In the case of Excalibur Ventures v Texas Keystone and others [2016] EWCA Civ 1144, the Court of Appeal ruled that litigation funders should assume responsibility for indemnity costs inflicted upon Excalibur Ventures as a result of its failed $1.6bn claim against Texas Keystone. Excalibur’s claim related to interests in four oilfields in Iraqi Kurdistan, but was dismissed by the trial judge as ‘speculative and opportunistic.’ The claim had received £31.75m accumulative funding from five separate backers, and was brought against Texas Keystone by a team from Clifford Chance.
Arkin gap dispute
Of the £31.75m total financing for the claim, £17.5m was provided as security for costs. While the funders had argued that the money put forward as security for costs should not count towards the Arkin cap – a principle which limits funders’ liability at a level equivalent to the amount they paid into the litigation – this argument was ultimately unsuccessful. In his judgement, Lord Justice Tomlinson said that liability for indemnity costs is part of the risk equation for litigation funding, not merely a punitive measure for those funders who engage in ‘discernable misconduct.’ He said: ‘By funding, the funder takes a risk, a risk as to the nature of which he has the opportunity to inform himself of both before offering funding and during the course of the litigation which he funds.’
Sources: Law Society Gazette; The American Lawyer; Legal Week
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