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LFJ Conversation

An LFJ Conversation with Jonathan Stroud

Jonathan Stroud is General Counsel at Unified Patents, where he
manages a growing team of talented, diverse attorneys and oversees a
docket of administrative challenges, appeals, licensing, pooling, and
district court work in addition to trademark, copyright,
administrative, amicus, policy, marketing, and corporate matters.


Prior to Unified, he was a patent litigator, and prior to that, he was
a patent examiner at the USPTO. He earned his J.D. with honors from
the American University Washington College of Law; his B.S. in
Biomedical Engineering from Tulane University; and his M.A. in Print
Journalism from the University of Southern California. He enjoys
teaching, writing, and speaking on patent and administrative law and
litigation finance.

Unified is a 350+ international membership organization that seeks to
improve patent quality and deter unsubstantiated or invalid patent
assertions in defined technology sectors (Zones) through its
activities. Its actions are focused broadly in Zones with substantial
assertions by Standards Essential Patents (SEP) holders and/or
Non-Practicing Entities (NPEs). These actions may include analytics,
prior art, invalidity contests, patentability analysis, administrative
patent review (IPR/reexam), amicus briefs, economic surveys, and
essentiality studies. Unified works independently of its members to
achieve its deterrence goals. Small members join for free while larger
ones pay modest annual fees.

Below is our LFJ Conversation with Jonathan Stroud:

1)   Unified Patents describes itself as an “anti-troll.” You claim to
be the only entity that deters abusive NPEs and never pays. Can you
elaborate?

In the patent risk management space, Unified is the only entity that
works to deter and disincentivize NPE assertions.  Because of the
expense and economics of patent litigation, parties often settle for
money damages less than the cost of defending themselves, paying the
entity, often for non-meritorious assertions. This allows them to
remain profitable, thus fueling and incentivizing future assertions,
regardless of merit. Unified is the only solution designed to counter
that dynamic.  That is why Unified never pays NPEs. This ensures that
Unified never incentivizes further NPE activity. By focusing on
deterrence, Unified never acts as a middleman, facilitating licensing
deals between NPEs and implementors.

2) How does Unified Patents work with litigation funders, specifically?

As many NPE suits are funded or controlled by third parties, we are
often called to consult on and seek to understand litigation funding
and the economics of assertion.  Among other things, we provide filing
data, funding information, reports, and other work related to funding
and also run a consulting business related to negotiations and aspects
of dealmaking affected by litigation funding.  For example, we have
helped identify that at least 30% of all U.S. patent litigation filed
in recent years has been funded (up through 2020), through one
mechanism or another.  We will continue to work to understand the
marketplace and transactions, and endeavor to provide the best insight
into the marketplace that our data affords.

3)  With Judge Connolly’s recent ruling, disclosure has become a hot
topic in the US. How do you see this ruling impacting IP litigation
going forward?

Well before Chief Judge Connolly’s actions, litigation funding
disclosure has been a topic of discussion at the judicial conference,
among other judges, and amongst those implementing and revising the
Federal Rules of Civil Procedure, not to mention Congress and the SEC.
The Judicial Conference has been called to revise the disclosure rules
for over a decade.  Similar disclosure orders or rules applied in New
Jersey, California, Michigan, and another dozen district courts
nationwide, in addition to numerous rulings on admissibility and
relevance in Federal and state courts stretching back decades.  Chief
Judge Connolly’s order has attracted outsized interest in the patent
community in particular.  It quickly exposed some of the 500 or so
cases filed annually by IP Edge as funded, as well as the high number
of patent plaintiffs in Delaware.   Calls for disclosure did not begin
with Judge Connolly; has been a continuing ongoing debate stretching
back decades. Insurance disclosures go back to the early 70s, and
other types of loans or financial instruments are already subject to
certain disclosure rules, in court, governmentally, or by regulators.
Moving forward, the increasing prevalence of litigation funding and
the rising awareness among the judiciary and bar will mean fitful
district-specific under- and over-disclosure until a national rule is
put in place through the Federal Rules of Civil Procedure.  It’s
inevitable.  It’s just a matter of time.

4) Insurers seem to be shying away from judgment preservation
insurance at the moment–is this a trend you see continuing, and how
might this impact IP litigation?

Insurance markets are often dominated by sales-side pressures and so
are susceptible to irrational exuberance and overpromotion of certain
policies.  Couple that with competition amongst brokers to offer
attractive terms for a “new” product, and you have pressures that have
driven down offered rates, a trend that seems to be reversing itself
now. To be sure, judgment preservation has existed in some form for
many years through other funding and insurance sources, and you’ve
always been able to buy and sell claims and judgments on appeal.

The increased emphasis on judgment preservation insurance seems driven
by a handful of brokers successfully selling rather large policies,
coupled with a glut of interest; my understanding is that some of the
recent (and predictable) remand on appeal have dampened
the enthusiasm of that market a tad, but that really just means rates
returning to reasonable levels (or at least growing resistant to
sales-side pressure).  The small JPI market should stabilize,
affording successful plaintiffs the option, and in turn extending
appellate timelines and recovery timelines, especially in
higher-profile damages award cases.  It will generally prevent
settlements below the insured threshold. It should also provide some
incentive to sue and to chase large damages awards in the first place,
if it becomes clear that JPI will be available after a judgment,
allowing for less well-capitalized plaintiffs to recover earlier and
avoid binary all-or-nothing outcomes.

