Litigation Funds & Asset Recovery: Litigation funding: an overview of a contentious area of growth

Wednesday, September 9, 2009

Litigation funding: an overview of a contentious area of growth

Third-party funding is certainly provoking debate. Tony Guise, of costs specialists Guise, says there has been a lot of ‘hot air’ about third-party funding over the last 18 months. ‘Some funders are drawing in their horns because the recession means recoverability is in doubt, while others are becoming more aggressive. There is no shortage of funding available – people are putting together capital funds of £20m-£30m – but it is not clear how many cases are actually being funded this way.
Everyone is watching the InnovatorOne case, where Addleshaw Goddard is representing several hundred investors backed by third-party funding. Everyone is after the big commercial action but they are inherently risky and they don’t provide a good business model. But the litigation funding market is attracting international interest. John Rossos is principal of Canadian BridgePoint Financial Services, which funds both law firms and individual cases. He has been in the UK researching opportunities and likes what he sees. ‘While the US market is huge, we feel we have a better cultural and legal fit with the UK. I also believe that the Legal Services Act will be the “big bang” for legal services. Sam Eastwood, partner in Norton Rose’s dispute resolution team, has first-hand experience of the market in one of the largest independently funded cases – the Stone & Rolls £69.5m professional negligence claim against accountancy firm Moore Stephens, bankrolled by IM Litigation Funding
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key Differences between Litigation Funding & Asset Recovery Funding

This is a new emerging asset class which is evolving rapidly into specialized sub sectors and recent funds have been launched and funded with substantial investors interest :- The three cornerstones of risk in litigation finance, in general, are determining the liability, the quantum (i.e. how much you can get back if you win), and the collection risks of a claim.In general showing that a perpetrator of fraud is obliged to repay a specific sum is based on objective facts. The risk lies in discovering and freezing assets. Echemus founds are experts in this field.

Please see Echemusfund.com as an example

1) LIABILITY in asset recovery is more objectively determined --unlike patent infringement or malpractice claims-- because in asset recovery one party has taken money wrongfully and has not paid it back. Concurrent criminal cases can also make proving liability a non-issue. In most other commercial claims, both sides fight like hell to prove they are, or are not liable using obscure technical arguments. In asset recovery, it's more akin to proof of debt.

2) QUANTUM in asset recovery is also determine objectively. The claimant knows how much has been stolen, and investigations and tracing determine how much value can be recovered. If stolen assets have been converted into real property, they can easily be valued. In other litigation finance claims, even if liability is established, quantum can vary wildly, and if juries are involved, it can be downright arbitrary.

3) COLLECTION is a genuine risk in asset recovery, but pre-emptive asset recovery and preservation measures are designed to ensure assets are frozen until debts are proven. It's also important to note that with other commercial claims appeals can pose a continuing and real risk, Judgement debts or an objectively established liability to account for assets are more difficult to appeal.

Listed Commercial Litigation Organisations

Burford Capital -

http://www.burfordcapital.com/purpose.html

A Guernsey-based investment fund is anticipated to become the second largest listing on London’s Alternative Investment Market (AIM) this year.

Burford Capital is aiming to raise £200m ($318m) in an initial public offering (IPO) to finance commercial litigation in the US.

It plans to start trading shares on AIM on or around 16 October. Latest Share PRICE

Juridica -

http://www.juridicainvestments.com/regnews.html

At the period end the Company had invested or committed $95.8 million across 12 investments giving exposure to 18 cases. As at 27 September 2009, the Company had invested or committed $115.4 million, representing 59% of the net asset value of the Company.
Income of $4.5 million, (2008: $7.3 million) reflecting the variable timing of results from portfolio investments and general decline in interest rates.
Realised gains for the period include a realised gain of $1.2 million on Case 0908-U, yielding an internal rate of return of 61% on the initial investment of $3.1 million
Net asset value as at 30 June of $196.7 million (2008: $152.3 million).

Annual report Latest Share Price

Litigation Funds & Asset Recovery

Wednesday, September 9, 2009

Litigation funding: an overview of a contentious area of growth

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key Differences between Litigation Funding & Asset Recovery Funding

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