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Commercial Deals

Regional UK Law Firm Makes Acquisition, Supported by Funding from Harbour

One of the largest areas of growth for litigation funders in the next decade could be through funding law firms, either via broader portfolio funding structures or the more emergent trend of funders taking ownership stakes in law firms. Whilst there has been more focus on developments in regulations governing law firm ownership in the United States, a new story suggests that the UK may also be a viable setting for increased funder involvement in law firm growth. An article by The Law Society Gazette highlights the news of two regional law firms from the Midlands, Talbots Law and Rothley Law, who are expanding their operations through acquisitions. The latter of these acquisitions is of particular interest, as according to Gazette’s reporting, Rothley Law’s acquisition of Shoosmiths’ ‘private client practice’ is being backed by leading litigation funder, Harbour. Whilst the value of the acquisition has not been disclosed, this move aligns with Harbour and other funders’ ambitions to take an increasingly active role in the funding and ownership of law firms. John Verrill, chair of Rothley Law, highlighted that this acquisition is only one part of their growth plan, stating: “with Harbour’s backing, we have the flexibility and appetite for further acquisitions, with a number of potential opportunities clearly in our sights.”
Announcements Commercial Deals

LionFish Announces Acquisition by Funds Managed by Foresight Group

Funds managed by Foresight Group (“Foresight”), a leading, listed, sustainability-led alternative asset investment manager with £12 billion* of assets under management, have completed the acquisition of LionFish Litigation Finance Limited (“LionFish”) from AIM-listed professional services firm RBG Holdings Plc (“RBG”). LionFish was launched in May 2020 as a subsidiary of RBG. Built on strong principles and a solid operating infrastructure, LionFish quickly established its presence in the market and experienced rapid growth. To accommodate its growth, LionFish entered a co-investment arrangement with Foresight in February 2022. Intended to be the first of many, this coinvestment afforded LionFish the ability to expand its capital investment base and reduce its reliance on RBG’s balance sheet. In December 2022, RBG announced intentions to refocus on professional services and received several bids to acquire the LionFish business. Foresight’s bid was unique and stood out given its patient capital base, long-term commitment and alignment with LionFish’s ambitions and investment thesis. Foresight’s acquisition will provide LionFish with the stability and support to leverage its team, its principal investment model, and its operational efficiency. Operationally, LionFish will remain an independent company run by management team Tets Ishikawa and Tanya Lansky, with general oversight from a soon to be announced and newly appointed board. Its existing transactions will continue to be honoured and capital for new investments made available immediately. Tets Ishikawa, Managing Director of LionFish, said: “We would like to thank RBG Holdings Plc for their support in launching LionFish. Although we had originally envisaged the partnership to last for many years, the lessons we learnt together and RBG’s decision to refocus on professional services has given us the opportunity to find a more suitable, long-term and exciting partner. Tanya and I would like to thank both RBG and Foresight for making this transaction possible.” Oliver Bates, Senior Private Debt Manager at Foresight, added: “We have followed the litigation finance market for several years and we have always been impressed by LionFish’s model and commercial approach. Having followed it closely over the last couple of years, it was always clear to us that Foresight could provide a stronger platform on which LionFish could fulfil its true potential. We are therefore delighted with this acquisition and are excited and confident that under our ownership, Tets, Tanya and the LionFish team will achieve their business ambitions.” Tanya Lansky, Managing Director of LionFish, comments: “Foresight’s deep and patient capital base, long-term commitment, and its understanding and support of our model made it stand out. Tets and I would like to thank Foresight for their faith and commitment in us and in our business. Notwithstanding the situation since last year, we have maintained a strong pipeline which we look forward to leveraging and continuing to grow in this exciting next chapter.”

ABOUT FORESIGHT GROUP

Foresight Group was founded in 1984 and is a leading listed infrastructure and private equity investment manager. With a long-established focus on ESG and sustainability-led strategies, it aims to provide attractive returns to its institutional and private investors from hard-to-access private markets. Foresight manages over 400 infrastructure assets with a focus on solar and onshore wind assets, bioenergy and waste, as well as renewable energy enabling projects, energy efficiency management solutions, social and core infrastructure projects and sustainable forestry assets. Its private equity team manages eleven regionally focused investment funds across the UK and an SME impact fund supporting Irish SMEs. This team reviews over 2,500 business plans each year and currently supports more than 250 investments in SMEs. Foresight Capital Management manages four strategies across seven investment vehicles. Foresight operates in eight countries across Europe, Australia and United States with AUM of £12 billion*. Foresight Group Holdings Limited listed on the Main Market of the London Stock Exchange in February 2021. https://www.foresightgroup.eu/shareholders

ABOUT LIONFISH LITIGATION FINANCE LIMITED

LionFish is a market-leading litigation funder, providing efficient, effective financing solutions to high value dispute assets. www.lflf.co.uk
Announcements Commercial Fundraising

Aristata Capital Completes Final Closing of Impact Litigation Fund Dedicated to Driving Positive Social and Environmental Change

Aristata Capital is pleased to announce that it has secured nearly £52 million of capital at final closing for its first impact litigation fund, Aristata Impact Litigation Fund I LP (AILF I). Aristata is a pioneer in the field of social and environmental litigation, bringing an impact investing lens to commercial litigation funding to seek attractive, uncorrelated financial returns while delivering positive, systemic social and environmental change. Aristata offers the first truly blended approach to litigation funding allowing investors to combine both the commercial rigour of traditional litigation funding methodologies and the success of public interest litigation strategies to drive social and environmental change. Aristata is building a global portfolio of claims covering areas including human rights, environmental protection, climate change, equality, indigenous rights, access to justice and a range of other critical cause areas. Aristata Capital’s first fund is anchored by Capricorn Investment Group’s Sustainable Investors Fund and The Soros Economic Development Fund. LPs include foundations, impact fund-of-funds, family offices in the US, UK, Europe, and Australia, as well as a number of high net worth individuals. “Aristata is proud to launch the first impact commercial litigation fund, and to have exceeded our fundraising target in a challenging market. The claims we are seeing and supporting demonstrate the need for funders focused on driving positive social and environmental impact - we want to close the justice gap in commercial litigation, where the system favours commercial strength and penalises those without.” said Rob Ryan, CEO of Aristata Capital. “We are proving that investors don’t have to choose between achieving financial returns and driving social and environmental impact”. “Since 2000, Capricorn has backed multiple new partnerships focused on specific areas of impact or sustainability, such as renewable energy infrastructure, clean technology, health and wellness, financial inclusion, and sustainable asset management.” Said Eric Techel, Partner at Capricorn. “Aristata is a great fit with this strategy, and we are excited to support the team as it builds the platform and establishes the funding of commercial litigation, with positive and measurable social impact, as an asset class.” Aristata seeks to create a safer and more equitable world by financing legal cases that empower historically marginalised voices, equalize unjust power dynamics and catalyse systemic change that protects the environment and communities. Aristata investments seek to secure compensation for individuals and communities and other entities affected by damaging commercial activity, to unlock the impact potential of similar cases to provide scalability and to generate successful legal outcomes that pressure corporations and industries to change behaviour. “We are delighted to partner with Aristata on this first of its kind impact litigation,” said Georgia Levenson Keohane, CEO of the Soros Economic Development Fund.  “This investment marries Open Society’s longstanding commitment to strategic litigation with innovative finance, as we test how private sector resources can enhance accountability on human rights and environmental protections.” Aristata operates in markets across the globe, sourcing claims from law firms and civil society wherever corporate activity causes harm. Aristata’s experienced litigation funding team is supported by an Investment Committee made up of experienced legal professionals and an Impact Advisory Board of international thought leaders across a diversified range of cause areas. About Our Investors: Capricorn Investment Group is one of the largest mission-aligned firms in the world and has since its inception in 2000 grown to manage more than $9 billion in multi-asset class portfolios for institutional investors through their range of impact-focused strategies. Their Sustainable Investors Fund (SIF) is a private equity partnership whose investment objective is to create significant value through ownership and early-stage investment in public and private asset managers who incorporate sustainability as a key driver of investment returns. The firm has offices in New York City and Palo Alto and was born from a belief that sustainable investment practices can enhance risk-adjusted returns. Underlying this investment approach is a deep desire to demonstrate the huge investment potential that resides in breakthrough commercial solutions to the world’s most pressing problems. The Soros Economic Development Fund (SEDF) is the impact investing arm of the Open Society Foundations (OSF).  Founded in 1997, SEDF has committed over $500 million to support Open Society’s commitments to democracy, human rights and social justice across the globe.
Commercial Legal Innovation

