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Commercial Special Features

Key Takeaways from the LFJ Podcast with Mani Walia of Siltstone Capital

On the latest episode of the LFJ Podcast, we spoke with Mani Walia, Managing Director, General Counsel and Chief Compliance Officer and Siltstone Capital. Siltstone is a Houston-based alternative investment firm that invests in litigation finance claims, focusing on $500,000 to $5 million funding requests. Siltstone is also producing LitFinCon, the inaugural litigation finance conference in the Houston area, set to take place on March 2nd and 3rd of 2022.

Below are some key takeaways from the discussion:

Re: Siltstone’s focus areas

Siltstone was founded nearly ten years ago in 2013 by a group of entrepreneurial, energy focused investors. Our team being entrepreneurial, was able to recruit folks with a very interesting set of backgrounds—not just energy sophistication on the nitty gritty of energy assets, but a legal team that understood that there might be value in claims.

Through the course of our energy work, we discovered that there may be times that we have to evaluate cases and see if there is any merit to a potential case. And that’s where my addition to the team was something that shaped how we look at things. I have a litigation background and am honored to have learned how to case pick from one of the premiere litigation firms in the country.

We had the impetus to start a litigation finance fund focused on energy because of the unique skills set that our team displays. So these two strategies are distinct, they have different bases and stakeholders—but there’s overlap.

Re: Limited Partners and Structuring of Funds

I’ll note that our funds are separate, so we have a set of funds that are tailored to the energy investor, and then a separate set of funds for those who might want exposure to litigation finance. We’re proud to have successfully closed our second such litigation finance fund in December of last year, 2021.

Some folks want a little exposure in both areas, in particular because of the uniqueness of our team—the energy expertise and the focusing on finding value in energy litigation.

Re: Types of Claims: Jurisdiction, Single case v Portfolio, Sizes?

First, we’re really proud to have entered into a very collegial space. Most of the litigation finance brethren that we have have helped pave the way for entities like us.

We’re guided by our experience, so we enjoy a laser-like focus with helping provide solutions only in the commercial context. We haven’t ventured outside into consumer finance or injury cases.

We also, for the same reasons, enjoy funding patent infringement cases. Earlier in my career, I tried patent infringement cases and by actively litigating a case or subject matter you really develop the ability to understand what makes a case meritorious or advantageous or what makes the case not good. So those are the two sub-focuses in our commercial lending. We enjoy looking at single case risk or portfolio funding.

Q: On ESG Investing & Access to Justice

At the end of the day, the job of a funder is to make sure there’s access to justice for somebody who thinks he or she should have a day in court. Embedded in that is an inherent ESG leveling-the-playing-field thought process.

Learn more about Siltstone’s upcoming event, LitFinCon (the inaugural litigation finance conference in the Houston area), here.

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Case Developments Commercial

Discovery Application Filed by Russian Billionaire Over Litigation Funding

By Harry Moran and 4 others |

The sanctioning of Russian business owners since 2022 has led to a plethora of litigation, as one ongoing case in Florida sees two Russian nationals in a dispute over the funding of litigation between them.

Reporting by Bloomberg Law covers ongoing proceedings in a Florida court, where sanctioned Russian billionaire Andrey Guriev is seeking discovery on the funding of claims brought against him by Alexander Gorbachev. The discovery application relates to a series of cases brought against Guriev by Gorbachev over his claimed partial ownership of Guriev’s company, with Gorbachev’s legal costs, insurance and additional expenses having been paid by Sphinx Funding LLC, a subsidiary of 777 Partners. 

Gorbachev failed in his claim brought against Guriev in the UK, but has since claimed that he does not have the £12 million that he has been ordered to pay to Guriev in court costs. Mr Guriev’s counsel from Boies Schiller Flexner, explained the reasoning behind the discovery application in a memorandum of law, stating:

“Mr. Guriev hopes to discover information relevant to the identities and ultimate sources of the funds provided by the third-party funders who financed Mr. Gorbachev’s failed, frivolous, and potentially fraudulent claims, as well as the true motives and objectives in bringing those claims.”

In response to a prior application by Guriev to have the two funders added as parties to the case, Joshua Wander, managing partner and co-founder of 777 Partners, stated that even though the company had covered some of Gorbachev’s legal costs, it had no stake in the result of the litigation. Furthermore, Wander had claimed that his companies had no paid any of Gorbachev’s legal costs after May 2023, following a “breakdown in the relationship between Alexander and the funders”.

Case Developments Commercial

£16m Settlement Reached in Dispute Between Funder and Investor’s Estate

By Harry Moran and 4 others |

The funding of arbitration claims brought against nation states represent challenging opportunities for legal funders, with the potential of a large return balanced against the complicated nature and prolonged timelines of these disputes. A new settlement in the High Court demonstrates that these issues can even extend to disputes between the claimant and funder, even when a valuable settlement is secured.

Reporting by the USA Herald covers the move by the High Court of Justice of England and Wales to finalise the settlement in a dispute between litigation funder Buttonwood Legal Capital, and the estate of late Finnish mining investor Mohamed Abdel Raouf Bahgat. The £16.74 million settlement which was approved by the court on Tuesday ended the legal action that Buttonwood began in 2022 to recover a share of the award won in Bahgat’s arbitration case against Egypt.

As Mr Bahgat died on 8 October 2022, the settlement was reached with his estate. The arbitration claim dated back to 2000 when Bahgat was arrested by the new government and had his assets frozen and his mining operations project seized. The arbitration ended in 2019 at a tribunal in The Hague where Bahgat was awarded $43.8 million, which following two years of interest and an enforcement dispute, finished as a $99.5 million payout in November 2021. Buttonwood brought a claim to the High Court in the following year to retrieve its share of the amount, further complicated by a prior renegotiation of terms between Buttonwood and Bahgat in 2017.

Neither Buttonwood Legal nor the Estate of Mr Bahgat have publicly commented on the settlement.

Commercial Regulatory Issues

LSB Director Argues Funding Should Move to a “Mandatory Model” of Regulation

By Harry Moran and 4 others |

With next Monday set as the deadline for the Civil Justice Council’s (CJC) Interim Report and Consultation on litigation funding, we are beginning to hear more vocal arguments about the approach the government should take towards regulating the litigation funding industry.

An article in Legal Futures provides an overview of remarks given by Richard Orpin, Director, Regulation & Policy at Legal Services Board, at a consultation event for the CJC review in Oxford. In his speech, Orpin advocated for “moving away from the voluntary model of regulation to a mandatory model” for litigation funding, suggesting that it should be brought “into the remit of the FCA (Financial Conduct Authority).

Orpin argued that the rise in the use of litigation funding had “coincided with an increase in poor practice by some law firms in receipt of that funding,” and that “this pattern of behaviour undermines trust confidence in the ‘no win, no fee’ sector.” Orpin put forward the view that regulators needed to take a “more proactive” stance, highlighting his organisation’s concerns over “poor standards of client care, short-term financial gain being put above the interests of client and duty to the court.”

Other speakers at the event varied in their perspectives, with Richard Blann, head of litigation and conduct investigations at Lloyds Banking Group, similarly arguing that the current model of self-regulation was “ineffective and inadequate” and that the Association of Litigation Funders (ALF) “has no teeth”. 

Adrian Chopin, managing director and founder of Bench Walk Advisers, offered a dissenting view and questioned some of the preconceptions about funding, saying that the suggestion there are “waterfalls where the funders take everything and the client gets nothing” demonstrated a “gross level of ignorance”.