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Commercial Deals

UK Startup Funder Seeks to Meet Regional Demand for Small Cap Funding

Litigation funding in the UK has been largely dominated by national or even global firms based out of London, who have traditionally focused on the lucrative market within the capital and surrounding regions. However, a new funder is seeking to widen access to financing for underserved regions in the country, with Thaxted Capital launching its new service out of Manchester. Speaking with the University of Cambridge’s Judge Business School, Jack Bradley-Seddon, founder of Thaxted Capital, described the need for wider regional representation, as well as funders who cater to the small-cap funding cases that require under £1 million in commitment. Thaxted has already secured £25 million in funding from Sandton Capital Partners, which singled out the new firm as a much-needed entrant into the market that can bring a unique approach. Mr Bradley-Seddon is also an alumnus of the Judge Business School, where he was awarded an EMBA in 2020, and has previously worked as an associate at both Akin Gump Strauss Hauer & Feld and Bench Walk Advisors.
Commercial Legal Innovation

New Italian Funder Promises To Combine Experience With Technology

As LFJ has been reporting, the European litigation funding market is continuing to grow and is predicted to see rapid expansion in the forthcoming years. This is reflected in the wave of new startup funders launching throughout the region. Just this week, a new Italian funder has arrived on the market: Lexcapital. In an article for Legal Community, one of the founders of Lexcapital, Giuseppe Farchione, spoke about the company’s innovative approach, which will combine the founders’ many years of experience, as well as the harnessing of new technologies to accurately assess the likelihood of a successful claim. At the heart of this proposition is a proprietary algorithm, Litigation Assessment, which the funder claims will save time and resources when evaluating the probability of a profitable return when engaging in a case. Mr Farchione comes from RSM, where he was a partner leading their special situations team, and is joined in the management of Lexcapital by Francesco D’Addario, Manuel Caccone and Giovanni Latorre.
Announcements Commercial People Moves

Therium Adds Four Investment Managers To Its Transatlantic Investment Team In London And New York

Therium Capital Management, the world’s leading global provider of legal finance, today announced that it has added four investment managers to its transatlantic investment team, Chris Wilkins and Charlie Temperley in London and Corey Banks and Joshua Card in New York.

Neil Purslow, Founder and Chief Investment Officer at Therium said: “We are delighted to welcome these four investment managers to our transatlantic investment team. Their strong legal know-how and experience of high-value litigation and arbitration across jurisdictions will add to our high-calibre investment team, as we continue to invest in a broad range of cases across the legal sector.

Alongside our investment team, they will work on cases right through from origination to completion. This unique approach allows our investment managers to build strong and enduring relationships with clients,get under the skin of the complex matters, be incredibly responsive and deliver top quality execution.”

Therium has now added five investment managers to date this year, including Fred Bowman who joined in January. The new investment managers will provide legal finance to meritorious cases, law firms and corporates through a range of innovative financing structures.

Corey Banks who will be based in New York has over five years’ experience as a commercial disputes associate at prominent New York law firm Wachtell, Lipton, Rosen & Katz, where he worked on a broad range of funded commercial disputes, including corporate and financial matters, breach of contract, antitrust/ competition and bankruptcy litigation. Previous roles include clerking at a US District Court and the Second Circuit US Court of Appeals. Corey also worked as an Associate at Clearly Gottlieb Steen & Hamilton. He graduated magna cum laude from Harvard Law School and holds a BA in International Relations and Japanese from Tufts University, Massachusetts.

Joshua Card, also based in New York joins from Sidley Austin’s where he was a senior managing associate in the Commercial Litigation and Disputes and Securities and Shareholder Litigation practices. Prior to this, Josh worked at Wachtell, Lipton, Rosen & Katz. He has experience of M&A cases, corporate governance litigation, white collar criminal matters and other corporate and securities matters, including commercial arbitration. Josh has also been a law clerk at a US District Court and the Second Circuit US Court of Appeals. He holds a BA in Political Science from Amherst College and obtained a Juris Doctor, magna cum laude from Brooklyn Law School.

Charlie Temperley, based in London, previously worked at Michelmores and Womble Bond Dickinson, where his practice encompassed a broad range of commercial litigation including high value, multi-jurisdictional disputes and enforcement actions. He has experience working on commercial contract claims, group actions, civil fraud and asset tracing, trusts and probate disputes, shareholder disputes, professional negligence, property litigation and joint venture breakdowns. Charlie holds a First-Class Joint Honours degree in Mathematics and Philosophy from the University of Nottingham and an MPhil in Philosophy from the University of Cambridge. He completed a Graduate Diploma in Law and Legal Practice Course at the University of Law, Guildford.