The Secondary Market’s Role in the Future of Litigation Funding

The future growth and potential scope of the litigation finance market is often discussed in the context of specific sectors or geographic markets in which third-party funding could see increased adoption. However, an important dimension that is on the mind of many industry leaders is the potential for a strong secondary market to take shape, which could act as a catalyst for further growth. In an article for Sentry Funding, Rachel Rothwell examines how a secondary market could transform litigation funding into ‘a well-established asset class’, providing benefits for funders, law firms, and their clients. Rothwell points out that this development would be a key step for investors by offering an alternative exit route without waiting for litigation to reach a conclusion, whilst also improving the levels of liquidity available for funders to access. Rothwell also suggests that a mature secondary market would provide avenues for new types of investors to engage with litigation finance, as it could alleviate the concerns of those investors who recoil at the excessively long durations that initial investors in litigation must endure. This is also a benefit for those investors who are more hesitant about engaging in litigation funding before a case has begun, when despite the normal levels of due diligence being applied, there are significantly more unknowns about the outcome. Rothwell references comments from leading funders at ILFA’s European Conference who broadly expressed support and suggested that the foundations for a real secondary market are already emerging. However, Rothwell also highlighted concerns raised by Christopher Bogart, chief executive of Burford Capital, who emphasised the need for funders to ensure that legal privilege and confidentiality are maintained in any such secondary market where funders are discussing ongoing cases with secondary buyers or investors.
Commercial People Moves

Deminor Expands into Scandinavia with Appointment of Mats Geijer

2023 continues to be a strong growth year for the market’s leading litigation funders, as the established industry names continue to record impressive results and grow their footprints in target locations. Continuing this trend, Deminor has announced its expansion into the Nordic region, opening its first office in Stockholm and appointing Mats Geijer as Counsel Scandinavia, leading Deminor’s funding activities across Sweden, Norway, Denmark, and Finland. Geijer joins Deminor from Therium in Sweden, where he acted as Investment Manager from 2019, having previously served as Managing Director at Mainpro AB.  In the announcement, Deminor’s chief investment officer, Charles Demoulin highlighted the skills and experience that Geijer would bring to the funder’s Nordic operations: “Mats arrives at Deminor with the combined expertise of being both a Swedish legal expert and an experienced litigation funder. Having worked on a broad range of domestic and multi-national disputes with a particular focus on management liability, post-M&A-litigation and insurance disputes, we have confidence in his ability to strengthen our position as a leading litigation funder on the European market.” Geijer also expressed his enthusiasm on joining Deminor and continuing to expand the presence of litigation financing in the Nordic region: “I am happy to join one of the oldest and most recognised players in the field. Litigation funding is now at a mature state in Scandinavia, so it’s a perfect match. I look forward to promoting the benefits of third-party funding and especially the opportunities Deminor has to offer in the Swedish, Norwegian, Danish and Finnish markets.”
Commercial Legal Innovation

Using Litigation Funding to Create a Mutually Beneficial Relationship Between In-House and Outside Counsel

The benefits of litigation funding are often discussed in singular terms, such as how outside capital can benefit a corporate legal department or how it can act as a powerful tool for law firms. However, it is also important to consider how third-party funders can benefit multiple parties at once and create a more mutually beneficial relationship between client and law firm. An insights article by Ryan Schultz, vice president of business development at Woodsford, highlights a 2022 survey from the Association of Corporate Counsel that indicated legal departments have faced up to a 20% reduction in their budgets. Coupled with the lengthy timelines for litigation, Schultz argues for a more holistic approach which could allow litigation funders to bridge the gap between these two parties to support a strong litigation strategy. Schultz offers the example of a client with a limited budget bringing a matter to outside counsel, who feel pressured to either offer a painfully high discount on their services or refuse the matter. In such a situation, Schultz suggests that a funder’s provision of capital can both ensure that the in-house counsel are able to select their firm of choice, whilst allowing that outside counsel to still take on the matter without negatively impacting their own firm’s financials. Looking beyond the pure financial benefits, Schultz points out that by providing the capital required, a funder can preemptively dispel any tensions that may arise between in-house and outside counsel over the cost or discount of the legal services provided. For law firms, this has the added benefit of allowing their litigation teams to pursue clients that ordinarily wouldn’t be able to afford such high legal fees, thereby further buttressing the firm’s revenue streams.
Case Developments Commercial

Law Firm Backed by Funder Pledges to Donate Portion of Fees to Charity

Litigation funding is useful for both claimants and law firms who wish to offset the financial cost and associated risks of pursuing meritorious lawsuits. However, it can also provide added benefits for, as illustrated by a new set of claims in the UK where the funded law firm has stated its intention to donate part of its fees to charity. Reporting by Charity Today reveals the rather unique situation in which law firm Harcus Parker has stated its intention to donate a portion of its fees to charities, should the claims reach a successful resolution. The claims are being brought on behalf of energy customers who were allegedly saddled with inflated bills, as utility companies allegedly added broker fees to the unit cost for non-domestic energy consumers. Harcus Parker is able to pursue this plan to donate a percentage of fees to charity, partly because the firm has received over £10 million in litigation funding, which has allowed it to offer claimants its services on a no-win no-fee basis. Damon Parker, senior partner at the law firm, stated: “For many of these organizations and their dependents, the high price of energy has had particularly detrimental effects. With this in mind, we thought it would be appropriate to give part of our fees to charities.” Harcus Parker has selected 10 charities that the funds would go towards, which include Mummy’s Star, The Loss Foundation, and Support Through Court. Damon Parker explained that if the claims are as successful as they expect, the firm is “confident each charity will receive a six-figure sum.”
Consumer

Missouri Governor Mike Parson signs comprehensive legislation regulating Consumer Legal Funding

Missouri Governor Michael Parson signed an omnibus bill, SB 103, containing sweeping new regulations for the growing industry of consumer legal funding—bringing meaningful oversight of provider companies for the first time in the state’s history. Missouri now joins several states, like Oklahoma, Nebraska, Ohio, Utah, Nevada, Vermont, Tennessee, Indiana, and Maine, who have acted to enact consumer protections while preserving consumer choice. Consumer legal funding—also known as pre-settlement funding—is a specialty financial service that allows plaintiffs pursuing a legal claim to sell part of the potential proceeds of the claim for cash now. Unlike a loan, there is no obligation to the funding company if the consumer does not have a successful outcome in their claim. And because it's the sale of an asset, it can't affect a person's credit or put them into collections. This legislation ensured that it will be treated as a consumer asset. “Consumer legal funding is a financial lifeline to those engaged in civil litigation who lack savings. Governor Parson giving his approval to this legislation is a win for robust consumer protections and protecting access to legal funding in Missouri.” Stated Missouri State Representative Phil Christofanelli Missouri State Senator Sandy Crawford stated "I am pleased that we were finally able to take the Consumer Legal Funding legislation across the finish line. Although this process has taken several years, I am confident the finished product was worth the time it took. I was happy to play a role in passing this important legislation." “Consumer legal funding is different from a lot of other financial products. It allows a consumer to get the financial assistance they need while their claim is making its way through the legal system.” said Eric Schuller, President Alliance for Responsible Consumer Legal Funding, the Trade Association that represents the companies that offer Consumer Legal Funding. Missouri State Senator Curtis Trent stated: “I appreciate the Governor’s support. This measure will ensure that Missourians have better access to the financial resources they need to protect their rights in Court.” Schuller said, “this is some of the most well-researched legislation we’ve seen come out in the last few years. It’s sure to serve as a model for other states in the years to come. This is good lawmaking in action—a trend which should continue.”
Commercial Regulatory Issues

