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ISSUE VII | 2018 Vannin goes to Germany Bright lights, big opportunity: Funding international commercial arbitration in New York On the march: Group actions in the UK Maximising the benefits of mediation in Asia Pacific markets What to say and when: Communications with Funders in US proceedings 60 seconds Q&A with Louise Bell, Enyo When healthcare licensing goes wrong Quantifying damages in competition litigation Salvage through litigation in insolvency: Considering third-party funding Law firm financing: Looking under the bonnet

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Page 1: Vannin goes to Germany · 2019-06-03 · Vannin goes to Germany 6 Theo Paeffgen, Regional Managing Director – DACH, Vannin Capital Bright lights, big opportunity: Funding international

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Vannin goes to Germany

Bright lights, big opportunity: Funding international commercial arbitration in New York

On the march: Group actions in the UK

Maximising the benefits of mediation in Asia Pacific markets

What to say and when: Communications with Funders in US proceedings

60 seconds Q&A with Louise Bell, Enyo

When healthcare licensing goes wrong

Quantifying damages in competition litigation

Salvage through litigation in insolvency: Considering third-party funding

Law firm financing: Looking under the bonnet

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VANNIN CAPITALCONTENTS

Vannin goes to Germany 6 Theo Paeffgen, Regional Managing Director – DACH, Vannin Capital

Bright lights, big opportunity: Funding international 12 commercial arbitration in New York Alexandra Dosman, Managing Director, Vannin Capital

On the march: Group actions in the UK 20 James Oldnall, Partner, and Lara Melrose, Managing Associate, Mishcon de Reya and Andrew Jones, Managing Director, Vannin Capital

Maximising the benefits of mediation in Asia Pacific markets 26 Gary Seib, Partner, Baker & McKenzie, Jason Betts, Partner, Herbert Smith Freehills and Patrick Coope, Regional Managing Director – Australasia, Vannin Capital

What to say and when: Communications with Funders in US proceedings 36 Alan Guy, Managing Director, Vannin Capital

60 seconds Q&A with Louise Bell, Enyo 44 Louise Bell, Partner, Enyo Law and Rosemary Ioannou, Managing Director, Vannin Capital

When healthcare licensing goes wrong 48 Henry Lebowitz and Mark Goodman, Partners, Debevoise & Plimpton, Jacob Stahl and Megan Bannigan, Counsels, Debevoise & Plimpton and Michael German, Managing Director, Vannin Capital

Quantifying damages in competition litigation 58 Bruno Augustin, Partner, Haberman Ilett, Rob van der Laan, Founder, OmniCLES and Rosie Ioannou, Managing Director, Vannin Capital

Salvage through litigation in insolvency: Considering third-party funding 66 Corrs Chambers Westgarth, Slaughter and May and Pip Murphy, Managing Director, Vannin Capital

Law firm financing: Looking under the bonnet 76 Yasmin Mohammad, Head of International Arbitration and David Collins, Chief Financial Officer, Vannin Capital

CONTENTS

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VANNIN CAPITALWELCOME

Welcome to the seventh edition of Funding in Focus. We are delighted to publish our update on the latest innovations in third-party dispute resolution funding, drawing on the experiences of Vannin Capital and the expertise of our esteemed friends and partners around the world.

As you will read over the following pages, the reach of third-party funding continues to grow, as new geographies discover the benefits of working with funders like Vannin Capital, and the scale and complexity of the cases with which we are involved continues to expand.

Since we published our last edition at the start of 2018, we have grown our business into Germany, representing an exciting step into civil law coverage. Germany, with a population of 81 million, ranks behind only China and the USA for merchandise exports traded worldwide, affording its exporting corporations great power internationally and giving rise to significant potential for litigation funding for disputes in its local courts. We are delighted to have been able to attract Theo Paeffgen to launch our German operation and he describes our new operation in this issue.

As well as building our global footprint, we are proud that Vannin continues to play a fundamental role in the growth of third-party funding worldwide, providing a powerful tool to those managing disputes. Articles in this edition explore the role that funding arrangements are playing in supporting group actions in the UK, commercial arbitrations in New York, mediations in Asia Pacific and healthcare licensing disputes worldwide.

As ever, we are delighted to share the expert perspectives of some external contributors and are immensely grateful to them for their time and commitment. As this industry matures, the range and diversity of leading practitioners with whom we interact continues to expand, as we all embrace the opportunities ahead. Funding in Focus will endeavour to continue bringing you the latest insights, analysis and views on best practice.

We hope you enjoy this latest edition. Please do not hesitate to get in touch should you have any questions, or if you would like to draw our attention to a particular topic for future discussion.

WELCOME

Richard Hextall Chief Executive Officer

VANNIN CAPITAL

Funding in Focus is published twice a year. Subscribe to receive this publication in advance of its general release by emailing [email protected]

SINCE WE PUBLISHED OUR LAST EDITION AT THE START OF 2018, WE HAVE GROWN OUR BUSINESS INTO GERMANY, REPRESENTING AN EXCITING STEP INTO CIVIL LAW COVERAGE.

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VANNIN CAPITALVANNIN GOES TO GERMANY

Theo PaeffgenRegional Managing Director DACH

VANNIN CAPITAL

On 1 June, 2018, Vannin Capital expanded its commitment to Continental Europe with the launch of our new German subsidiary. I am delighted to have joined the firm to spearhead the launch of our new office in Bonn, the former German capital. As the former CEO of FORIS AG, the first and biggest German litigation funder, established in 1996 and listed on the Frankfurt Stock Exchange in 1999, I am a firm believer in the potential for growth of litigation funding in Germany and beyond.

Vannin’s decision to locate in Bonn means we are positioned in the heart of the Rhein-Main region, where 15 of the DAX 30 corporations and all of the main international and domestic law firms and auditors have their headquarters.

VANNIN GOES TO GERMANY: ENHANCED COMMITMENT TO FUNDING OPPORTUNITIES IN CONTINENTAL EUROPE

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VANNIN CAPITALVANNIN GOES TO GERMANY

Our growth into Continental Europe is part of the firm’s global expansion strategy, and Bonn will be our ninth location globally, and second in mainland Europe. Bonn is well situated between the two largest finance cities in Germany – Düsseldorf and Frankfurt – and the new office will both boost our civil law capabilities and enhance our international coverage. In the same way that common law jurisdictions derive their legal systems from England, so the civil law legal system originates from Continental Europe and the Roman Empire, and has expanded around the world.

Because of this, opening in Germany was the next logical step for Vannin. Germany is widely regarded as an economic global power, evidenced by its third position in the ranking of merchandise exports traded worldwide, only outranked by China and the USA. Germany, with a population of 81 million, generated USD1.45 trillion of merchandise trade exports worldwide in 2017, comparing favourably with the USA which, with a population of 325 million, generated USD1.58 trillion.

Why were these two factors so important to Vannin? Because the choice of law and jurisdiction terms in any agreement follow the economic powers of the parties.

German exporting corporations prefer the choice of German law and jurisdiction when dealing with disputes and, in the case of arbitration, very few German companies will accept the London or Paris rules of arbitration. Only the rules of arbitration of the German Institute of Arbitration are readily accepted as a jurisdiction alternative to the German state courts.

Of course, there is also significant potential for litigation funding for disputes in state courts, and in disputes that are neither export nor cross-border transaction- related. In particular, claw-back claims in major insolvency situations throughout Continental Europe represent a sizeable potential growth area for litigation funding.

I have more than 20 years of practice experience in cross-border legal advisory work in Germany and for German corporate clients, and am qualified both as a German Rechtsanwalt and as an English solicitor. In my previous role I invented and structured the monetisation of disputed claims as additional value for claimants, and introduced this new investment potential to the German market in 2016, after having obtained the German Federal Financial Supervisory Authority’s (BAFin) approval.

GERMANY WAS THE NEXT LOGICAL STEP FOR VANNIN.

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VANNIN CAPITALVANNIN GOES TO GERMANY

Unlike all other non-German Litigation Funders offering their services in Germany, Vannin Capital is able to offer fully German Law compliant funding agreements. Not just money, but also peace of mind.

Our new operation will initially cover cases in Germany, Austria and Switzerland, thanks to their harmonised, German-based rules of procedure and common language, but we anticipate further expansion across the continent over time. I am now excited to be able to provide this new type of corporate finance by way of litigation funding to corporations, where balance sheet constraints at my previous company did not permit any solid offers to claimants.

We will start with a focus on disputes arising on the back of corporate finance transactions, on export and investment project-related matters, and on insolvency claw-back claims in the German-speaking part of Europe. This will be facilitated through an expansion of Vannin Capital’s Investment Committee, with the addition of highly-experienced judges and tribunal members who have practised the arbitration rules of the German Institute of Arbitration.

With Vannin Capital’s financial strength, the litigation funding potential in Germany truly can be lifted to the next level of evolution. We will be able not just to fund the costs of litigation in Germany, but allow the elimination of cost provisions on corporate balance sheets as well as provide assets by cash-outs on claims. Both sides of the balance sheets will benefit: provisions can be eliminated on the liability side and cash can be increased on the asset side after write-offs of the past left their painful mark.

If corporations can execute our funding agreements within one annual accounting cycle after the start of a dispute, CEOs and CFOs have a much more attractive alternative to reporting a major dispute as a write-off, with the extra burden of provisions for costs on enforcement to their general shareholder meetings.

I am very much looking forward to building out our capabilities in Germany, and expanding our enhanced civil law presence across Continental Europe. Please get in touch if there is anything you would like to discuss.

WITH VANNIN CAPITAL’S FINANCIAL STRENGTH, THE LITIGATION FUNDING POTENTIAL IN GERMANY TRULY CAN BE LIFTED TO THE NEXT LEVEL OF EVOLUTION.THEO PAEFFGEN

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VANNIN CAPITALBRIGHT LIGHTS, BIG OPPORTUNITY: FUNDING INTERNATIONAL COMMERCIAL ARBITRATION IN NEW YORK

Alexandra DosmanManaging Director

VANNIN CAPITAL

BRIGHT LIGHTS, BIG OPPORTUNITY: FUNDING INTERNATIONAL COMMERCIAL ARBITRATION IN NEW YORK

New York is the leading centre for commercial arbitration in the US, and third-party funding for cross-border disputes is taking off. Here Alexandra Dosman, Managing Director with Vannin Capital in New York, explains why it has so much to offer.

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FUNDING ARRANGEMENTS CAN BE POWERFUL TOOLS FOR CORPORATIONS CONTEMPLATING COMMERCIAL ARBITRATION AND FOR THE LAW FIRMS THAT ADVISE THEM.

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Much of the debate about third-party funding has occurred in the context of investment-treaty claims, in which private investors sue sovereign states for alleged treaty violations. Given the high stakes of these claims and the popular movement against investor-state dispute resolution as a whole, this is understandable. But it obscures the growing popularity of funding in purely commercial cross-border arbitrations.

The reason for the uptick is clear: funding arrangements can be powerful tools for corporations contemplating commercial arbitration and for the law firms that advise them. In New York, the leading forum for international commercial arbitration in the United States, corporates and law firms are adopting new options for the financing of their commercial arbitration claims.

New York leads the pack

International arbitration is the overwhelming preference for the resolution of cross-border commercial disputes. In May 2018, the School of International Arbitration at Queen Mary University of London and law firm White & Case released the fourth iteration of their industry-leading survey, entitled “The Evolution of International Arbitration”. Consistent with survey results from 2015, in the 2018 Queen Mary / White & Case Survey only 4% of respondents indicated that they would prefer litigation over international arbitration for cross-border matters.

As befits a global financial centre, New York is the dominant United States venue for international commercial arbitration. New York is identified as one of the top choices worldwide and as the preferred US seat in the 2018 Queen Mary / White & Case survey. In addition, a recent survey focused on the Americas from the University of Leicester and Gentium Law found that New York is the preferred US seat of 66% of

respondents. Statistics released by the International Chamber of Commerce’s International Court of Arbitration for new cases in 2017 show that half were based in New York.

Moreover, the pipeline of future cases in New York is strong. An astonishing 99% of respondents in the 2018 Queen Mary / White & Case survey said they would choose or recommend international arbitration to resolve cross-border disputes in the future. More particular to New York, the University of Leicester study showed that 61% of US respondents estimated that over half of all cross-border commercial contracts entered into in the past five years included an arbitration agreement.

Such future commercial disputes may well benefit from third-party funding, which is increasingly viewed within the international arbitration community as a routine method to fund arbitration cases. Corporate parties in particular are looking to third parties to help manage risk with respect to the cost of pursuing meritorious arbitration claims.

