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Commercial

Virtual Depositions Coming from Remote Legal

Remote depositions have become part-and-parcel of remote legal work during the pandemic. Now, one litigation funder has taken steps to partner with a remote deposition legal tech solution. LexShares reveals that it has partnered with Remote Legal, a legal services provider that lends expertise to video conferencing for depositions, court reporting, and arbitrations, among other proceedings. This technology differs from standard video chat applications, as it was specifically tailored to meet the needs of legal proceedings to facilitate socially distant meetings. Some of the features available include virtual exhibition of documents, live voice-to-text, a tech-enabled court reporter, and dedicated private chatrooms for privileged discussions. It’s expected that even after COVID, virtual proceedings will continue as they are a cost and time-saving measure.
Announcements Commercial

Deminor successfully raises EUR 40m to expand the growth of its litigation funding portfolio

Deminor Recovery Services announces the closing of a financing round consisting of equity, senior bank loans and mezzanine finance for an amount up to €40 million to support its rapidly growing litigation funding activities globally. 

The financing round is supported by the current shareholders as well as new investors including Saffelberg Investments, Finance&Invest Brussels and various other investors. The bank financing portion is provided by KBC Bank.  

Along with its current cash position and expected realizations from the existing portfolio, Deminor expects to be able to commit €90 million in new litigation funding investments over the next 2-3 years. These investments will be on Deminor’s own balance sheet, allowing the company to continue to make fast decisions and propose flexible funding terms. Crucially, Deminor’s Investment Committee retains the ultimate decision making authority as to which cases to invest in. 

Deminor’s core mission is to help investors and businesses monetise their legal claims by supporting individual and group litigation. We put our own money at stake:  we pay all legal costs and only receive a return if a case is successful and our client achieves a recovery. Originally started in the field of collective securities actions where Deminor has built and occupies a leading place in non-US jurisdictions, the business has been extended and now also includes private antitrust litigation and B2B commercial litigation.  

Deminor prides itself on providing more than just funding. We only take on good causes and we never compromise on our values. We stand by our clients and are determined to achieve recoveries for them. Clients can benefit from Deminor’s 13 year-long expertise in supporting complex international litigation and, where legally permitted, its unique claims management and back-office execution capacity. The company boasts one of the most impressive track records (over 80%) in the industry thanks to its careful selection of cases and management of litigation risks.  

To serve its growing client base in the US, UK and Asia, Deminor has opened offices over the last 3 years in New York, London and Hong Kong. The team is composed of 30 legal, finance, marketing and claims management professionals speaking 13 different languages.  

“This funding round is a milestone in the history of Deminor. We are thrilled to welcome our new investors and expand our success story thanks to their support. The additional capital will allow us to respond to the growing demand that we are seeing for litigation funding in our core markets and to achieve our mission statement: to give businesses access to the best legal representation and highest standards of justice when pursuing their legal claims.”, says Erik Bomans, CEO of Deminor. 

Commercial Special Features

Key Takeaways from LFJ’s Podcast with Louise Trayhurn of Legis Finance

Louise Trayhurn, Executive Director of Legis Finance, sat down with LFJ to discuss a broad range of industry topics, including Legis’ bespoke approach to managing client relationships, the various funding and insurance products her company offers, the growing trend of GCs and CFOs extracting more value out of their legal assets, and what trends she predicts for the future of the industry. Below are key takeaways from the conversation, which can be found in its entirety here. Q: How does Legis approach the issue of pricing transparency and consistency? A: At Legis, we share with the client, the law firm, and the funder all of the returns listed. It’s very transparent. Every party can see what’s going on. If they don’t like model scenarios...then we can adjust it. ‘Pivot’ is a word that’s used frequently in our office. We’ll constantly amend, adapt, and make changes here and there to try and get everybody comfortable. Q: In the US, contingency fees have long been used by lawyers to share risk with their clients. Can you explain the benefits of DBAs as opposed to conditional fee arrangements and the billable hour model? What has Legis specifically been doing to press for this transition to DBAs? A: We formed a working group for those interested in DBAs. The idea behind it was to...discuss the possibility of a standard damages-based agreement. I, having a background as a litigator, thought this was fairly ambitious. We got a whole group of litigators together, and as well as looking at the broader picture of a standard form document, we had a more urgent task, which was to work together to provide feedback to the team looking at amending the DBA regulations. Q: In the wake of COVID, we’re seeing a mindset shift that’s been talked about for years. What have you been noticing in terms of how GCs and CFOs are considering litigation finance? What do you see happening out there? A: GCs are sitting in their board rooms and they’re acting as cost centers. They take their seat and the first thing they’re asked is ‘okay, how much is legal spend going to be this month?’. There are numerous companies out there committed to spending a certain amount each month on their litigation. It’s just money going out the door, and it’s hard for those GCs to show their value other than reducing the amount of legal spend this month for the same results. Now, you can use litigation finance to generate revenue. Instead of being a drain on the company’s cash, you can in fact add; you can be a profit center, if you use your litigation assets to make money for the company instead of costing them money. You have funders willing to do the due diligence in an independent manner—I mean, we don’t get paid for picking bad cases—and GCs have in their hands a very powerful independent check on their cases, and that can help in all kinds of ways. Q: Broadly speaking, what predictions do you have in terms of the maturation of the Litigation Finance market. What can we expect this year and down the road? A: Certainly I’m going to say increased use of funding. And apart from that, there may well be a consolidation of existing funders, or funders standing behind funding. Increased use of different financial products to back funding—insurance or other entrants to the market. Or a secondary market of products available to funders to manage their own risk, and possibly a secondary market available to investors to package these litigation assets, standardize the documentation, and buy and sell risk. That should help open the marketplace for these institutions that want to create secondary markets.
Commercial

Asset Recovery Predictions for 2021

The IMF estimates that cumulative losses of the pandemic-caused downturn will surpass $12 trillion. With that in mind, creditors will have to adapt and adjust more than ever in order to enforce judgments and hold debtors accountable. Burford Capital explains that currently, debtors are more likely to hold back cash rather than pay off debts—even after a judgment. Stalling, evading, and taking a hardline stance are all done to buy debtors more time. It’s expected that there will be an increase in debtors reneging on previous agreements—necessitating more aggressive enforcement strategies. Economists tell us to expect more high-profile insolvencies in the coming year. In addition to parsing the assets of an insolvent company, creditors will likely have to investigate officers and directors for hidden assets. Indemnity clauses may also impact the creditor’s ability to locate and seize assets. This is likely to lead to a rise in debtors evading transparency measures, which were enacted specifically to hold them accountable. Several jurisdictions are pushing for greater transparency for owners and officers. The British Virgin Islands recently committed to greater transparency on beneficial ownership. If this catches on, places like Nevis and the Cook Islands may become even more popular with those wanting to hide assets. As enforcement becomes more difficult and time-consuming, more creditors will be turning to legal funding to pursue collections. Funders who specialize in asset recovery can provide an honest, unbiased assessment of the situation, and if applicable, recommend a course of action. Funders can allow creditors to pursue debt collection without taking on increased financial risk. As insolvencies increase, savvy creditors should be formulating a plan of action they can set in motion should the worst occur.
Commercial