California Business Owner Highlights How Litigation Funding Saved His Company

Calls for an increase in the levels of regulation and oversight of litigation finance across the United States have intensified in recent months, with states throughout the country introducing or passing legislation to enact stricter guidelines. However, in California where the proposed legislation has been put on hold for now, one business owner explains how third-party funding provided an invaluable lifeline for his business. An article in the San Fernando Valley Business Journal provides an account from Craig Underwood of Underwood Ranches, whose jalapeno pepper business had almost failed after a lengthy and costly dispute with a hot sauce manufacturer, Huy Fong Foods Inc. Viewers of the 60 Minutes piece on the Litigation Finance industry will remember the coverage of this case, which LFJ covered back in December of 2022.  A protracted lawsuit that began in 2017 saw Underwood awarded $23.3 million by a jury, only to be stymied by an appeal from Huy Fong. It was at this point where Underwood engaged Burford Capital for a $4 million loan that allowed the business to keep operating and fight the appeal, which resulted in the Second Appellate District Court affirming the award. Whilst Burford Capital doubled its money, taking $8 million from the final award, Underwood emphasized the vital role that the funder played in keeping his small business alive, and continues to argue against the proposed regulation in the California legislature. Underwood particularly opposes the disclosure requirements for plaintiffs using litigation funding, as it can disadvantage them against larger and wealthier defendants, stating that ““I wouldn’t want our opposition to know the position that we were in.” Andrew Cohen, director at Burford, explained the funder’s perspective on the case and why its return was so high, emphasizing that “there were real risks in the case,” and once due diligence had been completed, Burford had “negotiated terms with Craig based on that assessment.” Cohen echoed Underwood’s opposition to these enhanced regulatory measures, and pointed out that most arguments against litigation funding “are usually being put forth by folks who are upset that legal finance helps claimants get the result that they should be able to get.”
Case Developments Commercial

Defendants Request More Information as Sysco Moves to Make Burford Affiliate the Plaintiff in Antitrust Lawsuits

Although last week seemed to put the dispute between Burford Capital and Sysco Corp to bed, with both firms agreeing to drop all claims, it seems there may yet be another twist before the story reaches its end. Following Sysco’s resolution with Burford, the company had requested to transfer ownership of several antitrust claims to a Burford affiliate; a move which is now being questioned by more than one of the defendants. An article in Bloomberg Law provides an update on the ongoing saga that has kept Burford’s name in the headlines, as defendants including Tyson Fresh Meats Inc, JBS USA Food Co., and Triumph Foods stated that the proposed move by Sysco to substitute Carina Ventures LLC as the plaintiff needed more inspection. The defendants for the antitrust lawsuits have told the federal court that before the case can move forward, they require more information about this transfer of ownership, with Triumph Foods stating that Burford’s role is “shrouded in mystery.” Judge John F. Docherty in Minnesota has informed all parties that he will review Sysco’s plan to place two of the lawsuits under Carina Ventures’ ownership and hold hearings on the matter. Boies Schiller Flexner, the law firm that had originally represented Sysco until the dispute broke out with Burford, is set to return to lead the cases and represent Carina Ventures in the lawsuits.
Commercial Deals

Navigating the Complex Challenges Faced by Litigation Funders Today

In the dynamic landscape of litigation finance, funders are constantly navigating various challenges that impact their operations and profitability. This article delves into three key challenges faced by litigation funders today: high interest rates, the potential of a global recession, and the geopolitical issues stemming from escalating tensions between Western countries and Russia and/or China. Challenges from High Interest Rates One of the primary challenges faced by litigation funders is the impact of high interest rates. Litigation finance involves providing funding to claimants in exchange for a share of the potential settlement or award. The return on investment for funders largely depends on the successful outcome of the litigation. However, high interest rates can erode the profitability of these investments, especially in cases with prolonged litigation timelines. Litigation funders have benefits from a climate of low interest rates for years now. However those days are long gone. When interest rates are high, funders face the dilemma of balancing their desire for a reasonable return with the affordability of financing for claimants. Excessive interest rates can discourage claimants from seeking litigation finance, thereby reducing the pool of potential cases for funders to consider. Striking the right balance becomes crucial to maintaining a sustainable business model. Challenges from a Potential Global Recession The specter of a global recession poses significant challenges for litigation funders. During economic downturns, businesses and individuals often face financial constraints, leading to a surge in legal disputes. While this surge may present an opportunity for litigation funders to invest in potential claims, it also exposes them to increased risk. In a recessionary environment, the financial viability of potential defendants may be compromised, impacting the recoverability of potential judgments or settlements. Moreover, increased financial distress can lead to a rise in opportunistic claims or frivolous litigation, requiring thorough due diligence by litigation funders to identify viable cases. Furthermore, in times of economic uncertainty, funding sources for litigation finance may become scarcer and more expensive. This scarcity can limit the availability of capital for funders and make it harder for them to maintain a diversified portfolio of investments. Effective risk management and careful selection of cases become vital in navigating the challenges posed by a potential global recession. Challenges from Geopolitical Issues Caused by Increasing Tensions The escalating tensions between Western countries and Russia and China present unique challenges for litigation funders. Geopolitical issues, such as trade disputes, sanctions, or diplomatic conflicts, can directly impact the outcome of cross-border litigation cases, potentially hindering the enforcement of judgments or settlements. Litigation funders must navigate the complexities of different legal systems, regulatory frameworks, and political dynamics when investing in international cases. Tensions between countries can result in uncertainties and delays in the resolution of disputes, affecting the potential return on investment for funders. Additionally, geopolitical tensions can influence the perception of risk associated with investing in certain jurisdictions. Investors may become hesitant to finance litigation in regions where the rule of law is perceived to be weak or where political volatility raises concerns about the enforceability of judgments. Litigation funders must carefully assess these risks and employ robust risk mitigation strategies when considering international investments. Conclusion Litigation funders face a myriad of challenges in today's evolving landscape. High interest rates, the potential of a global recession, and geopolitical issues arising from escalating tensions between Western countries and Russia / China all pose significant obstacles to the success of litigation finance.  To overcome these challenges, funders must exercise prudence in their investment strategies, diligently assess risks, and adapt to the changing dynamics of the legal and geopolitical environments. By doing so, litigation funders can navigate these challenges and continue to play a crucial role in supporting access to justice and driving the growth of the litigation finance industry.
Commercial Legal Innovation

Insights from ILFA’s Annual European Conference

Last week saw the return of ILFA’s annual litigation finance conference, as leaders from the top funders, law firms, investors and insurers gathered to discuss the most-pressing issues in the industry. An article from CDR provides a recap of some of the key takeaways from the conference, particularly highlighting comments from Chris Bogart, Burford Capital’s chief executive, who criticized the Solicitors Regulation Authority (SRA) for hindering efforts by funders to take a more active stake the ownership of law firms. Bogart offered a scorching rebuke of the UK’s inability to adapt following the passage of the Legal Services Act in 2007, arguing that any progress “has been completely stymied by the bureaucratic ineptitude of the regulators here.” Neil Purslow spoke to the current environment of a stagnant economy and high inflation, Therium’s chief investment officer pointed out that the funding industry had previously benefited from “historically low interest rates” and must now adapt to the new normal.. Omni Bridgeway’s Andrew Saker argued that there were both benefits and risks in the current market, suggesting that whilst defendants may look at “the possibility of resolving measures more expeditiously”, funders would still be faced with the rising cost of capital impacting their business models. Meanwhile, independent litigation funding adviser Mikołaj Burzec provided insights on a new paper published by ILFA: “Resourcing the Rule of Law in Europe”, which analyses and critiques the European Union’s proposed regulations for the litigation finance industry. Burzec highlighted ILFA’s argument that the EU should wait for the full implementation of the Representative Actions Directive (RAD) and assess the resulting impact, before imposing further regulations on third-party funding.
Commercial Deals