Additionally, the Federal Circuit and other appellate courts will
eventually grapple with the “disclosure gap.” That is, the Federal
Rules of Civil Procedure insurance policies since the 1970s must be
disclosed at the trial level, but not yet at the appellate level; but
the same concerns that animated the 1970 amendments to the FRCP now
apply on appeal, with the rise of JPI.  Circuits will have to
grapple with adopting disclosure rules for insurance policies
contingent upon appeal.

5)   What trends are you seeing in the IP space that is relevant to
litigation funders, and how does Unified Patents’ service fit into
those trends?

Early funding stories were dominated by larger cases and portfolios,
but we are now seeing a trend of much smaller cases being funded, and,
in the case of both IP Edge and AiPi Solutions, with certain patent
aggregators getting creative and funding entire suites of very small
nuisance cases.  We see funding now at all levels, from the IP Edges
of the world to the Burfords, and there is a trend toward investing in
pharmaceutical ANDA litigation and ITC cases.  Both should continue,
which should extend cases, increase the duration and expense of
litigation, and should drive more licensing.  Unified will continue to
seek to deter baseless assertions and will continue to identify,
discuss, and detail the structures, funding arrangements, and suits
related to litigation funding, and continue to show how much funding
is now dominating U.S. patent litigation, to the extent it is knowable.

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LFJ Conversation

An LFJ Conversation with Ondrej Tylecek, Partner and Head of Investments, LitFin

By John Freund and 4 others |

Ondrej is Partner and Head of Investments at LitFin, which he joined shortly after its foundation. He is particularly responsible for the legal agenda, investments, and business relations. Prior to LitFin, he gained professional experience as a lawyer focusing on transactions and corporate law and as an investor in the private sector. Ondrej graduated in law from Masaryk University (Czech Republic) and Brussels School of Competition (Belgium).

Below is our LFJ Conversation with Ondrej Tylecek: 

LitFin has become one of the most prominent litigation funders in the continental EU for follow-on group litigations. Can you take us through the company's growth process - how were you able to effectively scale your business?

I think the key to our success is that, unlike other funders, LitFin is a vertically integrated structure. With that being said, we’re not just deploying the capital into cases brought to us on a silver plate, but we’re actively building the cases from the bottom, going the extra mile, which other players on the market typically don’t. For example, we’re creating personalized onboarding strategies and trying to keep an individual client approach at all times, not relying on third parties doing the work for us, because we want to be sure that the best quality is secured at all times. Also, unlike other litigation funders, we’re not paid managers who take a management fee every year, but we have the ‘funders mentality’ because together with our investors, LitFin’s partners have their own money at stake. That’s what sets us apart, and that’s why we have extra motivation to succeed on the market.

How challenging was it to educate the continental EU market on litigation funding? And what have you noticed in regard to the market's understanding and acceptance of litigation funding as the sector has evolved?

At first it was challenging indeed, because lots of clients could not imagine that such a great service with which we approached them could even exist. Not spending a cent on a court proceeding and only share when the case was successful? That must be a scam then! Nevertheless, I think that we went quite far from there, and nowadays prospective clients typically are aware of the industry and the benefits it brings to them. As litigation funding in Europe matures, besides pricing, the clients typically look into the funder’s track record, legal representation, and overall trustworthiness.

What are LitFin's plans for growth - both regionally / jurisdictionally, and also in terms of product offerings?

Most importantly, due to our rapid growth, LitFin is actively seeking an additional strategic partner to solidify its position as a leading EU litigation funder specializing in follow-on group litigations arising from competition law infringements. With that regard, we are already in discussions with several top-tier potential new business partners in the USA and locally. Our conservative target is to raise EUR 100 million within the next six to nine months to allow us to seize even more opportunities in the litigation finance space and expand our current portfolio, which already exceeds EUR 4 billion in claim value funded with a success rate over 90%.

From a regional perspective, 2024 was a breakthrough year for us in France and the Benelux region, where we successfully funded cases and strengthened our local presence. Our expansion in these markets has been driven by new colleagues from France, led by Juraj Siska, who joined us from the European Commission and who now serves at LitFin as the Director for France & Benelux. Building on this momentum, our focus for this year is on Spain and Italy, where we are already active and see strong potential for further growth.

Regarding product offerings, we remain committed to our core activities in the distressed sector in Central Europe. Beyond that, we have some exciting new products in development, which we prefer to not disclose at this stage. However, regardless of expansion plans, our top priority remains delivering bespoke, high-quality litigation funding solutions tailored to our clients’ needs.

What are LitFin's plans for growth - both regionally / jurisdictionally, and also in terms of product offerings? Last year you have established the first regulated fund (SICAV) in CEE (and one of the first in continental Europe) focused purely on the litigation funding industry. How have investors responded to the fund's launch, and do you foresee additional fund launches in the future?