Greenpoint Accuses Apollo of Stealing Trade Secrets

As the Litigation Finance industry expands, competition is bound to grow increasingly fierce. A new lawsuit filed by Greenpoint Capital Management may illustrate the competitive nature of the industry. Bloomberg News details that the case, Greenpoint Capital Management v Apollo Hybrid Value Management, was filed in Manhattan federal court last week. The suit claims that GCM afforded Apollo various trade secrets during talks for a proposed investment. Apollo allegedly forwarded this information to Kerberos Capital Management—a direct competitor of GCM. The information in question includes a method to evaluate new cases for risk and potential ROI before making an offer of legal funding. Both Apollo and Kerberos dispute the claims made by Greenpoint. Kerberos, which is not named as a defendant in the suit, expressed disdain for the idea that their funding model is in any way based on Greenpoint’s materials.
Commercial

The Future of Representative Actions in the UK

A recent panel discussion held by the British Institute of International and Comparative Law included partners from Hogan Lovells Matthew Felwick and Valerie Kenyon, along with Augusta Maciuleviciute of BEUC, Rhonson Salim of Ashton Law School, and Therium Capital Management’s Neil Purslow. Together, they discussed the EU Representative Actions Directive. JD Supra details the finer points of the panel, which focuses on the immediate future of representative actions (which vary in several ways from class actions) in the EU and UK. The first issue was the availability of qualified entities to bring claims under the new directive. Neil Purslow noted that litigation funders may find the qualifications too narrow for compliance. Insisting on a qualified entity may result in a bottleneck that impedes access to justice. The issue of ‘forum shopping’ was also discussed, relating to the Brussels I Regulation which is expected to limit how much forum shopping is permissible. Many speculate that data breaches and warranties will be focal areas for the new directive, and that the new directives on representative actions may see the biggest impact in places like Germany, which has no existing framework for collective cases. Most notably for litigation funding, the directive contains language meant to prevent funders from exerting influence over litigation or settlement decisions. These provisions will vary from one member state to another, but there appears to be a widespread commitment toward limiting the influence of third-party funders. Of course, funders are mainly interested in cases where a worthwhile recovery is possible. In jurisdictions where awards may only cover material damages, claimants might find a dearth of funders willing to sign on. Finally, the pros and cons of publicity on specific representative actions were discussed. Obviously, there are plusses and minuses on both sides. The main caveat being whether publicity could damage an entity whose liability has not been proven.
Announcements Commercial

Exton Advisors launches ‘special situations’ disputes finance service

Exton Advisors, a leading financial advisory firm in litigation, is launching a unique range of ‘special situations’ services designed to help companies look at their disputes in an entirely new way. The move is in response to the increasing economic uncertainty brought about by the global pandemic and sees the firm creating a range of advisory service lines designed to help corporates and their legal teams find the right funding products to support their litigation and unlock potential working capital at a critical time. Established in 2018, Exton Advisors is comprised of consultant practitioners from litigation finance, law, insurance, insolvency and financial structuring. Responding to the rapid growth of litigation funds in the UK in the past few years, the firm was created to offer financial advisory services for in-house lawyers, many of whom need real guidance when it comes to assessing the growing array of funding options available. Many corporate legal teams have significant levels of capital sunk into work-in-progress disputes, but simply don’t know where to start when it comes to funding these cases or how the transactions should be structured. Exton’s special situations advisory service is geared towards turning those disputes into assets, flowing working capital back into the business. John Astill, founder and director comments: “Litigation finance is poised to enter a golden era, but the reality is that the asset class remains opaque and complex. We’ve seen a number of recent judgements highlighting the danger companies and their private practitioners face should transactions not be structured correctly, including adverse costs protection in relevant common law jurisdictions. We’re designed to simplify that complexity and help clients make informed choices.” Whilst corporate legal teams are taking tentative steps to engage with specific funds, they currently have no means to compare options or understand the relative merits and risks locked up in the funding agreement. They also rely heavily on their roster of law firms for advice, many of whom have limited relationships with the funding community. Exton’s team provides them with an independent view on the whole market, which is increasingly seeing new and unfamiliar entrants with significant capital to deploy. Astill continues: “Working directly with one or two funders can result in cookie-cutter solutions. As a result, in-house counsel have historically deferred to their private practitioners to help them arrange funding for their business critical disputes, but that doesn’t always make sense – litigators are appointed for their ability to come out on the right side of a dispute, not their financial advice, and in some circumstances there is a risk they can have divergent interests.” The firm is now working with a number of UK corporates and private practices on new mandates, including many that are springing up as a result of group claims, post-Covid-19. Whilst the independence and insight that the firm provides is important, building trust is the key. Tom Steindler, director, concludes: “Now, more than ever, the organisations we work with require a trusted partner to help them ease balance sheet pressure and realise the asset value locked up in their portfolios of claims and awards. In many ways litigation finance is still a nascent force and we want to provide a true corporate finance advisory service to help companies expertly navigate the asset class and make the most of the opportunities it provides; for us it’s all about simplifying and improving the experience for everyone.” About Exton Advisors Exton Advisors is a specialist litigation finance and insurance advisory business. Its advisory services concentrate on the assessment of the availability of specialist litigation finance across a broad network of capital sources, advice on the preparation of proposals, price and structure comparisons, negotiation of the terms on which finance will be provided, and advice on the structure of finance agreements. This applies to single case or portfolio funding, right through to the monetisation of a claim, award or judgment. Exton provides a variety of pure advisory services too, such as second opinions on deal pricing, support on costs budgeting, pricing and even asset tracing. It also acts as a specialist litigation insurance broker, providing advisory and placement services to meet the complex and challenging needs of businesses, their private practitioners and funding partners. When it comes to disputes finance, businesses need true expertise, deep relationships and often require bespoke, game changing solutions. Exton has a unique perspective and a track record of delivering.
Commercial

Consequences vs Motivation in Litigation Funding for IP Cases

Despite Quibi’s failure to corner the short-form Netflix market, its IP dispute with Eko is still very much alive. Eko is being funded by Elliott Management—which has fought Quibi’s every attempt to get through the discovery process. In fact, Elliott tried to quash an SDNY subpoena investigating how much Elliott knows as the legal funder of the case.

Above the Law explains that this situation and its outcome should be of interest to litigation funders, as well as IP litigators and their clients. After all, the questions raised by Quibi’s opposition to Eko’s attempt to quash the subpoena could set precedent for future IP cases that are backed by third-party funding.

Some have speculated that Elliott’s decision to fund Eko was predicated on a romantic relationship involving a founder at Elliott. Others are focusing on Elliott’s unusual decision to allow Eko to run the case as if money were not an issue.

Quibi seems to suggest that Eko’s inability to demonstrate its assertions is reason enough to allow discovery into the funding agreement. The company also suggest that Eko’s claim for damages is ‘unusually aggressive’ to the point of suspicion. Earlier in the case, Quibi sought to deny that it was the giant in a David v Goliath situation. Now that Quibi had folded, the likelihood of Eko using that argument is slim.