Litigation Funding as a Powerful Tool for ESG Progress

The intersection of litigation finance and the drive towards progress in the ESG arena are often discussed as a great opportunity for the former, with numerous litigation opportunities arising from society’s shift towards a more responsible business culture. However, it can also be argued that litigation funding may prove to be one of the best tools available to realize a positive impact in terms of encouraging businesses to adhere to their proclaimed ESG strategies. An article in Reuters examines the utility of litigation finance in pursuing an ESG agenda, with insights from Lucy Glyn, director at Exton Advisors. Glyn highlights that funders are already engaged in ESG investments through a number of cases, with this provision of outside capital allowing claimants to pursue cases they usually couldn’t finance themselves, and thereby “enabling them to ultimately to hold companies to account for ESG failures.” Glyn points to investor-led lawsuits as a particularly strong avenue for ESG litigation funding, as investors recognise that it can be used to pressure unwilling boardrooms to make changes and at a strategic level, litigation funding can “serve as a catalyst for changes to promote responsible business practices.” Outside of targeting businesses who are not meeting ESG standards, third-party funding will also hopefully be an asset for those groups who wish to see meaningful changes from governments on a policy or regulatory level through targeted litigation.
Announcements Case Developments

LegalPay announces 2nd interim finance exits with 23% returns in SARE Gurugram

LegalPay, India’s first and largest third party litigation funding platform, has announced its second successful exit in the interim finance segment in last one year with 23% IRR (internal rate of returns).
The interim financier based in Delhi-NCR has achieved a successful exit from its investment in SARE Gurugram Pvt Limited (Sare Gurugram) within a short span of 11 months. In August of the previous year, the financier had provided undisclosed interim finance to the debt-laden real estate company.
Interim finance is a short-term lending granted  granted to the debt-ridden companies undergoing corporate insolvency resolution process (CIRP). Sare Gurugram, the unit of Sare Homes, had defaulted on dues to creditors for a construction of a township in outskirts of Delhi.
SARE Gurugram was admitted under Corporate Insolvency Resolution Process (CIRP) in March 2021 following a petition filed by Asset Care and Reconstruction Enterprises Limited. In April of this year, the National Company Law Tribunal (NCLT) approved a debt resolution plan to revive SARE Gurugram Private Limited, located in the NCR region. The plan was proposed by a consortium consisting of KGK Realty (India) Private Limited and Dhoot Infrastructure Projects Ltd.
Commenting on the exit, Kundan Shahi, Founder and CEO of LegalPay said, “This successful resolution of SARE Gurugram underlines LegalPay's commitment to providing innovative financial solutions that not only revive such businesses under insolvency but also contribute to the growth and development of the legal & insolvency industry.”
“We are grateful for the trust and collaboration of all stakeholders involved, and we remain dedicated to driving positive change and creating a thriving ecosystem for all,” he added.
LegalPay's ability to deliver exceptional returns while safeguarding the corporate debtor’s interest underscores the company's meticulous due diligence, comprehensive risk assessment, and strategic decision-making.
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Founded by Kundan Shahi in 2019, LegalPay is a leading player in the insolvency financing domain & India’s largest provider of litigation financing. It consistently navigates the complexities of the legal financing landscape to generate impressive results for its investors and helping such companies maximize their asset value.
Backed by 9Unicorns, Ambarish Gupta and well-known entrepreneur-turned-investor and global philanthropist Ashwini Kakkar, LegalPay operates on a ‘No Win No fee model’ which means that parties are only required to pay upon successful realization of the claim amount.
At present, the company manages over ₹ 2,500 crores in claims under management through its AI and technology-enabled platform and expects to raise it to ₹ 5,000 crores in CY 2024.
It's first interim finance exit was from Yashomati Hospitals in February last year.
Announcements Commercial People Moves

Omni Bridgeway announces U.S. legal industry leaders appointed to its Investment Committee

Omni Bridgeway is pleased to welcome Leora Ben-Ami and the Honorable Winifred Y. Smith (Ret.) to its Investment Committee. These nationally regarded legal industry professionals bring decades of experience and a wealth of knowledge to Omni Bridgeway's investment process. Ms. Ben-Ami will leverage her extensive background in intellectual property to review and evaluate cases relevant to the company's global IP portfolio. Judge Smith joins the US Investment Committee, where she will consider a variety of complex commercial cases. Ms. Ben-Ami is a renowned intellectual property attorney with a focus on biotechnology, life sciences and pharmaceuticals. She has extensive trial experience as lead counsel including arguing before the U.S. Court of Appeals and within the Federal Circuit. In addition to taking on leadership roles at various AmLaw Global 200 firms, Ms. Ben-Ami sits on the board of the New York Intellectual Property Law Association. The Honorable Winifred Y. Smith (Ret.) is a distinguished jurist, having served on the bench of the Alameda County Superior Court for over two decades adjudicating complex civil litigation matters and numerous questions of first impression. She was selected as Presiding Judge in 2015-2016 and later retired following her service in the Complex Civil Litigation division. Judge Smith also lent her experience as a Justice Pro Tem for the California Court of Appeal, First Appellate District, Division Four. In 2021, she was awarded Trial Judge of the Year by the American Board of Trial Advocates. Prior to her career on the bench, Judge Smith was a Deputy Attorney General with the California Department of Justice's Office of the Attorney General for 26 years. "We are thrilled to have these top legal minds on our Investment Committee," said Matt Harrison, Managing Director and co-Chief Investment Officer for the US. "With the addition of Ms. Ben-Ami and Judge Smith, claimants, sophisticated litigators, and companies seeking dispute and litigation funding can be confident our investment process continues to establish the highest standards in the industry." Managing Director and co-Chief Investment Officer for the US, Jim Batson, said "We are delighted to welcome the decades of experience from Ms. Ben-Ami and Judge Smith. It is important to continue to add members to the Investment Committee who bring diversity of thought from a range of experiences and backgrounds." "Ms. Ben-Ami has the ideal background for our global portfolio of intellectual property matters. Her experiences as a practice leader and trial attorney give her a unique perspective which will be invaluable to our internal and external stakeholders," commented Sarah Tsou, Portfolio Manager - Global Intellectual Property and Senior Investment Manager.
Commercial Deals

Lansdowne Oil & Gas Exploring Funding for Claim Against Irish Government

Litigation and arbitration pursued against national governments has a mixed history, with successful claims brought where governments have harmed companies’ interests through unlawful action, such as the ongoing Sulu dispute. However, what is clear in many of these cases, is that litigation funders can play a powerful role in supporting individuals or companies to seek legal redress against the otherwise immense power of the state. An article in The Times highlights another potential example of litigation funders backing claims against national governments, as the exploration company Lansdowne Oil & Gas announced that it is in talks with funders over the possibility of financing a case against the Irish Government. The claim, which is being brought through international arbitration, alleges that the Irish government “failed to act in a fair and reasonable manner” under the Energy Charter Treaty (ECT), when it withdrew an exploration license for the Barryroe prospect. Lansdowne, which owns a 20 per cent stake in the prospect, announced that it had been approached by several funders and that early discussions were met “with positive feedback”. Lansdowne has enlisted Ashurst to lead the arbitration proceedings, with the law firm having provided a settlement offer that the Irish government must respond to within three months.  Eamon Ryan, Minister for the Environment, Climate and Communications, stated that the government had concerns about the “financial capability” of Lansdowne and Barryroe Offshore Energy, with the latter controlling the other 80 per cent stake in the prospect.
Case Developments Commercial

