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Key Takeaways from LFJ’s Podcast with Louise Trayhurn of Legis Finance

By John Freund |

Louise Trayhurn, Executive Director of Legis Finance, sat down with LFJ to discuss a broad range of industry topics, including Legis’ bespoke approach to managing client relationships, the various funding and insurance products her company offers, the growing trend of GCs and CFOs extracting more value out of their legal assets, and what trends she predicts for the future of the industry.

Below are key takeaways from the conversation, which can be found in its entirety here.

Q: How does Legis approach the issue of pricing transparency and consistency?

A: At Legis, we share with the client, the law firm, and the funder all of the returns listed. It’s very transparent. Every party can see what’s going on. If they don’t like model scenarios…then we can adjust it. ‘Pivot’ is a word that’s used frequently in our office. We’ll constantly amend, adapt, and make changes here and there to try and get everybody comfortable.

Q: In the US, contingency fees have long been used by lawyers to share risk with their clients. Can you explain the benefits of DBAs as opposed to conditional fee arrangements and the billable hour model? What has Legis specifically been doing to press for this transition to DBAs?

A: We formed a working group for those interested in DBAs. The idea behind it was to…discuss the possibility of a standard damages-based agreement. I, having a background as a litigator, thought this was fairly ambitious.

We got a whole group of litigators together, and as well as looking at the broader picture of a standard form document, we had a more urgent task, which was to work together to provide feedback to the team looking at amending the DBA regulations.

Q: In the wake of COVID, we’re seeing a mindset shift that’s been talked about for years. What have you been noticing in terms of how GCs and CFOs are considering litigation finance? What do you see happening out there?

A: GCs are sitting in their board rooms and they’re acting as cost centers. They take their seat and the first thing they’re asked is ‘okay, how much is legal spend going to be this month?’. There are numerous companies out there committed to spending a certain amount each month on their litigation. It’s just money going out the door, and it’s hard for those GCs to show their value other than reducing the amount of legal spend this month for the same results.

Now, you can use litigation finance to generate revenue. Instead of being a drain on the company’s cash, you can in fact add; you can be a profit center, if you use your litigation assets to make money for the company instead of costing them money. You have funders willing to do the due diligence in an independent manner—I mean, we don’t get paid for picking bad cases—and GCs have in their hands a very powerful independent check on their cases, and that can help in all kinds of ways.

Q: Broadly speaking, what predictions do you have in terms of the maturation of the Litigation Finance market. What can we expect this year and down the road?

A: Certainly I’m going to say increased use of funding. And apart from that, there may well be a consolidation of existing funders, or funders standing behind funding. Increased use of different financial products to back funding—insurance or other entrants to the market. Or a secondary market of products available to funders to manage their own risk, and possibly a secondary market available to investors to package these litigation assets, standardize the documentation, and buy and sell risk. That should help open the marketplace for these institutions that want to create secondary markets.

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Commercial Regulatory Issues

Legislation to ensure the enforceability of LFAs is progressing smoothly through Parliament

By John Freund |

The following is a contributed piece by Tom Webster, Chief Commercial Officer at Sentry Funding.

So far, the Litigation Funding Agreements (Enforceability) Bill has been passing through Parliament without a hitch.

The government is bringing the legislation in response to the Supreme Court’s decision last summer in PACCAR Inc & Ors v Competition Appeal Tribunal & Ors [2023] UKSC 28, which called into question the enforceability of LFAs.

The Bill was briefly introduced into the House of Lords on 19 March, and was debated at second reading on 15 April. During the debate, while some peers discussed the need for regulation of the litigation funding industry and for careful consideration of whether the retrospective nature of the legislation was justified, no peers opposed the Bill – and many welcomed it.

More recently, during scrutiny at grand committee on 29 April, the relatively small number of peers who attended the session broadly supported the Bill, and several spoke in favour of the need for its provisions to be retrospective.

In terms of the Bill’s drafting, the government proposed some small changes at committee stage, which were waved through by peers. The most significant was to address a potential problem with the original drafting where the LFA relates to the payment of costs rather than funding the provision of advocacy or litigation services.

The problem was that, in the original wording, it could be argued that the Bill only applied to the funding of costs that relate to court proceedings, but not those relating to arbitration, or settlements. This has now been resolved by new wording to make clear that an LFA may relate to the payment of costs following court, tribunal or arbitration proceedings, or as part of a settlement. An LFA may also relate to the provision of advocacy or litigation services.