The investors responded very well, even though we focused on the Czech and Slovak region only and the fundraising period was short. Primarily, we were able to successfully test an interest in this new, uncorrelated asset class and are happy that investors, both institutions and individuals, perceive litigation funding as an interesting and valued addition to their investment portfolios. Regarding the SICAV fund, we’ll be launching a new evergreen sub-fund called ‘Credit’ with a target return of 13% p.a., which will allow qualified investors to be part of our success story without time limitations on the entry.

How are the recent regulatory frameworks such as the Voss Report impacting the funding industry? Do you see industry regulation as a risk for litigation funders going forward?

As one of Europe’s leading litigation funders, LitFin obviously closely monitors regulatory developments like the Voss Report. While it has raised concerns about potential industry regulation, we believe much of the criticism within the report misrepresents the realities of litigation finance. The report suggests excessive funder control over cases and a lack of transparency, but in practice, funders do not dictate legal strategy—claimants and their legal teams remain in charge. Moreover, existing contractual safeguards and ethical obligations already ensure accountability and fairness.

From my perspective, the biggest issue with the Voss Report is that it overlooks the essential role litigation funding plays in access to justice. Many businesses and consumers would be unable to challenge well-resourced defendants without financial backing. As Omni Bridgeway’s Wieger Wielinga rightly pointed out in a recent LFJ interview, ensuring a level playing field in litigation requires financial equality between counterparties, making litigation funding essential. Creating an artificial barrier would ultimately benefit large corporations at the expense of fairness.

We do not see regulation as an existential threat to the industry. If regulation is introduced, we expect it to focus on transparency rather than prohibition, ensuring credibility while allowing the market to function effectively. Markets like the UK and Australia have thriving litigation funding sectors under clear regulatory frameworks, and we expect Europe to follow a similar path. For reputable funders like LitFin, well-structured regulation could actually be beneficial, reinforcing trust in the industry and attracting institutional investors.