Legal Battle Between Burford and Sysco Ends as Both Parties Dismiss All Claims

Whilst funders and claimants almost always have a harmonious and mutually beneficial relationship, there are rare occasions where that partnership breaks down and contentious disputes emerge during the course of litigation. One such dispute that broke out in March of this year between Burford Capital and its client Sysco Corp has come to an end, with both parties mutually agreeing to drop all litigation and arbitration against one another. Reporting by Bloomberg Law provides insight into new court filings which have revealed that Burford and Sysco have dismissed all claims with prejudice, with neither party providing a comment or statement on this development. As for the original antitrust lawsuits Sysco had brought against poultry suppliers, the court filings reveal that all these claims have been assigned to Carina Ventures LLC, a Burford affiliate. The ongoing dispute between Burford and Sysco had proven to be a lightning rod for critics of litigation finance, as Sysco had alleged that Burford had blocked settlements in two lawsuits and seemingly accused the funder of unduly controlling the litigation. Burford had refuted these allegations and asserted that Sysco had violated the terms of the original funding agreement, thereby giving the funder the power of veto over the settlements.
Commercial Deals

TikTok Confirms it is Funding Users’ Lawsuit Against Montana

There are occasions when we see novel approaches to litigation financing, as has been demonstrated by a global social media company providing the financial backing for a lawsuit brought by its own users against the government. An article by The New York Times outlines a development in the case of five TikTok creators who filed a lawsuit against the state of Montana last month, alleging that Montana’s legislation banning TikTok violated their First Amendment rights. However, it has now been revealed in a statement by TikTok, that the company is covering the costs for this lawsuit, with spokeswoman Jodi Seth stating: “We support our creators in fighting for their constitutional rights.” The TikTok creators were approached by lawyers from Davis Wright Tremaine, who are now representing the claimants, and informed the individuals that TikTok would support them in both filing and funding the lawsuit. Ambika Kumar, partner and co-chair of Davis Wright Tremaine’s media law practice, pushed back on any suggestions that the social media giant’s involvement was an issue, arguing that “the fact that TikTok is paying for the suit is irrelevant to the legal merits of the case.”
Commercial

Chambers & Partners Release its Litigation Support Guide for 2023

The Chambers & Partners rankings provide an annual guide to the top firms in each region and practice area, as well as highlighting the established industry leaders alongside the rising stars to watch in these companies. This week, Chambers & Partners released its Chambers Litigation Support Guide for 2023, which includes rankings for over 250 individual practitioners and more than 340 firms, including practice areas such as litigation funding, forensic accounting, business intelligence and investigations, and PR and communications. In the Global-wide ranking covering litigation funding for international arbitration, Chambers ranked Harbour, LCM, Therium, Burford Capital, Fortress Investment Group and Omni Bridgeway as Band 1 firms. Nivalion, Parabellum Capital, and Profile Investment were also recognized as strong funders in Band 2. Chambers also provided rankings by region with guides available for Australia, Canada, Europe, Latin America, the Middle East, South-East Asia, the United Kingdom, and the United States. Within the most active markets such as the UK and US, Chambers provides guides to firms specifically involved with litigation funding for insolvency or for litigation funding brokers. All the rankings can be accessed through the Chambers Litigation Support Guide hub.
Consumer Special Features

Fair Pre-Settlement Funding – An Oxymoron or a Viable Alternative?

The following article was contributed by Julia DiCristofaro, program administrator at The Milestone Foundation. “I have a good client who is in need of pre-settlement funding, which I almost always advise against. But she is desperate, and this case will settle soon. Do you think you can help?” As program administrator of The Milestone Foundation, the only nonprofit providing pre-settlement funding to plaintiffs in need, I often hear this sentiment. Non-recourse, pre-settlement funding companies market themselves as quick cash options for plaintiffs who are awaiting their settlements.  It’s an easy lure for an individual who has undergone a catastrophic incident, one that has likely left them injured and unable to work, or facing mounting medical bills; someone who knows they will eventually receive a sum of money to live off of, but in the meantime, might not be able to afford groceries or rent. Pre-settlement funding, also referred to as litigation finance, has grown exponentially in the past decade and is now estimated to be a nine-figure industry. For many plaintiffs, this funding is a necessary lifeline to financially stay afloat as their case resolves. Yet, there are few regulations for this type of funding, often referred to as the “Wild West” of the lending industry. Murky contracts comprised of complex language, confusing terms, hidden fees, and complicated interest calculations are common features of these advances. When an individual is desperate to make ends meet, terms like “compounding interest,” “quarterly fees,” and “capped at three times the principal” fade into the background, as “cash in less than 24 hours,” “no credit checks,” and “if you don’t win your case, you don’t owe anything” catch their attention and provide a glimmer of hope. As many attorneys can attest, once a case settles and the payment is due to the lender, this lack of transparency often renders plaintiffs shocked to see that they now owe as much as $30,000 on the $10,000 advance they received. Plaintiffs can feel duped or betrayed, and oftentimes look to their attorneys to solve the problem by negotiating “haircuts” with the funder, or even waiving their own fees. An attorney practicing in New Mexico shared: “I had a client who recently received a $50,000 settlement. She owes $16,000 on a $5,000 advance she took out, and is panicking at how little money she’s actually going to receive. I think I am going to have to waive my fees on the case just to help her stay afloat.” It’s no wonder so many attorneys discourage their clients from taking these advances, though for many individuals, these funds are more critical now than ever. Plaintiffs have long been at a disadvantage when pursuing justice against deep-pocketed corporations that can make lowball offers in mediation, or await the time it takes to go in front of a jury. As with many facets of life, the Covid pandemic has played a role in shaping the civil justice landscape, as social distancing guidelines resulted in overloaded dockets and delayed court dates for civil cases. As a result, the advantage held by insurance companies and other defendants in personal injury cases has increased, as they continue to accept premiums and pay out less in settlements. Meanwhile, as government programs such as stimulus checks and eviction moratoriums expire, inflation continues to skyrocket, and savings dwindle, the majority of Americans are barely making ends meet; at the end of 2022, 64% of the U.S. population was living paycheck to paycheck, an increase from 61% in 2021 according to a recent LendingClub report. Much to the dismay of many experienced attorneys, these contrary factors - lengthened trial timelines and increased financial need - make non-recourse funding a necessary component of the civil litigation landscape. Given the oftentimes exploitative nature of non-recourse advances, many states have introduced legislation or enacted regulations to rein in the industry. For instance, in Colorado, some courts have voided or re-written individual litigation financing agreements as traditional loans subject to low-interest rate ceilings. While this helps plaintiffs avoid unfair and predatory rates, it also discourages many funders from assuming the risk that is inherent in non-recourse funding, leaving few options for these injured parties, who will then pressure their attorneys to settle their lawsuits – often to the detriment of their awards. Trade organizations such as The Alliance for Responsible Consumer Legal Funding (ARC) and American Legal Finance Association (ALFA), often lobby state legislatures to prevent restrictions on the litigation finance industry. They argue that the non-recourse nature of the lending requires their members to assume a high level of risk that justifies their practices, as the plaintiffs are only required to repay these advances using the proceeds from their lawsuit; in the instance of an unfavorable result, the lender does not recoup their advance. ARC states that they support legislation that “enacts robust consumer legal protection for consumer legal funding and maintains consumer access, because good legislation does both.” Both ARC and ALFA champion industry best practices and sponsor legislation to reflect these practices. ARC’s best practices range from recommending that contracts reflect all costs and fees - showing how much the consumer will owe every six months, and the maximum amount a provider may ever own of a recovery - to prohibiting attorneys from receiving referral fees or commissions from the companies their clients receive their funding from. To date, six states have enacted ARC-backed legislation, while other bills are being reviewed in states like Kansas and Rhode Island. While the activities undertaken by ARC and ALFA are adding regulatory measures to the industry, some might argue that they are not going as far as necessary to truly benefit plaintiffs who are utilizing this funding. Maximum payments and fees are listed in contracts, but they are generally not easily found on websites, making it difficult for plaintiffs to compare shops, or truly understand what they will owe until they go through the strenuous application and underwriting process. Additionally, these trade organizations do not make recommendations on interest rates or maximum repayment amounts, which enables their members to continue to charge exorbitant rates and fees. But that’s not to say there are no ethical lenders in the space. Some companies are instituting policies such as capping repayment amounts at two times the principal, offering advances with simple interest that is applied every six months, helping to identify government support, and introducing innovations like debit cards that enable borrowers to pay for basic necessities. Another viable alternative to unethical lending is The Milestone Foundation, formerly known as the Bairs Foundation, which was created six years ago to provide a plaintiff-focused option in the pre-litigation space. The only nonprofit providing low, simple interest pre-settlement advances, the foundation has helped more than 600 plaintiffs by advancing more than $4.8 million and is looking to expand its reach to serve more clients across the country. Steven Shapiro, partner at Ogborn Mihm LLP in Colorado, has seen firsthand the benefits, as well as the pitfalls, of pre-settlement funding. “My job as an attorney is to get my clients the award they deserve. If they don’t have the resources to pay their rent or buy their groceries, they are going to feel pressured to settle, and I won’t have the time I need to bring the case to a fair resolution.” Shapiro has at times seen clients with no alternative other than to take out advances with 30 to 40 percent interest rates; while painful at the time, these clients were able to see their cases through to a reasonable conclusion. He’s also seen The Milestone Foundation at work. He recounts his client Olga, a Russian-American woman disabled in a car accident, who was in need of funding. He referred her to The Milestone Foundation. “The foundation was able to provide Olga a reasonable advance at a reasonable rate, that enabled her to afford her living expenses for the duration of the case, which took about two years to settle and resulted in a seven-figure award. The contract was transparent and really the most wonderful thing. I would always opt to refer my clients to The Milestone Foundation rather than other lenders whose practices tend to be much more opaque.” While pre-settlement funding is often condemned by principled attorneys working to protect the best interests of their clients, ethical lenders like The Milestone Foundation are working to give the industry a new reputation. As the only nonprofit in the industry, The Milestone Foundation protects the interests of plaintiffs over profits, and hopes to inspire other entities to implement a similar approach toward pre-settlement funding.
Commercial Deals