A shift towards third-party funding

The 2018 Queen Mary / White & Case survey, based on 922 questionnaire responses and 142 in-person or telephone interviews, identified a clear trend toward market awareness of third-party funding. In the last survey, released in 2015, 91% of respondents reported being familiar with the existence of third-party funding for international arbitration. In 2018, that figure increased to 97%, showing almost complete market awareness of third-party funding.

More striking still are the numbers with respect to perceptions of third-party funding among respondents. According to the authors of the report, “In the three-year span since our previous survey, perception of third-party funding has seen a clear shift from neutral to positive: while around a third of respondents expressed a ‘neutral’ perception, more than half of the respondent group indicated a ‘positive’ perception.”

Importantly, this increase in positive perception is correlated to increased exposure to, and use of, funding in international arbitration. The report notes that, “the subgroup of respondents who have actually used third-party funding in practice confirms this trend by reflecting an even more positive view: no less than 75% of this subgroup perceives third-party funding positively while most of those left in the subgroup take a neutral stance.”

The positive perception may be linked to users’ primary concern about international arbitration: cost. A substantial majority of survey respondents (67%) identified the cost of arbitration as its least attractive feature. Given this concern about the cost of pursuing international arbitration claims, the increasing use and positive view of alternative funding arrangements is perhaps not such a surprise.

VANNIN CAPITALBRIGHT LIGHTS, BIG OPPORTUNITY: FUNDING INTERNATIONAL COMMERCIAL ARBITRATION IN NEW YORK

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Commercial sense

The use of third-party funding for international arbitration claims remains relatively new. Having originated in Australia in the early 2000s, funding is now well established in many jurisdictions, including the United Kingdom and the United States. Although alternative models such as contingent fee arrangements are commonplace in domestic disputes, lawyers who specialise in cross-border arbitration are now responding to client requests for alternative funding arrangements. While some clients pursue alternative funding because of financial distress, an increasing number of corporate parties are seeing the value third-party funding offers as a means to manage cost and uncertainty risk.

The basic principle is simple: a third party provides capital to defray costs of pursuing an arbitration, in return for a share of the proceeds if the claim is successful. Beyond that basic principle, and subject to any applicable local law requirements, the options for third-party support are limited only by commercial good sense. Options include funding legal fees or expert costs,

acquiring an interest in the claim or the business, financing a portfolio of claims, assuming responsibility for an adverse cost award… the possibilities abound.

Corporate treasurers may be particularly attracted to the accounting benefits of alternative funding. Pursuing a substantial arbitration claim can have a negative effect on a company’s P&L statement because legal and expert costs appear as a liability, but a likely recovery in arbitration cannot be treated as an offsetting asset. Depending on the type of funding, working with a third party can have a significant impact by removing legal and expert costs from the ledger.

Of course, prudent lawyers and clients will work with a well-established funder that is experienced in funding international arbitration claims and adheres to the highest ethical standards. And a party offered “easy” money should be wary. In order to make an informed investment decision, reputable funders undertake rigorous review and testing of potential or existing claims.

THIRD-PARTY FUNDING IS INCREASINGLY VIEWED WITHIN THE INTERNATIONAL ARBITRATION COMMUNITY AS A ROUTINE METHOD TO FUND ARBITRATION CASES.

VANNIN CAPITALBRIGHT LIGHTS, BIG OPPORTUNITY: FUNDING INTERNATIONAL COMMERCIAL ARBITRATION IN NEW YORK

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Soft law guidance for international arbitration

The rise in third-party funding has prompted close examination by the international arbitration community and has resulted in various studies and soft law guidance on the subject. In 2014, the International Bar Association issued Guidelines on Conflict of Interest that included guidance on the definition of third-party funders. As practices evolve, however, questions of definition and scope remain far from uncontroversial. The recently released report of the ICCA-Queen Mary Task Force on Third Party Funding, noting that “the meaning and contours of the terms “third-party funder” and “third-party funding” can be ambiguous and, in some instances, contested,” devoted a chapter to definitions.

Third-party funding has also attracted the attention of international organisations, including the United Nations Conference on International Trade Law (UNCITRAL). UNCITRAL’s newly reconstituted Working Group III, which is tasked with reviewing investor-state dispute settlement (ISDS) and reform, has identified third-party funding as one area of further study. In its most recent session in New York, UNCITRAL Working Group III heard comments from state-party delegates as well as observers on potential concerns and benefits with respect to third-party funding.

These studies are welcome as ISDS encounters greater scrutiny and as third-party funding practices evolve. Outside of the ISDS debate, however, in purely commercial cross-border matters, corporate parties and law firms are even more unlikely to be deterred. The appeal of alternative funding – the opportunity for smart risk management and costs control – is simply too bright to ignore.

CORPORATE TREASURERS MAY BE PARTICULARLY ATTRACTED TO THE ACCOUNTING BENEFITS OF ALTERNATIVE FUNDING.

VANNIN CAPITALBRIGHT LIGHTS, BIG OPPORTUNITY: FUNDING INTERNATIONAL COMMERCIAL ARBITRATION IN NEW YORK

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VANNIN CAPITALGROUP ACTIONS GATHER PACE IN UK

James Oldnall Partner

MISHCON DE REYA

Lara Melrose Managing Associate

MISHCON DE REYA

Andrew Jones Managing Director

VANNIN CAPITAL

ON THE MARCH: GROUP ACTIONS IN THE UK

The class action market continues to expand in the UK, but the collective active regime remains in need of reform. In this article, James Oldnall, Partner, and Lara Melrose, Managing Associate from Mishcon de Reya, discuss how they see group actions developing with Andrew Jones, Managing Director of Vannin Capital.

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VANNIN CAPITALGROUP ACTIONS GATHER PACE IN UK

In the UK, we are increasingly seeing a move towards using group litigation as a means to hold large multinationals to account. These huge corporations, particularly those in the finance sector or the knowledge economy, have been operating in industries governed by severely under-resourced regulators. But where the regulator may have failed to take action, we now see that those affected are no longer willing to let big corporations get away with unscrupulous behaviour, and the obvious vehicle for holding them to account is group action.

Similarly, even where there has been a successful intervention by the regulator, for example in the competition arena, dissatisfaction with the power play of these huge corporations means there is a real willingness amongst those affected to take the next step and seek compensation.

The competition arena is the one where we have seen the most movement towards group actions so far in the UK. The Consumer Rights Act 2015 and the introduction of the opt-out regime in the Competition Appeal Tribunal (CAT) seem to have made the UK a more attractive forum for potential claimants, with the publicity around the proceedings that have been brought so far indicating a genuine interest in these sorts of claims.

Practitioners continue to grapple with the CAT’s collective action regime because it is novel and relatively untested. At the moment, competition claims that do proceed do so on the basis of trial and error because there is so little authority to turn to. What is obvious from both the Dorothy Gibson v Mobility Scooters case and Walter Merricks v Mastercard, which both failed to get off the starting blocks, is that the CAT, whilst keen to encourage collective redress for consumers, will really scrutinise the

basis on which the claims demonstrate sufficient commonality and how damages are to be quantified. That means potential claimants must be extremely careful about how their claim is framed, which is a useful lesson for the collective action regime as a whole.

One of the biggest challenges when constructing class actions is that no two group actions are alike. They may share some similarities but each one involves mobilising new individuals with different skill sets, many of whom have never been exposed to litigation before.

Each claim tends to involve a lot of education around how the regime operates in a tight time frame, so it is often about managing expectations. It is therefore critical to have a network of advisors you can trust and that’s where having confidence in the backing of a blue-chip funder helps to both galvanise support and lend credibility to the claim.

Just a few of the group actions that stand out in the UK recently include the truck cartel group action, seeking damages from truck manufacturers who entered into a fraudulent price fixing cartel, and the Volkswagen class action, which saw almost 60,000 people sign up to sue the German carmaker over its emissions scandal.

Another fascinating claim that we are currently working on involves the consumer rights champion Richard Lloyd, who we are representing in his high profile representative action against Google Inc. That case is the first of its kind where an individual has brought a claim in the English courts against a huge technology company over data abuses on behalf of millions of consumers. Given the current climate around data privacy, it is very unlikely to be the last and even if the claim is unsuccessful, it will be a critical step in establishing a clear set of guidelines and precedent for similar group claims, whether concerning data abuses or other breaches of consumer rights.

Practitioners and consumer groups alike have watched these cases with interest and are thinking about redress. This, coupled with the availability of funding, has certainly resulted in an increase in group actions on a much larger scale than we have seen before, and we certainly envisage that growth continuing.

As our society continues to grapple with big data as well as the size, reach and sophistication of large multinational corporations, we expect the current wave of group litigation to continue. As the class action market in the UK matures, we also think it is likely we will see more shareholder group actions and securities class actions against issuers in the UK, where these claims historically have been brought in the US.

LITIGATION FUNDING IS CRUCIAL TO THE LAUNCH OF ANY COLLECTIVE ACTION.

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But the regime is ripe for reform. Take for example, data protection. The Government has opposed amendments to the Data Protection Bill that would have introduced a specific statutory right for not-for-profits and individual representatives to bring proceedings on behalf of data subjects on an opt-out basis. The current drafting of the Bill, which only allows a data subject to mandate a not-for-profit to bring claims on their behalf (i.e. opt-in), does little to address the massive imbalance in legal firepower between the large data controllers and the data subjects.

It also ignores the reality that most not-for-profits are unlikely to have the resources to round up the necessary numbers of claimants to launch a claim. So, whilst the Lloyd v Google case will undoubtedly assist in this area, there is still much to be done to bring the UK class action regime in line with other more developed jurisdictions.

Undoubtedly the UK has some catching up to do as class action litigation builds an increasing profile outside of the US. We do not think, however, that the rapid development of collective action regimes in other European jurisdictions will pose a competitive threat to the UK after Brexit. Collective actions are usually brought in

the same jurisdiction as the complainants reside, and in our experience are rarely about forum shopping.

One development that is having a hugely positive impact on the market in the UK is the growth of litigation funding options. Litigation funding is crucial to the launch of any collective action. The costs burden in collective claims is too significant for individual claimants to carry and so funding, together with after-the-event insurance, is usually a pre-requisite. Having the support and experience of a funder in your corner allows you the time and resource necessary to formulate a robust collective action. We find that the economics of any claim are as an important aspect to get right as the cause of action and damages analysis.

The availability of litigation funding is a key tool to ensuring the collective action regime in the UK continues to develop. Continued enthusiasm for these kinds of claims amongst litigation funders is important, as is a relationship of support and trust. A creative approach to funding terms, and ability to respond to applications for funding swiftly, will be key to the continuing expansion of class actions in the UK market, alongside some much-needed legislative reform.

THE COMPETITION ARENA IS THE ONE WHERE WE HAVE SEEN THE MOST MOVEMENT TOWARDS GROUP ACTIONS SO FAR IN THE UK.

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VANNIN CAPITALMAXIMISING THE BENEFITS OF MEDIATION IN ASIA PACIFIC MARKETS

Gary SeibPartner Asia Pacific Chair

BAKER & MCKENZIE

Jason BettsPartner

HERBERT SMITH FREEHILLS

Patrick Coope Regional Managing Director, Australasia

VANNIN CAPITAL

MAXIMISING THE BENEFITS OF MEDIATION IN ASIA PACIFIC MARKETS

In recent years we have seen a notable increase in high-value claims in the Asia Pacific region being dealt with through mediation. In this article, Gary Seib of Baker & McKenzie, Jason Betts of Herbert Smith Freehills and Patrick Coope of Vannin Capital examine how parties can maximise the prospects of an acceptable settlement in mediation, and if that cannot be achieved, at least maximise the benefits of participating.

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VANNIN CAPITALMAXIMISING THE BENEFITS OF MEDIATION IN ASIA PACIFIC MARKETS

In any case in an Australian superior court, mediation is now almost certain to be a key element of the dispute resolution process. Mediators are typically retired judges, although Registrars of the Federal Court have become increasingly common.

Likewise, since the Civil Justice Reforms of 2010 in Hong Kong, mediation has been mandated in the High Court and the District Court, and has become a fully utilised dispute resolution mechanism in litigation, arbitration and other dispute environments in Hong Kong. Here, generally speaking, mediators are drawn from the practising profession, and more than retired judges.

The duration and complexity of mediations varies enormously, with some lasting as little as 15 minutes and other cases going through as many as four mediations, plus further direct settlement negotiations, before conclusion.

Traditionally the format of mediations in Australia is long written position papers, opening oral presentations by each party’s counsel, followed by parties going into separate break-out rooms before opening offers are made via the mediator. These offers are usually very high for the plaintiff, and very low for the defendant. But there are signs of change on the horizon.

Developing trends

In Australia, we have witnessed a developing trend towards substantially reducing the length of, or even doing away with, written position papers, and not having opening oral presentations made by counsel.

