COMBAR Vienna debate

1. COMBAR Vienna debate This house would outlaw litigation funding

2. Proposing the motion Anna Boase One Essex Court

4. The Past Loren Kieve

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6. Proposing the motion (2) Kannon Shanmugam Williams & Connolly

7. The Present Siân Mirchandani

8. Litigation funding A vital social purpose of allowing litigants to pursue their claims against well-funded opponents. Available to plaintiffs & defendants, corporate or personal. Akin to insurance for potential liabilities. Judges speak of Litigation Funding with approval Recognised importance to a proper system of justice. As the U.S. District Court put it in Miller UK Ltd. v. Caterpillar, Inc, 2014 it evens the playing field and advances justice: Where a defendant enjoys substantial economic superiority, it can, if it chooses, embark on a scorched earth policy and overwhelm its opponent. But even where a case is not conducted with an ulterior purpose, the costs inherent in major litigation can be crippling, and a plaintiff, lacking the resources to sustain a long fight, may be forced to abandon the case or settle on distinctly disadvantageous terms.

9. "Funding is beneficial and should be supported. It promotes access to justice." The Right Honourable Sir Rupert Jackson, Former Lord Justice of Appeal, author of ‘The Jackson Review’ 2009

10. The Jackson Review Two principles: (1)As many different funding options as possible should be made available to litigants. (2) No funding mechanism should be permitted which increases the adverse costs risk imposed upon other parties. Five benefits: Promotes access to justice – as provides anadditional means of funding litigation Better to foregoe a percentage of damages than to recover nothing at all. Does not impose additional financial burden on opposing parties. Will be even more significant if success fees under CFAs become irrecoverable (as has now happened) Tends to filter out the unmeritorious claims, which benefits all parties (ultimately).

11. Judges speak in favour…. Excalibur Ventures [2017] 1 WLR 2221, CA held some unregulated and imprudent funders liable for over £20M indemnity costs having backed ‘spurious’ and ‘objectively hopeless’ claims. Lord Justice Tomlinson said: “It is true that the facilitation of access to justice is an incidental by-product of commercial funding, but that is not the essential motivation of the commercial funder. The commercial funder is an investor who hopes to make a return on his investment.” “…champerty involves behaviour likely to interfere with the due administration of justice. Litigation funding is an accepted and judicially sanctioned activity perceived to be in the public interest. What the judge characterised as “rigorous analysis of law, facts and witnesses, consideration of proportionality and review at appropriate intervals” is what is to be expected of a responsible funder…and cannot of itself be champertous. … rather than interfering with the due administration of justice, if anything such activities promote the due administration of justice.”

12. Judges speak in favour …extra judicially… “In order for a state to remain inclusive, it must not just express a commitment to the rule of law: it must provide effective mechanisms through which its citizens have genuine access to the court. Only then can they begin to have equality before the law; only then can they hold the powerful to account; only then can they render their legal rights a true reality rather than words on paper. “ Lord Neuberger, (then) President ofthe Supreme Court of the United Kingdom, Harbour Litigation Funding First Annual Lecture, 8 May 2013 “Thus, the public policy rationale regarding maintenance and champerty has turned full circle. Originally their prohibition was justifiable, as a means to help secure the development of an inclusive, pluralist society, governed by the rule of law. Now, it might be said,the exact reverse of the prohibition is justified, for the same reason: the development of litigation”

13. Funders agree… Rowles-Davies stated in ‘Third Party Litigation Funding’: “Historically, third-party funding was considered as being primarily a mechanism by which financially distressed claimants could obtain access to justice. However, much of the focus of the litigation finance market today is on the growing corporate utilization of funding by large, well-resourced entities. These entities may be looking for ways to manage risk, to reduce legal budgets, take the cost of pursuing arbitration off-balance sheet, or to pursue other business priorities instead of allocating resources to financing an arbitration matter. Put simply, funding is not only for those that are impecunious.” “The use of funding offers the client the ability to minimize risk, does not have any negative effect on their cash flow, and ensures payment of lawyers.”