IMN Announces Date for 2nd Annual Litigation Finance Forum in London

The Information Management Network (IMN) has announced the date for its 2nd Annual International Litigation Finance Forum, which will return to London on 19 October 2023. The event’s inaugural showing last year brought over 375 attendees together, representing senior executives from some of Europe’s leading funders, law firms, institutional investors and more. Along with the announcement of the date, IMN released the outline of the agenda for this year’s forum, with a wide variety of topics being covered across a full day of panel discussions and live Q&A. Recognizing the evolving discourse around litigation finance over the past year, this year’s conference will include a discussion on ‘Ethics, Disclosure, Regulation and Outside Equity Investments’ and a deep dive into ‘Tax Implications of Deal and Fund Structuring’. The sponsors for the 2023 event include Harbour Underwriting, Schulte Roth & Zabel, AON, the Consumer Attorney Marketing Group (CAMG), Factor Risk Management, and Exton Advisors. Those looking to attend the event are advised to register early, with Super Early Bird Registration being available until 25 August, with a discounted price of £895. To register for the event, click here.
Case Developments Commercial

Coinbase Scores Victory with Supreme Court Ruling on Federal Arbitration Act

Litigation Finance Journal recently reported that Coinbase became the first US-based cryptocurrency company to argue a case in front of the Supreme Court. The June decision has been announced, and with a 5-4 majority in favor of Coinbase, the high court ruled "that an interlocutory appeal about one matter (arbitrability) bars the district court from proceeding on another (the merits)." CoinDesk says the ruling is a distinct legal victory for Coinbase, one that could impact future lawsuits against all companies in the United States. For over a century, the Federal Arbitration Act (FAA) has been part of user agreements to protect corporations from risk and expense associated with court battles to resolve customer claims. The decision does not represent any high-court conclusions on cryptocurrencies, outside of Coinbase being one of the associated parties.   A lower court decision from the U.S. District Court for the Northern District of California denied Coinbase's arbitration agreement approach. On appeal, the Ninth Circuit denied Coinbase's motion to halt hearings while appeal is in progress.  The Supreme Court's decision in favor of Coinbase effectively stays any trial proceedings while appeal is in progress. 
Case Developments Commercial

Malaysian Government Acknowledges Need for Legitimate Litigation Funding Whilst Calling for Accountability 

The ongoing saga of the Sulu heirs arbitration case against the Malaysian government, which stands out as one of the high-profile cases of litigation funding in an international dispute, continues to evolve. After the Paris Court of Appeal ruled that the previous arbitral panel did not have jurisdiction to make its award, top officials from the Malaysian government have continued to speak in public about the perceived injustices of the arbitral process and the role that third-party litigation funding has played in it. An article by New Straits Times reports on the latest comments by Azalina Othman Said, a government minister for law and institutional reform, who continued to criticise the perceived failure of arbitrations and stated that "a strict code of ethics for arbitrators will cut any sham arbitration - that could go so far as to try to cripple sovereign nations - at its knees". Azalina also raised the issue of forum shopping, stating that claimants are able to do this and engage in an “endless pursuit” because “they are funded by a litigation fund with seemingly deep pockets and investors backing their pursuit.” In a separate interview with El País, Azalina Othman Said elaborated on her position regarding third-party funding and the need for more regulation of the practice, stating that whilst she appreciated there was a need for “legitimate funding”, it is also true that “there must also be accountability.” Regarding previous statements that the Malaysian government would pursue legal action against Therium for its role in funding the Sulu claimants, Azalina clarified that they were not threatening the funder, but if they find “an intention to subscribe to unlawful strategies or activities” then the government will “do what we need to do to defend our reputation.”
Commercial Regulatory Issues

Dutch Implementation of the EU Representative Actions Directive Sets Criteria for Litigation Funding

Analysis of new regulations which affect litigation funding in the European Union has largely focused on the negative impact of potential reforms that may be implemented as a result of the Voss Report. However, in the more immediate future, we will no doubt see how different countries within the EU will implement the Representative Action Directive, which may have an equally significant impact on the proliferation of third-party funding on the European continent. In a piece of analysis published in Lexology, Jeroen van Hezewijk, Jelle Drok, and Marco Vogels of Freshfields Bruckhaus Deringer, analyse the Netherlands’ implementation of the Directive through the ‘Dutch Implementation Act’. Having entered into force on 25 June 2023, the Freshfields authors examine the scope of the Netherlands’ implementation, as well as its specific regulations around issues such as qualified entities and litigation funding. With regards to litigation funding, the authors note that the new act has expanded upon previous legislation that governed the criteria for third-party funding of collective actions. These include prohibitions on actions brought against “a defendant that is a competitor of the funder or against a defendant on which the funding provider is dependent.” From a disclosure and transparency standpoint, the implementation act requires that when funding is involved in cross-border representative actions, the qualified entity must disclose its funding source on its website. Further disclosure of information around third-party funding may also be requested.
Announcements Commercial Regulatory Issues

New report warns: Restrictions on legal finance would leave EU businesses and consumers more vulnerable

European businesses and consumers could be left without access to a vital financing tool providing access to justice, experts warn today.

A report by the International Legal Finance Association (”ILFA”), which analyses proposed regulation on legal finance recently endorsed by the European Parliament, warns that if implemented, this could create a legal environment in Europe that would prevent many meritorious cases from being pursued.

This would be to the detriment of businesses — including startups and SMEs — and consumers alike, and it would only grant a licence for wrongdoers to continue to harm EU citizens and smaller, less well-resourced SMEs.

Legal finance provides the necessary resources in what are often lengthy and expensive legal endeavours, which empowers consumers and businesses, large and small, to seek the remedy they are due. Many funded matters are “David vs. Goliath” in nature, in which a smaller company is engaged in litigation against a larger well-resourced adversary. For EU citizens, it has helped bring cases in Europe on behalf of individuals and collective rights’ claims against a number of corporate entities.

