03 Jul 2015

Litigation funding can be a 'win-win'

Litigation funding has become more mainstream, no longer being used solely for David v Goliath situations, says Chris Smith.

Alexander Kuguchin Alexander Kuguchin

We recently published the first report in our new Funding in Focus Content Series.  We commissioned the report with two principle aims in mind. Firstly, to understand the approach our key stakeholders (clients, law firms, in-house counsel, barristers, finance directors et al) are taking towards third party funding. Second, to explore some of the likely opportunities for funding over the coming months and years.  One statistic that immediately jumps out is the fact that 73 per cent  of the respondents to our survey agreed that ‘funding can promote access to justice without imposing financial burdens on claimants’. Typically most claims we and others in the market fund are subject to confidentiality restrictions, but we funded a case last year which we can discuss and which is an exemplar of third party funding enabling access to justice. It also shows very clearly how funding can be a win-win-win.

The claimant

Gul Bottlers is a family run soft drinks manufacturer based in Pakistan. In 2012, Gul was preparing to start manufacturing and distributing double strength Vimto and Vimto carbonate in Pakistan where there was a lucrative market driven by a burgeoning middle class population. Gul built a factory and invested significant capital and manpower so that they were able to deliver the products to market. However, before production could start, Nichols Plc (the owner of the Vimto brand) wrongfully terminated the agreement and left Gul in a position where their only recourse was litigation. 

With support from Vannin Capital, judgement was handed down in favour of Gul in the amount of £8m plus costs. As Gul’s director, Shaheryar Leghari, commented at the time: 'With the support of Vannin and our legal team, justice was served. Disputes aren’t good for business but it’s good to know that when they arise there are tools available to help businesses of all sizes access justice.' Funding was a clear win for Gul – they were able to access justice and financial compensation which they would not have been able to without Vannin’s support. 

The law firm

I previously wrote an article entitled ‘Litigation funding: a driver for law firm growth?’ Gul is an excellent example of a claim generating fees for a top tier law firm that without funding would most likely have never been generated. Robert Wheal at White & Case neatly summed up the position, “Without funding, a winning case might not have been brought.  With funding, we were able to retain a first rate expert, instruct good counsel and devote the time need to win the case.” Of course, what he did not say is that Gul also benefitted from having an international law firm on their side as well. Funding was a win for White & Case – they generated fees that would not have been generated without funding and had the comfort of knowing from the outset that they would get paid (no sleepless nights worrying about whether the client would have the funds when it was time to pay).

The funder

Funding generated value for the claimant, the law firm and, indeed, all those involved in the claimant’s action. It also, of course, generated an investment return for Vannin and is a good illustration of how the interests of a funder are very closely aligned with those of the claimant – the claimant wins, we win; the claimant loses, we lose. 

Whilst David v Goliath situations like these are not our typical claims nowadays – our caseload tends to be a mix of corporates versus corporates or corporates versus states via bi-lateral investment treaties – they are a timely reminder of the value that funders bring to the market. There will, of course, remain those concerned about the perceived negatives of funding, but as our report shows, these are very much a case of perception rather than reality. 

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