09 Sep 2020

Litigation funders with $10bn firepower form global association

Washington DC-based body pledges to promote efficient, ethical and professional provision of capital

Twelve leading litigation finance firms have set up the International Legal Finance Association (ILFA), which aims to represent litigation funders in their dealings with governments, regulators, international associations, as well as professional legal bodies. 

It also intends to act as a clearing house for research, analysis and data concerning the industry.

Based in Washington DC, it will maintain a significant presence in London, being chaired by Leslie Perrin, chairman of London-based Calunius Capital.

Perrin, a former managing partner at Osborne Clarke, is a past chairman of the UK Association of Litigation Funders (ALF) and is highly regarded in the industry as someone who can manage competing views amongst funders firmly, and fairly.

“The commercial legal finance industry is one of the fastest-growing finance sectors in the world,” he said, adding that ILFA’s launch was “a testament to the commitment our industry is undertaking to provide critical capital to businesses in the most efficient, ethical and professional manner possible".

While not a self-regulatory body, funders are expected to follow high standards in representing over $10bn of funding firepower.

Omni Bridgeway executive director Hugh McLernon, a member of ILFA’s board, said members would “work together to establish principles of conduct for the industry and promote best practices in the field, so that ILFA members meet institutional standards and processes that clients expect of other finance providers”.

Perrin called the industry “a critical partner for businesses across the globe”, noting that “the spectacular growth of our industry over the last few decades speaks volumes about what a valuable service our industry provides”.

Of the twelve members, six – Burford Capital, Harbour Litigation Funding, Longford Capital Management, Omni Bridgeway, Therium Capital Management and Woodsford Litigation Funding – are founder members. All have internationally focused practices. 

Six further, mostly US-based funders have joined: D E Shaw & Co, Fortress Investment Group (which now includes Vannin Capital), Law Finance Group, Nivalion, Parabellum Capital and Validity Finance. 

Litigation funding has attracted criticism from defendant law firms, insurers, business groups, most notably in America and more recently, in Australia, where a parliamentary committee is holding an inquiry into litigation funding over concerns the ‘booming industry’ is leading to ‘poor justice outcomes’.

Perrin said: “Innovation and growth are not always met with universal praise. Unfortunately, some will always view [both] as a threat to the status quo.”

He added that ILFA would lead efforts to educate, inform, and “advocate for our members and provide a much-needed voice for clients who rely on us and the services we provide”.

Funders react

Three founding members – Harbour, Omni Bridgeway and Burford - spoke to The Global Legal Post. 

Susan Dunn, the current chair of the ALF and Harbour’s chief investment officer, said Harbour was happy to be a founding member “because of the co-ordinated approach it will bring to funding matters across a range of jurisdictions, where we can discuss both common issues, and country specific questions, alongside our own membership of the ALF”.

Omni’s McLernon said: “We have long supported a global association that protects and advocates for the international industry while upholding the highest standards for clients, and we are excited that we can now achieve this through ILFA.”

Christopher Bogart, CEO of Burford, added: “Establishing an international association is not only the right thing to do, but a necessary move to make.”

Outside ILFA members, there was endorsement from Litigation Capital Management. Executive chairman Nick Rowles-Davies praised Perrin as a "well-respected and well-known pioneer in our in our industry" and said the body's dedication to best practice and ability to influence would benefit the whole industry.

He added that whilst LCM had currently chosen not to join any associations, “we support the purpose and core mission of ILFA".

Law firms' view

Lianne Craig, head of commercial litigation at claimant firm Hausfeld, noted the established global nature of the founding members, saying the fact ILFA had chosen to launch out of Washington DC was “perhaps unsurprising, as the US remains a market with a huge untapped potential when it comes to litigation funding”.

She noted that the majority of additional members are US hedge funds, adding: “Whilst a number [of hedge funds] have long been involved ‘behind the scenes’ with more traditional funders, increasingly we have seen hedge funds fronting deals on their own account in Europe in recent years. An alignment of this nature with the more ‘traditional’ market participants is, I believe, a development to watch.”

From a defendant perspective, Damian Grave, head of Herbert Smith Freehills’ global class actions practice, welcomed ILFA’s remit to establish and promote of principles of best practice for the industry.

“This will be a key feature particularly as we are seeing in the Australian context currently, calls for increased regulation of funders and our courts are taking a more active role in scrutinising the conduct of funders,” he added.

Further reading on the national litigation funding debate in Australia

Litigation funding reforms in Australia must strike the right balance – Andrew Saker, of Omni Bridgeway, speaks out for balance and understanding as Australia debates litigation funding

Litigation funders have nothing to fear from reform in Australia – government plans to tighten regulation of funders is inevitable and should be welcomed, argues Sophy Woodward

We have allowed a sophisticated class action industry to grow without bespoke regulation – Jason Betts welcomes the Australian parliamentary review into class actions and calls for town hall-style public debates

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