Chris Wilkins, also based in London, joins after nine years as a solicitor at Slaughter and May. In the Disputes and Investigations Group, his practice focused on resolving large-scale, complex and often multi-jurisdictional disputes for large corporates, including FTSE 100 companies, across a wide range of industry sectors. He has advised on cases in the High Court and Competition Appeal Tribunal, as well as international arbitrations. Chris holds a First Class Honours degree in History from King’s College London and a Master’s degree with Distinction in International Relations from the London School of Economics. Chris completed a Graduate LLB at the University of London and a Legal Practice Course at BPP Law School.

 About Therium Capital Management:

Therium is a leading provider of investment capital to the legal industry and one of the largest, having raised over $1bn since 2009. With investment teams in the UK, USA, Australia, Germany and Norway, Therium has funded litigation and arbitration claims exceeding $40 billion, including many of the largest and most high profile funded cases in the UK and internationally and arbitrations under rules of the LCIA, ICC, UNCITRAL, LMAA, AAA, CIETAC, ICSID, Stockholm Chamber of Commerce and the Energy Charter Treaty. Therium has been Top Ranked by Chambers and Partners and Leaders League with investment officers across the UK, Europe, USA and Asia Pacific recognised as leading individuals in litigation finance.

To mark the firm’s tenth anniversary, Therium Access was launched in 2019 as a not-for-profit venture to fund a wide range of access to justice projects and cases – supporting the most vulnerable in our society and helping to bridge the widening justice gap. With its own board composed of eminent figures from the legal community and a dedicated grants officer, Therium Access has made over £1.3 m in financial commitments over the last 18 months to over 26 different organisations. As the first initiative of its kind, Therium has been shortlisted for several awards for launching this ground-breaking initiative, including the FT Innovative Lawyer Awards 2019, The Lawyer Awards 2021 and the Lexis Nexis Awards 2020 and 2022.

Therium also invests in AI and software projects to accelerate the advancement of the industry. As a founding member of ALF, ILFA and the Litigation Funding Working Group, Therium is also committed to shaping the future of legal finance and setting high standards for the industry.

Commercial Special Features

Key Takeaways from LFJs Special Event: How Investors Approach Litigation Finance

On Thursday, July 14th, Litigation Finance Journal hosted a digital event, “How Investors Approach Litigation Finance.” The event featured a unique cross-section of investor types, including David Gallagher, Co-Head of Litigation Investing at The D.E. Shaw Group, CJ Wei, Vice President of Private Credit at Northleaf Capital, Benjamin Blum, Managing Director at Flexpoint Ford, LLC, David Demeter, Director of Investment at Davidson College, and Kendra Corbett, Partner at Cloverlay. The event was moderated by Ed Truant, Founder of Slingshot Capital. Below are some key highlights from the discussion: ET: How did you start investing in Litigation Finance? What types of results did you focus on, and how has your strategy changed over time? DG: It takes time to obtain a meaningful number of results from litigation finance investments, and you can learn a lot along the way, even before the results come in. And because you invest in such a small proportion of the opportunities you look at, you try to learn from the investments you don’t make, as well as the investments you do make. And one of the lessons I’ve learned as it relates to deployment strategy, is that good deals are so hard to come by, and are a product of so many variables outside of your control, that it’s better to be responsive to the opportunity set in front of you, than to be wedded to the abstract ideas of portfolio construction or deal structuring. I think adaptiveness is key. KC: We’ve been active in deploying capital in litigation finance for over six years now, and I wouldn’t say our approach has changed dramatically. We’ve been laser-focused on maintaining diversification across cases to avoid binary risks, and finding alignment across all of the involved parties. I think we’ve looked for market specialists, and we haven’t necessarily tried to find litigation finance beta, and instead we’ve looked for partners with a demonstrable value-add and strategic advantage. ET:  For those panelists more interested in credit opportunities in the legal finance space, why did you decide to focus on credit? DG: At the D.E. Shaw Group, the litigation investing team works closely with the Private Credit group, which I like to think broadens the types of deals we do. So, in addition to investing in litigation finance deals with a more typical risk/reward profile, we also invest in less volatile opportunities that are less about litigation risk, and more about timing risk and basic credit risk. BB: There are a few ways to create a credit-like opportunity in litigation finance. In addition, the way David was describing, the other way is to create a credit-like product by lending against a diverse portfolio of individual case fundings. So the asset is a little bit less credit-like, but the investment structure creates a credit-like investment. Both areas are of interest to us, especially when there is strong alignment with the borrower and downside protection through underwriting, to justify accepting a return profile that is either capped or has limited upside. CW: At Northleaf, we have many different funds with many different return hurdles, so we view ourselves as a capital solutions provider to litigation finance businesses. That being said, our thesis around the asset class is akin to a type of Private Credit approach strategy. Principal protection is our priority. We not only have asset coverage of the legal assets, but additional covenants and protections, and bespoke structures where we have guardrails against any downside scenario. ET: From an equity perspective, how is litigation finance the same as, or different from, other equity assets in which you invest? DD: If you suspend disbelief a bit, I would equate it with early venture investing. Liquidity cycles tend to be uncorrelated in the long run, you’re generally creating milestones for capital, outcomes can be pretty skewed, where large winners make up the majority of profit (although it’s certainly more skewed in venture than in litigation finance), and the investment strategy isn’t all that scalable—managers have to be cognizant of all that they’re trying to deploy. DG: I’ll focus on some of the differences. First, a litigation finance investor has no control over the litigation, while an equity investor or investors that own the majority of the company—they do control the company. So the closest analogy is to a class of shares that has no voting rights. Second, LitFin investments are typically illiquid. Equity investments are typically liquid. Another difference is that case outcomes are typically more binary than business outcomes.  And one last difference is that a company you might invest in can pivot and respond as needed to market opportunities, a case you invest in—it pretty much is what it is, and there’s only so much that even the most talented lawyers can do, with the facts and the law involved. ET: One of the common criticisms I hear from fund managers, at least early on in the life cycle, is that investors are not willing to pay management fees to fund their operations. How does the panel respond to this criticism, given that the average litigation finance claim is small—around $3-5MM—and there is a lot of relatively sophisticated operations needed to be conducted by investment managers?   DD: I think there are ways of paying someone a full fee and making sure deployment is there. And that is my primary concern, and I think most LPs primary concern, when it comes to paying a management fee. We’re also concerned about misalignment. At the fund level, people should really be making a large amount of their compensation from performance fees, not salary. KC: It’s definitely a difficult issue. The fee drag that comes with charging investors on committed capital becomes pretty untenable when you’re comparing gross returns to net returns. So from our perspective, at a minimum, fees need to be on an as-committed basis. We’ve also seen scenarios where there is a lower management fee on committed capital that steps up once it’s drawn. It’s just really difficult with some of the commercial litigation strategies to have a full freight fee—2%--committed from investors.
Commercial Deals