The process in Hong Kong generally follows the same format. Gary Seib, Partner and Asia Pacific Chair at Baker & McKenzie, based in Hong Kong, says: “An issue, in my judgment, is that mediations too often take place well into the process – sometimes close to trial – when most of the work, and therefore expense, has been sunk. That, by itself, can entrench positions.”

WHILE IT IS POPULAR TO DOWNPLAY THE IMPORTANCE OF POSITION PAPERS IN A MEDIATION, IT CAN BE A DOCUMENT THAT HAS REAL FORENSIC VALUE.JASON BETTS

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and why, by reference to evidence and authorities, often identifies issues that need further work. Such issues are obviously better identified at the time of a mediation, when it can be possible to address them through further work or evidence, than when preparing for trial, when there is usually little more that can be done.

Coope says: “I find this often occurs in relation to quantum issues. My experience is that lawyers pay far more attention to liability issues (am I going to win) than quantum issues (how much will I get if I win). Having to prepare a written position paper can identify this at a stage when it is still possible to do something about it.”

Oral presentations by counsel are also extremely valuable in most cases. They provide the first opportunity to hear a defendant’s trial counsel articulating their views, and it is often possible to establish what they consider to be their best points

based on the emphasis placed on them, or even just the amount of time dedicated to them, in the presentation. While it is certainly true that parties sometimes set out to keep their powder dry by not fully disclosing all of their key points, typically the lack of emphasis on a point gives an indication that counsel does not consider it to be a strong one. This can also manifest in counsel not sounding overly convincing in their reasoning.

Betts adds: “If the parties are prepared to give meaningful oral presentations – not just a bland recital of their submissions – then the mediation has the most chance of success. I find that too often parties treat the oral exchanges with such caution that they don’t actually say anything other than their ‘safe statements’ within their written submission. The best and most productive mediations go ‘off script’ and get into a good and respectful debate about why aspects of the opponent’s position are weak.”

He says: “That means being plain about your own weaknesses. Actually, getting into the cut and thrust of the detail of the case can, for the right mediation, be critical. There is way too much emphasis on getting straight to the horse trade without first trying to win some ground on the key liability points through genuine argument. After all, that’s the whole point of the mediation.”

Coope says: “I usually have at least a slightly better understanding of a case by this listening. On a few occasions it has resulted in me materially changing my views about a case. I sometimes use the opportunity for questions afterwards to clarify my understanding. I’m not a fan of arguments at this time, but if I really don’t understand a point I will ask for it to be explained in a different way.”

He adds, “And the outcomes can be mixed. I did one mediation which ran for half a day and ended when the plaintiff was either unwilling or unable even to put a first offer (not even ‘verdict for the plaintiff with interest and costs’). Too often, in my experience, the Hong Kong mediators approach the discussion as a ‘shuttle diplomat’ rather than an enabler.”

Many argue that the trend towards de-emphasising the written position papers is a mistake.

Jason Betts, Partner of Herbert Smith Freehills and a class action specialist, notes: “While it is popular to downplay the importance of position papers in a mediation, it can be a document that has real forensic value. It is a preview into the way submissions will be put at trial, and therefore a real signal as to how the parties view their own strengths and weaknesses.

A seasoned litigator will see the breadcrumbs that lead to their opponent’s true strengths and weaknesses, and I find, especially in class actions, that a case theory can evolve materially with the benefit of a good position paper.”

Patrick Coope, Regional Managing Director of Vannin Capital, agrees: “Seeing a defendant’s position paper is valuable. It is usually the first time they have summarised their position and explained their reasoning by reference to evidence and authorities. The next time that is done is often in opening submissions at trial.”

The defendant’s position paper often gives a plaintiff and its legal team (and Vannin) useful information for risk assessment. More importantly, a plaintiff and its legal team often derive significant benefits from preparing their own position paper. The discipline of having to identify best points

SEEING A DEFENDANT’S POSITION PAPER IS VALUABLE. IT IS USUALLY THE FIRST TIME THEY HAVE SUMMARISED THEIR POSITION...PATRICK COOPE

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Betts adds: “It is also important to remember that there are cases that should not settle. In class actions, settlements have been almost invariable, but I expect that trend to end soon. Parties with strong defences are becoming more cautious about overpaying for settlements in respect of cases they think they would win – and there is an increasing appetite among corporate Australia and its insurers to break the settlement cycle in class actions; especially in a market where a significant proportion of settlements go to the promoters of class actions, which builds the very class action industry that is creating pressure for defendants in the first place.”

Getting more from mediation

Typically, the process of a mediation starts out with both sides making unrealistic opening offers. If the claim is for $10, the plaintiffs might open with $9, and the defendants with 50 cents. Everyone is aware that both parties will move substantially from their opening positions, and the mediator is then tasked with spending hours shuttling between the parties trying to get to a middle ground.

The mediator’s target is typically a deal somewhere between 40% and 60% of the difference between the opening offers. So, in our example, the mid-point is $4.75, meaning the mediator would likely target a deal between $4.25 and $5.25. The only focus is the figure.

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VANNIN CAPITALMAXIMISING THE BENEFITS OF MEDIATION IN ASIA PACIFIC MARKETS

Assessing the settlement figure

There is a school of thought that recommends against entering a mediation with a preconceived view about what settlement figure might be acceptable. The argument goes that this is advisable because a party never really knows what its bottom line is until it just has to say yes and get the money.

In truth, the plaintiff, their legal team and their funder should, well in advance of mediation, seek to value their case in a structured way and decide at least a range in which a settlement will be acceptable. There is no formulae for doing this, but factors that need to be considered include a realistic assessment of prospects of success of the case and the likely quantum of it; costs spent plus likely future costs; exposure if the case is unsuccessful; likely time to conclusion of the case; and the opportunity cost of the money and time if the case does not settle at mediation.

The aim of this exercise should not be to identify the ideal outcome, but to identify the figure, or range, below which the case should not settle, even given all of the risks of going to trial. That figure is almost always far below the ideal outcome.

Doing this preparation in advance has a number of benefits. Having a well-developed assessment of their position enables a plaintiff to negotiate better and respond faster to offers from defendants. It sets a structure for a plaintiff and its legal team to easily and quickly quantify any new information that comes to light and thus to adjust its assessment if necessary. Knowing your bottom line also enables a person to develop and modify their negotiating strategy as needed. Finally, even if the mediation fails, the assessment enables the plaintiff to make better informed decisions for the rest of the case.

Seib says: “Much will depend on the commercial context and my client’s goals. There’s commercial value in certainty, and so we may need to flex: the calculus of time, management time, cost and certainty on the

one hand, and maximising the result (or minimising as a defendant) on the other, needs to be assessed in context. There are claims, particularly at the lower end, where a quick summary process makes sense.”

He points to one claim that he is currently defending that has the potential to be large, and says he fails to see any benefit in running through the full process of discovery, statements and interlocutories in advance of a mediation, because enough is clear from the issues as framed pleadings.

He adds: “The reality is that time spent in an early meditation process may be an investment of time worth making. ‘No one ever lost a settlement,’ as one of my mentors used to say. Nor was anyone ever forced to settle – the option of walking away and continuing to litigate is always available. I would not normally want to be bound to a pre-conceived view, but I would strongly counsel for a framework: you want to have that going in. It’s a strategic ‘anchor’, if you will, as the cut, thrust and gaming of the mediation itself can impact each team’s tactical responses.”

THE REALITY IS THAT TIME SPENT IN AN EARLY MEDIATION PROCESS MAY BE AN INVESTMENT OF TIME WORTH MAKING.GARY SEIB

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VANNIN CAPITALMAXIMISING THE BENEFITS OF MEDIATION IN ASIA PACIFIC MARKETS

But is there a better approach? There are a range of other factors that might have value to one or both of the parties and that should be given due consideration in the mediation process. These include the timing of any payment, the staging of it, consideration other than in cash, confidentiality, timing of the settlement, linkages to other disputes, and the position of other defendants if it is a multi-defendant claim. There are plenty more.

If there are other issues such as these that open up the possibility of negotiating beyond the settlement figure, that allows for trading on various issues, particularly if one party places much more value on one issue than the other. That can make it easier, and quicker, to reach a settlement.

Coope points to an example he has experienced: “For its own valid internal reason (not related to ability to pay), a defendant wanted a lengthy period of time in which to pay any settlement amount,” he says. “The length of time until it got paid didn’t materially impact on the plaintiff. In that case, the plaintiff obtained a higher settlement sum but didn’t get paid it for a lengthy period.”

He adds, “My experience of mediations is that exploring whether there are other valuable issues to the parties frequently doesn’t happen at all. I think it should. Ideally it should happen before the parties start exchanging offers, possibly even in advance of the mediation.”

Seib says that a lot turns on the commercial context. “Running mediations for liquidators, where no ongoing commercial relationship is contemplated, can be a pure horse trade. And positions can therefore entrench, because what has either side got to lose? But mediations can offer more creative

solutions than the binary results of the horse trade or, failing that, the judgment or award. And that’s where the value can be created.”

Betts says: “Being prepared to actually debate the merits of the case – a surprisingly rare thing in mediations – is critical. Unless parties have the courage to get into the cut and thrust of a discussion of who might win, the horse trade is just a process of starting at extremes and hoping the parties land in a place they can both live with. Mediation needs to have some meaningful relationship to the merits of the respective parties, positions, and not taking the usual position of leaving the actual argument to the trial. This is the first opportunity for people to breathe life into the sterility of the documents and written evidence.”

Conclusion

Mediation may go in and out of fashion, it may not always succeed, and it may be rough justice when it does, but it is certainly here to stay.

In Hong Kong, hundreds of mediations take place in High and District Court litigation each year, and it is also very active outside the Court system. The same is true in Australia. When it might take place in the process, and how detailed the procedure should be, must be responsive to the nature of the dispute and the broadest appreciation of the parties’ commercial objectives.

There is value in getting each side in a room. While they may not always emerge with a resolution, much more time needs to be dedicated to exploring the full gamut of valuable issues that parties might be willing to negotiate, so that the discussion extends beyond settlement figures and has a greater chance of success.

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VANNIN CAPITALWHAT TO SAY AND WHEN: COMMUNICATIONS WITH FUNDERS IN US PROCEEDINGS

Alan GuyManaging Director

VANNIN CAPITAL

A huge volume of disclosure is routinely required in US litigation. Here, Alan Guy of Vannin Capital surveys the law in the US regarding the disclosure of communications with funders and sets out best practices for protecting those communications.

One of the defining features of civil litigation in the United States is the large amount of disclosure parties to a litigation can demand from one another. For parties thinking of using litigation funding in connection with a dispute in US courts, this raises several questions. For example, will disclosing confidential information about a case to a funder open the door to disclosure demands – commonly called discovery – in the litigation that follows? And will the terms of the funding agreement have to be disclosed to an opposing party?

These questions can be particularly nerve-wracking for litigants based outside the United States, who may not be familiar with how discovery works in US courts and may need the help of a funder to find qualified US counsel in the first instance. While there is no way to eliminate the risk of disclosures related to funding entirely, there are a few best practices that all litigants can use to minimise the risk that their communications and agreements with funders will get caught up in the broad scope of US-style discovery.

WHAT TO SAY AND WHEN: COMMUNICATIONS WITH FUNDERS IN US PROCEEDINGS

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Discovery in US civil proceedings

At first glance, US-style discovery can seem remarkably broad, but important limitations exist that can protect communications and agreements with funders from disclosure.

Unlike the system used in many civil law countries, discovery in US courts is based on the theory that each party should be required to produce all the evidence it has regarding the facts in a dispute, even if that evidence is unhelpful to that party’s case. As the US Supreme Court explained in the seminal case of Hickman v. Taylor, 329 U.S. 495, 507 (1947):

“ Mutual knowledge of all the relevant facts gathered by both parties is essential to proper litigation. To that end, either party may compel the other to disgorge whatever facts he has in his possession.”

Under the civil procedure and evidence rules that now apply in many US courts, “parties may obtain discovery regarding any non-privileged matter that is relevant to any party’s claim or defence” if the burden

of discovery is “proportional to the needs of the case”. Relevance is defined broadly to include any information making a fact “of consequence” to the dispute “more or less probable than it would be without the evidence.”

Because discovery obligations extend to information within a party’s “possession, custody, or control”, US courts will require the production of information even when that information is kept outside the territorial borders of the United States.

However, while at first glance US rules regarding discovery may appear to sweep up every scrap of information in a litigant’s possession, a number of important principles limit their reach – particularly where communications and agreements with funders are concerned.

First, while the definition of relevance is very broad under US law, US courts are reluctant to allow parties to obtain evidence that has only a speculative connection with a case. Courts have declined to compel the production of funding agreements

based on the hypothetical possibility that the agreements might violate rules against champerty and maintenance, noting that those were not defences to the claims against the defendant, or the mere possibility that the lead plaintiffs in a class action lacked the resources to adequately represent the class.

