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Commercial Regulatory Issues

Landmark New York Court’s Decision Strengthens the Future of Litigation Funding

The following piece was contributed by Guido Demarco, Director and Head of Legal Assets at Stonward.

In a groundbreaking legal battle that pitted Petersen Energía SAU and Petersen Energía Inversora SAU[1] (the Petersen Companies) against the Republic of Argentina, the recent decision by the District Court of Southern District of New York has far-reaching implications for the litigation funding industry. This landmark ruling reaffirms the critical role litigation funders play in providing access to justice, particularly in complex cases involving powerful sovereign entities.

The Petersen case was a high-stake dispute that arose when Argentina failed to fulfill its obligations under the bylaws of YPF S.A, the national oil company. When Argentina privatized the company during the 90s, the country promised under the bylaws a compensated exit to shareholders – a mandatory tender offer – if Argentina were to reacquire control of the company by any means. In 2012, Argentina expropriated Repsol’s 51% stake in YPF but did not fulfill this promise, eventually plunging the Petersen Companies into insolvency and liquidation.

To fight back against this injustice, the resourceful insolvency administrator of the companies, Armando Betancor, devised a liquidation plan in 2015 that included securing litigation funding. Given the immense risks involved, the Petersen Companies had to assign 70% of any recovery obtained in the claims to Burford Capital, the litigation funder. These risks included fighting a fierce sovereign in New York courts, which implied paying high attorney and experts’ fees during a lengthy period, as well as enforcement risks.

During the trial, Argentina attempted to diminish the awarded damages by arguing that the litigation funder was the primary beneficiary of the compensation, seeking to shift the focus away from the plaintiffs’ rightful claims. This tactic sought to undermine the legitimacy of the litigation funding arrangement, implying that the claimants should receive reduced damages due to the involvement of a third-party funder. However, the court’s decision firmly rejected this argument, emphasizing that the responsibility for compensation lay with Argentina, regardless of the funding arrangement, ensuring that the claimants were not deprived of the full measure of their entitled damages.

In a single paragraph, the Judge unequivocally dismissed Argentina’s attempts to derail the case by injecting the role of Burford Capital into the proceedings. The Judge emphasized that the essence of the case remained between the plaintiffs and the defendant who inequitably refused to comply with its promises:

“The Court also rejects the Republic’s effort to inject Burford Capital into these proceedings. This remains a case brought by plaintiffs against a defendant for its wrongful conduct towards them, and the relevant question is what the Republic owes Plaintiffs to compensate them for the loss of the use of their money, not what Plaintiffs have done or will do with what they are owed. The Republic owes no more or less because of Burford Capital’s involvement. Furthermore, the Republic pulled the considerable levers available to it as a sovereign to attempt to take what it should have paid for and has since spared no expense in its defense. If Plaintiffs were required to trade a substantial part of their potential recovery to secure the financing necessary to bring their claims, in Petersen’s case because it was driven to bankruptcy, and litigate their claims to conclusion against a powerful sovereign defendant that has behaved in this manner, this is all the more reason to award Plaintiffs the full measure of their damages.”

Ironically, the most powerful impact for the litigation funding industry comes not from a lengthy legal argument, but from a single paragraph tucked away in a footnote of the judgment. Within this inconspicuous footnote, the Judge’s words resonate loudly, reaffirming the fundamental principles underpinning litigation funding. It reminds us that justice is blind to the funding mechanisms employed to level the playing field and that litigants should not be penalized for seeking financial support, particularly when facing formidable sovereign opponents and obstacles.

No doubt, this will be a beacon in times in which the industry is under heavy scrutiny, especially in Europe under the so-called Voss Report. The ruling reaffirms the legitimacy and importance of litigation funders in enabling access to justice in complex cases where financial backing is essential to bring claims to fruition.

The Court’s decision in the Petersen case is a significant victory not only for the plaintiffs but also for the litigation funding industry. It sets a powerful precedent that reinforces the rights of litigants to secure funding for their cases without sacrificing the full measure of their damages, contributing to a more equitable and accessible legal system. This decision will inspire confidence among potential litigants, funders, and investors alike, encouraging continued growth in the litigation funding industry.

We, at Stonward, are proud of having Armando Betancor, the insolvency administrator of the Petersen companies, in our Board of Investment.

[1] Petersen Energía SAU and Petersen Energía Inversora SAU v. Republic of Argentina, District Court of Southern District of New York, 15 Civ. 2739 (LAP) – 16 Civ. 8569 (LAP)

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Case Developments Commercial

Sony and Apple Challenge Enforceability of Litigation Funding Models

By John Freund |

A pivotal UK court case could reshape the future of litigation finance agreements, as Sony and Apple reignite legal challenges to widely used third-party funding models in large-scale commercial disputes.

