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

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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Burford’s Q2 Profits Surge on New Capital

By John Freund |

Burford Capital has delivered its strongest quarterly performance in two years, buoyed by a swelling pipeline of high-value disputes and a fresh infusion of investor cash.

A press release in PR Newswire reveals that the New York- and London-listed funder more than doubled revenue and profitability in the three months to 30 June 2025. CEO Christopher Bogart credited “very substantial levels of new business” for the uptick, noting that demand for non-recourse financing remains “as strong as we’ve ever seen.”

The stellar quarter follows a lightning-quick, two-day debt offering in July that raised $500 million—capital Burford says will be deployed across a growing roster of commercial litigations, international arbitrations, and asset-recovery campaigns. Management also highlighted significant progress in portfolio rotations, underscoring the firm’s ability to monetise older positions while writing new ones at scale. Investors will get a deeper dive when Burford hosts its earnings call today at 9 a.m. EDT.

Burford’s results arrive amid heightened regulatory chatter in Washington and Westminster, yet the numbers suggest the industry’s largest player is unfazed—for now—by talk of disclosure mandates and tax levies. The firm emphasised that its legal-finance, risk-management and asset-recovery businesses remain uncorrelated to broader markets, a pitch that continues to resonate with pension funds and endowments hunting for alternative yield.

For litigation-finance insiders, Burford’s capital-raising prowess and improving margins could have ripple effects: rival funders may face stiffer competition for marquee cases, while law-firm partners might leverage the firm’s deeper pockets to negotiate richer portfolio deals.

Australian High Court Ruling Strengthens Class-Action Funders

By John Freund |

Australia’s litigation-funding industry just received the judicial certainty it has craved.

Clayton Utz reports that the High Court, in Kain v R&B Investments [2025] HCA 26, unanimously held that the Federal Court may impose common-fund orders (CFOs) or funding-equalisation orders at settlement or judgment—ensuring all class members, not just those who signed funding agreements, contribute to a funder’s commission.

The Court reaffirmed Brewster’s bar on early-stage CFOs but found late-stage CFOs fall within the “just” powers of ss 33V(2) and 33Z(1)(g) of the Federal Court Act. Crucially, the bench rejected “solicitor common-fund orders,” ruling that any CFO benefiting plaintiff firms would contravene the national ban on contingency fees outside Victoria.

For funders, the decision cements the enforceability of commissions in nationwide class actions and removes a major pricing risk that had lingered since Brewster. For plaintiff firms, however, the ruling slams the door on a hoped-for new revenue channel.

The Court’s reasoning—tying funding commissions to equitable cost-sharing rather than contingency returns—will likely embolden funders to back larger opt-out claims, knowing a CFO safety-net is available at settlement. Meanwhile, plaintiff firms may redouble lobbying efforts for contingency-fee reform, particularly in New South Wales and Queensland, to reclaim ground lost in today’s judgment. Whether lawmakers move on that front will shape Australia’s funding market in the years ahead.

Locke Capital Backs Sarama in US $120 Million ICSID Claim Against Burkina Faso

By John Freund |

A junior gold explorer is turning to third-party capital to fight what it calls the expropriation of a multi-million-ounce deposit.

According to a press release on ACCESS Newswire, ASX- and TSX-listed Sarama Resources has drawn down a four-year, US $4.4 million non-recourse facility from specialist funder Locke Capital II LLC. The proceeds will pay Boies Schiller Flexner’s fees and expert costs in Sarama’s arbitration against Burkina Faso at the International Centre for Settlement of Investment Disputes (ICSID).

Sarama alleges the government retroactively revoked its Tankoro 2 exploration permit in 2023, halting development of the flagship Sanutura project. An arbitral tribunal chaired by Prof. Albert Jan van den Berg held its first procedural hearing on 25 July; Sarama’s memorial is due 31 October, and the company is seeking no less than US $120 million in damages.

Under the Litigation Funding Agreement, Locke’s recourse is limited to arbitration proceeds and the ownership chain of Sanutura; Sarama’s other assets remain ring-fenced. Repayment occurs only on a successful award or settlement, with Locke’s return calculated on a multiple-of-invested-capital basis and adjusted for timing.

The deal underscores the continued appetite of specialist funders for investor-state claims, particularly in the mining sector where treaty protections offer a clear legal framework and potential nine-figure payouts.