While one state, Wisconsin, has adopted a blanket rule requiring the disclosure of funding agreements by plaintiffs in all civil litigation, this approach has not been adopted by most other authorities that have considered it. The handful of courts that have adopted rules regarding funding-related disclosure have focused on establishing the identity of the funder, not the financial terms of the funding agreement.

Secondly, US courts have recognised that it is unfair to allow one party to exploit the work of another by demanding documents prepared in anticipation of litigation or for trial. Absent a showing of special need, materials prepared by a party – or those working on behalf of a party – while investigating the facts of a dispute or

preparing a legal strategy are not subject to discovery. Furthermore, when there is a special need for disclosure (such as when a party has sole control of a statement from an unavailable witness), a court must still protect the “mental impressions, conclusions, opinions [and] legal theories of a party’s attorney or other representative concerning the litigation”.

Because this work-product doctrine is designed to prevent material from falling into the hands of an opposing party, disclosure of it to a third party does not automatically waive the protection. A waiver only occurs when the protected documents “are disclosed in a manner that substantially increases the opportunity for potential adversaries to discover them”. As a result, the majority of US courts that have considered demands for the disclosure of communications between litigants and funders regarding the merits of a case have found that the material is protected by the work-product doctrine and that it does not become subject to discovery when it is disclosed to a funder under a written confidentiality agreement.

Finally, like many common law jurisdictions, US courts recognise that confidential communications with an attorney for the purposes of obtaining legal advice are protected from discovery. This protection may attach even when communications take place outside of the United States if they relate primarily to a US dispute. While arguments can be made that disclosures to a litigation funder should not waive the attorney-client privilege, courts have been slow to accept such arguments. As a result, litigants should not assume that just because their attorney is present during discussions with funders, those communications will automatically be covered by the attorney-client privilege.

It is therefore clear that, while US courts do not automatically protect communications and agreements between litigants and funders, they are willing to apply traditional limitations on discovery to keep these materials out of an opposing party’s hands.

WHILE AT FIRST GLANCE US RULES REGARDING DISCOVERY MAY APPEAR TO SWEEP UP EVERY SCRAP OF INFORMATION IN A LITIGANT’S POSSESSION, A NUMBER OF IMPORTANT PRINCIPLES LIMIT THEIR REACH.

VANNIN CAPITALWHAT TO SAY AND WHEN: COMMUNICATIONS WITH FUNDERS IN US PROCEEDINGS

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Best practice

Because the law regarding disclosure and funding is evolving, there can be no ‘one size fits all’ approach to protecting communications and agreements between litigants and funders. However, certain best practices can help litigants maximise their chances of keeping materials confidential.

First, litigants should consider the reputation of a funder and the credentials of its team. While there are many sources of funding for civil litigation in the United States, only a handful have adopted Vannin’s approach of hiring experienced civil litigators to work with litigants throughout the life-cycle of a case. Working with a funder that understands the unique concerns that arise when deploying capital in connection with litigation will provide a litigant with an added measure of security from the moment the funding diligence process begins.

Second, litigants and funders should develop a plan for managing disclosure risks using available limitations on discovery at the outset of their relationship. That plan should take into account the rules governing discovery and disclosure in both the jurisdiction where litigation is likely and the jurisdictions where sensitive information may be kept. While it is often helpful to have litigation counsel involved at this stage, the work-product doctrine will provide a measure of protection even if counsel has yet to be retained.

Third, written non-disclosure agreements should be put in place before sensitive information is exchanged. Because the work-product doctrine remains one of the most robust protections for communications and agreements with funders, non-disclosure agreements should make clear that the primary purposes of any communications or funding agreements are to allow the litigant to pursue claims or defences in a pending or impending litigation.

Fourth, funding agreements should clearly state their litigation purpose and delineate the roles played by litigant, lawyer, and funders in relation to the case. When disclosure of a funding agreement is anticipated, it may also be appropriate to segregate particularly sensitive information, such as terms reflecting an attorney’s opinions regarding the merits of a case, so that they can be easily redacted.

Fifth, as the case proceeds, litigants, lawyers, and funders should follow the plan developed for managing disclosure risks at the outset and update it as necessary. As the law in this area evolves, they should adjust their practices to match. They should also take care that familiarity and convenience do not lead them to share information in ways that increase disclosure risks.

Finally, when communications or agreements with funders are the targets of discovery demands and the subject of disclosure obligations, litigants, lawyers, and funders should be forthright with the court and opposing parties when resisting disclosure. Courts are likely to look much more favourably on objections to disclosure if they are raised promptly and in an appropriate manner.

LITIGANTS SHOULD NOT ASSUME THAT BECAUSE THEIR ATTORNEY IS PRESENT DURING DISCUSSIONS WITH FUNDERS, THOSE COMMUNICATIONS WILL AUTOMATICALLY BE COVERED BY THE ATTORNEY- CLIENT PRIVILEGE.

VANNIN CAPITALWHAT TO SAY AND WHEN: COMMUNICATIONS WITH FUNDERS IN US PROCEEDINGS

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Conclusion

The United States is an appealing forum in which to litigate for many reasons, not least of which is the increasing availability of funding from experienced funders like Vannin. While discovery in US civil litigation is broad – a fact that can work to the significant advantage of a litigant – an increasingly robust body of law is developing that protects communication and agreements with funders from disclosure. By following the best practices above, litigants can take maximum advantage of both features of the US legal system.

AN INCREASINGLY ROBUST BODY OF LAW IS DEVELOPING THAT PROTECTS COMMUNICATION AND AGREEMENTS WITH FUNDERS FROM DISCLOSURE.

VANNIN CAPITALWHAT TO SAY AND WHEN: COMMUNICATIONS WITH FUNDERS IN US PROCEEDINGS

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VANNIN CAPITAL60 SECONDS Q&A WITH LOUISE BELL

Rosemary IoannouManaging Director

VANNIN CAPITAL

While the volume of contentious insolvency claims has fallen from its peak immediately after the global financial crisis, disputes involving allegations of fraud remain common. Here, Louise Bell, a specialist in complex disputes in insolvency situations at Enyo Law discusses what is keeping her busy.

60 SECONDS Q&A WITH LOUISE BELL ENYO

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“YOU WILL ALWAYS HAVE A HARD CORE OF INDIVIDUALS WHO ARE ROUTINELY DISHONEST, INCLUDING INDIVIDUALS WHO ARE INVOLVED IN SERIOUS ORGANISED CRIME.”LOUISE BELL

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VANNIN CAPITAL60 SECONDS Q&A WITH LOUISE BELL

RI: Is there a ‘most common’ type of claim you are seeing as part of your contentious insolvency practice at the moment?

LB: Most of the claims I deal with have a grounding in fraud. Typically, they will involve one or more directors of the insolvent entity, and often they also involve other entities that have been mixed up in the activity, which has caused the insolvent company to suffer a loss. It is sometimes easy to overlook the fact that the company itself is, in many legal scenarios, the victim of the fraud even though ultimately it is creditors who suffer a loss.

In terms of types of claims, the insolvent entity will have at its disposal the usual range of common law remedies. These can usually be supported by the office holder’s statutory remedies such as transactions defrauding creditors, preferences and transactions at an undervalue.

RI: How does that differ to the types of claims that were arising 10 years ago, in the immediate aftermath of the financial crisis?

LB: In relation to the types of claim that were arising, I would say it is the same. In terms of the volume of claims, there is a difference. You will always have a hard core of individuals who are routinely dishonest, including individuals who are involved in serious organised crime. There is another sub-set of people who, whilst not routinely dishonest, have a propensity towards dishonesty when they find themselves in difficult financial situations.

RI: The dreaded question: is Brexit impacting the cases and work you are seeing? If not, do you expect it to?

LB: Not yet! The European Union (Withdrawal) Act 2018 provides that the Recast Regulation on Insolvency will continue to apply to all insolvency proceedings commenced in any Member State (including the UK) until 31 December 2020 (the end of the transition period). What will happen after that is pure speculation but certainly, absent a new regime, cross-border enforcement in European jurisdictions will become much more difficult. We will be thrown back to the previous legislation whereby the English courts determine whether they have jurisdiction to commence insolvency proceedings in each particular case, and there is no automatic recognition of those proceedings by the Member States.

The position is not assisted by the fact that very few Member States are signatories to the UNCITRAL Model Law on Cross Border Insolvency. What I would like to see is something very similar to the Recast Regulation being adopted between the UK and each of the remaining Member States. There is some incentive for that to happen because the UK’s administration processes and Companies’ Act schemes of arrangements are popular with our European counterparts.

RI: You were recently involved in the case Burnden Holdings (UK) Limited v Fielding and another [2018] UKSC 14 before the Supreme Court. Do you think that decision has wider practice points that the market should be aware of?

LB: Yes, I think it does. Prior to the Supreme Court’s decision, there was surprisingly little case law on the meaning of section 21(1)(b) of the Limitation Act. It is well established law that directors are ‘trustees’ for the purposes of section 21 of the Act. The Supreme Court found that, by virtue of their office, directors should be treated as ‘fiduciary stewards’ of a company’s property even though that property was legally owned by the company. Accordingly, a company director will always fulfil the requirement of section 21(1)(b) that he or she has previously received trust property.

In many cases, suspending the period of limitation comes with a requirement to establish that the defendant has acted dishonestly which, as we all know, can be a difficult threshold to reach. That requirement is, however, absent from section 21(1)(b). As stated by the Supreme Court, the purpose of the section “is to give a trustee the benefit of the lapse of time when, although he had done something legally or technically wrong, he had done nothing morally wrong or dishonest. It is not intended to protect him where, if he pleaded the statute, he would come off with something he ought not to have”.

Whilst in an ideal world, none of us wants to be in a position where we are having to find ways to suspend a period of limitation, we have all been presented with claims which, on the face of it, could be met with a limitation defence. This can often happen in an insolvency context where directors’ actions are not given close scrutiny until an office holder is appointed. The Supreme Court’s decision opens up the possibility for claims to be brought in relation to transactions where the primary limitation period has expired, without the need to show dishonesty.

RI: Historically, how has litigation in an insolvency context been funded?

LB: In the past, in cases where there were no assets in the case with which to fund litigation, claims would need to be funded by creditors or by the lawyers agreeing to act under a conditional fee agreement. Whilst lawyers may be willing to act under a CFA for small claims, on more significant pieces of litigation, the financial investment required from the law firm was usually too much and many claims were just not pursued as a direct consequence of lack of funding.

RI: Has the growth of litigation funding changed the way you and your clients think about how claims may be funded?

LB: The growth of litigation funding has definitely changed the landscape. It is now possible to bring claims that might not otherwise have seen the light of day. Whilst we always approach creditors to ascertain whether they are prepared to provide funding, there is often little appetite for creditors who have already lost money to put more capital at risk.

RI: Generally, who pushes for an approach to funders? The lawyers, the insolvency practitioner or the creditor body (who would otherwise have to fund the dispute themselves)?

LB: It is incumbent on us as lawyers to discuss the various funding options available to our clients at the outset of litigation. It is generally the office holder who will make the decision about whether to make an approach to funders, not least because the office holder must act in accordance with his general duties to creditors when considering whether to bring the claim or not.

RI: How do you see the contentious insolvency market developing over the next five years? Do you see funding forming a significant part of that development?

LB: With more funders now in the marketplace, I think more office holders are looking closely at whether there are claims they should be bringing to increase returns to creditors. For years now, perfectly good claims have not been brought because there were insufficient uncharged assets in a case to fund litigation. In the last five years, there has been a growth in the number of contentious insolvency cases and, with the funding options now available to office holders, I see that growth continuing.

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VANNIN CAPITALWHEN HEALTHCARE LICENSING GOES WRONG

Michael GermanManaging Director

VANNIN CAPITAL

In this article, a team from Debevoise & Plimpton and Michael German, Managing Director at Vannin Capital, explore how disputes involving litigants of disparate resources develop in the healthcare industry, and the risks and opportunities that arise in such big money disputes.

It is well established that corporate litigants are increasingly using dispute resolution funding as part of their broader legal strategies. Businesses have recognised that funding arrangements that permit them to leverage offensive litigation in a manner equivalent to leveraging mainline revenue streams, while protecting against downside financial risk, present unique opportunities to vindicate rights without shifting the focus of the enterprise to litigation.

When these litigants find themselves involved in disputes that are large relative to the size of their business, they are often left with a Hobson’s choice: shift the focus of the company, and the majority of its resources, to vindicating its rights in risky litigation, or walk away from the potential litigation with nothing to show except the injury imposed on it by the counterparty. Such big money disputes are a particular feature of the healthcare industry, where small biopharmaceutical companies frequently look to larger, better-resourced corporate giants to create and bring to market exciting new compounds and applications.