Quibi has further suggested that Eko may be controlling litigation and settlement decisions, contrary to what ethical standards allow. Combined with accusations of Elliott’s disclosure of funding being intentionally belated, it’s a compelling argument for increased discovery.

Ultimately, Quibi asserts that Elliott’s relationship with Eko is business related, not legal in nature. How the court rules in this motion will no doubt impact discovery relating to litigation funders for some time to come.

Commercial

Freedom Foods Faces Second Class Action

Cereal and snack company Freedom Foods is still in voluntary suspension from ASX until its recapitalization is completed in April. Since then, the company sold to Arnott for $20 million. Dairy News Australia details that after a shareholder class action was filed in December, a second class action has now been served. This one, backed by legal funder Omni Bridgeway, alleges mishandling of expenses and inventory. This mishandling allegedly led to a mismanaged audit that negatively impacted investors.
Commercial

ASIC Changes Sunset Date to August 2025

The Australian Securities & Investments Commission (ASIC) has confirmed that it has changed the sunset date of the ASIC Corporations Instrument from October 2020 to August 2025. Lawyers Weekly details that the primary instrument offered exemptions from specific provisions of the Corporations Act of 2001. This was intended to give participants time to adjust to the implementation of the new regulatory rules for litigation funding schemes. This was done for several reasons. Primarily, to address overlap between the primary instrument and the conclusions of the parliamentary joint committee. As yet, the Australian government has not responded to those recommendations. The Senate standing committee also expressed concerns about the primary instrument.
Commercial

Arbitral Awards and Limitation Periods

Arbitral awards are widely enforceable, which is a bonus for the parties involved. However, this enforcement is finite. There are limitation periods which, once surpassed, can render an arbitral award unenforceable. Omni Bridgeway explains that award creditors disregard or underestimate the risk involved in failing to observe limitation periods. If a debtor is not inclined to make payment, local limitations can actually work to their advantage. Once the limit for the arbitral award passes, the award might become unenforceable in jurisdictions where available assets are located. To add even more complexity, there is no uniform regulation on time periods of arbitration awards. The time period varies from one jurisdiction to the next, and may differ based on other factors. In a 2010 case, the Canadian Supreme Court ruled that the laws on limitation periods for enforcement of an award from outside the country apply as “rules of procedure.” Differences in limitation periods between countries is substantial. In Canada, various provinces have time limitations of between 2-10 years. In the US, 3 years is standard. Russia is also 3 years, while China allows only 2. Common law jurisdictions like England and Wales state that awards cannot be enforced after 6 years from the time of the cause of action. Given these facts, a timely enforcement strategy is vital. This should include a thorough discovery process, detailing the attachable assets and a clear delineation of which limitation periods may apply. Blind enforcement is also an option, though the time consuming, complex, and comparatively expensive nature makes this an unattractive option in most situations. Surely, a creditor is free to wait for a debtor to negotiate a settlement or simply pay what they owe. But a savvy creditor will devise a strategy for enforcement and recovery in the event that a debtor does not pay up.
Commercial

Burford Capital Roundtable: Industry Research

A recent roundtable of law firm leaders featured Jason Peltz of Bartlit Beck, Frank Ryan of DLA Piper, and Jason Leckerman of Ballard Spahr. They discussed industry trends, the ongoing impact of COVID, and how to best educate the public about legal funding. Burford Capital Director Christine Azar led the discussion, beginning with the high number of law firm mergers. The panel did not agree with the notion that ‘bigger is better’ when it comes to firm size. Leckerman states that it can be more advantageous to focus on core areas that clients already want and need. It’s likely that firms will focus on attracting those clients who need their specialized expertise, rather than trying to be all things to all people. Certainly, firms will want to focus on factors other than size. The ESG initiatives being adopted are likely to attract new clients who share those values. This includes more than just donating time and money; it involves joining forces with groups that get things done. That said, attracting talent can be challenging regardless of firm size—and finding strong lawyers is vital to client growth and retention. More than 65% of lawyers assert that their firms are considering risk-based practices. Peltz notes that institutional constraints may impede the shift from billable hours to risk-based models. For the panel, it seemed unlikely that big firms are willing or able to develop risk-based practices, even though alternative fee arrangements are becoming increasingly common. Ultimately, the growth of third-party litigation funding depends on clients understanding its value. Helping clients consider this option realistically and accurately is of vital importance—especially when funding is an ideal way to meet the goals of clients.  
Commercial

UK Insurer Launches $1 Billion Litigation Finance Firm

Thomas Miller, UK Insurer, has recently acquired the litigation insurance business—TheJudge Group. This merger has launched Erso Capital, a litigation finance firm with a staggering $1 billion in capital, housed within discretionary funds, single managed accounts, and co-investment funds.  Bloomberg Law details that the litigation finance arm will be led by founders from TheJudge Group, including James Blick, Matthew Amey, and James Delaney. It is expected to provide funding in single cases as well as portfolios, and will engage in claims monetization. The Judge Group is known for offering litigation insurance as an alternative to traditional litigation finance. Litigation insurance is often used to cover lawyer fees in losing cases. CEO of Thomas Miller Group, Bruce Kesterson, explains that TheJudge is a respected entity in this industry, and has a top-notch management team.
Announcements

KBRA Assigns Preliminary Rating to Oasis 2021-1

Kroll Bond Rating Agency (KBRA) assigns a preliminary rating to one class of notes issued by Oasis 2021-1 LLC ("Oasis 2021-1"). The notes are newly issued asset backed securities (ABS) backed by litigation finance receivables. Oasis 2021-1 represents the third ABS collateralized by litigation finance receivables to be sponsored by Oasis Intermediate Holdco, LLC ("Oasis") and the first to include Oasis’ MedPort-branded ("MedPort") medical lien receivables. The previous transaction, Oasis 2020-2 LLC, closed on June 2, 2020. Oasis, through its operating subsidiaries, has a long history as an originator, underwriter and servicer of litigation finance receivables. Oasis is a wholly-owned subsidiary of Oasis Parent, L.P. which is majority owned by Parthenon Investors IV, L.P. The MedPort receivables are originated by various originators with operating histories dating back to 2003. Oasis acquired the various MedPort originators on January 5, 2021. The portfolio securing the notes has an aggregate discounted receivable balance ("ADPB") of approximately $139 million as of the statistical cutoff date. The ADPB is the aggregate discounted collections associated with the Oasis 2021-1 portfolio’s litigation funding receivables, litigation loan receivables, medical funding receivables and medical loan receivables. The discount rate used to calculate the ADPB is a percentage equal to the sum of the anticipated interest rate on the notes, the servicing fee rate of 1.50%, and an additional 0.10%. As of the statistical cutoff date, litigation receivables, Medport medical receivables and Key Health medical receivables comprise approximately 36%, 58% and 6% of the aggregate funded amount of the Oasis 2021-1 pool and have average advance to expected case settlement values of 9.5%, 31.6% and 29.5%, respectively. Disclosures Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above. A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here. Information on the meaning of each rating category can be located here. Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com. About KBRA Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority pursuant to the Temporary Registration Regime. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider.
Commercial

Is the Shell Ruling a Harbinger of More Large Class Actions?