LFJ Conversation

An LFJ Conversation with Philippa Wilkinson, Associate Director, S-RM

By John Freund |
Philippa Wilkinson is an Associate Director on S-RM’s Disputes & Investigations team, which is dedicated to providing investigative support to parties to contentious situations. She has experience managing asset tracing investigations, as well as litigation and arbitration support engagements, associated with complex corporate disputes. While her practice is global, Philippa specialises in matters involving Middle Eastern parties, having spent several years in the Middle East, living and working in Tunisia and the UAE. She previously worked as a journalist covering finance and infrastructure in the GCC and wider Middle East, and subsequently covering European infrastructure funds. Philippa has an MA in Near and Middle Eastern Studies from the School of African and Oriental Studies, and a BA in Modern Languages from Durham University. She is a fluent Arabic, Spanish and French speaker. Below is our LFJ Conversation with Philippa Wilkinson. What are the most significant obstacles encountered during asset recovery processes, particularly in cross-border cases? The biggest obstacle is usually the cost of recovery. If the prospect of recovery looks weak or complex at first glance, perhaps because key assets are located in jurisdictions which are not enforcement-friendly, or are held through offshore structures, often the matter is shelved because the client or litigation funder decides it is not a good use of funds. But carrying out some light touch asset tracing at this stage can give the decision-makers confidence that a judgment or award can be monetised, and encourage them to move forward with enforcement or make a funding decision. This can also help funders get comfortable on duration risk, if there are assets which are ‘low-hanging fruit’ and the team can map out a clear path to enforcement. An investigator with asset tracing expertise can provide the information the legal team needs to develop a viable, costed strategy for enforcement and recovery, either by identifying specific assets to target, understanding how and where assets are owned, or instead identifying pressure points and vulnerabilities which will be useful in settlement negotiations. S-RM is acutely aware of the client’s legal strategy. We focus our investigations on the jurisdictions where enforcement is going to be feasible, efficient and cost effective, understanding early that are no attractive assets in a certain jurisdiction, so the whole team can rework their strategy and redirect resources to more viable leads to attachable assets elsewhere. Judgment debtors often decide to dissipate their assets to avoid paying judgments or awards. Pre-action asset tracing and ongoing monitoring gives you a baseline against which to track and document asset dissipation, such as the transfer of valuable assets to proxies (who could be family members or trusted employees), the creation of offshore trusts, and other asset protection structures. If you have carried out a thorough investigation into the asset dissipation and can prove that it is likely to take or has in fact taken place, you can seek worldwide freezing orders in common law jurisdictions such as England, Hong Kong and Singapore to prevent further dissipation, and allowing enforcement against proxies. Often compiling this evidence can be challenging, and this is why you need experts, whether it is obtaining hard-to-locate records in far flung places, using source intelligence to understand the adverse party’s financial position, or developing intelligence on assets. For example, as part of an asset trace in support of a freezing order application, we were told by sources that the adverse party, a shipping company, was using nominees to set up front companies to continue operating ships despite claiming it had no assets to satisfy the award. Following up on this intelligence, we were able to obtain the incorporation documents from the Marshall Islands corporate register and transcripts from the Liberian shipping register, which, on analysis, we found contained a correspondence address linked to the adverse party. These documents supported one part of the legal team’s freezing order application.  Can you discuss how effective asset tracing can reveal hidden value within a portfolio of claims? A portfolio of distressed debt often sits on the balance sheet of a bank, a fund or other entity, and sometimes they are reluctant either to write it off completely, or to invest in recovery. Asset tracing can triage which of the debts might be recoverable, and allow that recovery effort to move forward by making it more attractive for a funder to either finance or acquire. S-RM takes a commercial approach to triaging non-performing loans, focusing on identifying the viable opportunities for recovery. Based on this we can support analysis of how valuable the portfolio might be in the hands of a proactive legal and investigative team. We recently triaged a portfolio of bad commercial debts in the UAE over which the principals of failed companies had provided personal guarantees. When they couldn’t service the debt, they fled the country. We were able to quickly focus on the guarantors who had connections to jurisdictions such as the UK and the US, and owned valuable residential real estate there. Based on our extensive experience of supporting asset recovery, we then classified the debts which made up the portfolio by attractiveness for enforcement, which supported a commercial analysis of the likely return on investment. Following on from this high-level ‘triage’ asset tracing , S-RM supports more in-depth asset tracing efforts once our clients reach the enforcement stage, to ensure that the recovery is maximised by identifying assets and understanding and documenting ownership. S-RM has for many years supported the National Asset Management Agency (‘NAMA’), created by the Irish government in the wake of the 2008 real estate crisis to consolidate bad debt, with asset tracing across Europe to support and inform their negotiations with debtors and recovery efforts. Having successfully recovered nearly EUR 48 billion, NAMA is due to wind up its operations by the end of the year. We are also on the investigations panel for Ukraine’s Deposit Guarantee Fund, which has a mandate to recover funds from its portfolio of distressed assets originating from failures of Ukrainian banks. How have advancements in technology, such as blockchain analysis and digital forensics, transformed asset tracing methodologies? The biggest shift in my opinion is the increasing availability and searchability of data. Some of that is open source or public data – available on the deep or dark web or via data analysis platforms – and with the help of AI search tools we can sift and interrogate that data. In some cases that might be as straightforward as identifying leaked contact details that then lead us on to social media activity that can be a rich source of leads and contextual information about assets. We can also synthesise that data using graphing tools to map out very clearly the web presence and social media interactions of a company or individual, and surface new leads. This can be very helpful in a challenging asset trace where your subject maintains a low profile, or has learned to be discreet about their assets, whereas their associates or family members might not be so cautious. In some instances, we have been lucky enough to find and download leaked documents published by anti-corruption activists and circulated on the web. We then process them in a safe environment so any malware in the data is contained, and then making them machine searchable and translatable using AI tools. Then we are able to map corporate structures that are deliberately obscured and understand how assets are truly controlled. In one recent sovereign asset trace, this type of leaked data showed that government officials were closely involved in the day-to-day management of a state-owned energy firm, directing managers to sign certain politically important contracts in other countries, supporting our client’s argument that the state-owned entity was an alter-ego of the state. In the crypto sector, blockchain explorers play a similar role, to help you navigate and analyse the enormous amount of public data generated by cryptocurrency transactions on the blockchain. When you are working with the victims of crypto frauds and scams, this is vital to understanding the money laundering activity of the threat actors, and getting the recovery process underway. The essential input for this type of work is a wallet ID or transaction hash as a starting point (for example the victim’s original transfer) – without this there is no way to start mapping the transactions. Any investigations firm claiming to be able to identify wallet IDs without such a starting point should be challenged on their methodologies. When we have access to corporate systems, cloud accounts or devices for our investigation, for example thanks to insolvency practitioners, or court orders mandating a search of some devices, the asset recovery team draws on its skilled digital forensics investigators. As part of digital forensic investigations we can recover and analyse a wide range of digital artifacts to guide our research, and also extract large datasets for analysis. Again, with the support of AI tools that allow you to machine read and translate a huge range of documents, and help identify key documents for analysis, we can do this in a much more efficient and targeted way. What legal and regulatory challenges do practitioners face in asset recovery, and how can they be navigated effectively? From the perspective of a corporate intelligence firm, we work closely with legal teams to understand where there are obstacles in a particular jurisdiction and where is attractive for enforcement, adapting our investigation accordingly. We are also very mindful of local laws and regulations regarding how we can work, including privacy laws, regulations on surveillance, and freedom of information laws. In the US, S-RM’s team includes licensed private investigators in New York and Washington DC, and we make sure that we stay in line with regulations on our industry – the lawyers we work with need to feel confident about using our information in court. The direct challenges we face in asset tracing research often relate to shifting laws and regulations around transparency and privacy. For example, in 2021 US Congress passed the Corporate Transparency Act creating a beneficial ownership registry for US legal entities, which we initially hoped might include public access, as such registers are incredibly useful resources for asset tracing, providing documentary evidence of the beneficial ownership of assets. The implementation of the registry is currently on hold while the Supreme Court decides several cases, and there are currently no plans to allow private sector investigators to access the data. Similarly in 2018 the British Virgin Islands and Cayman Islands were forced to prepare to introduce publicly accessible registers of the beneficial ownership of companies. However, since the November 2023 European Court of Justice ruling that public access to such registers infringes privacy rights, the future of access to these registers has been in question. The UK is also planning a new Foreign Influence Registration Scheme (similar to the Foreign Agent Registration Act in the US, which can be a useful source of data around foreign states’ international commercial and lobbying activities, and how funds are channelled) which was intended to come into force in 2024 under the 2023 National Security Act. This can be helpful for developing in-depth analysis on the extent to which a state-owned entity is an alter ego of the state, by considering its participation in coordinated lobbying efforts. This has been delayed indefinitely and we are still waiting to be able to access the data. We are always monitoring for new resources and changes to the way information is accessible, to make sure we are making the most of transparency and anti-corruption laws. Why is a multidisciplinary approach crucial in asset recovery, and how does S-RM integrate various expertise areas in its investigations? At S-RM, we feel we work best when we are an integral part of the asset recovery team, in regular contact with our clients about strategy and working closely with other advisors. That allows us to target our research efforts most effectively and make sure that everything we do is supporting and advancing that strategy. There is nothing worse than investing a lot of time and hard work into following a lead on an asset, only to find that the client was already aware of it or has discounted it for strategic reasons. This can also include working with forensic accountants or insolvency practitioners who have access to internal documents of an insolvent company, and where we can support their work by investigating the recipients of funds and their connections to the company’s principals, or feed in questions for interviews with company officers. In addition, we regularly work with public relations teams, both defensively (to identify and mitigate vulnerabilities that could be exposed by the opposing party), and proactively, to provide intelligence on vulnerabilities that a skilled PR team can build a media strategy to exploit. In that scenario we are looking for pressure points that could bring the opposing party to the table for serious settlement negotiations. This can be particularly effective when an adversary is at an important inflection point with regards to attracting investment, for example states trying to attract foreign direct investment, a company planning an IPO, or a businessperson setting up a new venture or seeking advancement in their career. In all these scenarios, they will want to avoid ‘dirty laundry’ such as corruption or financial mismanagement coming to the surface at a moment when they most need to present their best image to others. We were recently carrying out an asset trace into a US businessman relating to a decade-old debt he was still refusing to settle, and found that he was developing a business partnership with investors in a new European market. This gave us an excellent opportunity to negotiate a settlement, as when the new partners were made aware of this historic dispute they were discouraged from investing. Again, the ideal dynamic when we work with other advisors is regular, open communication, so that the broader team pull together to focus on the most productive approach and make sure S-RM is providing actionable intelligence throughout. Finally, we have a network of surveillance specialists who have law enforcement or intelligence backgrounds, and can be incredibly important in asset investigations. To make the most of such a resource-intensive approach, surveillance needs to be targeted and timed with a specific outcome in mind, rather than open-ended. In the right circumstances, discreet surveillance can be vital to locate an individual to serve a freezing order, or understand the lifestyle and residence of a debtor without tipping them off. Often we need to set up surveillance at very short notice when we learn of upcoming travel or a court hearing, and having trusted, experienced individuals on the ground already is critical.
LFJ Conversation