However, in October 2022, an own-initiative report from Member of the European Parliament (MEP)  Axel Voss made recommendations which would significantly undermine the availability of legal finance within the EU.

The proposal put forward by Axel Voss MEP would make it more difficult for small and medium-sized enterprises (SMEs) to mitigate risk and keep capital in their business, and for consumers to have the necessary resources to seek redress and defend their rights. It includes the introduction of a fee cap for funders and a controversial forced disclosure provision for claimants, all of which would drastically reduce the economic viability of legal finance.

Now, experts in legal finance, collective redress, and consumer rights speak out about the dangers of the EU turning Voss’ recommendations into law. ILFA challenges the assumptions in the Voss proposals, as follows:

  • Lawmakers across EU member states are already struggling to implement the Representative Actions Directive (RAD) - aimed at strengthening the collective interests of consumers and ensuring a right to redress via representative actions. Limiting legal finance risks undermining the positive steps being made to create a collective redress regime that works for consumers.

  • Legislating the recommendations of the Voss Report would embolden large companies to engage in intellectual property (IP) theft from Europe’s SMEs. Without legal finance, Europe’s SMEs cannot defend themselves against malfeasance by multinational corporations or well-resourced Chinese companies.

  • Legal finance could be a vital component in the future battles on data, artificial intelligence, and new technologies involving analysis of complex issues and new legal concepts which will require resourcing to ensure that the EU’s “Brussels Effect” is realised. There are currently few, if any, resources available to fund meritorious litigation with scant evidence in the Voss Report that public funding or bank loans could assist.

  • Legal finance is an emerging market in Europe. The steady growth of legal finance in Europe is not only beneficial to European companies and consumers, but to the European economy.  Sophisticated and well-established investors, including pension funds and institutional investors, are continuing to see investments in legal finance as a worthy addition to their portfolios, driving important investment into the European economy during turbulent times.

Gary Barnett, Executive Director of ILFA, says: “Legal finance empowers businesses, large and small, to mitigate risk and maintain sufficient capital so they can grow and innovate. Without access to this financing, many meritorious claims, including those brought by small and medium-sized enterprises (SMEs) and consumers, would not go forward. Legal finance providers are experts in finding the most meritorious, and often important, cases that the courts need to hear and are willing to invest the time and money into issues that serve the public good.  The EU should be finding ways to increase access to this vital resource that benefits the EU legal system and its citizens.”

Prof. Dr. Ianika Tzankova, First European Chair of Mass Claim Dispute Resolution, partner at Birkway, says: “One of the big advantages of the Representative Actions Directive in my view, is that it explicitly recognises the importance of the principle of equality of arms, meaning a fair balance in the opportunities given to both parties. Legal finance takes seriously the idea that financial equality of arms is required for effective collective redress and consumer protection. In fact, without the availability of that funding source I doubt there would be any meaningful collective redress in the EU right now.”

Thomas Kohlmeier, Co-founder and co-CEO of Nivalion AG, a provider of Legal Finance Solutions in Europe, says: “The Rule of Law in Europe needs the support of funders who understand the law and are willing to share in the risk and invest in meritorious cases. The question that has not been answered to date is what happens to all those important cases that will go unheard in the courts if the special interests get their way? It seems almost cynical to restrict access to justice on the basis of unproven allegations and misunderstanding of key economic principles.”

The report is released as the deadline for European Member States to implement the Representative Actions Directive has passed on 25 June. The EU Commission will begin enforcement action against a number of member states given their failure to transpose the RAD after a two-year hiatus meaning important cases against corporate malfeasance could be jeopardised.

ILFA recommends that any further EU legislation should await the full implementation of RAD and comprehensive consultation with key stakeholders, such as consumer rights groups and SMEs Executive Agency, and ensure that any regulatory proposals are based on facts, data, and real-world experience.

Consumer rights experts are concerned that further legal finance regulation will affect the realisation of the Representative Actions Directive (‘RAD’), Europe’s first class action law.

The full report from ILFA, Resourcing the Rule of Law, is available here.

Commercial Regulatory Issues

Law Professors Argues Funders are Not “Passive Partners” in Mass Tort Lawsuits

Critiques of third-party litigation funding tend to focus on two main issues: the perceived lack of transparency around funders’ involvement, and the potential for these funders to unduly influence the litigation process. A new academic paper suggests that a major issue is the involvement of litigation funding in mass tort lawsuits, arguing that funders will control the litigation in order to drive up their own financial returns whilst leaving the actual victims worse off. An article by Bloomberg Law features an interview with Samir Parikh of Lewis & Clark Law School, who recently published a paper entitled ‘Opaque Capital and Mass Tort Financing’ on the Yale Law Journal Forum.  In the interview, Parikh claims that there are no real restrictions on outside capital taking control of mass tort lawsuits, despite the fact that litigation funders almost unanimously assert that they do have control over the litigation process or on settlement decisions. Parikh’s essay states that funders are never “passive partners” and that the reason these investors are pursuing mass tort cases so actively, is because they are aiming “to dictate outcomes.” Parikh compares the situation to other investment markets, claiming that “it’s a playbook we’ve seen private equity funds run in distressed debt situations all the time. And the truth is it could be happening in cases that we don’t know about.” Parikh’s theory centers around his concept of “the Alchemist’s Inversion”, where funders will look to create mass tort cases without doing proper due diligence on all the claimants, then they will look to increase the value of the claims before dictating the timing and details of any settlement. Parikh believes that these kinds of situations already exist, but with the alleged danger posed to the actual claimants in mass torts, he argues that “even if it’s happening on a small scale, the point is the explosion of the practice should be anticipated.”
Announcements Commercial

Manolete Partners Releases Audited Results for FY23

Manolete (AIM:MANO), the leading UK-listed insolvency litigation financing company, today announces its audited results for the year ended 31 March 2023.  Steven Cooklin, Chief Executive Officer, commented: "The annual results for FY23 mask a picture of two very different six-month periods for the Company: the first half of the trading year was subdued, as the Company had only just begun to emerge from the ending, in April 2022, of the temporary suspension of certain important insolvency laws that the UK Government had instigated in June 2020 in response to the COVID-19 pandemic. While normal insolvency laws resumed at the start of the financial year, there is always a natural time lag between insolvencies commencing and the associated litigation claims being referred to Manolete, as Liquidators and Administrators need time to conduct their regulatory investigations before they can assemble cases for consideration by us. The second half saw a strong resumption of the growth that the Company had exhibited prior to the pandemic, as the UK Insolvency Market returned to normal operations with a strong recovery in cases being referred to us.  Given the fact that we enjoyed only the latter six months of more "normal" trading, the results are highly commendable given the loss made in H1 and recovery in H2. We had a record number of 798 new case enquiries and a record number of 263 new case investments; gross cash receipts from completed cases were at a record level of £26.7m and a new record was also set with 193 cases being legally completed in the 12-month period. We ended the year with another record number of 351 live cases in progress and the Company returning to profitability in the second half. These positive KPIs have continued into the current FY24 - with signed cases for the first two months of FY24 being 154% higher than the first two trading months of the FY23. Consequently, we have added, and continue to add, to our expert in-house legal and financial analyst teams to address the increased level of demand for our insolvency litigation solutions. With prevalent headwinds of inflation and significantly higher interest rates facing the UK economy, the Company is well set for continued growth over the foreseeable future". Financial (statutory and non-statutory) highlights:
  •     Realised revenues on completed cases were £26.8m, an increase of 76% (FY22: £15.2m) although FY23 contained an exceptionally large funded case completion of which £4.9m was recorded in realised revenue (total settlement £9.5m).
  •     129% of total revenues represented by realised revenues on fully completed cases (FY22: 77%) offset by negative unrealised revenues.
  •     Increase in the valuation of the cartel cases contributed £1.2m to gross profit in FY23 (FY22: £5.1m).
  •     EBIT reduced by 159% to a loss of £(3.1)m (FY22: £5.3m) a result of pressure on valuations in H1 FY23 on existing cases and a single rare larger case loss at trial.
  •     The Company made a loss before tax of £(4.0)m (FY22: £4.5m profit).
  •     Gross cash receipts from completed cases were £26.7m, an increase of 72% (FY22: £15.5m).
  •     The Company's retained share of gross cash receipts from completed cases (after all legal costs and payments to Insolvent Estates) was £13.1m, an increase of 47% (FY22: £8.9m).
  •     Cash generated from operations (after all completed case costs and all overheads but before new case investments and taxation) was £8.0m (FY22: £4.4m).
  •     Gross cash of £0.6m and borrowings of £10.5m (FY22: £2.2m and £13.5m) as at 31 March 2023 and £14.5m unutilised funds available on the Revolving Credit Facility with HSBC.
  •     Final dividend of nil per share. 
Operational highlights:
  •     New case investments in UK insolvency cases, an increase of 65%: 263 in FY23 (FY22: 159).
  •     Based on unaudited internal management information: ROI of 125% and Money Multiple of 2.2x from 689 completed cases since inception
  •     Based on unaudited internal management information: 193 cases were completed in FY23 (FY22: 139 cases), with an average duration per case of 15.5 months (FY22: 13.2 months), generating a Money Multiple of 1.9x (FY22: 1.87) and an IRR of 131% (FY22: 132%)
  •     Average case duration across the full portfolio of 689 completed cases is 12.8 months
  •     29% increase in live cases: 351 in process as at 31 March 2023 (272 as at 31 March 2022)
A copy of the annual report and accounts will be available on the Company's website shortly and will be posted to shareholders in due course.
Consumer