WHEN HEALTHCARE LICENSING GOES WRONG

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The issue

In recent years, pharmaceutical companies have expanded their developmental pipelines by entering into collaborative agreements with smaller biopharmaceutical companies (licensors) that have key compounds, technologies, or other valuable property under development. These agreements typically include a license of the product and related intellectual property to the larger pharmaceutical company (the licensee) and, in turn, give the licensee some or all responsibility for development and commercialisation of the product. Similar collaboration agreements are common between well-established medtech companies and smaller companies that are developing innovative medical devices.

When successful, these types of collaboration agreements provide significant benefits for both parties. For the licensee, the collaboration agreement can add a promising new product to its pipeline. This is particularly valuable to companies that have struggled to develop products in-house or that are trying to enter or expand a therapeutic area. Collaboration agreements also allow the licensee to avoid the costs and risks attendant in buying the licensor outright.

For the licensor, a collaboration agreement facilitates a partnership with a well-established entity that has the resources necessary to complete the development process – including clinical trials, manufacturing and distribution – and has a large market presence. It also provides financial incentive, generally including a significant up-front payment and future royalties from the licensee. As opposed to an outright sale, the royalties allow the licensor to profit directly from the product if it proves successful.

VANNIN CAPITALWHEN HEALTHCARE LICENSING GOES WRONG

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Collaboration agreements, of course, also come with risks. Depending on the terms of the agreement, the licensor may cede significant control over development, manufacturing, and commercialisation of the licensed compound to the licensee. As such, risks to the licensor may include:

• The possibility that the product never ultimately gets off the ground due to varying (and hard to predict) degrees of commitment from the licensee.

• Breaches of the agreement by the licensee, including failing to fully protect the intellectual property that it licenses or pay all of the royalties that it potentially owes.

• Bad publicity if the licensee engages in conduct with respect to the licensed property that may tarnish the licensor’s brand or reputation.

The licensee also faces a number of risks:

• The licensor may fail to disclose key data that calls into question the product’s safety or efficacy or may otherwise be uncooperative.

• The product may fail in clinical trials or the authorities may not approve the product.

• The commercial market for the product may be less than the licensor predicts because of competitive therapies or other reasons.

• The licensor may demand royalties to which it is not entitled, in some cases by obtaining follow-on patents of questionable validity.

Disputes arising out of pharmaceutical collaboration agreements can be costly to litigate and, depending on the circumstances, can result in large-scale verdicts spanning eight or nine figures. Unlike large licensees, smaller licensors often lack the resources to hire the skilled counsel and experts necessary to bring or defend such cases. Litigation funders can help level the playing field by offering financing to these small licensors.

Examples of collaboration agreements

Several recent examples illustrate the scale and significance of healthcare collaboration agreements. In May 2018, Zymeworks, a small-cap biopharmaceutical company, entered into a collaboration agreement with Daiichi Sankyo, a large pharmaceutical company based in Japan. Daiichi acquired the licenses to two of Zymeworks’ technology platforms for use in developing biotherapeutics for an up-

front payment of $18 million. Under the agreement, Zymeworks was potentially entitled to up to $467 million in royalties depending on clinical, regulatory, and commercial outcomes.

Similarly, in 2017, Takeda Pharmaceutical Company, a large pharmaceutical company based in Japan, entered into a collaboration agreement with Karolinska Institutet and The Structural Genomics Consortium to evaluate new treatment options for inflammatory bowel disease. Under the terms of the agreement, Takeda agreed to provide funds for three years of research and received commercialisation rights to any clinical outcomes that resulted from the study.

In medtech, GE Healthcare and HeartFlow, a venture-backed cardiovascular company founded in 2007, entered into a collaboration agreement in 2017 whereby GE would incorporate HeartFlow’s fractional flow technology – a software representing the entirety of its product portfolio – into GE’s scanners. Although HeartFlow was already commercially available, the deal benefited HeartFlow by giving it considerably more market access and GE by allowing it to incorporate the technology into its existing coronary artery disease product line.

Mark GoodmanPartner

DEBEVOISE & PLIMPTON

Megan BanniganCounsel

DEBEVOISE & PLIMPTON

Henry LebowitzPartner

DEBEVOISE & PLIMPTON

Jacob StahlCounsel

DEBEVOISE & PLIMPTON

VANNIN CAPITALWHEN HEALTHCARE LICENSING GOES WRONG

FOR MANY LICENSORS, A DISPUTE OVER A COLLABORATION AGREEMENT WILL BE ‘BET THE COMPANY’ LITIGATION

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Risks arising from collaboration agreements

Royalty disputes

Royalty disagreements are perhaps the most common type of dispute in the collaboration context. For example, in 2003, the small-cap biopharma company Array BioPharma entered into a collaboration agreement with much larger pharmaceutical business AstraZeneca. Under the agreement, Array licensed to AstraZeneca a compound known as selumetinib, for the purpose of developing cancer therapeutics. Last year, AstraZeneca entered into a separate collaboration agreement with Merck & Co, under which selumetinib was sub-licensed by AstraZeneca to Merck & Co. Array claims that under its 2003 agreement with AstraZeneca, it is owed 12% of the proceeds from AstraZeneca’s sub-license agreement with Merck & Co, and it is seeking at least $192 million in damages. AstraZeneca disputes its obligation to pay royalties out of the sublicensing deal, and the litigation is ongoing.

Disputes about skirting collaboration agreements

Disputes may also arise when a licensee develops or acquires a competing product or finds another way to develop the product that potentially falls outside the collaboration agreement and the licensee’s obligations to pay royalties.

For example, in 2012, ProCaps and Patheon entered into a collaboration agreement under which Patheon would market soft gel capsules developed and manufactured by ProCaps. But soon after the agreement went into effect, Patheon acquired Banner Pharmacaps, ProCaps’ primary competitor. ProCaps brought binding arbitration on a breach of contract claim and sued in Federal Court, on the grounds that Patheon’s acquisition of Banner was anticompetitive. ProCaps was awarded $909,500 in the arbitration, far short of the $135 million it was seeking, because the arbitrators reportedly found that the collaboration agreement did not permit recovery of lost profit damages. Patheon defeated ProCaps’ antitrust claims.

In 2008, Napo Pharmaceuticals entered into a collaboration agreement with Salix Pharmaceuticals. Under the agreement, Napo granted Salix the rights to develop, commercialise and distribute crofelemer, a drug that was developed to treat diarrhoea in people living with HIV/AIDS and diarrhoea-predominant irritable bowel syndrome (IBS). Napo subsequently filed suit, arguing that Salix failed to make commercially reasonable efforts to develop the drug for IBS. Napo claimed that this conduct caused it to suffer $150 million in damages. The parties reached a confidential settlement.

DISPUTES ARISING OUT OF PHARMACEUTICAL COLLABORATION AGREEMENTS CAN BE COSTLY TO LITIGATE AND CAN RESULT IN LARGE-SCALE VERDICTS SPANNING EIGHT OR NINE FIGURES.

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LITIGATION FUNDERS CAN HELP LEVEL THE PLAYING FIELD BY OFFERING FINANCING TO SMALL LICENSORS.

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VANNIN CAPITALWHEN HEALTHCARE LICENSING GOES WRONG

Patent “evergreening”

Disputes commonly arise when licensors are alleged to have engaged in “evergreening” their patents. Evergreening is the practice of attempting to extend the life and profitability of a patent family by developing new patents that are closely related to the original inventions. For the licensees, this practice is problematic because collaboration agreements will typically cover a family of patents. That means that the licensee may have to pay royalties for a worthless patent or at least one of questionable validity (and, therefore, value as a competitive barrier). Licensees often respond to this practice by seeking to invalidate the evergreened patent.

The Cabilly family of patents is the most famous example of this practice and the conflicts that can come from it. In 1997, MedImmune entered into a license agreement with Genentech for a patent developed by Genentech for synthesizing “chimeric” antibodies for use in medication (Cabilly I) as well as a pending patent application for “Cabilly II”, which was broader than Cabilly I. Before the application for Cabilly II was approved,

MedImmune developed and received FDA approval for Synagis, a drug used to prevent respiratory tract disease in young children. MedImmune took the position that the medication did not make use of the Cabilly I patent and did not make royalty payments from its Synagis sales. Genentech, on the other hand, argued that the medication was covered by Cabilly II, causing MedImmune to commence paying royalties under protest. MedImmune sought a declaratory judgment that the Cabilly II patent was invalid. After resolution of the lengthy proceedings, including procedural question claims that went all the way to Supreme Court, the Cabilly II patent was upheld.

Misuse of intellectual property

Collaboration agreements also pose a risk to licensors’ proprietary information, such as trade secrets and knowhow. While necessary for the collaboration, transferring this proprietary information increases the risk of disclosure, which can be particularly harmful for companies that license a substantial percentage of their intellectual property portfolio.

For example, Codexis entered into a collaboration agreement with a large pharmaceutical company in 2004. Codexis licensed biocatalysts, which are a type of enzyme used in the manufacturing of chemical compounds. Codexis collaborated extensively with the pharmaceutical company, and many of its scientists worked hand-in-hand with those of the pharmaceutical company, including Tao, a scientist who eventually left his position to found EnzymeWorks. Believing that EnzymeWorks was using Codexis’ proprietary information, Codexis filed suit against EnzymeWorks in 2010 for patent infringement, misappropriation of trade secrets, breach of contract, and other causes of action. The parties settled earlier this year, nearly eight years after EnzymeWorks was founded.

Similarly, in De Simone v. VLS Pharmaceuticals, VSL and Sigma-Tau Pharmaceuticals entered into a collaboration agreement under which VSL granted Sigma-Tau a license to use its patents and knowhow related to the production of certain probiotics that were developed for use in medications.

When Claudio De Simone, the original patent owner and founder of VSL, left the company to start a generic competitor to VSL, he sought a declaratory judgment that he owned the knowhow. VSL and Sigma-Tau countersued, arguing that De Simone’s new venture misappropriated VSL’s knowhow and infringed upon VSL’s trademark, among other causes of action. The litigation is ongoing, but De Simone has been preliminarily enjoined from using specific marketing materials and trademarks.

Litigation funding for licensors

For many licensors, a dispute over a collaboration agreement will be “bet the company” litigation: if the licensor does not prevail, the company may go out of business or, at the very least, be severely impaired. The stakes are so high because victory may result in a licensor being able to profit from its core intellectual property in the future or to receive a large award compensating it for past damages. A loss, by contrast, may render the licensor’s intellectual property worthless.

Litigation over licensing disputes is often costly. For a party to maximise its chances of success, it will likely need to retain a team of sophisticated litigators with expertise not only in litigating complex commercial disputes, but also in the nuances of healthcare regulation and intellectual property law that may be implicated by the dispute. Moreover, it may be necessary to hire a stable of experts to support the company’s position with respect to both scientific and commercial issues. Depending on the circumstances, the cost of litigation may be many millions of dollars.

While large company licensees often have access to the resources necessary to litigate such disputes, the licensors in these disputes – typically smaller companies with little or no profits – typically do not. Litigation funding, however, evens the playing field. When licensors present a strong liability case, funding the licensor such that it may develop and execute a robust litigation strategy eliminates the need for the smaller entity to make that Hobson’s choice: it can both vindicate its rights and focus on its business.

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VANNIN CAPITALQUANTIFYING DAMAGES IN COMPETITION LITIGATION

Bruno AugustinPartner

HABERMAN ILETT

Rob van der LaanFounder

OMNICLES

Rosemary Ioannou Managing Director

VANNIN CAPITAL

QUANTIFYING DAMAGES IN COMPETITION LITIGATION

With a growing number of damages claims for anti-competitive behaviour both in the UK and across Europe, the question of how these damages can be quantified becomes ever more important. Here, Bruno Augustin of Haberman Ilett, Rob van der Laan of OmniCLES and Rosie Ioannou of Vannin Capital consider some key questions relating to the quantification of damages in private enforcement actions involving competition law.

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VANNIN CAPITALQUANTIFYING DAMAGES IN COMPETITION LITIGATION

Quantification techniques

There are a number of techniques that can be used to assess damages for breaches of competition law. The key is always to remember what you are trying to achieve, namely determining the loss suffered by the claimant by means of comparing what would have happened in the absence of a breach to what happened in reality.

The method adopted must be the one most suitable to the facts and commercial realities of the case. For example, if the claimant is a new entrant to the market, it would be difficult to apply a “before and after” method to quantifying its loss, as by definition there is unlikely to be “before” performance with which to compare its performance during the period of the infringement.

The facts may also reveal commercial realities of the case that are not consistent with conventional wisdom. For example, the claimant may have a long-term agreement to sell on a cartelised product at a fixed price, so in those circumstances could not be said to have passed on the overcharge it suffered from the defendant, even though economic opinion may suggest this to be likely in general terms.

