Viren Mascarenhas is a Partner in the Litigation and Arbitration Practice at Milbank LLP based in New York. He specializes in construction, commercial and investment arbitration, and has represented investors in investment arbitrations against the governments of Argentina, Azerbaijan, Bosnia-Herzegovina, Bolivia, Ecuador, India, Italy, Mexico, Nigeria, Peru, the Philippines, the Russian Federation, Timor-Leste, Uruguay, and Venezuela.
Viren has special expertise in commercial disputes in the energy and mining sectors, and construction disputes over energy infrastructure. He has been ranked in international arbitration by Chambers Global, Chambers USA, Legal 500, Lawdragon 500, Who’s Who Legal, Euromoney Legal Media, Latinvex, and Law 360, and has been recognized more generally for his accomplishments as a lawyer by The New York Law Journal, Crain’s New York Business, the American Bar Association, the US National South Asian Bar Association, and the US LGBT Bar Association.
Milbank is a full-services, international law firm, with offices in the US (New York, Los Angeles, and Washington DC), Brazil, Europe (London, Munich, and Frankfurt), and Asia (Beijing, Hong Kong, Singapore, Seoul and Tokyo). Its Litigation and Arbitration practice thrive on complex cases in federal and state courts throughout the US, English courts, and arbitral tribunals.
Below is our LFJ Conversation with Viren Mascarenhas:
What first interested you in litigation finance? What experiences (positive or negative) have you had interacting with the sector?
My first encounter with the litigation finance industry goes back to 2011, when a funder instructed the firm where I was then an associate to assess the likelihood of an investor prevailing in a potential investment treaty arbitration against a South American state regarding the denial of a mining concession. The experience helped me cut out the noise; focus on the key elements of an alleged wrongdoing; review the key evidence; and then use my judgment to assess the likely outcome. As lawyers, we want to tell the full story when pleading a case—sometimes to a fault. Litigation funders—like judges and arbitrators—rigorously try get to the heart of the matter quicker.
My experience with the sector has always been positive. In addition to being instructed by funders to do risk assessment, I have been able to secure funding successfully for my clients over the past decade from several different funders. These were all meritorious matters in which my clients would not have been able to get a shot at justice without funding. And their claims always have become stronger and more compelling based on insights shared by experienced funders during the due diligence/underwriting phases and exchanges during the arbitral proceedings.
What trends are you seeing pertaining to arbitration funding of various legal sectors? How is the landscape evolving?
The trends I have seen are:
- Funders have become more selective about funding investment treaty claims. The increased selectivity usually is unrelated to the merits of the cases—which often times are compelling—but concern over the length of time tribunals are taking to render awards, and subsequent time thereafter to enforce the award if the respondent state does not comply willingly with the award. The profile of the sovereign defendant (are they likely to pay; do they have enforceable assets) has become critical to the funding assessment.
- By contrast, funders are increasingly keen to fund commercial and construction arbitrations. They are very eager to work with corporates that likely have a portfolio of arbitrations at any given time.
- More players exist in the market now to buy a stake or all of an arbitration award than a decade ago.
What are the regional issues that arise when funding arbitration disputes?
It is becoming increasingly clearer in certain jurisdictions, especially in Asia, about the extent to which litigation funding is permitted and under what terms because of recent legislative or common law developments in those jurisdictions. However, clients from those jurisdictions who are seeking litigation funding sometimes have “sticker shock” when reviewing funding terms being offered to them either to fund their matters or to “buy” their awards. They need more handholding when it comes to understanding the economics of litigation funding, largely because of a lack of familiarity with the litigation funding market.
Sometimes, local law firms that have strong relationships with local clients may have difficulty securing funding either because they are not known to the funders (relationships matter) or because they have not represented their clients in specialized arbitrations, such as construction or investment arbitrations. In these circumstances, local law firms have reached out to me to serve as lead or co-counsel during the funding process and then subsequently in the arbitrations.
What are the challenges presented in terms of compliance with the losing party during an arbitral award, and how do you navigate those?
Enforcement of international arbitration awards has got a relatively bad rap now because of investment arbitration. Increasingly, sovereign states seek annulment of an award as a matter of course, just to tie things up in annulment proceedings for several years to demonstrate to their voting constituents that the government used all options available to it. And even after an award survives annulment challenges, some states still do not pay up, resulting in years of enforcement litigation chasing after those state assets that are not protected by sovereign immunity.
The challenges are much fewer in commercial and construction arbitration. Unless the stakes are very high (a “bet the company” arbitration), award debtors do not frequently seek annulment of an award given the low chances of ultimately being successful. Unless the award debtor is a true deadbeat, it will tend to comply with the award or at least offer to settle the award at a discount. Often, these commercial actors have long-standing relationships with each other, so the arbitration outcome is just one component of the business relationship with the counterparty and overall reputation in the industry.
What are the trends / key developments you are keeping an eye on in relation to litigation/arbitration funding that impact how you think about your international arbitration portfolio?
The main developments that I focus on are:
- New mining claims from investors in the critical minerals industry. These are minerals that are essential to the energy transition (such as lithium, which is used in battery storage). Governments all over the world, such as in Argentina, Bolivia, Chile, Mexico, Zimbabwe, and Zambia, are enacting new measures to regulate and control these critical minerals. Many of the mining companies or their investors (such as electric vehicle automakers) are new to the mining sector and/or are junior or small mining companies. They likely will need third-party funding for their claims—and there will be claims in the next few decades given the commercial and geo-political fights over critical minerals in the supply chains.
- More arbitrations in the renewables sector (commercial, construction, and investment arbitrations) all over the world as governments continue to implement their obligations under the Paris Agreement and fulfill their Nationally Determined Contributions to invest in renewable energy, low carbon, and hydrogen projects. As has been the case in Italy, Spain and other European countries, governments may change a key economic input (such as the price of feed-in tariffs) that led to foreign investment in the renewables sector, resulting in investment treaty disputes. There will also be more commercial disputes as new technologies in the sector evolve and the limits of existing technologies in long-term projects (wear and tear) are tested.
- My firm Milbank frequently serves as counsel to lenders in financing projects. If the project company is tied up in disputes, lenders need comfort on recovering their loans, which requires ballparking damages and obtaining protections in the form of insurance products or indemnities. This has led to me facilitating more conversations between my finance/restructuring partners and litigation funders.
- Discussions with clients over whether to secure ATE insurance even if an arbitration is not seated in a jurisdiction such as England that adopts a default principle of “loser pays.” We are seeing more adverse costs awards against unsuccessful claimants in the investment arbitration space. So, a client may want to consider whether to obtain ATE insurance in addition to third party funding, even though this might mean more overall borrowing.