An LFJ Conversation with Joshua Coleman‑Pecha, Senior Associate, Holman Fenwick Willan

By John Freund |

Joshua Coleman-Pecha is a senior international construction, infrastructure and technology dispute specialist working in the MENA region. He advises on construction and technology projects from inception to completion. Joshua is a qualified solicitor advocate, meaning he has rights of audience in the courts of England & Wales, and is a PRINCE 2 qualified project manager.

Joshua advises on all aspects of complex dispute avoidance and resolution. He has represented several clients in billion-dollar disputes before a variety of arbitral institutions including ICC, LCIA, UNCITRAL, DIAC, and SCCA. He has experience handling disputes under the governing laws of England & Wales, the UAE, Saudi, and Qatar.

Joshua’s recent significant work includes advising in relation to oil and gas processing facilities, drilling contracts (onshore and offshore), a water desalinisation plant, a battery energy storage park, the MENA region’s largest metro system, and a major railroad and metro project in the UAE and Saudi respectively. Joshua has experience of projects across the region having handled disputes in, for example, the UAE, Oman, Qatar, Saudi Arabia, Iraq, and Turkey. His clients include international oil & gas companies, refining and petrochemical companies, EPC contractors, oil & gas service companies, EPC employers, and international technology providers. Finally, he acts in a hybrid role as general counsel to a billion dollar pharmaceutical company based in the UAE.

Joshua was recently recognized as a ‘Key Lawyer’ in Oil, Gas and Natural Resources by Legal 500 2024. He is also a member of various construction industry associations and a contributing member of the Legal Funding Journal.

Below is our LFJ Conversation with Joshua Coleman‑Pecha: The MENA region, and Saudi Arabia in particular, is a growing jurisdiction in the global legal funding market.  What has hindered funders from embracing this market in the past, and why the change--what has prompted more funders to take an interest in this part of the world? 

I think there have been a few factors that have limited funders' interest in operating in the Saudi market, or, financing disputes that involve Saudi law and / or Saudi Courts.

First, the high-level point is that legal funding is not prohibited under Saudi law. However, until now, in Saudi and across the GCC, whilst the view has been that written laws do not prohibit legal funding, there has been a high degree of uncertainty as to how, in practice, the courts would treat parties backed by legal funders. Quite understandably, legal funders and litigants have been hesitant to be the 'test cases' on which this issue is examined. To some extent I think this hesitancy remains, though it is decreasing as GCC countries refine their laws and legal practice, and legal funders look to the growing markets across the GCC for new opportunities.

