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Getting The Deal Through


Steven Friel and Jonathan Barnes

Woodsford Litigation Funding

Tuesday 11 December 2018

This is the third edition of our global survey of the law and practice of litigation funding. The exponential growth of our industry continues, as does the widespread professional, judicial and legislative support for our capital and professional investment in litigation lawyers and their clients.

The first litigation funding rankings were published by Chambers and Partners in 2018, confirming the dominance of the well-established players in the market – in particular, the members of the London-based Association of Litigation Funders. Woodsford, Burford and Vannin shared the distinction of being the only funders to rank in both the United States and the United Kingdom – the two main centres for the international litigation funding industry.
The amount of capital being deployed into litigation funding continues to be high. Burford, whose shares have soared by more than 1,000 per cent in three years, raised £193 million in an alternative investment market equity placing, while Woodsford announced a further US$75 million shareholder facility.

One of the benefits of an annual publication such as this is that we can track changes in the jurisdictions we monitor.

In Australia, litigation funding has long been closely related to the class action landscape. In 2018, there were a number of cases where the courts made so-called ‘common fund’ orders, both as part of a class action settlement and also at an early stage of proceedings. A common fund order can effectively bind all members of a class to the terms of a funding agreement, not just those who have executed the agreement. Its purpose is to equalise the distribution of damages so that unfunded claimants must also contribute to the costs of the claim, including the funder’s fee. It was observed in Money Max Int Pty Ltd (trustee) v QBE Insurance Group Limited (2016) 245 FCR 191 FCAFC 148 at [82]:

We expect that the courts will approve funding commission rates that avoid excessive or disproportionate charges to class members but which recognise the important role of litigation funding in providing access to justice, are commercially realistic and properly reflect the costs and risks taken by the funder, and which avoid hindsight bias.

While the majority of US consumer class actions are financed by class counsel (that is, counsel advances expenses for the case in the hope of eventually earning a fee award), there are other jurisdictions in which the development of class actions is related to the growth of litigation funding. In Germany, for example, the government established in November 2018 a special kind of class action (Musterfeststellungsklage), which will be available for consumer rights as well as business claims (eg, cartel damages).

In New Zealand, the Law Commission announced that it is to review the law relating to class actions and litigation funding, with a view to making reform recommendations to the Minister of Justice. The task of the Law Commission is ‘to assess whether the potential benefits of class actions and litigation funding can be realised in a manner that outweighs any costs and disadvantages they might give rise to’.

In the Cayman Islands, a draft bill has been circulated in respect of a law to regulate the private funding of litigation. The draft bill, would (among other things) repeal any offences under the common law of maintenance and champerty, and impose (as yet unspecified) limits on the amount payable to a third-party funder.

In Ireland, there have been further calls from the senior judiciary for the legislature to step in to amend and the clarify the ancient case law that has impeded the development of litigation funding in that jurisdiction. In the case of SPV OSUS Limited v HSBC Institutional Trust Services (Ireland) Limited & Ors, the Irish Supreme Court identified that ‘urgent reform is needed so that the right of access to the courts can be rendered effective in a practical sense.’

In Singapore, growth of third-party funding has been slower than expected. The Ministry of Law stated in September 2018, that they are aware of only one publicised instance of a ‘live’ Singapore-seated arbitration being financed by a third-party funder.

In England, Lord Justice Jackson, while reviewing the reforms made as a result of his 2009 report into the civil litigation costs regime, noted that his proposals to promote third-party funding and introduce a code for funders have been successful. He said:

These reforms enable parties to pursue claims (and sometimes defences) when they could not otherwise afford to do so. Funders are highly experienced litigators and they exercise effective control over costs. They often insist upon having court-approved budgets. Self-evidently, these reforms promote access to justice and tend to control costs.

The New York City Bar Association issued an advisory opinion that called into question the appropriateness of law firms obtaining non-recourse loans from funders to be repaid from the law firm’s future legal fees. A number of experts have commented that the opinion is inconsistent with settled New York case law on this point, and no doubt this issue will have developed further by the time we sit down to write the 2020 edition of this publication.

As always, we are grateful to the authors of the national chapters for their hard work. We are particularly grateful to the authors of the new national chapters, from Israel, Spain and the United Arab Emirates.

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