Some say that Britain is in the midst of a third wave of class actions. After the US and Australian markets embraced the practice of collective actions against big businesses and governments, class actions—especially those backed by third-party legal funders—have gained popularity around the globe.

City A.M. explains that some see the combination of claimant firms and litigation funders as having created an exploitative market where businesses find themselves at the mercy of class action claimants. Perhaps what those people really fear is increased access to justice and a fair fight on behalf of those who would previously be steamrolled by huge corporations with limitless resources. A prime example of this is when Shell Oil had to compensate Nigerian farmers for damage resulting from two oil spills.

Fears of large class actions are amplified by COVID, and by the outcry from insurers who assert that they can’t possibly honor all of their policies in the wake of a global pandemic. Complications stemming from Brexit may also bring with them a spate of class actions involving logistical issues. It’s possible that companies will rally together to file a collective claim addressing the impact on their businesses.

Chris Bushell, partner at HFS, warns that a wave of new class actions could be coming. At the same time, others at HFS assert that it’s unlikely that US trends in class actions will repeat themselves in the UK. One main difference between these jurisdictions is ‘opt-out’ (where every impacted class member is considered a claimant unless they specifically ask not to be) and ‘opt-in’ (where claimants must register to become part of the case).

Commercial

Business Challenges of Law Firm Leaders

A recent roundtable of law firm leaders featured a discussion on the most challenging aspects of the COVID crisis. Moderator Christine Azar is a director at Burford and a leading litigator. Participants include Jason Leckerman, Litigation Chair at Ballard Spahr, Jason Peltz, managing partner at Barlit Beck, and Frank Ryan, Global Co-Chair and Co-CEO of DLA Piper. Burford Capital details the main points of the discussion, along with forecasts for the future of Litigation Finance. Frank Ryan began by explaining that first and foremost, safety is everyone’s most pressing issue. Beyond that, responding quickly and effectively for sophisticated clients is more important than ever. Jason Peltz asserted that an unrelenting uncertainty combined with the already tenuous world of high-stakes commercial litigation has engendered a nearly untenable amount of doubt, frustration, and fear. Jason Leckerman agreed and explained that addressing and improving legal tech has made a profound difference in the ability of firms to meet their goals. Participants were not exactly optimistic about a return to normalcy. At the same time, all three expressed pride in the way their firms have adapted and risen to difficult circumstances. Jason Peltz affirmed that client success is indistinguishable from firm success. Firms that evolve, adapt and work together as a team have seen the most impressive results during the pandemic. Frank Ryan is impressed by how quick and agile his team has become, which is a necessary part of staying competitive in this new climate. Jason Leckerman detailed the difficulty in addressing delays, anticipating upcoming challenges, and maximizing the value of existing assets. Ongoing, proactive communication with clients is essential—along with creativity and flexibility in developing cost and fee arrangements. Being able to offer clients value in a climate with some predictability and appropriate risk-sharing is a vital part of successfully meeting client needs in the time of COVID.
Commercial

Third-Party Funding Webinar: Dispute Resolution

As financial uncertainty grows, potential clients of every stripe are looking for ways to finance cases, see their day in court, and improve their bottom line. Legal finance offers a variety of creative solutions to keep balance sheets in the black, and to improve access to justice for those who need it most.

LCM details that Nick Rowles-Davies appeared in a webinar hosted by the UAE branch of the Chartered Institute of Arbitrators. Rowles-Davies began with an overview of litigation funding—specifically detailing the difference between single case funding, class actions, insolvency and liquidation, and portfolio funding arrangements.

Portfolio funding is of particular interest as the fastest growing funding agreement type. Rowles-Davies asserts that corporate clients, in particular, take issue with how funders vet cases.

Legal funding was once predominantly about David v Goliath situations where citizens found themselves at the mercy of corporate or government entities with seemingly limitless funds. But as ‘legal funding’ morphs into ‘providing legal capital’, some fear that average citizens in need might be pushed aside in favor of corporate clients that can ultimately provide larger rewards.

Globally, litigation funding is only increasing in acceptance. Some countries have, or are in the process of creating, new laws to invite and loosely regulate the industry. A few countries are poised to become desirable hubs for international or cross-jurisdictional litigation.

The COVID pandemic has pushed the industry forward in several ways. In the early days of COVID, some corporate clients put cases on hold, fearing that looming budgetary issues could arise. Businesses considering launching a dispute may have decided against it for budgetary reasons. Law firms representing corporate clients share these concerns—all of which have led to a rise in litigation funding.

That trend is expected to continue for many years to come.

Commercial

Mastercard Class Action Set to Return to Court in March

One of the largest class actions in UK history is set to return to court for a hearing next month. Millions of consumers in the UK could see payouts of hundreds of pounds each in an action claiming the credit giant charged unlawfully high fees between May 1992 and June 2008. Money Saving Expert details that law firm Quinn Emanuel launched the action against Mastercard in 2016. The case alleges that in addition to businesses enduring fees, the costs were likely passed on to consumers regardless of what payment methods they used for purchases. As such, anyone over age 16 who made purchases during the impacted time frame is represented in the case, provided they lived in the UK for three consecutive months. The Mastercard case is the first mass consumer claim being brought under the provisions of the Consumer Rights Act of 2015. The case is made possible because of the new collective action regime, and thanks to funding from Innsworth Capital Limited. The funder has pledged GBP 60 million toward the case and will take a percentage of any monies awarded. Mastercard insists that the claim is actually being pushed by US litigators as a money-making scheme. Spokespeople from Mastercard disagree with the claims made and assert that their payment technology has provided benefits to UK citizens. The March hearing will determine if the case will proceed.
Commercial

Steinhoff Shareholders Unmoved by Settlement Offer

Claimants in the Steinhoff class action can’t shake the suspicion that former chair Christo Wiese is getting far more than he should. A proposed global settlement in the class action has Wiese’s recovery rate estimated to be at least eight times more than that of shareholders—and possibly as much as 15 times more. Money Web details that around 20% of the shareholders affirmed their desire to fight the proposed settlement. That number may be growing. The settlement, announced in June 2020, stated that almost GBP 1 billion is available to be allocated among the claimants. The total amount itself is not in question—but the allocation amounts are very much in dispute. If the parties cannot reach an agreement, liquidation could occur—leaving shareholders with very little incentive to move forward. However, the threat of liquidation has not been sufficient motivation for shareholders to accept a settlement they deem patently unfair. It had been thought that Conservatorium’s settlement with Steinhoff would add some degree of certainty moving forward. Conservatorium had, after all, filed at least four challenges to Wiese’s claim against Steinhoff. Instead, the settlement served as a reminder of the difficulty in getting claimants on board with any settlement. Some have speculated that Wiese’s obvious preferential treatment in the proposed settlement is so egregious that claimants would rather risk liquidation than accept it. One sticking point appears to be the dichotomy between contractual claimants like Wiese and his affiliates, and MPCs who purchased their shares on the open market. If the proposal isn’t amended to rectify this imbalance, it’s likely to be formally rejected.
Commercial

