Clarifying the Ethics and Responsibilities Inherent in Litigation Funding

Clarifying the Ethics and Responsibilities Inherent in Litigation Funding

The following is a contributed piece from Nick Rowles-Davies, Executive Vice Chairman of Litigation Capital Management. Along with Andrew Saker, CEO of Omni Bridgeway, and Neil Purslow, Co-Founder of Therium, Nick will be a panelist on LFJ’s upcoming special digital conference — an industry roundup of the major events impacting commercial litigation funding in 2020, and what to expect in 2021.  Recently, there has been a lot of discussion around litigation finance. This is generally a good thing, as although litigation finance is no longer an unknown dark art, the industry still benefits from a heightened profile as it progresses on the journey from obscure to mainstream. That said, recent theoretical musings have concerned the ethics surrounding a funder’s involvement in a case, some funders’ closer associations with law firms and the duties of the lawyers running funded cases. These are important issues that should be discussed and debated openly, albeit more usefully by practitioners and funders who have real experience of such matters in jurisdictions where funding is permitted, so as to avoid naïve commentary that betrays a lack of practical knowledge and understanding of how these matters actually work. One issue raised recently is the concern that using funding can create a conflict between the duties of the lawyer to their client and any duty to the funder. There is a suggestion that in this regard, funders create a ‘practical difficulty’ for lawyers, who are torn between protecting the interests of their clients and pleasing investors. The only duty of the lawyers in a matter which is financed by a third-party funder is always the one to their client. Professional funders invariably include a provision within their funding agreements that requires the lawyers to act in accordance with their professional duties and any regulatory requirements. That said, the practical reality is that any professional funder will wish to ensure that the interests of the client and the funder are entirely aligned. No funder wants to create a situation where the client has little or nothing to gain from the outcome of the case. The simple reason for this is that the funder does not influence or control the decision making in the litigation or arbitration. They cannot, and attempting to do so would put the funder’s investment at risk. Funders provide passive capital and once they have decided to invest in a case there are only certain circumstances where a withdrawal from the case is permitted. In reality, given the experience of the established professional funding cohort, most clients are keen to discuss their case with the funder in a way that seeks out the funder’s views and gives the client the benefit of the many years of experience that the funders have gained. Despite the suggested concerns, funders do only have a limited and pre-agreed role in any decision making, and the funding agreements reflect that position. It has also been suggested that clients should seek independent advice on the terms of the funding agreement, namely alternative advice from the lawyers running the actual case. That does happen, although it is not mandatory given that the parties are commercial entities seeking to enter into a commercial agreement, but then neither is it mandatory for a client entering into a DBA/contingency fee agreement with their lawyers in England and Wales. It has been observed that there are law firms who are forging closer links or associations with funders and whether that, also, raises questions of duty or loyalty. The commentary above is equally applicable to this. Lawyers know where their duty lies, and professional funders have no interest in interfering in that. Perhaps a more pertinent question is to ask why these associations are happening. Since the last financial crisis, the law firm model has been changing with corporate clients insisting on higher value and better predictability on fees. In a downward trend since 2008, law firms have been losing out on collections on billable time. Moreover, the most important issue and the area that in house legal teams believe needs the most attention is the provision of more creative and alternative billing solutions.[1] One way in which law firms can offer an alternative is by the provision of litigation finance. Law firms that are forging closer associations with funders are showing that they understand their clients’ needs and are reacting to their clients’ requests by offering an alternative. The legal market is extremely competitive. It should be assumed that all the lawyers pitching commercial clients for work are very good lawyers. Law firms, particularly in the current financial climate, not only have to address the requirements of those commercial and corporate clients, but they need to set themselves apart from the competition. They need to change the narrative and distinguish themselves in a crowded market. The firms that have made such arrangements are benefitting from the ability to do this and are gaining more work from existing clients and winning new clients with the benefit of their associations with litigation funders. Used intelligently, litigation finance is an excellent business development tool for law firms. However, these associations go much further than simply being a response to in house corporate demands or the business development needs of law firms. The benefits to the law firms and to their clients are numerous, as they are of course to the funders. Nothing in these arrangements is, should be, or indeed could be, exclusive. The law firm should always act in the client’s best interests. Whilst the funder may see all of a firm’s potential funding opportunities, it is incumbent on the funder to create an arrangement that is always going to be competitive for the law firm’s clients. That is a significant benefit to all parties. The established professional funders consider every case on its own merit and risk profile and could not guarantee that they will always offer the cheapest terms – to do so would undermine one of the cardinal rules practiced by real funders, namely the pricing of risk. Accordingly, there will be occasions where the funder with whom the firm has an association cannot provide terms that meet the client’s demands for a particular case. Whilst the regular referral of cases is a benefit to the funder, there is real value to both funder and law firm in the knowledge and experience gained by working closely together, understanding the methodology and then adopting the processes and the thinking undertaken by the funders, even using similar terminology and document precedents. This exchange of information means that the law firm really understands what it takes to obtain approval for funding. That leads to a better result for clients. There is no time and money wasted in hopeless applications and cases that can be funded are executed more swiftly whilst those that cannot be funded rejected swiftly, or do not make it past the law firm’s triage process which has been honed by continued education from the funder. It is incumbent on any new industry to listen to concerns, ethical or otherwise, and respond with appropriate understanding and professionalism to address those concerns. All of the issues raised recently have been asked and answered many times before. The litigation finance industry has matured significantly in the last 10 years and is now treated, rightly, as a useful and often necessary tool in any disputes lawyer’s toolbox. The general international trend is one of growing acceptance, increasing adoption of, and accelerated adaptation to, litigation finance—particularly in sophisticated international hubs for dispute resolution.   [1] (2019 Report on the State Of The Legal Market by the Georgetown University Law Centre and Thomson Reuters Legal Executive Institute & Peer Monitor)
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Omni Bridgeway Posts Strong FY25 After ‘Transformational’ Year