European Funding Predicted To Account for 15% Of Global Market By 2025

While the US and UK are most often in the news for their high profile litigation funding cases, the European continent is seeing an equally impressive rise in the number of funding agreements, and there is plenty of reason to expect this upward momentum to continue. New research and analysis from Deminor, the global litigation funder, suggests that in the next five years, the European market alone could see annual growth of 8.3% and account for 16% of the world’s litigation funding market by 2025. In a feature for The Global Legal Post, Erik Bomans, the CEO of Deminor, speculated that this rise would be driven by a combination of factors including economic instability, a rise in shareholders holding companies to account over ESG targets, and human rights violation claims. Going beyond the growth in funding itself, Mr Bomans argues that this increased volume in the number of cases will likely be accompanied by a more significant proportion of successful claims by litigants, as the breadth of legal advice available is widened. In addition to this booming market share, it is also expected that we may see a broadening of the number of jurisdictions in Europe that will see an increased uptake in third-party funding. Lianne Craig, the managing partner of law firm Hausfeld’s London office, highlights that the firm has seen real interest and engagement from funders towards participating in previously underserved markets such as Italy, Portugal and Spain.
Commercial

Clarion Remains on Top for Litigation Costs Services

UK law firm Clarion is riding high in 2022, after being placed in the top tier of legal cost services by Chambers & Partners for a third year in a row. Having been highlighted for their breadth of knowledge, pragmatic approach and praised by clients for their responsive services; the firm remains a UK leader in the field of costs services and litigation funding. Speaking with Business Up North, Andrew McAulay, the partner at Clarion in charge of this practice area, highlighted the firm’s nationwide approach, and ability to work with London firms, as well as being able to assist on cases with a global scope. Mr McAulay’s team are regularly engaged by parties on either side of cost disputes, and have an experienced bench of professionals with expertise working alongside both small and large business entities, as well as lay clients. Mr McAulay and his colleague, Stephanie Kaye, were also both listed by Chambers & Partners in the top band for individual practitioners for Costs Lawyers, with McAulay having been recognised as such for three years consecutively.
Commercial

Claimant And Enforcement Require Equal Appraisal, Says Top Funder

When evaluating the potential of entering into a funding agreement with a prospective client, funders must weigh a number of factors, when evaluating the merit of a case and what any potential outcome could entail, whether that be financial return or loss. In the latest of a series of analysis, Glyn Rees of Augusta Ventures, has provided two new articles with insights into how funders should evaluate both a claimant’s legitimacy and what enforcement factors could affect the funder’s return on investment. When analysing the potential client’s merit, Mr Rees argues that any prospective funder should first consider whether the claimant has experience in pursuing proceedings, and if so, what their motivations are for this latest claim. Additionally, it is worth assessing the claimant’s financial situation in case there is a risk of insolvency, which could affect proceedings and what their expectations are for any final settlement. On the enforcement side, Mr Rees primarily focuses on the point that no funder should engage in a case where success would come with only symbolic return, rather than financial gain. Moreover, he highlights the need to undertake detailed inspection of the defendant’s resources and consider where the seat of arbitration is, as this may be the biggest factor in determining how enforceable any settlement is.
Case Developments Commercial