LCM Successfully Secures $50 Million Credit Facility

Responding to increases in legal finance applications, Litigation Capital Management announced that the company has secured $50 million in credit. This will increase the funder’s ability to bankroll cases. Proactive Investors reports that the facility comes via Northleaf, a private markets investment firm with global reach. The cost of the facility has a cap of 13% per annum. Northleaf has extensive experience with Litigation Finance. Chairman of LCM, Jonathan Moulds, explains that the credit facility represents an opportunity for growth.
Commercial

Commercial Dispute Negotiation Strategies

Part Two of Omni Bridgeway’s podcast features input from Robert Bordone, Senior Fellow at Harvard Law. This portion features discussion around unproductive behaviors of others, alternative negotiation methods, positional bargaining, and takeaways from the Harvard Negotiation Institute Workshop. Omni Bridgeway’s Clive Bowman leads the discussion, which begins with positional bargaining. This concept involves two parties with drastically different opening positions—not unlike children and parents negotiating a bedtime. Trying to reach a compromise between two extreme stances often leads to both sides digging in. Escalation leads to impasse, or worse yet, results that mean almost nothing to either party. Untethered bargaining (that which doesn’t account for what each side values), can be so random that the results become downright arbitrary. Preferably, principled negotiation (AKA, mutual gains negotiation) is a more nuanced and effective approach. In this bargaining style, we look past the stated positions of each side and discover what each actually values. Once everyone’s true goals are understood, it becomes feasible to create an agreement that allows everyone to have their needs met. How can a negotiation take place when one party’s intransigence impedes open discussion? Active listening is one suggestion Bordone offers. Of course, this is more than just listening. It’s taking steps to see that the other party feels heard and respected. That can go a surprisingly long way toward getting someone to actively sit at the bargaining table. Asking pointed questions about individual requests or provisions can shed light on what they value. Even people who only seem to complain can be reached this way—by simply asking them what doesn’t work for them. This information can then be used to deduce what the other party is looking for, even if they refuse to say so outright. Given his insights, Bordone’s experience with difficult negotiators is obviously varied and thorough.
Commercial

Patent Litigation and IP Trends

Widespread economic uncertainty often gives rise to an increase in IP lawsuits, as companies seek to extract value from IP assets. Right now, regulatory changes are taking place around the world that will make things easier for patent holders. Burford Capital explains some of the trends taking shape around the world. Companies based in Asia often see the US as an attractive jurisdiction for IP enforcement, partly due to the large damage awards doled out to plaintiffs. Meanwhile, China is endeavoring to create a more friendly environment for IP litigation. New law in China is set to take effect in June of this year. This includes several industry-specific protections and increases in damages for intentional infringement. It’s predicted that China will see an uptick in IP litigation in 2021 and beyond. Some trends suggest that there is pent-up litigation activity in China that will reveal itself in the coming months. Germany is also seeking to expand its reputation as a desirable legal venue. The Unified Patent Court Agreement was ratified in November. Some say this heralds the passing of Unitary Patent legislation in the years to come. That would allow one European Patent Office request to seek IP protection in as many as 25 EU member states. This would make filing for patent protection simpler and less expensive. In the EU, so-called Big Tech is already facing increased regulation. There is speculation that this will generate a thirst for IP litigation. Recently, the EU announced investigations into Amazon and a continued inquiry into Google and Facebook. The upcoming Digital Services Act is poised to further transform the landscape for competing Tech companies. While no one can be 100% certain of what’s to come, it’s clear that IP litigation shows no signs of slowing. Indeed, there is already expanded interest in monetizing strategies for patent holders.
Commercial

Burford Capital Portfolio Performance Sees Best Year Ever

Burford Capital has announced that it will resume shareholder payouts this year, after suspending dividend outlay in 2020. Reports from the funder indicate that group-wide portfolio claims rose 8%, totaling $4.6 billion. Global Legal Post details that Litigation Finance has experienced much less business disruption than anticipated. While the first part of the year was impacted by slowdowns, there was a rebound in the later months. Much of this is credited to an increase in portfolio funding agreements. Christopher Bogart, Burford CEO, reveals that the firm is positioned to grow and expand. Burford’s balance sheet stood at $336 million as of the end of last year when the funder experienced an all-time high return of 92%.
Commercial

Dispute Resolution Negotiation Strategies

Negotiation strategy in commercial dispute resolution is a nuanced and complicated endeavor. Chief Investment Officer at Omni Bridgeway, Clive Bowman, discusses the issue with Robert Bordone, Senior Fellow at Harvard Law. Omni Bridgeway details some of the theories behind specific negotiation strategies, how to best achieve the outcome you want, and how and why negotiations should create value. Bordone begins by explaining that negotiating isn’t just a meeting to settle litigation. Negotiation is happening any time one party seeks to influence or persuade another—which is ongoing in the legal world. In any negotiation, part of the challenge is to get what you want while ensuring that what you’re offering the other party is a reasonable and attractive option. Obviously, dispute resolution will be more complex and contentious than simply making a deal. Disputes may be tinged with anger, fear, outrage, or they may be emotional over a loss. That aside, the idea that one can either ‘win’ or ‘lose’ a negotiation can make some overly intransigent, which makes mutually beneficial agreements even more difficult to reach. Preparation for negotiation is essential, even for skilled negotiators. Preparing a flexible settlement offer, considering how much leeway they have to change terms, and locating and addressing potential blind spots are all essential. Bordone goes on to explain that sometimes there’s not enough information to have effective negotiations—sometimes parties try to negotiate too early. Waiting until crucial facts are known by all parties, and letting emotions die down can go a long way toward achieving an effective negotiation.
Commercial

Class Action Regimes in the UK

The UK takes great pride in its legal system and the ability of that system to mete out justice for everyone. This was demonstrated last year, when a test case brought by the FCA was adjudicated in only seven months. It was ultimately resolved by the Supreme Court, which ruled that insurers must cover COVID-related losses for their policyholders. Lawyer Monthly asserts that as class actions increase in number, the UK needs to catch up with the class-action regimes enjoyed by the rest of the world. Indeed, as clients and legal teams can now seek out the best jurisdictions for their cases, the UK would do well to strengthen and solidify laws surrounding class actions. One dominant issue with class actions is opt-in versus opt-out. The Hiscox Action Group, for example, is an opt-in collection of hospitality businesses allegedly harmed by the same entity. This action requires impacted parties to register and agree to the funding arrangement. Opt-out claims, considered preferrable by lawyers and funders, include all impacted parties in the claim unless they specifically ask not to be included. This structure is simpler and more inclusive by most measurements. Currently, UK class actions may only involve competition claims. These claims are presided over by CAT, the Competition Appeals Tribunal. If this regime is successful, it may be used as a blueprint for other claim types. Some say there’s good reason to keep class actions on a tight leash. Tales of spurious litigation backed by opportunistic funders have some legal experts worried about clogging courts with frivolous class actions. Realistically, funders have no interest in supporting cases without merit. And the goal of litigation funding is to increase access to justice.
Commercial