By John Freund |

Omni Bridgeway has reported a step-change year, pairing robust investment performance with a balance sheet reset that positions the platform for its next growth phase. The ASX-listed funder highlighted headline income of $651.3 million, a $3.6 billion portfolio (up 29% year over year), and A$5.2 billion in assets under management. Returns were anchored by a 2.5x MOIC across 60 full and partial completions, while operating discipline showed through with a 6.2% reduction in cash opex. Management framed FY25 as both a consolidation of strategy and a proof point for the firm’s fair value marks.

An article in PR Newswire notes the year also brought 52 new investments totaling A$517 million in commitments and A$525.9 million added to fair value. Crucially, Omni executed its Fund 9 transaction with Ares—fully deleveraging and “significantly derisking” the balance sheet—while also validating its model with third-party institutional capital. CEO Raymond van Hulst called FY25 “a positive year with excellent investment returns and a transformative transaction,” adding that the platform is well placed for continued growth.

For a sector navigating evolving regulation and disclosure debates, the numbers matter—but so does capital formation. Omni’s ability to recycle capital, expand AUM and originate across jurisdictions reinforces the durability of legal assets as an alternative class.

Apex Litigation Finance Appoints Gabriel Olearnik as Head of Legal

By John Freund |

Apex Litigation Finance has strengthened its leadership team with the appointment of Gabriel Olearnik, a highly experienced litigation funding professional with a global track record in high-value dispute resolution and complex commercial matters.

Over the past five years, Gabriel has originated and reviewed more than 451 litigation funding cases worldwide with an aggregate value exceeding $116 billion, closing deals worth over $700 million. His recent work includes the successful settlement of a high-profile BIT matter as well as executive employment claims in the UK.

Gabriel’s career spans senior roles in UK, US and European litigation funders, where he was instrumental in structuring high-value transactions, securing strategic court orders and conducting multi-jurisdictional investigations. In 2023, he closed a £268 million litigation funding deal in just three weeks, underscoring his ability to deliver results under tight timelines.

Recognised by Lexology as one of only 66 lawyers worldwide to receive the Thought Leaders in Third Party Funding accolade, Gabriel has been involved in matters that have attracted daily media coverage and required innovative dispute strategies. His experience extends to training legal teams, advising on politically sensitive disputes, and executing complex enforcement actions.

“Gabriel brings exceptional global experience, deep sector knowledge, and a proven ability to deliver in high-stakes environments,” said Maurice Power, CEO of Apex Litigation Finance. “His appointment further enhances Apex’s market position and it’s ability to originate, evaluate and fund complex commercial claims for our clients.”

“I am delighted to join Maurice and the team at Apex,” said Gabriel. “Apex’s strong financial backing and their speed of execution make this a natural alignment. I look forward to building on the strong foundation set out by my predecessor, Stephen Allinson, and contributing to the future success of the business.”

Gabriel’s appointment reflects Apex’s ongoing growth in funding small to mid-sized UK commercial disputes and builds on the company’s commitment to delivering fast, fair, and competitive non-recourse litigation funding solutions to claimant’s who may be prohibited from pursuing meritorious cases due to cost and/or financial risk.

Cartiga’s $540M SPAC with Alchemy

By John Freund |

Cartiga, a long-standing player in consumer and attorney funding, is heading to the public markets. The company agreed to combine with Alchemy Investments Acquisition Corp. 1 in a transaction pegged at $540 million in equity consideration, positioning the platform to scale its data-driven approach to underwriting and portfolio management. Management frames the move as about reach and efficiency: tapping a listed currency, broadening investor access to the asset class, and accelerating inorganic growth.

An article in MarketWatch reports that the proposed business combination would take Cartiga public via Alchemy’s SPAC, with the parties emphasizing how a listing could support growth initiatives and acquisitions. The piece notes the strategic rationale—public-market transparency and capital flexibility—as the platform seeks to deepen its footprint in funding for legal claims and law firms.

While final timing remains subject to customary steps (including the shareholder vote and regulatory filings), the announcement marks one of the most significant U.S. litigation-finance capital-markets events of the year.

Cartiga’s trajectory reflects a broader institutionalization of legal finance: more data, more discipline, and more diversified funding channels. The company’s model—providing non-recourse advances to plaintiffs and working capital to law firms—relies on proprietary analytics and scale to manage risk and returns across cycles. A public listing, if completed, would put Cartiga alongside other listed peers globally and provide investors with another pure-play exposure to the asset class’s uncorrelated return profile.