Therium Funds High-Profile Claim By Malaysian Royal Heirs

A litigation funding giant has found itself in opposition to the Malaysian government, by funding a lawsuit by the heirs to the Sultanate of Sulu, in a claim valued at $14.92 billion. Whilst high-profile cases are not foreign to the world of litigation finance, it is certainly a unique position for a funder to be involved in a dispute between a country’s royal family and the state’s government. Profiled in an in-depth feature by The Edge Markets, the claim by the heirs of the late Sultan Jamalul Kiram II comes as a result of an arbitration judgement by a French court, which ruled the Malaysian government was required to pay the nearly $15 billion in damages. This was a result of the state failing to make an annual payment agreed to in an 1878 accord over sovereign land rights, which the government ceased paying in 2013 due to armed militants occupying the area. When the government refused to compensate the heirs of the Sultan for those stated damages, bailiffs working on instruction from the plaintiffs seized two companies belonging to the state-run oil corporation Petroliam Nasional Bhd. While the Paris Court of Appeal has issued a temporary halt on the initial arbitration ruling, the heirs’ legal team led by Paul Cohen, of 4-5 Gray’s Inn Square chambers, have stated that the halt is only enforceable in Paris. While this matter is far from resolved, it is clear there is an appetite among high-profile funders to attach themselves to such cases where the opportunity to gain a significant financial return is available.
Commercial Deals

Top Australian Funder Sees Opportunities in a Post-COVID Market

The impact and the effects of the COVID-19 pandemic are still unfolding across the globe, and its disruption of key industries may result in a follow-on surge in class action cases. Whilst most businesses fought to stay profitable or even afloat, the financial support offered by many governments around the world also helped support businesses that had fundamental flaws or failings pre-pandemic. Interviewed by The Australian Financial Review, the executive chairman of CASL, John Walker, predicts an influx in class actions now that businesses will once again come under tight scrutiny of their activities. This prediction comes with the added weight of CASL building a sizable war chest of $155 million to fund such litigation, with Mr Walker highlighting the area of ESG as a potential firestorm of future claims. Mr Walker also linked the expected rise in claims to the potential for even greater levels of third-party funding due to the continuing increase in inflation, and with investors looking for safer bets than equity investments. Despite regulatory tightening on the funding industry by the previous Australian government, he also expects the new administration to make gradual, if not immediate, changes that will widen access and opportunity for claimants seeking external funding.
Commercial Deals

The Stage Is Set For A Boom In Litigation Funding in Scotland

With instability at the highest levels of government in Westminster, and an economic downturn preoccupying the minds of everyone from Canary Wharf to the small business owner on the high street, flexibility in third-party funding legislation is likely to drive a surge in litigation. This is particularly true in Scotland, where previous regional legislation had prevented a wider adoption of litigation financing. But now local as well as national funders are standing by to support a rise in the number of claims being filed. Writing in The Scotsman, Edward Gratwick, a legal director at Addleshaw Goddard, sees the industry moving in one direction: upward. He notes that since Scotland’s Civil Litigation Act came into law in 2020, the types of litigation finance agreements that have been allowed in this jurisdiction have significantly expanded. As a result, potential claimants who were shut out of the system due to a lack of capital, are now able to seek justice with the help of an enthusiastic cadre of funders. Mr Gratwick also highlights that while under previous regulatory structures, these funding agreements mostly revolved around insolvency cases, we should expect to see a variety of commercial cases take advantage of funding opportunities. This is further reinforced by the growth of new startup funders specifically catering to regional UK markets, as well as London-based firms hoping to find new revenue channels outside the capital.
Commercial Legal Innovation

2022 Thought Leaders in Litigation Finance 

Since 1996, Who's Who Legal has been examining the International legal scene to decipher trends in litigation finance innovation development. In a new research report, WWL Thought Leaders: Third Party Funding 2022 explores the latest cutting edge insights into the global litigation investment marketplace.  WhoseWhoLegal.com features Eric Blìnderman (CEO at Therium Capital Management) and James Little (Principal of Drumcliffe) in Q&A sessions on the evolution of litigation investment. Blinderman and Little are considered LF pioneers, well-regarded within the industry. Click here to read more.
Commercial

