Trending Now
  • Joint Liability Proposals Threaten Consumer Legal Funding
Commercial Special Features

Key Takeaways from LFJ’s Special Digital Event on Australia: The Evolution of a Litigation Finance Market

Litigation Finance News
June 17, 2021

Key Takeaways from LFJ’s Special Digital Event on Australia: The Evolution of a Litigation Finance Market

Litigation Finance News
On Tuesday June 15th, LFJ hosted a special digital event on Australia: The Evolution of a Litigation Finance Market. Moderator Ed Truant (ET), founder of Slingshot Capital, helmed a panel discussion  that covered a broad range of issues facing the Australian market. Panelists included Andrew Saker (AS), CEO of Omni Bridgeway, Stuart Price (SP), CEO of CASL, and Patrick Moloney (PM), CEO of Litigation Capital Management.  Below are some key takeaways from the event:  ET: From my perspective, and I have diligenced many managers on a global basis, the Australian fund managers seem to be the most successful and consistently performing fund managers in the world, can you offer any insight as to why that may be the case?  PM: The fact that the panelists here today have been around since the inception of the industry in Australia, it’s given us a long time to think long and hard about not only how we originate these opportunities for investment, but how we undertake the due diligence process, and how we manage those processes. AS: There’s a combination of factors. It’s partly to do with the strength of the legal system here in Australia, involving a sophisticated judiciary. As a second point, there’s historically been limited competition. As a consequence, litigation funders could afford to be more choosy—and cases were generally of higher quality. ET: Another difference in the Australian market is the concept of contingent fees for law firms. Can you comment about why that really doesn’t exist in the Australian market? Is that changing, and what effect may that have? SP: Contingency fees were introduced in 2020 in Victoria, where law firms were able to receive a return/reward of the settlement proceeds. This has really expanded the litigation funding market—providing different forms of litigation funding for plaintiffs—that should be a positive outcome. PM: There’s a strongly held perception in Australia that there’s a conflict of interest between lawyers participating, and having their fees tied to the outcome of a particular dispute resolution. I think that’s one of the reasons Australia has resisted the contingency fee type of charging that has been prevalent for many years in places like the US. ET: Do you find that people consider Australia a market leader in Litigation Finance in terms of innovation? Have you seen examples of Australian innovation cross-pollinating to other jurisdictions? PM: I’m not sure that Australia really has led a tremendous amount of innovation in our industry. Our greatest innovation is in taking this industry and turning it into a business. AS: Australia has been innovative in the evolution of the business, and its coupling with the conducive class action regime we have here in Australia. There are some very good minds around the world within our organization and elsewhere that are taking this industry in new directions. It’s still very much in its infancy, and the next steps for its evolution are going to be interesting and exciting to see. ET: As your business grew, what changes did you witness in terms of regulatory, legislative, etc. And how did those changes affect the market? AS: I’m a recent newcomer to the industry. I’ve been with Omni Bridgeway now for six years. During that period, we’ve seen the growth of the industry and its continued adoption outside the traditional uses of litigation funding. So that’s one of the more significant changes we’ve seen—adoption by corporates, for exploring ways to mitigate legal risk. The other significant issue is the growth of regulation and the industry of criticism that seems to be evolving toward litigation finance, which all started from a very noble social access to justice limb. I think it continues to have those characteristics. But for whatever reason, an ear has been gained for those who are critical of the industry—which will lead to a reassessment of how the industry is regulated and run. PM: I’ve been involved in this industry directly now for 18 years. The greatest shift I’ve observed has been that shift between those who use litigation finance for necessity to those who use it through choice. People who need finances in order to continue their dispute or go through the arbitral process. And the maturing of our industry has now brought it to larger corporates who use litigation finance as an incredibly efficient capital source to run their portfolio disputes and manage risk, and to also bring in an efficient way of managing disputes through to their conclusion. ET: Looking forward, in the insolvency market, there’s an expected tsunami of insolvency claims post-COVID, yet Australia as a country appears to have managed the economic impact perhaps better than the rest of the world. Is the tsunami coming? SP: Australia has done remarkably well on a global scale. Its economy is strong and it seems to have weathered the impact of COVID very well. I’ve been speaking with a number of insolvency practitioners, and they do not expect a tsunami. They certainly don’t expect a large wave—but out of any crisis will always come bad behavior and some insolvencies. So for people who are committed to the insolvency market, when you’re there consistently, you’ll have a relatively consistent stream of opportunities. There is unlikely to be a tsunami—but as ever there will be corporate misbehavior, which can lead to insolvencies.