Litigation Funding Best Practices Recommendations

It’s estimated that third-party funders put up over $2.3 billion a year to help get lawsuits off the ground. Despite those staggering numbers, the industry is poised for further growth. As COVID-related delays and work stoppages continue, the need for legal funding is expected to surge. National Law Review details that while laws governing litigation funding vary from one state to the next, funders aren’t yet subjected to micromanagement or intense scrutiny in most areas. Last year, the American Bar Association released Best Practices for Third-Party Litigation Funding. It outlines legal and ethical norms for funders and those who work with them to consider. Regarding funding agreements, the ABA suggests that they offer clear terms for who will pay the funder, how, and when. There should also be clear provisions for how, when, and why funding could be withdrawn. Best Practices also details ways in which lawyers and clients can ensure that they retain full control over decision-making in a case. This should be spelled out in the funding agreement. Also, caution should be used when providing information to funders. While funders can and should expect to be updated on the case, confidentiality remains a crucial component of attorney-client relations. In fact, it’s suggested that the language in funding agreements spell out that funders cannot make an effort to control expenses or decision-making in the cases they fund. Ideally, funders would be provided strictly with public documents—but local laws may allow for private documents to be shared, with client permission. While ABA guidelines are not laws, it’s possible that they’ll be referred to by future lawmakers as regulation over the Litigation Finance industry is considered.
Announcements Commercial