Omni Bridgeway on Defense Side Financing

The vulnerabilities of being on the defense side of litigation are immense. According to a new Omni Bridgeway research report, there are opportunities for claimants to leverage world class defense side opportunities as part of portfolio strategies.  Jason Levine (Investment Manager and US Legal Counsel at Omni Bridgeway) highlights that settlement is normally the likely outcome of litigation; funders can express returns in a variety of ways. Shifting upfront litigation exposure to the funders is oftentimes a worthwhile investment for claimants looking to diversify their risk exposure.  Similarly, defense side funding opportunities hedge against abusive litigation from opportunistic adversaries. Check out Omni Bridgeway's conversion on defense side litigation here. 
Case Developments Commercial

Bundled Class Against Apple APP and Google PLAY Stores

Czech-based funder LitFin has announced a bundled action against Google and Apple concerning their application store download purchase agreements. LitFin alleges that Google and Apple have abused their market dominance by inflating in-app commissions at or above 30%.  According to LitFin, Google and Apple have been subject to intense litigation that have assessed billions of dollars in fines and levies against their application store terms and developer revenue share policies.  LitFin suggests that both the Apple APP and Google PLAY stores have engaged in monopolistic behavior. LitFin's class action lawsuit aims to set precedent for more equitable and fair dealing in application design and product innovation.  Click here to find out more. 
Commercial

Ethics and Values Behind Litigation Finance Products and Services 

Above the Law profiles thoughts and ideas behind ethical communication of third party funding products during attorney-client discussion. Marla Decker argues that clients often have a material benefit in engaging legal finance options for strong case claims.  Ms. Decker argues that all attorney-client conversations should embrace ethical duty and care when it comes to financial benefits of litigation finance. Monetization of claim awards is a unique opportunity for many to expand bottom line growth. Therefore, Ms. Decker suggests that it is an ethical imperative for values-focused attorneys to properly discuss third party funding options with clients.  Click here to learn more about Ms. Decker's insights.   
Commercial Regulatory Issues

The Argument Against Forced Legal Finance Agreement Disclosure 

Keith Sharfman (Professor at St. John's University School of Law) has a new feature arguing against mandatory litigation finance agreement disclosure in the 94 New York State Bar Journal 36. Mr. Sharfman's article covers unique approaches to legislation targeted at third party funders and their clients.  Sharfman's research concludes that financial privacy is subject to degradation under forced litigation agreement disclosure rules. Furthermore, Mr. Sharfman alludes to the notion that claimants who have not received funding face discriminatory acts from adversaries who may take advantage of those who have not received funding.  Mr. Sharfman therefore suggests that lawmakers reject mandatory legal funding agreement disclosure. 
Commercial Fundraising

Aristata Capital Drives Meritorious Funding Innovation Banking £40MM Investment 

Aristata Capital is proud to announce a £40MM capital injection to fund a portfolio of impact investments. Such investment will include funding legal expenses for cases involving human rights, equality, indigenous law and ESG litigation.  In a press release, Aristata says the firm seeks to expand its customer base to include claimants who lack access to capital while victims of meritorious claims. Aristata suggests that the global system of commercial litigation has created an enterprise-ready environment for pursuing portfolio impact of this subject matter.  Aristata says the investment builds on years of experience in strategic litigation systems and processes. 
Commercial Deals

Deminor’s Research Reports ESG Bump 

Legal Futures profiles Deminor's ESG insights in a new report. Deminor says that ESG legal investment has a high likelihood of becoming one of the United Kingdom's most investable lines of business for litigation financiers.  Deminor forecasts that litigation funders will experience active upcoming regulatory requirements that should be embraced. Furthermore, Legal Dive highlights that most class actions in the United Kingdom have a litigation financier funding the effort. Trends point to a continuation of favorable circumstances for funded ESG class actions in the UK.  Click here to learn more. 
Commercial

Litigation Finance as a Revenue Vehicle

In a new article, Legal Dive explores the notion that litigation portfolios can become a revenue driver for legacy gain. According to Legal Dive, investors are 'plowing' funds into legal finance products and services looking to avoid cyclical market events. As a revenue driver, investors are looking at returns up to 4x their contribution.  With such figures, Legal Dive suggests that strategic partnership with legal funders should be a topic for every modern general counsel's office. The growing acceptance of litigation finance is widely considered to be an opportunity for innovators in the legal arena.  Legal Dive also focuses on monetization of potential awards, in that if a general counsel's office is relentless, the firm can profit from various business lines of litigation portfolio case assets. 
Commercial Legal Innovation

