Last week, Brown Rudnick hosted its third annual European Litigation Funding Conference, proving once again to be one of the premier gatherings of industry thought leaders and executives. The one-day event featured an agenda full of insightful discussions, as senior representatives from funders, law firms, insurers, and other industry firms, all provided their perspectives on the most pressing issues facing the European funding market. The conference served as a reminder of the growing interest in litigation finance, as the venue was packed with attendees and without an empty seat in sight at the start of proceedings.
Before the panel discussions began, the event kicked off with a keynote speech from Camille Vasquez, partner and co-chair of the brand & reputation management group at Brown Rudnick. Vasquez, who gained international recognition for her involvement in the Depp v. Heard trial, offered an alternative perspective on litigation funding, exploring its potential use in defamation cases brought by high-profile individuals or companies. As Vasquez explained, whilst it is commonly assumed that celebrities and other public figures have access to large amounts of liquid capital, this is often not the case. In such situations, Vasquez suggested that litigation funders may be able to play a crucial role in supporting high-profile plaintiffs who are eager to pursue defamation litigation but lack the funds to seek justice.
A Post-PACCAR World and the Future of Regulation
Unsurprisingly, the hottest topic at the litigation funding conference was the ongoing impact of the Supreme Court’s PACCAR ruling and the recent announcement by the UK government that it would introduce legislation to reverse the effects of that decision on litigation funding.
Looking at the long-term impact of the Supreme Court’s decision, Susan Dunn from Harbour provided the quote of the morning, when she emphatically stated that the PACCAR ruling would be remembered as “a footnote in history, not a chapter.” Similarly, Nicholas Bacon KC of 4 New Square Chambers, described it as “a blip in the landscape” of the UK funding market, and pointed out that the situation had in some ways had positive effects as it had brought wider public attention to litigation funding.
However, speakers across the day recognised that PACCAR had created unnecessary uncertainty for investors considering engaging with the UK market, and had created fresh talking points for the most vocal opponents of third-party funding. NorthWall Capital’s Alexander Garnier reported that the Supreme Court’s judgement had “made people more nervous about investing in the UK and London”, because it had increased the risk of investments or had increased the perception of those risk levels. According to Professor Rachael Mulheron KC, another negative side-effect of the decision has been the “unfortunate conflation between regulation and PACCAR,” which has made productive discussions around the future of industry oversight more challenging.
As the event’s participants discussed the effects of PACCAR, these exchanges naturally turned to the government’s announcement of new legislation and a potential review into the litigation funding market. With the review suggesting the possibility of enhanced regulation of third-party funding, Woodsford’s Charlie Morris admitted that this aspect of the government’s announcement was unfortunate, as it had “given an opportunity for the anti-funding lobby” and compared it the “politically motivated campaign” that took place in Australia to crack down on litigation funders.
As to what future regulations could (or should) look like, speakers at the conference were divided on certain issues such as a potential cap on the level of returns a funder could take from any award or damages. Morris once again emphasised the need to avoid “broad brush statutory prohibitions”, whilst Dunn firmly argued that a cap on funders’ returns “should not be part of any regulation.” In contrast, Garnier expressed an openness to some form of cap, explaining that he would “welcome clarity” on industry regulations, “even if it involves a regime that includes a cap on damages.”
Offering the most succinct perspective on the funding industry’s view of new legislation, Matthew Lo from Exton Advisors argued that there is “nothing to be afraid of about regulation in general, but the devil is in the detail.” On a similar note, Professor Mulheron suggested that the most important thing for any government plans to introduce new regulations is that “funders have to be around the table” for these discussions.
The Impact of the Post Office Scandal
Closely tied to the UK government’s ongoing attempts to soften the blow of PACCAR, is the role played by the Post Office scandal and the impact it had on bringing the vital role of litigation funding in securing access to justice to the public’s attention. One of the highlights of the day’s discussions was the insight provided by Neil Purslow of Therium, who offered a fascinating account of the funder’s involvement in the sub-postmasters litigation and expressed some frank reflections on the ways it had highlighted the nefarious tactics of defendants.
Purslow described the case as a perfect example of a defendant “spending money on lawyers rather than doing the right thing”, and noted that the Post Office had spent £100 million to fight the case rather than actually providing compensation to the victims upfront. Purslow emphasised this fact in combination with a rebuttal of the oft-repeated claim that Therium had taken 80% of the damages awarded to the sub-postmasters, explaining that the actual return for the funder was around 41%. In light of these facts, Purslow described the arguments in favour of a broader cap on funders’ fees as “nonsense”, and instead highlighted the case as yet another instance of defendants taking “a scorched earth approach to litigation.”