BURFORD CAPITAL PROVIDES 2020 BUSINESS UPDATE AND REINSTATES FULL DIVIDEND

Burford Capital Limited, the leading global finance and asset management firm focused on law, today released a business update on its 2020 activities. All figures in this disclosure are unaudited. Certain definitions are provided below; additional definitions, reconciliations and information are set out in Burford’s 2020 Interim Report, which is available on our website at the following address: www.burfordcapital.com/shareholders. As previously disclosed, Burford will announce full preliminary results for the year ended December 31, 2020 on March 24, 2021 at 08.00am EDT / 12.00pm GMT / 1.00pm CET. Introduction1 Burford had the best year in its history for portfolio performance, generating record levels of realized gain and more cash from successes than ever before. Burford ended the year with its highest-ever levels of cash liquidity, and its portfolio of ongoing matters is larger than it has ever been. Burford’s concluded case ROIC rose to its highest year-end level in our history. New business, which suffered from the effects of the pandemic in 1H 2020, snapped back in 2H 2020. Notably, Burford’s YPF-related assets (comprising the Petersen and Eton Park claims) did not contribute to earnings in 2020, for the first time in five years. Burford’s Group-wide total income crossed the half-billion-dollar mark in 2020 for the first time in our history, driven by significant asset realizations during the year. As our managed funds participated in a sizeable share of these realizations (which should generate performance fees for Burford in future years), Burford’s consolidated and balance sheet-only total income was largely flat in 2020 compared to 2019.  Profit after tax was down given modestly higher operating expenses and higher than normal book tax charges. Burford suspended its dividend in early 2020 due to uncertainty around the pandemic, but given the year’s performance and Burford’s strong liquidity position, the Board will recommend that shareholders approve at the Annual General Meeting a full resumption of the dividend at its previous annual level of 12.5 US cents per share, with a record date in June 2021. Although Burford did not pay an interim dividend in December 2020, we will nonetheless recommend payment of the entire full year dividend of 12.5 US cents per share in June 2021. Christopher Bogart, CEO, Burford Capital, commented: “2020 was another year of strong performance for Burford. We achieved record amounts of asset realizations from core litigation finance, which generated more realized gains and cash proceeds from case successes than ever before, driving our cumulative concluded case ROIC to an all-time year-end high of 92%. With cash on Burford’s balance sheet of $336 million at the end of 2020, we are in a strong position to fund the additional future growth we anticipate. We look to the remainder of 2021 with excitement.” Portfolio activity and returns Burford saw strong performance in its capital provision-direct business – its traditional, core legal finance business:
  • Group-wide realizations of $608 million, up 72% (2019: $354 million)
  • Balance sheet realizations of $336 million, up 47% (2019: $228 million)
Those realizations translated into record-breaking realized gains in the capital provision-direct business:
  • Group-wide realized gains of $361 million, up 103% (2019: $178 million)
  • Balance sheet realized gains of $179 million, up 48% (2019: $121 million)
Burford’s successes pushed its concluded case ROIC since inception to its highest-ever year-end level at 92% at December 31, 2020 (2019: 88%) on $1.6 billion of cumulative realizations. Burford’s 2020 realizations were lumpy, consistent with past experience, with an active first half and a slow second half. Even without a global pandemic, such volatility is to be expected from individual litigation matters and thus our portfolio. It is, therefore, difficult to identify the impact of the pandemic on realizations during 2H 2020. It is also difficult to predict the timing and impact of the post-pandemic environment on realizations as delayed cases may resolve alongside undisrupted matters or may be pushed out broadly across our capital provision assets. As the financing we provide often compensates Burford for the extension of a case’s duration, delay can give rise to increased income in successful recoveries where a time-based return component exists. Burford also generated $223 million in Group-wide realizations in 2020 from its capital provision-indirect portfolio, of which $173 million were for the balance sheet. Burford closed the year with the largest Group-wide portfolio in its history: $4.6 billion, up 8% (2019: $4.2 billion), representing a 53% CAGR over the last five years. Cash generation and liquidity (Burford balance sheet only) Almost all of our realizations turned into cash during 2020: the capital provision-direct business generated $325 million of cash proceeds, up 55% (2019: $210 million). The capital provision-indirect portfolio also produced $173 million in cash proceeds as Burford focused on accelerating resolutions in that portfolio in light of the pandemic, contributing to total cash receipts of $519 million. A substantial portion of the $281 million of due from settlement receivables at June 30, 2020 paid in cash during 2H 2020, such that due from settlement receivables at December 31, 2020 were only $30 million. Thus, Burford ended the year with a record-breaking level of liquidity: $336 million of cash and cash management assets, up 63% (2019: $206 million). New business We believe that new commitments were negatively affected by the pandemic in the first half of 2020. However, activity rebounded in the second half of 2020 to return to levels consistent with the second half of 2019, but not sufficiently to offset the slower first half.
  • Group-wide new capital provision-direct commitments were $570 million in 2020, down 40% (2019: $955 million)
    • 2H 2020: $454 million, down only 7% (2H 2019: $490 million)
  • Balance sheet new capital provision-direct commitments were $336 million in 2020, down 37% (2019: $530 million)
    • 2H 2020: $279 million, down only 2% (2H 2019: $285 million)
Burford did not make any new commitments to the capital provision-indirect portfolio in 2020, consistent with our previously disclosed approach. New deployments fell sharply in the first half of 2020 as courts closed and litigation matters (and therefore spending on those matters) slowed. Activity resumed in 2H 2020 and thus we saw significantly higher deployment levels than in 1H 2020, although activity remained below historical levels (and below 2H 2019 when we experienced an unusually high level of initial deployments on new commitments).
  • Group-wide capital provision-direct deployments were $368 million in 2020, down 27% (2019:  $501 million)
    • 2H 2020: $247 million, up 104% from 1H 2020 ($121 million), though down 26% from 2H 2019 ($335 million)
  • Balance sheet capital provision-direct deployments were $225 million in 2020, down 16% (2019:  $269 million)
    • 2H 2020: $158 million, up 136% from 1H 2020 ($67 million), though down 16% from 2H 2019 ($188 million)
Income statement metrics Burford is in the process of preparing its 2020 financial statements, which also are subject to audit; thus, the figures below are preliminary and subject to adjustment. As a reminder, Burford prepares its financial statements on a consolidated basis, which includes the results of certain funds and other entities we are required to consolidate. These consolidated results are different than both our Group-wide results (which include all of our non-consolidated funds as well) and Burford-only results, which exclude the consolidated funds. Burford’s overall portfolio performance was very strong on a cash basis; indeed, Group-wide total income exceeded $500 million for the first time. However, the structure of some of our investment funds means that the Burford balance sheet does not receive or recognize performance fees related to the fund portion of those successes until some future date given the funds’ “European” performance fee structure.  Moreover, 2020 was the first year in five years where Burford’s total income did not include any unrealized gain from the YPF-related assets. Thus, we expect to report the following results for 2020:
  • Total income: $345-355 million on a consolidated basis (2019: $366 million), $340-350 million Burford-only (2019: $357 million)
    • Excluding income from YPF-related assets, which accounted for over half of 2019’s total, 2020 total income rose by $170-$180 million, or by 95-101%, on a consolidated basis and by $175-$185 million, or by 104-109%, on a Burford-only basis.
  • Operating profit (consolidated and unadjusted Burford-only): $240-250 million (2019: $265 million)
    • Operating profit was affected by modestly higher general operating expenses consistent with Burford’s ongoing growth strategy, current expenses related to managing assets in funds where the related performance fees will occur in the future and expenses related to Burford’s New York Stock Exchange listing and other equity-related matters
  • Profit after tax (consolidated and unadjusted Burford-only): $160-170 million (2019: $212 million)
    • Profit after tax was impacted by a large book tax charge, as discussed in our interim report that does not reflect the much lower level of cash taxes actually paid
Covid-19 pandemic Burford’s business has been disrupted considerably less by the pandemic than might have been feared a year ago. To be sure, we saw slowdowns in new business during the first half of 2020, but then a rebound during the second half of the year. Courts and arbitral tribunals have adjusted their processes, although jury trials remain largely suspended. Doubtless we will see some elongation of the lives of some matters, but we have not seen any matters discontinue nor have any parties become insolvent. Our team has adjusted to remote work without much effort. We will not be entirely back to normal until people can safely gather in groups indoors, but we have certainly weathered this terrible time much better than many – and the future likely includes an uptick in disputes and, therefore, financing opportunities for Burford. Definitions and use of alternative performance measures We report our financial results under International Financial Reporting Standards (“IFRS”). IFRS requires us to present financials that consolidate some of the limited partner interests in funds we manage as well as assets held by our balance sheet where we have a partner or minority investor. We therefore refer to various presentations of our financial results as:
    • Consolidated refers to assets, liabilities and activities that include those third-party interests, partially owned subsidiaries and special purpose vehicles that we are required to consolidate under IFRS accounting. This presentation conforms to the presentation of Burford on a consolidated basis in our financials. The major entities consolidated into Burford include the Strategic Value Fund, BOF-C (our arrangement with a Sovereign Wealth Fund) and several entities in which Burford holds investments where there is also a third-party partner in or owner of those entities. Note that in our financial statements, our consolidated presentation is referred to as Group.
    • Burford-only, Burford standalone, Burford balance sheet only, “balance sheet” or similar terms refers to assets, liabilities and activities that pertain only to Burford itself, excluding any third-party interests and the portions of jointly owned entities owned by others.
    • Group-wide refers to Burford and its managed funds taken together, including those portions of the funds owned by third parties and including funds that are not consolidated into Burford’s consolidated financials. In addition to the consolidated funds, Group-wide includes the Partners funds (our first three core litigation finance funds), Burford Opportunity Fund and Burford Alternative Income Fund and its predecessor.
We refer to our capital provision assets in two categories:
  • Direct, which includes all our legal finance assets (including those generated by asset recovery and legal risk management activities) that we have made directly (i.e., not through participation in a fund) from our balance sheet. We also include direct (not through a fund) complex strategies assets in this category.
  • Indirect, which includes our balance sheet’s participations in one of our funds. Currently, this category is comprised entirely of our position in the Burford Strategic Value Fund.
We also use certain Alternative Performance Measures (“APMs”), which are not presented in accordance with IFRS, to measure the performance of certain of our assets including:
  • Return on invested capital (ROIC) means the absolute amount of realizations from a concluded asset divided by the amount of expenditure incurred in funding that asset, expressed as a percentage figure. In this release, when we refer to our concluded case ROIC, we are referring to the ROIC on concluded and partially concluded capital provision direct assets on Burford’s balance sheet since the inception of the company until the current date.
  • Compound annual growth rate (CAGR) is the annual rate of return that would be required for a sum to grow from its beginning balance to its end balance, assuming reinvestment at the end of each year.
Our business activities include:
  • Legal finance, which includes our traditional core litigation finance activities in which we are providing clients with financing against the future value of legal claims. It also encompasses our asset recovery and legal risk management activities, which often are provided to the same clients.
  • Complex strategies encompasses our activities providing capital as a principal in legal-related assets, often securities, loans and other financial assets where a significant portion of the expected return arises from the outcome of legal or regulatory activity. Most of our complex strategies activities over the past several years have been conducted through our Strategic Value Fund.
  • Post-settlement finance includes our financing of legal-related assets in situations where litigation has been resolved, such as financing of settlements and law firm receivables.
  • Asset management includes our activities administering the funds we manage for third-party investors.
Other terms we use include:
  • Cash receipts provide a measure of the cash that Burford’s business generates during a given year. In particular, cash receipts represent the cash generated from operations, including cash proceeds from realized assets, before any deployments into funding existing or new assets. Cash receipts are calculated as the cash proceeds from our capital provision assets, including cash proceeds from related hedging assets, plus cash income from asset management fees, services and other income.
  • Commitment is the amount of financing we agree to provide for a legal finance asset. Commitments can be definitive (requiring us to provide funding on a schedule, or more often, when certain expenses are incurred) or discretionary (only requiring us to provide funding after reviewing and approving a future matter). Unless otherwise indicated, commitments include deployed cost and undrawn commitments.
  • Deployment refers to the funding provided for an asset, which adds to Burford’s invested cost in that asset. We use the term interchangeably with addition.
  • Deployed cost is the amount of funding we have provided for an asset as of the applicable point in time.
  • Liquidity refers to the amount of cash and cash management assets on our balance sheet.
  • Portfolio refers to the total amount of our capital provision and post-settlement assets, valued at deployed cost plus any fair value adjustments and any undrawn commitments.
  • Realization: A legal finance asset is realized when the asset is concluded (when litigation risk has been resolved). A realization will result in Burford receiving cash or, occasionally, some other asset or recognizing a due from settlement receivable, reflecting what Burford is owed on the asset. We use the term interchangeably with recovery.
  • Realized gain/loss refers to the total amount of gain or loss generated by a legal finance asset when it is realized, calculated simply as realized proceeds less deployed funds, without regard for any previously recognized fair value adjustment.
  • Unadjusted Burford-only refers to Burford-only income metrics without adjustment, as presented in prior years, to exclude the impact of intangible amortization and certain other expenses.
  • YPF-related assets refers to our Petersen and Eton Park legal finance assets, which are two claims relating to Argentina’s nationalization of YPF, the Argentine energy company.
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 law firms and clients around the world from its principal offices in New York, London, Chicago, Washington, Singapore and Sydney. For more information, please visit www.burfordcapital.com. This communication shall not constitute an offer to sell or the solicitation of an offer to buy any ordinary shares or other securities of Burford. This release does not constitute an offer of any Burford fund. Burford Capital Investment Management LLC ("BCIM"), which acts as the fund manager of all Burford funds, is registered as an investment adviser with the U.S. Securities and Exchange Commission. The information provided herein is for informational purposes only. Past performance is not indicative of future results. The information contained herein is not, and should not be construed as, an offer to sell or the solicitation of an offer to buy any securities (including, without limitation, interests or shares in the funds). Any such offer or solicitation may be made only by means of a final confidential Private Placement Memorandum and other offering documents. Forward-looking statements This announcement contains “forward-looking statements” within the meaning of Section 21E of the US Securities Exchange Act of 1934 regarding assumptions, expectations, projections, intentions and beliefs about future events. These statements are intended as “forward-looking statements”. In some cases, predictive, future-tense or forward-looking words such as “aim”, “anticipate”, “believe”, “continue”, “could”, “estimate”, “expect”, “forecast”, “guidance”, “intend”, “may”, “plan”, “potential”, “predict”, “projected”, “should” or “will” or the negative of such terms or other comparable terminology are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. In addition, we and our representatives may from time to time make other oral or written statements which are forward-looking statements, including in our periodic reports that we file with the US Securities and Exchange Commission, other information sent to our security holders, and other written materials. By their nature, forward-looking statements involve known and unknown risks, uncertainties and other factors because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and are based on  numerous assumptions and that our actual results of operations, including our financial condition and liquidity and the development of the industry in which we operate, may differ materially from (and be more negative than) those made in, or suggested by, the forward-looking statements contained in this report. Significant factors that may cause actual results to differ from those we expect include those discussed in “Item 3, Key Information – D. Risk Factors” in our registration statement on Form 20-F filed with the US Securities and Exchange Commission on September 11, 2020. In addition, even if our results of operations, including our financial condition and liquidity and the development of the industry in which we operate, are consistent with the forward-looking statements contained in this report, those results or developments may not be indicative of results or developments in subsequent periods. Except as required by law, we undertake no obligation to update or revise the forward-looking statements contained in this report, whether as a result of new information, future events, a change in our views or expectations or otherwise.
Commercial