Innovative Australian Funder Launches Service With New Approach

The vibrant and growing litigation finance market in Australia continues to expand, with the launch of a new funder in Juel Litigation Finance. With a goal to shake-up the industry, Juel is aiming to operate as a traditional litigation funder, and also bring a more holistic approach to legal financing that considers the individual behind the case as important as the case itself. Speaking with Lawyers Weekly, founder and executive director Mark Paton explained that Juel wants to be a partner to litigants and support them with any costs incurred during litigation – not simply legal fees. Mr Paton stresses that the new funder will not just focus on providing the legal financing, but rebalance the whole equation in favour of individuals and businesses who will already be under immense pressure during the litigation process. This innovative approach will allow Juel to support a wide range of cases, from personal injury disputes to insolvency matters, ensuring that their clients have a partner during proceedings from beginning to end.
Commercial Regulatory Issues

The Role of Superannuation Funds in Litigation Finance

The role of superannuation funds in litigation finance (specifically in funding class action claims) has been highlighted by industry insiders in Australia, who point to it as a benefit to the funds themselves and also an encouragement of good corporate governance. The recent example of HESTA, a super fund based in Sydney, taking part in a class action lawsuit against multiple financial service companies, has demonstrated both the appetite and the potential benefits of such engagements. In an article by Super Review, vice president and managing director of Financial Recovery Technologies, Sean Cookson, spoke about this more active approach to investment, and highlighted HESTA as a super fund that has been able to leverage its capital to apply pressure through this alternative avenue. Mr Cookson pointed to the fact that apart from the US, Australia represented one of the lowest risk countries for funds to join class action claims when compared to jurisdictions such as Germany and the UK. Mary Delahunty, the former head of impact at HESTA, went a step further and stated that it was incumbent upon super funds to recover losses through class actions where corporates have failed in their fiduciary duty to shareholders. However, both Cookson and Delahunty warned that in order for this to be effective, the Australian government will need to reverse course and place an emphasis on regulating corporate behaviour.
Case Developments Commercial

Finnish Investor Argues He Is Not Required To Pay Funder

In a high-profile dispute between litigant and litigation funder, a mining investor who successfully sued the Egyptian government has refused to compensate Buttonwood Legal Capital after claiming the funding agreement is invalid. Mohamed Abdel Raouf Bahgat, who was the beneficiary of a $99.5 million award in 2021, defended his position to the High Court by arguing that the agreement’s terms were invalid due to extraordinarily high fees combined with an additionally large rate of interest. According to reporting in Law360, Bhagat claims that Buttonwood was not legitimately positioned as a litigation funder, and that the agreement itself was not properly concluded. Buttonwood, who supported Mr Bhagat with £2.3 million in funding, argues that he is in breach of the initial 2017 settlement agreement and is owed over £16 million in unpaid fees.
Case Developments Consumer

Deception And Fraud By Solicitor Led To Collapse Of Axiom, SFO Alleges

Investment in litigation finance does not come without risks, however, few investors would expect to see these funds taken for personal and criminal gain by the lawyers they were meant to support. This is exactly what is alleged to have happened in the recent case of Timothy Schools, who took over £19.5 million from Axiom Legal Financing Fund starting in 2009, and then allegedly proceeded to funnel this money to himself and to two other individuals who are also accused of fraudulent behaviour. Examined in reporting by The Law Society Gazette and Law 360, the charges leveled by the Serious Fraud Office (SFO) outline how Schools used his law firm, ATM Solicitors, to take the loans from Axiom only to enrich himself by funneling the money to a network of offshore companies. His co-defendants include solicitor Richard Emmett and independent financial adviser David Kennedy, who are accused of receiving over £1 million and £5 million of fraudulent funds respectively. This alleged deception of Axiom led to its collapse in October 2012, as auditors unearthed the catastrophic information that the fund was owed £60 million from loans to law firms. Prosecuting for the SFO, Miranda Moore QC, argued that the defendants were skimming commission off these loans without informing Axiom, and that they willfully misused these investors’ funds to profit themselves. Moore stated that these actions not only led to the collapse of Axiom and loss of investor capital, it also deprived the claimants who the loans were intended for, of their representation and access to justice. The three defendants have denied the charges and the trial is expected to come to a close on Monday with the court’s judgement.
Commercial Deals

Litigation Funding in Poland: A Closer Look

Poland has seen tremendous economic growth in recent decades, and now stands out as one of the business powerhouses within Europe. However, unlike other major economies within the region (UK, Germany and the Netherlands) we have not seen a commensurate rise in the adoption of litigation funding and investment that one might expect. In the first part of a series of analysis for Augusta Ventures, investment manager Greg Beres outlines some of the unique considerations that may cause hesitancy for those looking to invest in Polish litigation finance. The main concern for potential funders is the often slow and protracted nature of the country’s courts, with the majority of litigation taking several years to reach completion. This is further compounded by legislation that mandates the right to appeal, leading to cases having extended lifespans and delaying return on investment. Beres suggests that while funders shouldn’t write off investment in Poland completely, any engagements need to be low-risk cases and have realistic expectations about the time it will take to see those returns.
Announcements Deals