Any kind of model or description will, by definition, only reflect a part of reality, ignoring the rest for convenience’s sake. As such, once the fundamental elements of a market are identified, in any given scenario, it makes sense to use a number of different techniques rather than a single method to derive several estimates that are compatible with the fundamentals of the market. If the outcomes are very similar, this may provide additional confidence in the results. If the outcomes are very different, analysis of the differences may provide insight in a better estimation.

In general, taking various approaches to test the robustness of the model or method will improve the result.

THE MORE RELEVANT DATA THERE IS AVAILABLE THE BETTER – THOUGH THE KEY WORD HERE IS ‘RELEVANT’.

Courts and tribunals have been dealing with the quantification of damages in private enforcement actions in all areas of the law for many years, and there is much jurisprudence and professional experience that competition law practitioners can call upon from other legal disciplines to assist with the task.

Essentially, there is no reason why competition law should be treated any differently. The need to estimate the “but-for” or “counterfactual” scenario against which to compare what really happened is an obvious task in any damages action, no matter what area of the law the claim arises from. It is something experts encounter in a number of different damages actions, usually without the need for complex models.

The quantification of damages in competition law can be different, however, when the whole market for a particular product needs to be evaluated, such as in actions brought by a group of claimants against a large cartel. It is then necessary to have a good understanding of markets in order to assess damages from an infringement of competition law. Both claims based on an abuse of a dominant position and claims based on a cartel infringement suggest that only a limited part of the market may be unaffected and suitable as a base for the counterfactual.

The counterfactual in competition may therefore require a more fundamental understanding of the working of markets compared to what is required for the quantification of damages in other areas. How a market would operate without the infringement can depend on detailed analysis of, for example, the impact of capacity constraints and customer loyalty.

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Disclosing relevant data

Expert accountants and economists are used to having to make assumptions when key data is missing. But the starting point is always that the more relevant data there is available the better – though the key word here is “relevant”.

For example, in cartel cases, one can make the case for any loosely significant factor having an influence on the counterfactual price, and be tempted to include it in a regression model, just because data exists that allows one to do this. However, in reality it may be better to adopt a simpler technique that focuses on the more directly relevant factors, even if such available data is more limited. At the end of the day it is the quality, rather than the quantity, of data that counts.

We should not forget that there is often not a strict boundary between relevant and irrelevant. This applies in particular to statistical data, where one generally opts for a pre-defined level of confidence before drawing conclusions. One needs to be cautious before labelling information as irrelevant from the outset of an assessment.

Furthermore, quantity has a quality of itself. There is no point spending resources on analysing huge amounts of data just for the sake of them being available. However, the analysis of a large dataset often provides some unexpected qualitative insights. There is a fine balance to be struck between controlling costs and allowing sufficient freedom of action to obtain additional insights.

IT IS NOT COST-EFFECTIVE TO SPEND CONSIDERABLE TIME AND MONEY SEARCHING FOR AN ELUSIVE ‘TRUTH’ AND IN THE PROCESS PRODUCE A CALCULATION SO COMPLEX THAT MOST PEOPLE CANNOT UNDERSTAND IT.

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Calculation precision

The calculation needs to be as precise as the evidence allows. We must not forget that in calculating the “counterfactual” scenario, we are dealing with a situation that never happened. Therefore, it is impossible to determine scientifically what the alternative scenario would definitely have looked like if there was no breach. There is no “truth” that can be discovered – it is by necessity always going to be an estimate.

Different cases require different solutions. For example, assume that the key question is whether different market conditions would have resulted in market entry in the counterfactual. The entry/no entry question may only need superficial attention if either entry is only plausible in very narrowly defined circumstances (long-term contract) or entry would be plausible even if market conditions would change only marginally (perfectly contestable market). A precise estimation would not be much use.

On the other hand, there are situations where the most precise level of estimation is desirable in order to narrow the range of plausible levels of entry as far as possible. Precision is generally required where the claimant and the defendant agree on the relevant elements that need to be taken into account. In many cases, the importance of the various variables proposed is disputed and the question is more about plausibility and fairness of incorporating the respective variables than about the accuracy of the prediction produced by one of those specific variables.

Accepting this reality, it is not cost-effective to spend considerable time and money searching for an elusive “truth” and in the process produce a calculation so complex that most people cannot understand it. The balance has to be struck between aiming for as much precision as the evidence allows, and producing a calculation that is readily understandable, supported by facts, and makes sense intuitively.

In all our years of dealing with damages quantification in different areas of the law, very rarely have we found judges or arbitrators to be won over by complex models – they are more likely to accept the calculations that are aimed at a level that they can follow with minimal difficulty, and which make more sense and are better supported by the evidence than the calculation produced by the other side.

The role of pass-on

The decisions of the Competition Appeal Tribunal in Sainsbury’s v Mastercard and Merricks v Mastercard highlighted the importance of dealing with the “pass-on” defence when trying to establish a claim for damages in competition cases. This is where the defendant claims that the claimant has not suffered any loss because it has passed on any overcharge it may have suffered to its own customers.

The Sainsbury’s case highlighted the need to establish an evidential link between the overcharge and an increase in the price of the product the claimant was selling to its customers, in order for the defence to succeed. This has put more onus on

parties to forensically examine the evidence of how the overcharge is reflected in pricing decisions of individual claimants, to prove whether or not pass-on occurred.

The Merricks case highlighted the need to set out in cases of collective actions by groups of claimants, even at the group certification stage of the action, how damages suffered by different sub-classes of claimants can be determined. Pass-on plays a significant part in this analysis as it is a major factor in differentiating the experience of different claimants who form part of the group.

Damages claims in such actions can therefore be split into two stages: first, to determine the extent of the overcharge in the counterfactual market absent the infringement, and second, to determine to what extent this overcharge is passed on by the claimants to their customers to limit the loss they actually suffered. Expert accounting and economic evidence will play a key role in determining both.

Choice of expert

There are many circumstances where an expert economist’s evidence will be useful. If the quantum of the claim hinges on the relative market strengths of the claimant and defendant, or an identification of the relevant market, an economist’s input is essential.

Even though we have cautioned against the use of complex models, in some circumstances, particularly in cartel cases where the whole of a national or regional market is involved, a sophisticated regression model may be useful to estimate a likely overcharge.

Different disciplines look at the world in different ways. When data is used in an economic model it is essential that, for example, the origin and definitions of the data are identified (or confirmed) objectively. An economist has to work on the basis of information provided by companies almost without exception. It goes without saying that an expert accountant’s involvement is almost a conditio sine qua non for damage quantification and often proves invaluable for the economist.

Modelling on its own is an abstraction of reality to make analysis feasible. In general, it is best to incorporate experts from different backgrounds to allow questioning of the assumptions and conclusions. Creating a team of experts who recognise their respective limitations and respect each other’s inputs is often the most effective solution.

Which expert, or combination of experts, to go for will depend on the facts of the case and the legal strategy formulated to run it. In competition cases, the financial and economic factors involved tend to support a combination of expert economic and accounting evidence as a good way to get a sensible result.

A version of this article was previously published in the Global Legal Group publication “Strategic View” in June 2016.

IN ALL OUR YEARS, VERY RARELY HAVE WE FOUND JUDGES OR ARBITRATORS TO BE WON OVER BY COMPLEX MODELS...

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Pip Murphy Managing Director

VANNIN CAPITAL

In this article we asked Corrs Chambers Westgarth and Slaughter and May to consider how maritime salvage principles have been used in Australia and the United Kingdom to ensure insolvency practitioners are paid for the costs and expenses properly incurred in the care, preservation, and realisation of assets (including for the costs of litigation funding arrangements).

What we at Vannin Capital observe in practice is that while the priority status of insolvency practitioner fees and expenses is largely the same in Australia and the United Kingdom, there is a stronger reliance in the United Kingdom on detailed statutory provisions, which stipulate what constitutes litigation costs and expenses that are properly incurred and, therefore, reimbursable.

SALVAGE THROUGH LITIGATION IN INSOLVENCY: CONSIDERING THIRD-PARTY FUNDING

VANNIN CAPITALSALVAGE THROUGH LITIGATION IN INSOLVENCY: CONSIDERING THIRD-PARTY FUNDING

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Rachael King Partner

CORRS CHAMBERS WESTGARTH

Damian Taylor Partner

SLAUGHTER AND MAY

Tegan Harrington Lawyer

CORRS CHAMBERS WESTGARTH

Emma Laurie-Rhodes Associate

SLAUGHTER AND MAY

Application of the salvage principle in Universal Distributing

In 1933, the Australian High Court drew on the law of salvage in holding that a liquidator is entitled to an equitable lien for the costs, charges and expenses incurred by the liquidator in realising assets brought into the estate, which takes priority over a creditor’s security.1 The rationale is that those taking the benefit of the liquidation should not escape bearing the burden of the proper cost of it.2

In Universal Distributing, Dixon J held that while the creditor’s security had priority over the general costs and expenses of the liquidation, the expenses incurred by the liquidator in the actual realisation of the assets subject to the security should be charged upon that fund.3

The principle draws its foundations from the law of salvage where, in return for work and labour done, or money expended, by a third party to salvage any ship (or its cargo), a reasonable amount is to be paid to the salvor by the owner of the ship, cargo or equipment saved.

Priority ranking under the Corporations Legislation

Pursuant to the Corporations Act 2001 (Cth) s 556 and Corporations Regulations 2001 (Cth) Sch 8A reg 4, an insolvency practitioner (including a deed administrator) must apply the property of the company coming under his or her control under this deed in the order of priority specified in Corporations Act 2001 (Cth) s 556, in priority to “all other unsecured debts and claims”. Expenses (except deferred expenses) properly incurred in preserving, realising or getting in property of the company, or in carrying on the company’s business, rank first.4

If an expense is properly incurred in preserving, realising or getting in property of the company, the liquidator (or third party)5 that incurred the expense will be entitled to an equitable lien, which has priority over all other debts of the company, secured or unsecured.6

THE RATIONALE IS THAT THOSE TAKING THE BENEFIT OF THE LIQUIDATION SHOULD NOT ESCAPE BEARING THE BURDEN OF THE PROPER COST OF IT.

VANNIN CAPITALSALVAGE THROUGH LITIGATION IN INSOLVENCY: CONSIDERING THIRD-PARTY FUNDING

1 Re Universal Distributing Co Ltd (in liquidation) (1933) 48 CLR 171 (Universal Distributing).

2 See also Shirlaw v Taylor (1991) 31 FCR 222, 230; Thackray and others (in their personal capacity and as receivers and managers of Great Southern Managers Australia Ltd (ACN 083 825 405) (receivers and managers appointed) (in liq)) v Gunns Plantations Ltd and others (2011) 85 ACSR 144, [40] (Thackray).

3 Universal Distributing, at 174-54 Section 433 of the Corporations Act provides similarly with respect

to receivers appointed prior to the winding up of a company.5 Young v ACN 081 162 512 Pty Ltd (in liq) (2005) 218 ALR 449.6 Ibid.

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INSOLVENCY PRACTITIONERS SHOULD CAREFULLY CONSIDER PROPOSED LITIGATION TO ENSURE EXPENSES INCURRED UNDER A LITIGATION FUNDING ARRANGEMENT ARE ‘PROPER’ AND ‘REASONABLE’.

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When the salvage principles in Universal Distributing apply

Consistent with Universal Distributing, in Stewart the High Court found an equitable lien in favour of a liquidator, based on salvage principles as:

(a) the relevant company was in liquidation;

(b) the liquidator had incurred expenses and rendered services in the realisation of an asset;

(c) the resulting fund was insufficient to meet both the liquidator’s costs and expenses of realisation and the debt due to a secured creditor; and

(d) the creditor claimed the fund.7

In both Universal Distributing and Stewart, funds were actually realised as a result of the relevant litigation.

Statements made by Maxwell P in Primary Securities Ltd v Willmott Forests Ltd (recvs and mngrs apptd) (in liq) (2016) 50 VR 752 suggest that the principle in Universal Distributing applies even where no fund is created. Maxwell P said, (in circumstances where the appointment

of the liquidator came to an end before a fund had been created):

“ Identifying the recoverable costs is made no more difficult by the absence of a fund. In every case, the question to be determined is one of fact, namely, whether the costs were incurred exclusively for the purpose of care, preservation and/or realisation of the assets… the principle in Universal Distributing does not depend for its application on the existence of a fund as the product of the liquidator’s efforts…”

However, the application of the Universal Distributing principle where no funds are, in fact, created departs from the original principle of salvage, which requires the creation of a benefit by the salvor.