Neil Woodford Announces New Investment Firm

After a forced liquidation in 2019, Neil Woodford is back. The former “Oracle of Oxford” announced his new business venture, WCM Partners, after a public apology for what transpired in his last business. The new venture will be based in Jersey and Buckinghamshire. The Guardian reports that a recent Sunday Telegraph interview included an apology for losses at the Woodford Equity Income Fund. The fund was disrupted by a short-selling attack against legal funder Burford Capital, leading to a massive drop in Burford share price that led to an eventual liquidation of Woodford's fund. In the interview, Woodford asserted that investor capital could have been recovered had the firm not been forced into liquidation. In addition to Burford Capital, Woodford’s previous investments included Purplebricks and Provident Financial. Prior to the liquidation, Woodford was criticized for investing in small, private companies that were difficult to sell. It’s noteworthy that an investigation into Woodford’s last venture by the Financial Conduct Authority has not been published. One might think that a prerequisite before regaining investor confidence—especially since some of Woodford’s previous investors have yet to receive the last of their money back, and many others suffered steep losses. Woodford did claim responsibility for the underperformance of his investment strategies, and said he was “very sorry.” Woodford’s comments are unlikely to elicit any sympathy, since he earned millions in dividends just before the firm collapsed. He claimed he’s been forced to sell one of his homes, worth about GBP 30 million. Woodford states that his last failed venture shouldn’t be the epitaph of his illustrious career, even as he understands that investors may be understandably reluctant to trust him in the future.
Commercial

Changes in Disclosure Laws Threaten Class Actions

Treasurer Josh Frydenberg continues his assault on class actions by making permanent what was meant to be a temporary regulatory shield. The extension of the COVID-inspired policy means that corporations breaching their disclosure obligations may now only be subjected to civil penalties in situations where they acted knowingly and with negligence or recklessness. Financial Review details that before COVID, disclosure rules were more strict. A shareholder lawsuit could be pursued when company officers did not disclose relevant information—regardless of the intent. This makes sense, as the intent doesn’t negate shareholder losses. ASIC is still able to prosecute criminal breaches when they occur, but unless malicious intent can be established, shareholders are unlikely to see their day in court. Meanwhile, Frydenberg claims that these are necessary changes needed to ensure that litigation funders face even more regulatory scrutiny. The treasurer also suggested that class actions backed by third-party funding should register as managed investment schemes.   As one might expect, big business is strongly in favor of the new policy. It was also recommended by the Parliamentary Joint Committee for Corporations and Financial Services. Frydenberg claims that this puts Australia’s policies more in line with those in the UK and US courts. Opponents of the measure suggest that it’s another in a long line of ways in which Frydenberg besmirches litigation funders with accusations of ‘opportunistic’ or even ‘frivolous’ class actions. Essentially, companies and officers will not be held liable for conduct that is deceptive or misleading, unless “fault” is also proven. Without the realistic threat of shareholder class actions, what’s to stop companies from engaging in deception or misleading shareholders? Still, the recent parliamentary inquiry was not complimentary toward legal funding, asserting that it “uses” the justice system to generate a return on investment.
Commercial

Law Firm Panels and General Counsel

More often than not, corporate legal departments have their own preferred provider network of law firm partners. Periodically, these networks are reevaluated and updated to streamline strategy or control costs. These occasional reviews have become more frequent, and requests for proposals (RFPs) are up 25% from where they were in 2017. As restructuring and budget shortfalls are becoming increasingly common thanks to COVID, these panel reviews are likely to continue.

Burford Capital explains that while corporate legal departments are retooling and adapting, partnering with a legal finance company may make a lot of sense. Risk-sharing, for example, by entering a portfolio funding arrangement—can help buttress otherwise stressed balance sheets.

In-house lawyers often say that they’ve chosen not to pursue valid, promising legal claims due to cost. By leveraging legal finance, firms in that situation could simply use non-recourse funding to increase liquidity at the same time they lower their own risk.

Legal finance may help achieve many of the goals GCs pursue, as they review their legal networks. The expertise of established litigation funders is a boon to any legal team. Their experience is more likely to lie in vetting cases, possibly filling a knowledge gap within the existing team.

Legal finance makes budgeting easier by increasing the certainty of incoming funds. Funders can be utilized not just for the funds themselves, but for strategic purposes as well. In addition to expertise and a winning track record, funders should be well-financed and open to transparency. Scale is also important, so it’s vital to choose a funder that can meet your legal finance needs.

Establishing and evaluating legal partner relationships should be a regular occurrence for GCs. The time to reevaluate isn’t after a meritorious case emerges. The key is to be ready to strike when the opportunity presents itself.