Brown Rudnick advises on £100m litigation funding partnership between North Wall Capital and PGMBM

International law firm Brown Rudnick has advised alternative investment firm North Wall Capital on a £100m litigation funding partnership with PGMBM, a law firm focused on environmental, social and corporate governance cases. The investment will be used by PGMBM to address the growing demand from consumers and other victims of injustice to seek recourse against corporates. Fabian Chrobog, Founder and Chief Investment Officer of North Wall Capital said: “We are thrilled to announce this partnership with PGMBM as part of our ESG-focused legal assets strategy. We are incredibly grateful to Elena and the litigation funding team at Brown Rudnick for advising on this significant deal.” Elena Rey, Partner at Brown Rudnick who led the deal team said: “This deal is thought to be the largest investment in a UK claimant law firm to date, strengthening Brown Rudnick’s leadership as the go-to advisor for litigation funding deals. This was a complex structure, which included a framework for the type of cases that this investment can be used to fund. We are delighted to have advised North Wall on this significant component of their ESG strategy.” As well as Elena Rey, the Brown Rudnick deal team included Counsel Tristan Dollie and Associates Natalie Grundy and Reena Patel. Brown Rudnick is the go-to law firm for litigation funding deals, thanks to their deep understanding of the industry and experience in structuring innovative and complex deals. In April 2021, Brown Rudnick advised on the multimillion-dollar funding agreement for a legal claim against social media giant TikTok and its parent company ByteDance. In November 2020, Brown Rudnick launched the Litigation Funding Working Group, which now has over 90 members to develop model documents. In May 2022, Brown Rudnick hosted London’s first ever Litigation Funding Conference, attended by over 300 funders, lawyers, brokers, investors and other entities from the litigation funding eco-system. London-based North Wall Capital provides private capital to Western European special situations and manages several funds on behalf of global institutional investors. This investment brings the total invested by North Wall in PGMBM to £150million. In March 2021, North Wall Capital and PGMBM announced a £45m funding partnership. PGMBM is a partnership between British, American, Brazilian, and Dutch lawyers passionate about championing justice for the victims of wrongdoing by large corporations. This month, the firm secured a landmark, unanimous judgment from the Court of Appeal that allows over 200,000 victims of the Mariana Dam disaster, Brazil’s worst ever environmental disaster, to seek redress against the world's largest mining company, BHP, in the Courts of England and Wales. The firm is at the cutting edge of international consumer claims, including historic settlements on behalf of over 15,000 claimants in the Volkswagen NOx Emissions Group Litigation in May 2022 and 16,000 victims of the British Airways Data Breach in 2021. About Brown Rudnick LLP Brown Rudnick is an international law firm that serves clients around the world from offices in key financial centers across the United States and Europe. We combine ingenuity with experience to achieve great outcomes for our clients. We deliver partner-driven service; we incentivize our lawyers to collaborate in the client’s best interest; and we put excellence before scale, focusing on industry-driven, client-facing practices where we are recognized leaders.
Commercial Regulatory Issues

Nigeria’s New Arbitration Legislation Opens The Door For Third-Party Funding

While the litigation funding industry continues its rapid growth in many territories around the globe, we are starting to see similar patterns emerging in Africa. With the passage of Nigeria’s Arbitration and Mediation Bill, the country has opened the doors for wider adoption of third-party funding with these latest changes to the regulatory framework. Analysis by White & Case examines the ways in which this new legislation will not only make it easier for parties to engage in funding agreements, but also offer sensible oversight and scrutiny for this process. The new law allows for third-party funding in arbitration cases in the Nigerian court system, which White & Case notes is only the third case of a bill with such direct language, after similar legislation in Hong Kong and Singapore. As mentioned, the new law ensures that any funding agreements must be disclosed and covers situations where costs orders may be brought by respondents, providing much-needed guarantees in cases where the claimant would not have the capital to cover such costs.
Commercial Deals