14. What motivates a Third Party Funder? An adequate demonstration of a solid claim with a healthy, recoverable margin between the anticipated damages recovery and the anticipated budget for legal fees and costs. The facts, the merits, the parties, and their representatives will all play a crucial role in this calculus. “In addition, the analysis will consider other factors such as: • value of the law suits; • amount to be advanced; • jurisdictional obstacles; • defences; • nature and length of the proceeding (including whether arbitration or litigation; venue and applicable rules); • possibilities of settlement; • creditworthiness of client and the opposing party (particularly with a view to collection prospects); • visibility and location of the opposing party’s assets; • counsel chosen and compensation structure (whether there is a contingency fee agreement in place) or • additional obligations of the party to be funded linked to the potential risk of recovery (such as previous funding agreements or any other alliance).”

15. Funders’ approach - like Insurers Funder must assess a case to determine whether the case fits its criteria: Creditworthiness of Ds: can they pay and are assets locatable? Only litigation that is of practical value supported - not someone wanting their ‘day in court’ Merits of the case: how long , winnable, supported by legal opinions? Only litigation that is likely to win supported Value of the claim: what recoverable damages? Substantial cases only Costs: are they realistic? Funder puts brakes on legal costs – will not fund an extravagantly run case. Claim value / costs ratio: is this at least be 10 to 1? Not fund claims where it is all about the costs Experience of the legal team: do they have a track record in the relevant area of law? Support reputable lawyers All these factors support and promote strong claims being run cost efficiently and effectively through the justice system. None encourage bad or hopeless claims. Excalibur case means that funders in the UK know they can be liable for massive costs if claims are not assessed properly leading to unmeritorious and expensive claims that are badly run.

16. Proposing the motion (3) Brian Doctor QC Fountain Court Chambers

17. The Future Andrew Burns QC

18. Litigation Funding: Here to stay Academic Support: Nieuwveld and Sahani - ‘Third-Party Funding in International Arbitration’ “The global economic slowdown has also inspired companies facing bankruptcy or insolvency to seek funding to pursue claims that may generate cash flow for their businesses or mitigate the risk of losing a ’bet-the-company’ dispute.” Four main forces: increasing access to justice … a means to pursue a meritorious claim while also maintaining… cash flow for BAU… Investors… seek investments that are not directly tied to or affected by the volatile and unpredictable financial markets … third-party funding as corporate finance, whereby corporate entities … enter into bespoke arrangements … as a means of raising capital for general operating expenses or expansion to meet new business goals.”

19. “Funders have too much control.”“What about conflicts of interest?”“More spurious cases” False Flags against Funding

20. Case Study 1 A State delayed and refused an oil field concession in breach of an Energy Treaty causing loss to R co. R co had strong prospects of recovering very significant monetary damages but was reluctant to sue a National State. R Co’s CEO used funding to commence an arbitration to protect their investment, at no extra cost to the company – managing its risk and if successful it retains a proportion the award. It moderated its risk, while moderating its recovery. .

21. Case Study 2 A SME took an investment opportunity to a Bank which rejected the proposal but then acquired the target company itself in breach of confidence. A clear cut case. SME could afford litigation, but was concerned about cash flow and tying up resources in legal costs. Could Bank push for a lower settlement if dragged it out? Funder assessed the merits of the case and backed the SME with a multi-million pound budget - SME could afford to go to trial. It assisted with the selection of the legal team and legal strategy. The Bank saw SME was ready and able to see it through and so a favourable settlement was achievable.

22. Case Study 3 Investors in a Channel Islands trust company had their money diverted into unauthorised activities causing loss. They appointed a new trustee, but the funds had been diverted and so there were no resources to pursue the litigation. The investors were reluctant to provide additional funding. The old trustee used diversionary tactics to make the litigation uneconomic. Harbour Funding agreed to fund the litigation and the new trustee obtained rulings on the delaying tactics. Without the Harbour Funding the trustee would not have been able to fund the case for the long haul.

24. COMBAR Vienna debate This house would outlaw litigation funding

25. COMBAR Vienna debate This house would NOT outlaw litigation funding