balance sheet cash and $40.1 million of OBL share of cash and receivables within Funds), plus $60 million in undrawn debt.
Financial highlights3
  • Total income of $135.8 million (including a net gain on deconsolidation of the Fund 4 IP portfolio) derived from diversified sources comprising litigation completions, a secondary market sale, management fees, and interest revenue.
  • Group profit after tax (before non-controlling interests (NCI)) of $33.4 million (1H23: $30.1 million loss after tax); with $47.6 million loss attributable to OBL (the Group’s equity holders) and $81.0 million profit attributable to NCI.
  • Employee expenses of $34.4 million decreased 12% due to team optimisation, a reduction in contractors and higher capitalised costs of investment managers.
  • Corporate overheads of $9.0 million increased 4% due mainly to the amortisation of the Fund 8 insurance premium, notwithstanding significant reductions in other corporate overhead expenses.
  • Carrying value of litigation investments of $654.7 million (30 June 2023: $596.7 million) across 285 funded litigation investments. Negative case developments including lower than anticipated income, extended duration and adverse milestones associated with a funded law firm portfolio have resulted in a $44.9 million reduction of the carrying value. 
1 Represents non-IFRS information. Here Fund 5 is presented at 100% for consistency of presentation across OBL’s Funds. 2 Inclusive of OBL’s co-funding (OBL’s commitment of US$100 million to each Series II fund is capped at 20% of the ultimate fund size (i.e. after further closings). 3 Per the Group Consolidated Financial Statements. The full Interim Financial Report can be read here. The full 1H24 results Investor Presentation can be read here.
Community Spotlights
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Member Spotlight: Dinesh Natarajan

Trident Strategy is a Singapore-based strategic consultancy that Dinesh Natarajan founded and leads as CEO. Dinesh have over 9 years of experience in law, management consulting, and litigation, and helps clients across various sectors and geographies to achieve their goals in the strategic partnerships and sports, media and entertainment industries. Dinesh combines his skills and knowledge in strategy, legal finance, and arbitration to deliver value-added solutions and insights.

Dinesh is also a Network Member at Lexolent, the world's first globally coordinated network for legal finance professionals. Lexolent connects him with a diverse and dynamic community of experts, investors, and innovators in the rapidly growing field of legal finance. He leverages his expertise in sports law and arbitration to advise and support clients on complex and high-stakes legal matters.

Dinesh is passionate about foreign policy, international politics, and youth leadership, and engages in various platforms and initiatives that foster dialogue, collaboration, and social impact. Dinesh serves his community in various roles, such as sitting on the Management Committee of a Hindu temple, the Legal Committee of the Football Association of Singapore, and the Disciplinary & Ethics Committee of the ASEAN Football Federation. He live by the motto: Serve. Lead. Inspire.

Company Name and Description:   Trident Strategy- a consultancy that provides services in the legal and Sports industry.

Company Website: www.trident-strategy.com

Year Founded:  2021

Headquarters:  Singapore

Area of Focus:  Law, strategy, finance, sports, media, entertainment

Member Quote: Keen to establish a Litigation Fund and interested to speak with players in the industry who could be a mentor and/or partner with.

Commercial Regulatory Issues

Lobbyist for ILFA Calls Failure to Disclose Foreign Entities ‘an Oversight’

As criticism and scrutiny of litigation funding reaches new heights, opponents of the industry will be keeping a close eye on anything that appears to show funders operating in ways that can be framed negatively. A recent article highlights that it is not just funders who are under the spotlight. A newsletter published by Politico earlier this month reported that Miller Strategies, a D.C.-based lobbying firm, said it would update its lobbying disclosures around its work for the International Legal Finance Association (ILFA). These amendments were required, as it had failed to disclose that the following five members of ILFA are foreign companies: Harbour Litigation Funding, Innsworth Advisors Limited, Nivalion AG, Omni Bridgeway and Therium Capital Management. Speaking with Politico, Miller Strategies’ founder and CEO Jeff Miller said that the failure to disclose the foreign entities “was an oversight”, and that the lobbying firm would “amend accordingly.” Miller also added that his firm had paused its work for ILFA at the end of 2023, having been paid a fee of $50,000 per quarter. According to data collated by OpenSecrets, a nonprofit that tracks lobbying spending in U.S. politics, Miller Strategies was paid a total of $110,000 by ILFA in 2023. OpenSecrets tracking also reveals that ILFA paid another lobbying firm, West Front Strategies, $120,000 for its services last year.