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Highlights from IMN’s 2nd Annual International Litigation Finance Forum

October 20, 2023

Highlights from IMN’s 2nd Annual International Litigation Finance Forum

On October 19th, IMN hosted its second Annual International Litigation Finance Forum in London, bringing together thought leaders from across the litigation finance industry and showcasing perspectives from funders, lawyers, insurers and more across a packed day of content. Following on from the successful inaugural edition in 2022, this year’s event once again demonstrated the growing strength of the litigation funding market, both in the UK and across the globe. The agenda also managed to capture the broad diversity of perspectives within the industry, with lively discussion and debate across the panels and breakout sessions. The day began with a panel focused on the current state of litigation funding in Europe, which immediately demonstrated the changes in the regional market over the last 12 months. Whereas last year’s panel on this topic was dominated by discussion around the Voss Report and the looming prospect of further regulation, yesterday’s conversation was firmly focused on the increasing innovation in the market and an evolving landscape that has seen competing models of third-party financing develop. Litica’s Ed Yell emphatically stated that “the growth in Europe over the last year has been spectacular”, and Iain McKenny from Profile Investment described the current state of play as a “hot bed for evolution.” A core element of the panel’s conversation revolved around the growing formation of a secondary market for litigation finance transactions, with JBSL’s co-founder Sarah Lieber summarising it aptly: “Secondary trading is the hallmark of a maturing asset class, it’s necessary to think about from the beginning of every funding deal.” The second panel of the morning ventured into the economics of the market, looking at the different types of funder capitalization and the challenges faced by funders looking to raise capital in the turbulent market. The panellists explored the differences between the UK and US market, with Ted Farrell from Litigation Funding Advisers, highlighting the lack of portfolio funding deals in the UK and pointing out that “single case is always going to be super expensive.” Neil Purslow explained that from Therium’s perspective, portfolio deals in the UK “usually don’t work well and fail”, resulting in a pivot back towards single case funding. The first of two panels focusing on the role of litigation insurance saw a wide-ranging discussion that covered everything from the type of cover available, to the increasingly varied ways that funders, law firms and insurers are collaborating on deals. On this topic, Robin Ganguly from Aon, stressed the need for funders and insurers “to work together to make the industry sustainable,” emphasising that “deals have to be attractive to everyone or deals won’t get done.” All the panelists agreed that those seeking insurers needed to be more proactive and prepared, with Tom Davey of Factor Risk Management putting it in clear terms: “Get insurance when it’s available, not three weeks before trial.” Unsurprisingly, the following panel discussion on class actions and group litigation immediately turned to the subject of the Supreme Court’s PACCAR ruling. Echoing similar sentiments from speakers earlier in the day, most of the panelists agreed that funders and law firms were taking a pragmatic approach and exploring a variety of alternative structures for funding agreements and working closely with clients to find an optimal solution. Brown Rudnick’s Elena Ray provided the clearest overview of the situation, saying that firms “are not seeing a negative impact on the litigation funding space, so the parties have adjusted well to the PACCAR judgement.” Lara Melrose from Orchard Global described the UK’s group action market as “a very buoyant one” and noted that funders are benefitting from the courts’ flexible approach as demonstrated in recent decisions including the first amalgamation of claims in the CAT and the first application for a collective settlement. Alex Garnier of NorthWall Capital also pointed out that part of funders’ interest in class actions stems from the fact that “they’re not just fought in the courtroom they’re also fought in the court of public opinion”, thereby creating added pressure on large corporates to settle rather than “having their dirty laundry aired in court for months.” After a break for lunch and networking, the agenda once again returned to the topic of insurance, but with this panel putting an added emphasis on the lawyers’ perspective. Prompted by the panel’s moderator, Rocco Pirozzolo, the lawyers on the panel discussed some of the difficulties and frustrations they’ve faced when looking to secure insurance for a case. HFW’s Nicola Gare turned the question on its head, instead pointing out some best practices, with a particular emphasis on those funders who are able to give a prompt decision and explain their reasoning.  Meanwhile, Jamie Molloy from Ignite Insurance, and James Gowen-Smith from Miller, both said that it was important for all parties to remember it was a collaborative relationship and that it always worked best where there was adequate transparency, and where insurers were involved in the strategy discussions as early as possible. The agenda turned from the present to the future in the next panel, with an insightful discussion around new models of delivering legal finance and how new technology, such as emerging AI tools, can be incorporated to fuel future growth. Nick Rolwes-Davis from Lexolent led the calls for more innovation and change in the funding process, arguing that the industry was “probably overdue a change” and that increased efficiency could be achieved by “using technology as a triage tool.” Ben Knowles of Clyde & Co. offered similar support for evolution within litigation funding, pointing out that from a law firm’s perspective, “if technology could improve that due diligence process, then hopefully more cases could be funded.” In the penultimate session of the day, Louise Trayhurn from Legis Finance, and Carlos Ara Triadu from Cuatrecasas, led the room in an engaging and entertaining interactive session. Trayhurn turned the tables on the audience, seeking out the varying perspectives of lawyers and funders on the evolving relationship between funders and law firms. Whilst some attendees were more hesitant than others, the live Q&A format provided an excellent change of pace and allowed for a free-flowing discussion about the unique challenges and opportunities around the lawyer-funder dynamic. For the final panel of the event, the focus shifted to developments in continental Europe and the ongoing implementation of the EU’s Directive on Representative Actions. The discussion, moderated by Joanna Curtis from Brown Rudnick, looked at the differing approaches to implementation across Europe, focusing on the panelist’s local jurisdictions of Germany, Ireland, and Spain. Whilst all the speakers agreed that the directive was a positive development overall, they also pointed out that in terms of enhancing access to litigation funding in Europe, it may not produce significant changes. Elaine Whiteford from Wilkie Farr & Gallagher highlighted that there are still “a number of critical issues that the initiative doesn’t address for funders” in Europe, with the use of funding still primarily limited by each country’s national laws on its permissibility. Overall, IMN’s second UK event managed to provide an insightful exploration of the litigation funding industry and provided attendees with a comprehensive view of the market, bolstered by insights from stellar thought leaders. Across a busy day of content, the forum offered a platform for a variety of perspectives, generating debates and discussions that will no doubt continue long after the event. LFJ looks forward to seeing how IMN continues to build on the success of the 2023 forum in the future.