Second, for many years Sharia has been the dominant system of law in Saudi. Sharia law is a huge subject, and it is impossible to consider all the aspects of it here. However, in summary, it is a combination of several different texts and is subject to several schools of legal interpretation. As with other GCC countries, Saudi is a civil law system, and does not rely on binding precedent. It may be that legal funders have been hesitant to make investments in an environment that they don't feel they fully understand. However, in recent times, Saudi has taken significant strides towards codifying its laws. All GCC countries are on this path to a greater or lesser extent, which helps provide certainty. In addition, with better recording and proliferation of court judgments and legal knowledge across the entire market, my sense is that international investors are becoming more confident in these surroundings.

Third, all GCC countries have been signatories to the New York Convention for some time. However, recent years have seen an acceleration of arbitration across the GCC, as recognition of the jurisdiction of arbitral tribunals and willingness to enforce arbitral awards increases. In Saudi, part of the country's 'Vision 2023' is to have the leading arbitral institution in the Middle East, and be considered one of the leading arbitral institutions worldwide. Saudi has implemented a new Arbitration Law, and the Saudi Center for Commercial Arbitration (SCCA) has received significant investment, allowing it to hire globally recognised practitioners to join its senior ranks. Its rules are based on UNCITRAL rules and were updated in 2023 to reflect the most modern sets of arbitral rules globally.

Fourth, through discussion with various funders, my understanding of their view is that investing in Saudi is outside their commercial risk parameters. Factors such as uncertainty over duration of legal proceedings, lack of knowledge of Sharia, and questions over enforcement have made it difficult to determine likely ROI. Certainty over enforcement of arbitral awards in Saudi is increasing and the reasons for this are discussed below / later.

Finally, from the perspective of a funded party, and bearing in mind a lot of these parties are contractors in the construction industry, I think there is hesitancy to use legal funding as it can wipe out profit margins.

You deal with the Saudi construction claims sector specifically. What is the TAM of this market, and why should litigation funders take an interest here? 

The market is huge. Focusing just on the projects sector alone, there are approximately USD 1.8trn of projects planned or underway in Saudi (USD 330bn of which are already underway), making it the largest market in the MENA region. Over the last five years, the Saudi projects sector has, on average, awarded USD 60bn of projects a year, which looks set to grow year-on-year to around USD 80bn by 2028.

It is impossible to accurately estimate the number or value of disputes emanating from these projects. Of course, arbitration is private, but also many issues or disputes will not come to light due to being settled through commercial negotiations. We do know that right now approximately 440 projects in Saudi are identified as being 'on hold' (which means there is almost certainly going to be some form of dispute arising) with a combined value of USD 231bn. As the number and value of projects approaching completion or achieving completion increases, I expect to see these figures grow.

How do claimants and litigators on the ground feel about litigation funding? How do they look at the practice from both an economic and cultural perspective? 

For the reasons discussed above, legal funding has yet to proliferate in GCC countries. My experience is that, at best, many legal advisors (both in private practice and in-house) and potential litigants have limited knowledge about legal funding and are therefore sceptical of its merits. At worst, these parties may not know anything about legal funding at all, or, have a misunderstanding of what it is about and how it can help. I believe that education is needed before legal funding can be considered 'mainstream' in this region.

Where legal funding may be better known is amongst international entities (like international contractors) operating in Saudi or the wider GCC. However, even where there more understanding as regards the concept and a willingness to consider it as an option, barriers remain. For example, contractors are often put off legal funding when the cost is revealed.

Construction disputes are often fact heavy, require a significant amount of analysis before funders can begin to assess the merits, and, if they go to trial, will require lengthy investment periods. All this means that funder risk goes up, so the required returns go up, which can seriously damage contractor profits. There's little point in a contractor taking funding if it's going to wipe out the contractor's profit margin on the underlying project.

My personal view is that discussion between contractors and funders can yield a solution. On the one hand contractors may be persuaded to take funding based on a holistic view of its financial benefits. Portfolio funding may make taking funding economically palatable to contractors. However, also in my view, the greatest opportunity for striking investment deals lies in the fact that both employers and contractors tend to want to settle disputes at the earliest opportunity. If legal funders are willing to take this into account, it may shift the investment metrics sufficiently to make legal funding attractive to all parties.

What about enforcement in Saudi Arabia? How much of a concern is this, and what steps should funders take to allay their concerns about enforcement over a specific claim? 

The laws

Saudi has been signatory to the New York convention since 1994. However, its arbitration friendliness has increased massively in the last few years, including the creation of the previously mentioned SCCA in 2016. In addition, two key rules have been promulgated:

In 2012, Saudi passed KSA Royal Decree M/34 concerning the approval of the Law of Arbitration (KSA Arbitration Law) (together with its Implementing Rules) and in 2013, Royal Decree M/53 (Enforcement Law). The KSA Arbitration law is modelled on the UNCITRAL model law, which is regarded as international best practice.

The KSA Arbitration Law curtailed the Saudi courts' interventionist powers in relation to arbitrations seated in Saudi Arabia by recognizing for the first time the parties' autonomy to tailor their arbitration procedure in certain important respects, including by explicitly recognizing the adoption of institutional arbitration rules. The KSA Arbitration Law also addressed a key concern under the old law – the power of the Saudi courts to reopen and effectively re-litigate awards on their merits.