Universal Distributing applies to other insolvency practitioners

It is not necessary that the party claiming the equitable lien under the Universal Distributing principle is a liquidator.8 The principle also applies to deed administrators, receivers, and receivers and managers.9

As noted by Davies J in the 2011 Victorian Supreme Court case of Thackray:

“ The underlying principle in each case is that it would be inequitable for the person who has created or realised a valuable asset, in which others claim an interest, not to have his or her costs, expenses and fees incurred in producing the asset paid out of the fund or property created.”10

However, deed administrators should take care not to inadvertently exclude the application of the Universal Distributing principle. If one or more clauses of the deed of company arrangement has the effect of detracting from the fundamental principal/agent relationship, the deed administrator may no longer be an agent of the company and a fiduciary.11 In Cresvale, Austin J implied that the “well-established right of indemnity to recover fees and expenses out of property realised in the course of receivership, supported by an equitable lien,” would not apply where the deed administrator was not an agent of the company and a fiduciary, on proper construction of the relevant deed of company arrangement.12

Equitable lien covers expenses properly incurred

The Universal Distributing principle only applies where the relevant expenses were “reasonably incurred in the care, preservation and realisation of the property”.13 An insolvency practitioner will have an equitable lien for their proper remuneration, costs and expenses, attributable to work done exclusively in caring for, preserving and realising the company’s assets.14

A liquidator’s lien includes litigation funding expenses: IMF v Meadow Springs

In the 2009 case of IMF v Meadow Springs, the liquidator arranged for the insolvent company’s costs and expenses of conducting proceedings to be funded by a litigation funder pursuant to a litigation funding agreement.15 The litigation funding agreement provided for the payment of fees to the funder as well as a percentage of any realisations (referred to here as the premium), after the funder was reimbursed for solicitor and liquidator fees it had incurred.

It was conceded that the funder ought to be reimbursed for the solicitor and liquidator fees, by way of the Universal Distributing principles. The Court of Appeal considered whether the liquidator’s equitable lien ought to extend to the litigation funder’s fees and premium.

The Court found that the Universal Distributing principle applied to the whole of the amount owing to the funder under the litigation funding agreement, including the fees and the premium, in addition to the reimbursement of the solicitor and liquidator’s expenses.16 As such, the Court found that an equitable lien in favour of the liquidator included the whole of the litigation funding expenses and that those amounts should be paid out of the funds realised before any amount due to the secured creditors.

With respect to the premium, the Court observed that:

(a) the premium was one of the litigation funder’s conditions for giving its support to enable the recovery of the funds from the successful proceedings;

(b) the litigation funder “was funding the litigation not merely to achieve return of the monies it had advanced, but to obtain part of the proceeds as its commercial return for its involvement”;

(c) “the way in which it sought to structure the payment of its reward…does not affect the common sense and commercial characterisation of what that stipulation clearly was; namely, part of the price or cost of IMF’s funding”; and

(d) without the litigation funder’s support, the liquidator and insolvent company would not have had the funding to pursue the relevant claim.

The Court said:

“ It follows that the realisation of the resolution sum in the winding-up, through the efforts of the liquidator funded by IMF, was achieved because the liquidator and Meadow Springs agreed to incur obligations to IMF to pay to it all the amounts due under the IMF funding agreement. The payment of liabilities created by the liquidator in achieving the realisation of the fund that was constituted by the resolution sum must be borne by that fund in accordance with the Universal Distributing principle.”17

Insolvency practitioners should therefore carefully consider the proposed litigation, as well as the availability and terms of litigation funding, to ensure that expenses incurred under the terms of a litigation funding arrangement are ‘proper’ and ‘reasonable’.

VANNIN CAPITALSALVAGE THROUGH LITIGATION IN INSOLVENCY: CONSIDERING THIRD-PARTY FUNDING

7 Stewart v Atco Controls Pty Ltd (in Liquidation) (2014) 252 CLR 307, [35] (Stewart).8 Arms v WSA Online Ltd (subject to a deed of company arrangement) [2007] FCA 1712 at [11]

(Arms) per Ryan J; Wellnora Pty Ltd v Fiorentino (2008) 66 ACSR 229 (Wellnora), [24] quoting Austin J in Cresvale Far East v Cresvale Securities (No 2) (2001) 39 ACSR 622 (Cresvale), [70].

9 Ibid. Note also that the Universal Distributing principles have been codified in Australia, pursuant to Corporations Act 2001 (Cth) s 556 and Corporations Regulations 2001 (Cth) Sch 8A reg 4.

10 Thackray at [41].11 See Cresvale (2001) 39 ACSR 622, [70].12 Ibid.

13 Universal Distributing at 174.14 Coad v Wellness Pursuit Pty Ltd (in liq) (2009 71 ACSR 250, [96]; Universal Distributing at 175.15 IMF (Australia) Limited v Meadow Springs Fairway Resort Limited (in liquidation) (2009)

69 ACSR 507 (IMF v Meadow Springs).16 IMF v Meadow Springs (2009) 69 ACSR 507, [49]-[51], [72]-[73].17 IMF v Meadow Springs (2009) 69 ACSR 507, [72]-[73].

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Considerations impacting funding arrangements

In the 2002 Supreme Court of New South Wales decision of Re ACN 076 673 875 LTD (rec and mgr apptd) (in liq) (2002) 42 ACSR 296, Austin J outlined a number of the factors that should be considered by insolvency practitioners before bringing proceedings and entering into third-party litigation funding arrangements. The relevant factors included:

(a) the liquidator’s prospects of success in the litigation;

(b) the interests of creditors other than the proposed defendant;

(c) possible oppression in the bringing of the proceedings;

(d) the nature and complexity of the cause of action;

(e) the amount of costs likely to be incurred in the conduct of the action and the extent to which the financier is to contribute to those costs;

(f) the extent to which the financier is to contribute towards the costs of the defendant in the event that the action is not successful, or towards any order for security for costs by the court before which the action is to be heard;

(g) the extent to which the liquidator has canvassed other funding options;

(h) the level of the funder’s premium;

(i) the risks involved in the claim; and

(j) the liquidator’s consultations with creditors.18

The matters considered by the Court in IMF v Meadow Springs also provide an indication of what circumstances will support the reasonableness of propriety of incurring litigation funding expenses (and ultimately, the recovery of such expenses).

In IMF v Meadow Springs, the secured creditor contended that the fees and the premium exceeded reasonable expenses incurred in the care, preservation and realisation of the asset (being the cause of action).19

The Court did not agree with the secured creditor because:

(a) the secured creditor declined to provide funding for the proceedings;

(b) the secured creditor was aware that the liquidator entered into the funding agreement but took no steps to challenge it;

(c) the cause of action would become statute barred about a year after the funding agreement was made; and

(d) the secured creditor took no steps to enforce its security, for example, by appointing a receiver.20

Position in the UK

In the UK, while the expenses of the winding up are paid in priority to distributions to creditors,21 there are some exceptions for litigation expenses. Litigation expenses are those expenses that are:

(a) incurred by the liquidator in the conduct of legal proceedings which the liquidator is entitled to bring;

(b) properly chargeable or incurred in the preparation or conduct of legal proceedings;

(c) more than (or in the liquidator’s opinion, are likely to be more than) £5,000.22

Such expenses arguably include costs and expenses associated with third-party litigation funding arrangements.

VANNIN CAPITALSALVAGE THROUGH LITIGATION IN INSOLVENCY: CONSIDERING THIRD-PARTY FUNDING

18 Re ACN 076 673 875 LTD (rec and mgr apptd) (in liq) (2002) 42 ACSR 296, [17]-[28].19 IMF v Meadow Springs (2009) 69 ACSR 507, [75].20 IMF v Meadow Springs (2009) 69 ACSR 507, [76].21 Insolvency Act 1986 (UK) s 176ZA; Insolvency (England and Wales) Rules 2016 (Insolvency Rules) rr 6.42 and 7.108.22 Insolvency Rules r 6.44 and 7.111.

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Litigation expenses

Litigation expenses will not be paid in priority to secured creditors and cannot be paid out of the property the subject of a floating charge, unless and until the expenses have been approved or authorised in accordance with rules 6.45-6.48 and 7.113-7.116 of the Insolvency Rules.23

Approval or authorisation under rules 6.45-6.48 and 7.113-7.116 of the Insolvency Rules is required where the liquidator:

(a) ascertains that property is comprised in or subject to a floating charge;

(b) has or proposes to institute, continue or defend legal proceedings; and

(c) before or during the proceedings identifies that:

(i) the assets of the company available to pay the creditors are or will be insufficient to pay the litigation expenses; and

(ii) in order to pay litigation expenses, it will need recourse to property comprised on, or subject to, a floating charge created by the company.

If approval or authorisation is required, in order to benefit from the priority afforded by s176ZA of the Insolvency Act 1986, the liquidator must:

(a) seek approval from the creditor(s) having a claim to the property subject to a floating charge; and

(b) seek authorisation for the amount of litigation expenses the liquidator sees fit.24

Seeking court approval

A liquidator may apply to the court for approval of litigation expenses where:

(a) the relevant creditor is a defendant or proposed defendant to the proceedings; or

(b) the relevant creditor declined to approve/authorise the litigation expenses; or

(c) the relevant creditor approved/authorised an amount which is less than the amount the liquidator considers sufficient; or

(d) the relevant creditor made an application for further particulars or another response to the liquidator’s request that is, in the liquidator’s opinion, unreasonable; or

(e) the liquidator thinks the circumstances are such that they require urgent approval/authorisation, either:

(i) without seeking creditor approval; or

(ii) before the creditor is required to respond to the approval/authorisation request.

Commonality of the UK and Australian positions

In both the UK and Australia, insolvency practitioners should take a number of steps before embarking on litigation, including ensuring that they consult with (and in the UK, obtain approval from) secured creditors before incurring litigation expenses, including under litigation funding arrangements.

In Australia, consultation with (and acquiescence of) secured creditors will be relevant in considering the reasonableness and propriety of the litigation expenses incurred. In the UK, without creditor approval, there is a risk of losing the priority ranking conferred by s176ZA of the Insolvency Act 1986 (UK) for the payment of litigation expenses.

VANNIN CAPITALSALVAGE THROUGH LITIGATION IN INSOLVENCY: CONSIDERING THIRD-PARTY FUNDING

IN BOTH THE UK AND AUSTRALIA, INSOLVENCY PRACTITIONERS SHOULD CONSULT WITH SECURED CREDITORS BEFORE INCURRING LITIGATION EXPENSES, INCLUDING UNDER LITIGATION FUNDING ARRANGEMENTS.

23 Insolvency Rules rr 6.44(2) and 7.112.24 Approval or authorisation must be in accordance with Insolvency Rules rr 6.46 and 7.114.

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VANNIN CAPITALLAW FIRM FINANCING: LOOKING UNDER THE BONNET

Yasmin MohammadHead of International Arbitration

VANNIN CAPITAL

David CollinsChief Financial Officer

VANNIN CAPITAL

LAW FIRM FINANCING: LOOKING UNDER THE BONNET

With the increased use of third-party funding has come an evolution and diversification in the forms of financing available. In this article, Vannin’s Head of International Arbitration Yasmin Mohammad, and Chief Financial Officer David Collins, break down the mechanics of law firm financing and introduce portfolio funding, describing in detail the way to combine law firm financing and traditional client funding, as well as the benefits of doing so.

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Traditional client funding

It is probably superfluous to define traditional client funding here, but by way of reminder, it essentially consists of a funder agreeing to advance funds to meet legal fees and costs of the client and its lawyers in the context of an international arbitration or a court litigation. Should the client prevail in its venture, it will have agreed to pay to its financier a portion of the damages recovered. If the client loses, the funder will have lost its investment and the client will not owe any reimbursement to the funder.

We could continue for several paragraphs describing the multiple mutations of this simple definition (recourse funding, equity funding etc) but for the purposes of this article, please bear this simplest definition in mind.

Law firm financing

Law firm financing refers to a funder underwriting the risk that a law firm may be willing to take with regard to its client(s). Across the market of both arbitration and litigation, law firms are exploring ways to use legal financing to secure optimal rates for their clients (often a useful marketing tool) and to benefit themselves from law firm financing agreements.

Let us imagine that a law firm takes a case on a 30% contingency and that that 30% of its fees will benefit from an uplift on success. That 30% contingency fee element can be financed fully or partially.

The funder will advance the law firm all or a portion of the 30% contingent fees and take over the risk from the law firm. In exchange for taking that risk, the funder will require a portion of the success fee negotiated by the law firm. The portion of the success fee is usually proportional to the amount of risk undertaken by the funder for the law firm.

Thus, law firm financing allows the law firm to immediately “monetise” the contingency fee element negotiated and to shift the risk of losing the case and never being paid that contingent success fee element on to the funder. The funder will pay that contingent fee element during the life of the case and against the usual invoices billed by the law firm, thus assuming the risk of losing the case altogether or the risk of failing to recover the amounts awarded through a successful award or decision.