An article in Law360 reports that the two tech giants are questioning the validity of litigation funding arrangements tied to multibillion-pound cartel claims brought against them. Their core argument: that certain litigation funding agreements may run afoul of UK laws governing damages-based agreements (DBAs), which restrict the share of damages a representative may take as remuneration. A previous Court of Appeal decision in PACCAR Inc. v. Competition Appeal Tribunal held that some funding models might qualify as DBAs, rendering them unenforceable if they fail to comply with statutory rules.

This resurrected dispute centers on claims brought by class representatives against Apple and Sony over alleged anti-competitive behavior. The companies argue that if the funding arrangements breach DBA regulations, the entire claims may be invalidated. For the litigation funding industry, the outcome could severely curtail access to justice mechanisms in the UK—especially for collective actions in competition law, where third-party financing is often essential.

The UK’s Competition Appeal Tribunal previously stayed the proceedings pending clarity on the legal standing of such funding arrangements. With the dispute now heading back to court, all eyes will be on whether the judiciary draws a clear line around the enforceability of funder agreements under current law.

The decision could force funders to rework deal structures or risk losing enforceability altogether. As UK courts revisit the DBA implications for litigation finance, the sector faces heightened uncertainty over regulatory compliance, enforceability, and long-term viability in complex group litigation. Will this lead to a redefinition of permissible funding models—or to a call for legislative reform to protect access to collective redress?

Case Developments Commercial

Funder’s Interference in Texas Fee Dispute Rejected by Appeals Court

By Harry Moran |

A Texas appeals court has ruled that a litigation funder cannot block attorneys from pursuing a fee dispute following a remand order, reinforcing the limited standing of funders in fee-shifting battles. In a 2-1 decision, the First Court of Appeals found that the funder’s interest in the outcome, while financial, did not confer the legal authority necessary to participate in the dispute or enforce a side agreement aimed at halting the proceedings.

An article in Law360 details the underlying case, which stems from a contentious attorney fee battle following a remand to state court. The litigation funder, asserting contractual rights tied to a funding agreement, attempted to intervene and stop the fee litigation between plaintiffs' and defense counsel. But the appellate court sided with the trial court’s decision to proceed, emphasizing that only parties directly involved in the underlying legal work—and not third-party financiers—are entitled to challenge or control post-remand fee determinations. The majority opinion concluded that the funder’s contract could not supersede procedural law governing who may participate in such disputes.

In dissent, one justice argued that the funder’s financial interest merited consideration, suggesting that a more expansive view of standing could be warranted. But the majority held firm, stating that expanding standing would invite unwanted complexity and undermine judicial efficiency.

This decision sends a strong signal to funders operating in Texas: fee rights must be contractually precise and procedurally valid. As more funders build fee recovery provisions into their agreements, questions linger about how far those rights can extend—especially in jurisdictions hesitant to allow funders a seat at the litigation table.

Commercial Regulatory Issues

Oklahoma Moves to Restrict Foreign Litigation Funding, Cap Damages

By John Freund |

In a significant policy shift, Oklahoma has enacted legislation targeting foreign influence in its judicial system through third-party litigation funding. Signed into law by Governor Kevin Stitt, the two-pronged legislation not only prohibits foreign entities from funding lawsuits in the state but also imposes a $500,000 cap on non-economic damages in civil cases—excluding exceptions such as wrongful death. The new laws take effect November 1, 2025.

An article in The Journal Record notes that proponents of the legislation, including the Oklahoma Civil Justice Council and key Republican lawmakers, argue these measures are necessary to preserve the integrity of the state's courts and protect domestic businesses from what they view as undue interference. The foreign funding restriction applies to entities from countries identified as foreign adversaries by federal standards, including China and Russia.

Critics, however, contend that the laws may undermine access to justice, especially in complex or high-cost litigation where third-party funding can serve as a vital resource. The cap on non-economic damages, in particular, has drawn concern from trial lawyers who argue it may disproportionately impact vulnerable plaintiffs without sufficient financial means.

Oklahoma’s move aligns with a broader national trend of state-level scrutiny over third-party litigation funding. Lawmakers in several states have introduced or passed legislation to increase transparency, impose registration requirements, or limit funding sources.

For the legal funding industry, the Oklahoma law raises pressing questions about how funders will adapt to an increasingly fragmented regulatory landscape. It also underscores the growing political sensitivity around foreign capital in civil litigation—a trend that could prompt further regulatory action across other jurisdictions.