The Enforcement Law has led to the creation of specialized enforcement courts, whose jurisdiction supersedes that of the Board of Grievances (the court previously competent to hear requests for enforcement of arbitral awards). This in turn has started to have a salutary effect on the enforcement of foreign arbitral awards, which until 2017 was an uncertain prospect. The Enforcement Law contains provisions that affect all aspects of enforcement of judgments and arbitral awards, both domestic and foreign. In practice, the Enforcement Law has resulted in the unprecedented enforcement of several foreign arbitral awards, which is welcome development. It is hoped that the Rules supplementing the KSA Arbitration Law will help to provide more certainty around how the courts will apply the KSA Arbitration Law, including with respect to enforcement of arbitral awards.

Domestic Arbitral Awards

Domestic arbitral awards must comply with the KSA Arbitration Law. The Enforcement Courts have jurisdiction to enforce domestic arbitral awards under article 9(2) of the Enforcement Law. For a domestic arbitral award, it must be declared as enforceable by the appeal court with initial jurisdiction over the dispute. Therefore, an application is needed to the relevant appeal court for a declaration that the award is enforceable by the party seeking enforcement. The declaration is normally represented by a court stamp, after which the request for enforcement can be registered with the Enforcement Court.

Domestic arbitral awards that are enforceable include:

  • monetary awards
  • specific performance
  • sale or delivery of tangible and intangible property

Article 55 of the KSA Arbitration Law outlines the procedural and substantive requirements of a valid arbitral award. Pursuant to this provision, the competent court must verify the following conditions to issue an order for enforcement:

  • The arbitral award must not contradict other court decisions or laws on the same subject in Saudi Arabia.
  • The loser has been duly notified of the arbitral award.
  • The arbitral award must not violate Saudi public policy (Sharia). My understanding is that where the Saudi Courts have been confronted with an award where part of it contradicts Sharia, in some instances, they have been willing to strike out the unenforceable part and enforce the remainder.

Furthermore, the arbitral award must comply with the formality requirements of the KSA Arbitration Law and be compliant with Sharia principles. Article 49 of the KSA Arbitration Law states that an arbitral award is not subject to appeal. However, under article 50(1), a party may apply to annul an arbitral award issued on the following grounds:

  • “if no arbitration agreement exists, or if such agreement is void, voidable, or terminated due to expiry of its term;
  • if either party, at the time of concluding the arbitration agreement, lacks legal capacity, pursuant to the law governing his capacity;
  • if either arbitration party fails to present his defence due to lack of proper notification of the appointment of an arbitrator or of the arbitration proceedings or for any other reason beyond his control;
  • if the arbitration award excludes the application of any rules which the parties to arbitration agree to apply to the subject matter of the dispute;
  • if the composition of the arbitration tribunal or the appointment of the arbitrators is carried out in a manner violating this Law or the agreement of the parties;
  • if the arbitration award rules on matters not included in the arbitration agreement; nevertheless, if parts of the award relating to matters subject to arbitration can be separated from those not subject there to, then nullification shall apply only to parts not subject to arbitration; and
  • If the arbitration tribunal fails to observe conditions required for the award in a manner affecting its substance, or if the award is based on void arbitration proceedings that affect it.”

Furthermore, under article 50(2) of the KSA Arbitration Law, the court may, on its own jurisdiction, nullify the arbitral award if:

  • it violates Sharia or Saudi public policy; or
  • the subject matter of the dispute was not arbitrable, e.g., not capable of being resolved by arbitration, under Saudi law.

The application for nullification of the arbitral award must be made 60 days after the nullifying party was notified of the award.

Foreign Arbitral Awards

Foreign awards must comply with the Enforcement Law as well as the New York Convention for enforcement of foreign arbitral awards. For a foreign arbitral award, a party does not need a declaration that it is enforceable from the relevant domestic appeal court. Instead, the party requesting enforcement can apply directly to the Enforcement Court, with no statute of limitations applicable.

For foreign arbitral awards to be enforceable they must meet the following criteria:

  • The award must be a final award and must not contradict another judgment or court order issued on the same subject in Saudi Arabia, or contradict the public policy of Saudi Arabia.
  • Reciprocity must be established between Saudi Arabia and the jurisdiction in which the award is issued. The burden on proving reciprocity is on the party requesting enforcement.
  • The award must have been issued by a tribunal with jurisdiction under the relevant foreign law, and the subject matter of the aware, should not be under mandatory jurisdiction of Saudi Arabia;
  • All parties must have conducted the proceedings with all procedural regularities in place, with due representation If the respondent to the proceedings was notified, but was not represented, and this can be evidenced, such an award is still enforceable.

The Enforcement Court has jurisdiction to enforce foreign arbitral awards in accordance with the requirements of the Enforcement Law:

  • Saudi courts must not have jurisdiction to decide the dispute.
  • The tribunal issuing the award must have had jurisdiction over the dispute.
  • The arbitral proceedings were conducted in accordance with due process, e.g., the parties had fair opportunities to present their cases.
  • The arbitral award is final and not subject to appeal under the law of the seat of arbitration.
  • The arbitral award must not contradict other court decisions or laws on the same subject in Saudi Arabia.
  • The arbitral award must not violate Saudi public policy.