US Investors Face Wide Array Of Funding Opportunities Abroad

The US remains the market with the highest volume of class action litigation, and has been the go-to market for investors looking to capitalize, but this does not mean they should restrict themselves to American cases. Whilst litigation financing in Europe and Asia may be less familiar territory to US investors, there are a plethora of opportunities within the UK, Australian, Dutch and German markets all offering tangible rewards for smart investing. In a recent feature for Funds Europe, director of business development at Broadridge, Trip Chong, outlines the potential opportunities and risks that need to be analyzed by US investors before diving in. She highlights that not only should stand-alone cases in other jurisdictions be considered, but also multi-jurisdictional cases that originate in the US could see investors reap significant gains. Key to engaging in these foreign markets, she emphasizes, is the ability to monitor a breadth of cases and to dive into the detail on each matter. Within this analysis, there are multiple factors that investors are urged to consider, from the individual jurisdiction’s nuances, the resources required to adequately fund a claim, and importantly, any reputational risk that may be at stake for aligning with a litigant. However, she also raises the important point that these markets may be seeing higher rates of successful and high-value settlements than in the US, and that ESG-specific cases are gaining particular traction in Europe. Investors should closely evaluate each funder’s proposition and ensure adequate risk-management through insurance provisions. Yet despite these necessary risk mitigants, it would be foolish for US investors to eschew exploring the many opportunities in other regions that may yield high returns on investment.
Commercial Deals

ESG Litigation Gains Traction With Investors

The ever-growing focus on ESG for companies around the world looks to be a double-edged sword, as investors may soon switch from rewarding companies pursuing ESG strategies with capital to instead funding litigation against those that fail to deliver on their promises. The increasing adoption of third party funding for legal recourse makes this strategy a much more compelling avenue for those seeking to pursue claims against industry giants, who otherwise might have been beyond the reach of smaller entities. Sarah Mills of FNArena outlines the growing potential of this industry, highlighting major players such as Burford Capital, Omni Bridgeway and Harbour Litigation Funding as some of those already taking advantage of these ESG-specific opportunities. Existing activity has the potential to be boosted by the fact that the SEC plans to enforce mandatory reporting of emissions for companies by the end of 2022. Those embedded in the industry already see a path to further expansion, with Ed Truant, CEO of Slingshot Capital, predicting that ESG-specific litigation could solidify as an individual asset class for investors. This is further reinforced as the industry is starting to see funders dedicate specialist funds towards ESG litigations, such as North Wall Capital’s £100 million investment in PGMBM to bring ESG claims, and Aristata Capital bringing in £40 million to drive its impact litigation fund. There are concerns that this type of litigation may not have staying power beyond the short-term. However, insiders like Mr Truant believe that as the wider litigation finance industry continues to grow, this will naturally be replicated in the ESG arena, as multinationals are held to account over their environmental promises.
Case Developments Commercial

LegalPay Continues To Dominate Indian Market With Latest Case

The market-leader for litigation finance in India, LegalPay, is continuing to trail blaze with its latest funding for Just Deliveries to pursue claims against Coffee by Di Bella India. The cafe chain is being sued for unpaid invoices due to Just Deliveries, a logistics solutions company based in Mumbai, which provided the cafes with delivery logistic services for a monthly rate. CXOtoday reports that despite multiple demands for payment, Coffee by Di Bella India has still failed to fulfill these invoice requests. As a result, Just Deliveries enlisted the services of LegalPay in order to engage in arbitration actions in an effort to seek recovery of the payments.  The case represents another major action for LegalPay, which remains the only homegrown third party legal funding provider in India.
Case Developments Commercial

Johnson and Johnson’s ‘Texas Two Step’ Talc Restructuring 

Johnson and Johnson (J&J) has engaged a restructuring vehicle to leverage bankruptcy protection for its talcum claim awards. The 'Texas Two Step' is a legal investment strategy that limits overall financial loss due to class action and other corporate litigation. J&J has allocated $2B to a new company that will hold litigation liability.  Litigation Finance Journal has collated 12 highlights to a Brief for Amici Law Professors on Support of Appellants of the J&J talcum business reorganization. Legal scholars are labeling J&J's approach as an extraordinary effort by wealthy and sophisticated individuals who aim to bypass bankruptcy court supervision.  Authors of the brief summarize that J&J has leveraged Texas state law to organize a unique limited liability approach to talc claim exposure and corresponding expenses.  Some say the total addressable market for talcum claims exceeds $10B, so it will be interesting to see how this plays out. 
Commercial

Guernsey Stands Out As Innovative Hub For UK Funders

The growth of the litigation funding industry in the UK over recent years has not just taken place in the capital, as the Channel Islands of Guernsey and Jersey have become a go-to destination for funders. Major industry players including Burford Capital, Therium and Bench Walk Advisors have all established a number of funds in these territories. This reputation as an attractive location for litigation funders has also resulted in a growing array of companies specializing in support services for both funders and lawyers anchoring themselves in Guernsey. Writing in Bdaily News, Simon Graham of Lancaster Guernsey highlights that the islands’ appeal to the industry stems from its welcoming regulatory environment, its proximity to London, and a legal framework that is easily approachable for UK law firms. He also points out that this coincides with an emphasis on innovation, including the Guernsey Registry which has implemented a streamlined and effective online interface for entities to more easily manage administration. With this solid foundation, Mr Graham expects to see continued growth and evolution for the litigation finance sector in Guernsey and Jersey.