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U.S. Treasury Reverses Course, Permits Venezuela to Fund Maduro’s Legal Defense

By John Freund |

The U.S. Treasury has amended an OFAC sanctions license to permit the Venezuelan government to finance the legal representation of Nicolás Maduro and his wife Cilia Flores, reversing an earlier position that had blocked such payments and threatened to derail the federal narcoterrorism case against them in New York.

As reported by Latin Times, the amended license, disclosed in a joint letter submitted to U.S. District Judge Alvin Hellerstein on April 25, allows Maduro's defense team, led by Barry Pollack, to receive payment from Venezuelan state funds, subject to strict conditions including a requirement that the funds originate from sources available after March 5, 2026. The reversal comes after OFAC briefly authorized the same payments in January, only to revoke that license within hours, prompting Pollack to argue that the restriction effectively denied Maduro his Sixth Amendment right to counsel.

The development is a notable update to the story LFJ covered in February, when the Treasury's initial blocking position raised novel questions at the intersection of sanctions law, third-party defense funding, and constitutional rights. The new license effectively resolves the dispute, removing what prosecutors had attributed to an "administrative error" and clearing the way for the case to proceed without further litigation over funding access.

For the litigation finance community, the reversal underscores how sanctions law can intersect with the practical realities of who pays for litigation — particularly in cases involving sovereigns, sanctioned entities, or politically exposed individuals. While the Maduro matter sits well outside the commercial litigation funding mainstream, the OFAC framework that governs these payments is the same regime funders must navigate when financing claims involving sanctioned counterparties, foreign state defendants, or assets subject to enforcement holds.

Maduro and Flores remain in federal custody at the Metropolitan Detention Center in Brooklyn and have pleaded not guilty to charges including narcoterrorism conspiracy, drug trafficking, and weapons offenses.