Purslow concluded his contribution to the day’s discussion by recognising that whilst the PACCAR decision had been “a self-inflicted wound”, the industry and government’s reaction has clearly demonstrated that the UK “is a jurisdiction that is supportive to litigation finance.” Furthermore, Purslow praised his fellow litigation funders for “working together collaboratively and sharing ideas” to protect the UK funding industry, and highlighted the value of institutions like ILFA in providing a powerful voice that could “address the issue and get the government to act.”
Economic Pressures, Corporate Cases and Law Firm Funding
During the day’s panel discussions, speakers offered their views on the trends, opportunities and challenges that industry participants have seen over the last twelve months. As many industry leaders have spoken about in the last year, whilst litigation funding is broadly seen as an uncorrelated asset class, that does not mean that it has been, as Matthew Lo put it, “immune to the wider economic environment”. The majority of panellists agreed that the rise in interest rates had continued to apply pressure on funders’ pricing, which then increased cost of financing creating challenges for those funders looking to raise capital.
However, due to these challenging economic conditions, speakers noted that there has been an increase in demand for funding from law firms and corporations, both of whom are facing similar budget pressures whilst still looking to manage their litigation strategies. As Christiane Deniger of Burford Capital explained, many listed companies are actively seeking funding for a portfolio of cases and are “ready and willing to not spend their own money if they can take ours.” Rocco Pirozzolo from Harbour Underwriting added that these corporate cases were often attractive, because key decision makers at these companies share the funder’s perspective that “they have to be commercial and they have to be reasonable.”
When it came to working with corporate GCs and CFOs, there was a broad consensus among the industry leaders present that there was still plenty of work to do around educating these inhouse decision-makers on the nuances of litigation funding. Ayse Yazir from Bench Walk noted that there is often still “concern over the control of the case”, with critics of the litigation finance industry contributing to fears that funders would seize control of the litigation process. Nathaniel Cortez of Moelis acknowledged that whilst these corporate leaders “don’t need to be experts on litigation finance”, it was clear that many GCs and financial directors did not “understand the breadth and depth of the industry”.
The discussions focused on law firm funding proved to be some of the most enlightening exchanges of the conference, with funders and lawyers alike sharing their perspectives on some of the unique challenges and opportunities that this avenue of investing entailed.
Hugo Lestiboudois from SYZ Capital made a clear delineation between straightforward litigation financing and the process of lending directly to law firms. He explained that law firm funding “is not as commoditised as litigation finance is today”, with investors needing to approach it from a business perspective and often having to “compete on terms, rather than on price.” Reinforcing this viewpoint, Chris Benson from Leigh Day argued that this type of funding crucially involves “getting lawyers to think like economists”, and acknowledged that this can be challenging as “a lot of lawyers have no interest in finance.”
Looking at the practical steps involved in law firm funding, both in terms of the due diligence undertaken pre-funding and the ongoing monitoring and reporting that must take place post-funding, the speakers once again provided useful insights. Joshua Katz from Gramercy said that from his firm’s perspective, part of the journey was understanding the law firm’s wider strategic objectives, saying that Gramercy recognised that for a firm there are “some cases you should pursue even if they’re not economical, for the greater good.” Similarly when it came to the ongoing relationship between the funder and law firms, it was not only crucial for practical issues like reporting systems to be in alignment, Lestiboudois highlighted the need for a “cultural fit” between firms.
A High Benchmark for Industry Conferences
By the end of the day, the event’s attendees had been treated to a plethora of engaging discussions across seven separate panels, bolstered by plenty of opportunities for networking and connections between sessions. The full scope and detail of every speaker’s insights could not be encompassed in this single overview of the day’s proceedings, but by the time the agenda concluded with informal refreshments, the conference had succeeded in providing an impressively diverse array of perspectives on litigation funding in Europe.
Brown Rudnick’s third European Litigation Funding Conference proved to be an enlightening experience for those in attendance, with the proceedings expertly guided by the conference chair Elena Rey and fellow moderators from Brown Rudnick, who skilfully guided the event’s packed schedule. LFJ’s team were delighted to meet with fellow attendees who expressed their enjoyment of the event, and we are already looking forward to covering next year’s iteration of Brown Rudnick’s conference.