The New York Convention is considered the foundation for enforcing arbitral awards in a state other than where the arbitral award was issued (i.e., foreign arbitral awards). All arbitral awards not issued under the KSA Arbitration Law are considered foreign arbitral awards. Contracting states to the New York Convention must recognise foreign arbitral awards as binding and enforce them under their rules of procedure, and without imposing “substantially more onerous conditions or higher fees or charges” for foreign arbitral awards than the State would impose on domestic arbitral awards.

Process for Enforcement of Arbitral Awards

To enforce an arbitration award the application for enforcement must include:

  • “the original award or an attested copy thereof;
  • a true copy of the arbitration agreement;
  • an Arabic translation of the arbitration award attested by an accredited authority, if the award is not issued in Arabic; and
  • a proof of the deposit of the award with the competent court, pursuant to article 44 of KSA Arbitration Law.”

Article 6 of the Enforcement Law addressing all judgments and awards, states that all judgments issued by an Enforcement Court are subject to appeal and the court of the KSA Arbitration Law appeal's judgment would then be final. However, for arbitral awards issued under the KSA Arbitration Law, article 55(3) of the KSA Arbitration Law does not allow appeal of an order to enforce an arbitral award. By contrast, an order refusing enforcement is appealable.

The enforcement procedure is as follows:

  • An enforcement request is made through the Najiz application (the Ministry of Justice’s online portal) is made by the applicant.
  • The request is reviewed procedurally by the Enforcement Court, and is then referred to an enforcement judge. This will require up to three days.
  • If the enforcement judge is satisfied, an enforcement order will be issued (Article 34 decision), ordering one party to comply within five days of the notice.

The applicant must wait twenty days for the Enforcement Court to notify the relevant party of the Article 34 decision. If this is not done, the applicant may request for the notice to be served by publication in local press, by the Enforcement Court. Although the applicant will initially pay for the publication of the notice (three to five days are required for publication from payment), the costs are able to be reimbursed from the enforcement order.

If the Article 34 decision is not adhered to, within five days of notification, the enforcement judge may be requested to enforce sanctions against the non-complying party. Such measures, under Article 46 are issued up to ten days after the expiry of the Article 34 decision or from the date of applicant's request to issue an Article 46 decision, provided that the request is made at least five days after the Article 34 decision is notified. All decisions by an enforcement judge are final, unless they relate to certain procedures or costs.

Other Considerations on Enforcing Arbitration Awards

The public policy exception to enforcing foreign arbitral awards has traditionally been very broad. An award that contradicts Sharia law or public policy will not be enforced by the Enforcement Court. However, if the part that contradicts public policy can be separated from the rest of the award, only that part should not be enforced.

The Enforcement Law sets out that the enforcement judge cannot enforce a foreign arbitral award if it includes what is contradictory to public policy. The implementing regulations of the Enforcement Law defines "public policy" as the Islamic Sharia. Saudi Arabia Royal Decree No. 44682/1443 dated 28 August 2021 limits the definition of public policy to general rules of Islamic law based on the Quran and the Sunnah. Recently successful grounds were:

  • Late payment charges were found to amount to usury.
  • Compensation for holding back money was found to amount to usury.
  • The award involved the sale of property which the purported seller did not own.

Public policy is not limited to procedural deficiencies. The Saudi court can, of its own volition, refuse to enforce an award that contradicts Sharia, including any of the evidence relied on by the tribunal that is not acceptable under Sharia (for example, if the tribunal relied on the testimony of a person with a mental impairment). The court could also refuse enforcement if the award itself contradicts Sharia (for example, an award of interest).

Other Enforcement Mechanisms

Saudi Arabia is also party to Riyadh Arab Agreement for Judicial Co-operation and the GCC Agreement for the Enforcement of Judgments, Rogatory, and Judicial Publication.

One of the benefits of a more mature market is the presence of consultants, advisors and experts whom funders can rely on. How prevalent are such experts within the Saudi legal / litigation funding market?  What can funders do to ensure they are receiving reliable, actionable advice? 

Until recently, to participate in the Saudi market, international firms had to enter an alliance with a local partner firm. With the change of laws in this area, several international firms have now opened their own Saudi office, and HFW (the firm I work at) is one of those. This divergence perhaps causes some difficulty for clients seeking joined-up legal advice. Naturally, high quality Saudi firms focus on work in the local courts, where they have rights of audience. International firms are more likely to focus on international clients, working with contracts under foreign laws, with arbitration as a dispute resolution mechanism. In both cases, the proliferation of work requires additional legal practitioners, and this growth potentially comes at the cost of quality legal advice or, at least, relevant experience.

Of course, it is tempting for me to say that HFW should be every funder's first call for Saudi related advice! The reality, as everyone knows, is that every dispute is different and requires different skill sets, sector knowledge, legal qualification(s), and price point. I'm sure it doesn't really need to be said, as legal funders know their jobs better than I do, but I would always suggest seeking advice from firms and individuals who have wide experience in the jurisdiction, have advised on disputes in the relevant sector in that jurisdiction previously, and understand what legal funders need and want to be able to make their investment decision.