Commercial

‘PPI 2.0’: Claims Firms and Funded CMCs Move to Capture Up to 40% of UK Car Finance Redress Pots

By John Freund |

Law firms and claims management companies are positioning to extract up to 40% of consumer payouts under the FCA's £9.1 billion car finance redress scheme, drawing comparisons to the PPI mis-selling era and prompting unprecedented regulatory enforcement against firms targeting motorists.

As reported by The Telegraph (via Yahoo Finance), the FCA's free redress scheme would deliver an average payout of £830 directly to consumers, but a parallel ecosystem of CMCs and law firms is aggressively soliciting drivers and offering to handle claims in exchange for substantial cuts of any recovery. Named firms include Barings Law — reported to be projecting up to £300 million in motor finance revenue — alongside Sentinel Legal, Consumer Rights Solicitors, and The Claims Protection Agency (TCPA). The Solicitors Regulation Authority is currently investigating 71 law firms, the FCA has forced three CMCs to reduce fees and blocked four others from taking new clients, and regulators have removed more than 800 misleading adverts, including unauthorized uses of Martin Lewis's likeness.

For the litigation finance community, the most notable disclosure in the reporting is the involvement of institutional capital behind the claims machine. Katch Investment Group is identified as a funder of TCPA and Consumer Rights Solicitors, with reported 19.1% returns in 2023 — a data point that underscores the increasingly direct role specialist credit and litigation funders are playing in financing UK consumer claims operations.

The Telegraph piece flags a series of consumer protection concerns: one customer reportedly had 21 different firms simultaneously claiming to represent them, multiple firms have failed to disclose the existence of the free FCA scheme, and several CMCs have advertised average payouts of £5,318 — more than six times the FCA's own £830 estimate. The FCA has emphasized that consumers using law firms or CMCs "must be able to trust those firms to act in their best interests."

The dynamic illustrates the dual-edged nature of mass consumer redress in markets where claims fee economics support a parallel commercial ecosystem. As the FCA scheme rolls out across roughly 12.1 million eligible finance agreements, with most claims expected to settle by end-2027, regulatory scrutiny of the claims-handling tier — and the funders financing it — is likely to intensify.

Commercial

UK Motor Lenders Step Aside on FCA’s £9.1 Billion Redress Scheme

By John Freund |

Major UK car finance lenders, including Santander, Barclays, and Lloyds Banking Group's Black Horse division, have signalled they will not legally challenge the FCA's £9.1 billion motor finance redress scheme, removing a significant barrier to one of the largest consumer remediation programs in UK financial services history.

As reported by Times & Star, the Finance and Leasing Association (FLA) confirmed it would not mount a legal challenge despite continued industry concerns about the scheme's design. The decision clears the path for the FCA to begin issuing payments later this year, with most of the roughly 12.1 million eligible finance agreements expected to be settled by the end of 2027. The scheme provides for an average payout of £829 per driver, with £7.5 billion flowing directly to consumers and the balance covering administration and claims handling.

The lenders' stand-down comes as the redress program faces a separate legal challenge from Consumer Voice, the consumer advocacy group preparing to argue the scheme will significantly underpay drivers relative to common-law damages. That challenge runs alongside parallel group litigation in the Court of Appeal — covered separately by LFJ — where lenders are seeking to dismantle a 5,000-claimant group motor finance case in the courts.

For litigation funders, the lenders' acceptance of the FCA scheme structure has mixed implications. On one hand, the regulatory channel reduces the need for individual or grouped court proceedings on the underlying mis-selling claims, potentially shrinking the addressable market for funded litigation in the motor finance space. On the other, the scheme's perceived inadequacy — central to Consumer Voice's challenge and to the parallel group litigation — preserves a meaningful tail of funded claims pursuing damages outside the regulator's framework.

The FCA scheme also sits alongside an active claims management ecosystem in which CMCs, law firms, and their backers are positioning to capture sizable shares of consumer payouts, a dynamic that has drawn intensified regulatory scrutiny in recent weeks.