Commercial

View All
Commercial

Litigation Financiers Organize on Capitol Hill

By John Freund |

The litigation finance industry is mobilizing its defenses after nearly facing extinction through federal legislation last year. In response to Senator Thom Tillis's surprise attempt to impose a 41% tax on litigation finance profits, two attorneys have launched the American Civil Accountability Alliance—a lobbying group dedicated to fighting back against efforts to restrict third-party funding of lawsuits.

As reported in Bloomberg Law, co-founder Erick Robinson, a Houston patent lawyer, described the industry's collective shock when the Tillis measure came within striking distance of passing as part of a major tax and spending package. The proposal ultimately failed, but the close call exposed the $16 billion industry's vulnerability to legislative ambush tactics. Robinson noted that the measure appeared with only five weeks before the final vote, giving stakeholders little time to respond before the Senate parliamentarian ultimately removed it on procedural grounds.

The new alliance represents a shift toward grassroots advocacy, focusing on bringing forward voices of individuals and small parties whose cases would have been impossible without funding. Robinson emphasized that state-level legislation now poses the greater threat, as these bills receive less media scrutiny than federal proposals while establishing precedents that can spread rapidly across jurisdictions.

The group is still forming its board and hiring lobbyists, but its founders are clear about their mission: ensuring that litigation finance isn't quietly regulated out of existence through misleading rhetoric about foreign influence or frivolous litigation—claims Robinson dismisses as disconnected from how funders actually evaluate cases for investment.

Commercial

ISO’s ‘Litigation Funding Mutual Disclosure’ May Be Unenforceable

By John Freund |

The insurance industry has introduced a new policy condition entitled "Litigation Funding Mutual Disclosure" (ISO Form CG 99 11 01 26) that may be included in liability policies starting this month. The condition allows either party to demand mutual disclosure of third-party litigation funding agreements when disputes arise over whether a claim or suit is covered by the policy. However, the condition faces significant enforceability challenges that make it largely unworkable in practice.

As reported in Omni Bridgeway, the condition is unenforceable for several key reasons. First, when an insurer denies coverage and the policyholder commences coverage litigation, the denial likely relieves the policyholder of compliance with policy conditions. Courts typically hold that insurers must demonstrate actual and substantial prejudice from a policyholder's failure to perform a condition, which would be difficult to establish when coverage has already been denied.

Additionally, the condition's requirement for policyholders to disclose funding agreements would force them to breach confidentiality provisions in those agreements, amounting to intentional interference with contractual relations. The condition is also overly broad, extending to funding agreements between attorneys and funders where the insurer has no privity. Most problematically, the "mutual" disclosure requirement lacks true mutuality since insurers rarely use litigation funding except for subrogation claims, creating a one-sided obligation that borders on bad faith.

The condition appears designed to give insurers a litigation advantage by accessing policyholders' private financial information, despite overwhelming judicial precedent that litigation finance is rarely relevant to case claims and defenses. Policyholders should reject this provision during policy renewals whenever possible.

Commercial Regulatory Issues

Valve Faces Certified UK Class Action Despite Funding Scrutiny

By John Freund |

The UK Competition Appeal Tribunal (CAT) has delivered a closely watched judgment certifying an opt-out collective proceedings order (CPO) against Valve Corporation, clearing the way for a landmark competition claim to proceed on behalf of millions of UK consumers. The decision marks another important moment in the evolution of collective actions—and their funding—in the UK.

In its judgment, the CAT approved the application brought by Vicki Shotbolt as class representative, alleging that Valve abused a dominant position in the PC video games market through its operation of the Steam platform. The claim contends that Valve imposed restrictive pricing and distribution practices that inflated prices paid by UK consumers. Valve opposed certification on multiple grounds, including challenges to the suitability of the class representative, the methodology for assessing aggregate damages, and the adequacy of the litigation funding arrangements supporting the claim.

The Tribunal rejected Valve’s objections, finding that the proposed methodology for estimating class-wide loss met the “realistic prospect” threshold required at the certification stage. While Valve criticised the expert evidence as overly theoretical and insufficiently grounded in data, the CAT reiterated that a CPO hearing is not a mini-trial, and that disputes over economic modelling are better resolved at a later merits stage.

Of particular interest to the legal funding market, the CAT also examined the funding structure underpinning the claim. Valve argued that the arrangements raised concerns around control, proportionality, and potential conflicts. The Tribunal disagreed, concluding that the funding terms were sufficiently transparent and that appropriate safeguards were in place to ensure the independence of the class representative and legal team. In doing so, the CAT reaffirmed its now-familiar approach of scrutinising funding without treating third-party finance as inherently problematic.

With certification granted, the case will now proceed as one of the largest opt-out competition claims yet to advance in the UK. For litigation funders, the ruling underscores the CAT’s continued willingness to accommodate complex funding structures in large consumer actions—while signalling that challenges to funding are unlikely to succeed absent clear evidence of abuse or impropriety.