Supporters of Louisiana Litigation Finance Disclosure Bill Discuss Route Forward After Governor’s Veto

Efforts to increase the amount of regulation around litigation financing within individual states has been on the rise throughout the last year, with state legislatures across the US introducing new legislation. A recent attempt in Louisiana, which placed a large emphasis on increasing transparency requirements for third-party funding, suffered a major setback as the Governor vetoed the bill which had been approved by the legislature. Reporting by the Louisiana Record provides an update on efforts by supporters of Senate Bill 196 to push forward with seeing these increased disclosure measures implemented. Lauren Hadden, general counsel for the Louisiana Association of Business and Industry (LABI), stated that if the state legislature is able to reconvene later in June, “we would obviously love to see SB 196 among the list of bills taken up.”  However, as it is currently uncertain whether the legislature will come back for a veto-override session, Hadden suggested that the bill’s supporters “stand ready to work with all interested parties to once again develop legislation that addresses this issue during next year’s legislative session.” Hadden argued that SB-196 was not an attempt to outlaw or restrict third-party litigation funding, instead it was designed to be “a balanced transparency measure that would have simply balanced the ledger in litigation.” The decision as to whether or not the legislature will hold a veto-override session will likely not be motivated by the litigation financing bill itself, as Republican lawmakers in the legislature have discussed it primarily in relation to the Governor’s plans to veto a more contentious bill passed by House Republicans.
Announcements Commercial

New research offers inside look at how businesses are managing litigation in uncertain economy

Burford Capital, the leading global finance and asset management firm focused on law, today releases new independent research on how in-house lawyers are adjusting their strategies in a period of sustained uncertainty. Businesses are seeking to manage risks and costs, and in turn, legal departments—and the outside law firms that work with them—have the opportunity to position themselves as part of the solution, with legal finance expected to play a role.

To better understand how macroeconomic trends impact senior in-house lawyers’ thinking about litigation, managing risk and their expectations for their law firm partners, Burford commissioned independent research that was conducted via extensive one-on-one interviews with 66 GCs, heads of litigation and other senior lawyers responsible for litigation at companies in the US, Europe, Asia and Australia.

Nearly three in four (74%) senior in-house lawyers expect to see an increase in the volume of disputes over the next two years due to the current geopolitical, economic and regulatory environment. Four in five (80%) say the current economic uncertainty will have knock-on effects for the legal department. Not surprisingly, a solid majority (62%) expect their law firms to offer more cost and risk-sharing solutions, and over half (51%) expect their firms to be knowledgeable about legal finance.

Christopher Bogart, CEO of Burford Capital, said: “We at Burford have been at the forefront of legal finance since 2009, working with lawyers in good and bad economic times. What remains constant is that in-house lawyers are always looking for ways to maximize corporate value and share risk. Burford’s latest research confirms that legal finance has taken on greater importance for businesses, especially as uncertainty in the global economy remains. We stand ready to partner with clients to solve their pressing needs, and to equip their outside counsel to be as nimble and innovative as their clients expect.”

Key findings from the research include:

  • The economy is increasing the volume and potential budget challenges of commercial litigation and arbitration.
    • Senior in-house lawyers expect to see an increase in the frequency of commercial disputes in the next two years, and the economy is exacerbating the challenges in-house lawyers face in paying for litigation and arbitration.
    • Cost causes some businesses to forgo meritorious claims and awards, while others are becoming more proactive in safeguarding claims as valuable business assets.
      • “[I]n an economic downturn, we may not be as motivated to pursue some litigation or transactional matters without creative billing options. Law firms want to be sticky with their clients, and companies are increasingly narrowing down who they work with to add more favorable terms with a select group of firms,” said an associate general counsel of a media and entertainment corporation.
  • GCs believe it is important for the legal department to show it can not only manage costs, but also add value to the business.
    • Cash flow and liquidity remain very important factors for GCs when they consider pursuing meritorious claims.
    • While GCs don’t use quantitative financial modeling of commercial claims, most say it would be valuable to be able to predict potential returns.
    • The availability of legal finance increasingly plays a role in deciding whether or not to pursue meritorious litigation or arbitration claims.
      • “[Legal finance] gave the CFO the opportunity to time recoveries as he needed them and use that funding to invest in the company,” said a general counsel of a global food and beverage company.
      • “I have explored the use of legal finance and would do so again. The liquidity aspect is a big needle-mover for many companies, especially because it could provoke a settlement earlier, bring in money earlier and de-risk litigation,” said corporate counsel and director of a global retail corporation.
  • GCs expect more financial innovation from outside counsel.
    • GCs expect their law firms to offer more cost and risk-sharing solutions, particularly in a down economy, which also means that law firms are expected to be knowledgeable about legal finance.
      • “I want my outside counsel to be aware of and advise on every option available to us in setting a strategy,” said a chief litigation counsel of a manufacturing corporation.

The 2023 GC Survey can be downloaded on Burford’s website. Extensive one-on-one interviews were conducted by phone between March and May 2023 by Ari Kaplan Advisors.

About Burford Capital

Burford Capital 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), and it works with companies and law firms around the world from its offices in New York, London, Chicago, Washington, DC, Singapore, Dubai, Sydney and Hong Kong.

For more information, please visit www.burfordcapital.com.

Case Developments Commercial

Dieselgate Claims Demonstrate Power of Litigation Financing

Consumers who have been the victim of corporate negligence or fraudulent practices by large multinationals have always been at a disadvantage when it comes to seeking justice, overwhelmed by the sheer scale of legal and financial resources that companies have in reserve. However, recent years have demonstrated that litigation funding can make a significant impact in leveling the playing field between consumers and corporations. In a blog post on LinkedIn by Sparkle Capital Limited, a UK litigation funder, this exact dynamic is explored in relation to the ‘Dieselgate’ emissions scandal which has illustrated the power of litigation financing. The article highlights the staggering number of consumers that approached law firms in the UK to pursue claims against vehicle manufacturers, noting that without third-party funding, very few of these claims against well-resourced companies could have been pursued.  Sparkle Capital goes on to point out that these partnerships between funders, law firms and claimants has achieved notable progress in securing compensation for consumers, with manufacturers forced to reach significant settlement agreements in the face of these funded claims. They also suggest that the successes of the Dieselgate claims lay out a perfect example for how litigation funding can be used in future situations where a very high volume of consumers are looking to bring claims against multiple large corporations.