Portfolio funding

Generally, under a portfolio funding arrangement a funder advances funds against a portfolio of cross-collateralised cases.

A law firm that has taken on some risk in several cases could transfer all or a portion of that risk to a funder by having its risk financed in the context of a portfolio.

The cross-collateralisation of the claims allows the funder to offer the best possible terms to the law firm as its return will be safeguarded by the whole portfolio of claims.

Moreover, if the portfolio of cases does not already exist, then a facility can be agreed to constitute/populate the portfolio.

We are seeing a growth in legal finance for portfolios of cases as law firms and clients internalise the use of third-party funding as a risk management tool.

Co-existence with traditional financing

Naturally, both law firm financing and traditional client funding can work in conjunction with portfolio funding. In fact, our experience at Vannin is that the three means of financing are often combined.

VANNIN CAPITALLAW FIRM FINANCING: LOOKING UNDER THE BONNET

WE ARE SEEING A GROWTH IN LEGAL FINANCE FOR PORTFOLIOS OF CASES AS LAW FIRMS AND CLIENTS INTERNALISE THE USE OF THIRD-PARTY FUNDING AS A RISK MANAGEMENT TOOL.

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How it works

In order to break down the mechanism, we have chosen to focus this article on the workings of law firm financing and client funding, which is best illustrated by an example:

Scenario: Client has a case with a budget that amounts to a total of €10 million, of which €5 million is intended for legal fees and the rest is dedicated to other costs (institution, travel, translation etc) and other fees (arbitrators and legal, industry and quantum experts).

Let us assume, for the purposes of this example, that:

• The law firm agrees to take a case on 30% contingency where that 30% of legal fees will carry a success fee of two times the 30%

• The client asks the funder to fund the other 70% of the legal fees plus 100% of the other fees/disbursements/costs

• The law firm asks the funder to fund 50% of its contingency

The funder would then end up funding:

• €3.5million (70% of the legal fees for the client)

• €5.0 million (100% of the other fees/ disbursements/costs)

• €0.75 million (50% of the law firms contingency/15% of the legal fees for the law firm)

• €9.25 million

The funder’s negotiated return on investment

As most will be aware, funding terms are most often calculated as either a multiple of the money invested or a percentage of the damages recovered. These terms are usually tailored to the specific aspects of a case for example, to account for the time value of money for the lengthier cases (investment treaty arbitration, for instance).

It would overly complicate our example to use real-life terms so we have chosen to use a flat three times return to break down the mechanism and illustrate how law firm financing and client funding can and do, work together.

On the basis of a three times return, in our example, the funder would have agreed with the client that its return on investment would be calculated as follows:

1. Reimbursement of the monies invested for the client directly = €8.5 million (€5 million of other costs and fees plus €3.5 million of legal fees discounted)

2. A three times multiple of €8.5 million, which would amount to €25.5 million

As you will recall, the law firm and the funder will have agreed to a separate agreement whereby the funder pays the law firm 50% of its contingency fee (€0.75 million), in exchange for 50% of its success fee (€1.5 million).

This would result in the funder receiving a total of €35.5 million.

VANNIN CAPITALLAW FIRM FINANCING: LOOKING UNDER THE BONNET

ACROSS THE MARKET, LAW FIRMS ARE EXPLORING WAYS TO USE LEGAL FINANCING TO SECURE OPTIMAL RATES FOR THEIR CLIENTS AND TO BENEFIT THEMSELVES.

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Once the claim is successful

As you will have heard countless times by now, funders invest in disputes having in mind a very important rule of thumb: we look for a minimum 1:10 ratio between the funding amount required and the serious, likely, conservative quantum to be expected. What is a “serious, likely, conservative” quantum figure? One that is based on documented factual evidence like proven sunk costs or documented and substantiated solid historical cash flows for a claim that is neither speculative nor overly optimistic.

This ensures that even when claimants do not obtain the full amount claimed (which they often do not), the funder has accounted for that eventuality in its assessment of the quantum and has gotten comfortable that the minimum 1:10 ratio still exits. This 1:10 ratio is intended to protect the clients from seeing their lawyers fully paid and their funders walking away with the majority of the damages.

In our example, if the funder has agreed to invest close to €10 million, it is because it has thoroughly checked and satisfied itself that the quantum awarded (or negotiated) is most likely to amount to €100 million at a minimum.

Thus, if the claim is successful and the client is awarded €100 million, the funder would receive a total of €35.5 million. As you will recall, the law firm would have been paid throughout the case (whether it wins or loses) as follows:

€3.5 million (base fees)

+ €0.75 million (50% of its contingency funded)

€4.25 million (from an initial full budget of €5 million)

In addition, upon a successful outcome, the law firm would also receive €1.5 million, which represents 50% of the negotiated success fee (the other 50% being paid to the funder for having financed 50% of the contingency fee arrangement).

The total paid to the law firm upon a successful outcome would therefore amount to €5.75 million.

It is interesting to note that in our example, 26% of the law firm’s total remuneration (or €1.5 million) would be contingent upon success. Therefore, the law firm still participates in the upside of success and does better on success than had it simply been paid 100% of fees with no contingency.

VANNIN CAPITALLAW FIRM FINANCING: LOOKING UNDER THE BONNET

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What if the law firm had not funded part of its contingency fee?

It is also interesting to highlight that without any law firm financing, but with a similar contingency fee arrangement, the law firm would have been paid as follows:

€3.5 million (during the life of the case whether it won or lost)

+ €3 million (success fee if the case was won)

€6.5 million (having shouldered the risk alone on the full €3 million contingent element, which here represents 46% of the law firm’s total remuneration)

Therefore, in the example with law firm financing, the law firm gets more certainty on its fees in exchange for giving away some of the upside of success to the funder.

VANNIN CAPITALLAW FIRM FINANCING: LOOKING UNDER THE BONNET

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Let’s not forget about the client

As demonstrated below, the client retains the majority of the damages, all the while (1) not having taken any risk, (2) not having drained its cash reserves and (3) not having impacted its accounts or EBITDA.

Let’s run through the subtraction:

The award is rendered and amounts to €100 million. We will need to subtract the amounts owed to the law firm and the funder first:

€100 million

€34 million (funder’s share)

€1.5 million (50% of the law firm’s success fee)

- €1.5 million (paid to the law firm from the awarded quantum in addition to the fees received during the life of the case)

€63 million

What if the law firm had not entered into a separate agreement with the funder?

In this scenario, the funder would have funded “only” 70% of the legal fees (€3.5 million) and 100% of the other fees and costs (€5 million), which would amount to €8.5 million.

Upon a successful outcome, the funder would firstly be reimbursed the €8.5 million it expended and secondly, receive three times that as a funding premium, amounting to €34 million in total.

The law firm would have been paid 70% of its fees during the life of the case (€3.5 million) and in the event of a successful award, it would receive an additional €1.5 million in deferred fees and €1.5 million in success fees (€3 million contingent upon success).

Upon payment of a €100 million award (or decision), the client would receive:

€100 million

€34 million (for the funder)

- €3 million (for the success fee of the law firm, bearing in mind that the firm has already been paid €3.5 million during the life of the dispute)

€63 million

VANNIN CAPITALLAW FIRM FINANCING: LOOKING UNDER THE BONNET

So, the client is not impacted by the arrangement between the law firm and funder where the funder funds part of the law firm’s contingency fee.

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The context of a portfolio

In a sequel to this article in the next edition of Funding in Focus, we will address in equal detail the financial model of a funded portfolio where funding is provided either (1) to a series of claims handled by the same law firm with different clients or (2) to a single client with a number of different claims (which may be handled by one or several different law firms).

To begin to understand the benefits of portfolio funding, one should first imagine our example above replicated five to ten times across a portfolio of cases. Second, keep in mind the comfort given to a funder that could cross-collateralise its required return on investment across the cases (and the resulting financial terms of that comfort).

In our next article, we will give a concrete example of how an actual portfolio of cases would be funded and how the returns could be allocated between client, law firm and funder.

In the meantime, please do not hesitate to reach out with any specific questions that you may have.

THE CLIENT IS NOT IMPACTED BY THE ARRANGEMENT BETWEEN THE LAW FIRM AND FUNDER WHERE THE FUNDER FUNDS PART OF THE LAW FIRM’S CONTINGENCY FEE.

VANNIN CAPITALLAW FIRM FINANCING: LOOKING UNDER THE BONNET

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VANNIN CAPITALCONTRIBUTORS

WITH THANKS TO OUR CONTRIBUTORS

Rosemary IoannouManaging Director

VANNIN CAPITAL

+44 20 7043 [email protected]

Theo PaeffgenRegional Managing Director – DACH

VANNIN CAPITAL

+49 228 2865 [email protected]

Andrew JonesManaging Director

VANNIN CAPITAL

+44 20 7099 [email protected]

Yasmin MohammadHead of International Arbitration

VANNIN CAPITAL

+33 975 129 [email protected]

Pip MurphyManaging Director

VANNIN CAPITAL

+61 438 260 [email protected]

Gary SeibPartner

BAKER & MCKENZIE

+852 2846 [email protected]

Mark P GoodmanPartner

DEBEVOISE & PLIMPTON

+1 212 909 [email protected]

Bruno AugustinPartner

HABERMAN ILETT LLP

+44 20 3096 [email protected]

Rob van der LaanEconomist (Competition Law)

OMNICLES

+31 6 4530 [email protected]

Alexandra DosmanManaging Director

VANNIN CAPITAL

+1 646 693 [email protected]

Tegan HarringtonLawyer

CORRS CHAMBERS WESTGARTH

+61 8 9460 [email protected]

Henry LebowitzPartner

DEBEVOISE & PLIMPTON

+1 212 909 [email protected]

Jason BettsPartner

HERBERT SMITH FREEHILLS

+61 2 9225 [email protected]

Emma Laurie-RhodesAssociate

SLAUGHTER AND MAY

+44 20 7090 4202emma.laurie-rhodes@ slaughterandmay.com

Michael GermanManaging Director

VANNIN CAPITAL

+1 212 651 [email protected]

Rachael KingPartner

CORRS CHAMBERS WESTGARTH

+618 9460 [email protected]

Jacob W StahlCounsel

DEBEVOISE & PLIMPTON

+1 212 909 [email protected]

Lara MelroseManaging Associate

MISHCON DE REYA

+44 20 3321 [email protected]

Damian TaylorPartner

SLAUGHTER AND MAY

+44 20 7090 5309damian.taylor@ slaughterandmay.com

Alan GuyManaging Director

VANNIN CAPITAL

+1 646 693 [email protected]

Megan K BanniganCounsel

DEBEVOISE & PLIMPTON

+1 212 909 [email protected]

Louise BellPartner

ENYO LAW

+44 20 3837 [email protected]

James OldnallPartner

MISCHON DE REYA

+44 20 3321 [email protected]

Patrick CoopeRegional Managing Director – Australasia

VANNIN CAPITAL

+44 20 7099 [email protected]

Richard HextallChief Executive Officer

VANNIN CAPITAL

+44 20 3051 [email protected]

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Registered Office

Vannin Capital PCC13-14 EsplanadeSt Helier, JerseyJE1 1EE

+44 1624 615 [email protected]

About Vannin Capital

Established in 2010, Vannin Capital is the global expert in legal finance, supporting law firms and corporations in the successful resolution of high-value commercial disputes.

From single case funding, to portfolio finance and enforcement arrangements, we offer creative capital solutions that are tailored to our clients’ needs.

Our global team of legal and financial experts cover the key commercial litigation and arbitration centres from our offices in London, Jersey, Paris, New York, Washington, Sydney, Melbourne and Bonn. More than just capital, we combine global experience with local knowledge to deliver the highest standard of service and expertise to our clients around the world.

A market leader, we are a member of the Association of Litigation Funders of England and Wales (ALF), conducting our business to the highest standards in line with its code of conduct.

©2018 Vannin Capital PCC.

The information contained in this publication is intended solely for general information purposes and does not constitute legal, financial or other professional advice. Neither Vannin Capital PCC nor its subsidiary companies accept liability to any party for any loss, damage or disruption which may arise from information contained in this publication.

All rights reserved. No part of this publication may be reproduced in any manner without the prior written permission of Vannin Capital PCC.

Vannin Capital PCC is registered in Jersey with registration number 119327 and having its registered office at 13-14 Esplanade, St. Helier, Jersey, JE1 1EE.

London

+44 207 139 [email protected]

Melbourne

+613 8375 [email protected]

New York

+1 212 951 [email protected]

Paris

+33 975 129 [email protected]

Sydney

+61 283 105 [email protected]

vannin.com

Washington, D.C.

+1 202 350 [email protected]

Bonn

+49 (228) [email protected]