Meanwhile another government amendment was aimed at avoiding problems for litigants-in-person, by ensuring that the definition of LFAs in the Bill includes agreements to fund the expenses of LiPs, for example where they need to pay for an expert’s report.

During grand committee, peers also expressed their approval of the broad terms of reference that have now been published by the Civil Justice Council for its review of litigation funding, which will include an examination of whether the sector should be regulated; and if so, how. Peers commended the speedy timescale that the CJC has set itself, aiming to produce an interim report by the summer, and a full report by summer 2025.

As the Litigation Funding Agreements (Enforceability) Bill continues its journey through Parliament and the CJC begins work on its review, there are clearly significant changes on the way for the litigation funding sector in the UK.

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Commercial Regulatory Issues

Rowles-Davies: Retrospective Provision in Litigation Funding Bill is ‘Fundamentally Flawed’

By John Freund |

In an article shared on LinkedIn, Nick Rowles-Davies, founder and CEO of Lexolent, makes the case against the retrospective aspect of the UK government’s Litigation Funding Agreements (Enforceability) Bill. Whilst acknowledging that many within the industry disagree with his position, Rowles-Davies argues that ‘the Bill should be prospective only and that the retrospective element is fundamentally flawed.’

Rowles-Davies summarizes his extensive article into the following key points:

  1. ‘The starting point for any consideration of the Bill must be firstly to correct the various inaccurate Supporting Documents (to the Bill) such that the law as it stands, and has always stood, is properly reflected. 
  2. The Government has put forward no credible justification to support the retrospective provision in the Bill.
  3. When considered under the true set of facts, this legislation appears to be incompatible with the ECHR. 
  4. The justification for the Bill’s prospective elements and its (arguably unprecedented) retrospective aspect must be considered separately. The Supporting Documents grossly misrepresent the position. Save for pure value transfers from previously funded parties to existing funders, what the Bill properly seeks to achieve can be accomplished through prospective only legislation. 
  5. If retrospectivity survives, it is likely that the matter will come before the courts quickly thereafter in relation to the ECHR.’

Rowles-Davies argues in the article that ‘the Supporting Documents to the LFA Bill provide absolutely no evidence of legal precedent to support the retrospective aspect of the Bill.” He goes on to say that not only is this bill ‘unprecedented’, but it also fails to provide ‘credible “public interest” justification for the retrospective aspect.’ 

In the conclusion of the article, Rowles-Davies calls on both chambers of Parliament to ‘take proper time to explore the foundation upon which the Bill rests and then test its contents after it has been repaired.’ Furthermore, he argues that ‘the positioning of the Bill is disrespectful to a busy Parliament tasked with addressing far more pressing global, social, and public interest matters.’

Commercial Regulatory Issues

Bills Targeting Litigation Finance Disclosure and Foreign Funders Make Progress in Louisiana

By John Freund |

Reporting by Bloomberg Law covers the campaign to introduce new rules governing litigation funding in the state of Louisiana, with proponents of the legislation sensing an opportunity to make progress since the state elected a new governor, Jeff Landry. The two bills making their way through the Legislature are: HB336, which would create a Litigation Financing Disclosure Act, and SB355, which would enact ‘transparency and limitations on foreign third-party litigation funding’. 

In an interview with Bloomberg, Representative Emily Chenevert ,who brought HB336, explained that the turnover in elected representatives provided a fresh opportunity, saying: “The appetite was there already within the legislature and so now it’s like, let’s attempt this and let’s see with a new House and some new senators what could happen.” Dai Wai Chin Feman, managing director at funder Parabellum Capital, spoke out in opposition to Chenevert’s bill but said that SB355 was “acceptable to our industry.”

HB336 would require any party in a civil action to disclose the existence of a litigation financing agreement, whilst redacting the financial details of the agreement, and would make all financing arrangements ‘permissible subjects of discovery’. The bill also prohibits funders from controlling or making any decisions in the proceedings, stating that ‘The right to make these decisions remains solely with the plaintiff and the plaintiff's attorney in the civil proceeding.’

SB355 requires any foreign litigation funder involved in a civil action in Louisiana to disclose its details to the state’s attorney general (AG), and to provide the AG with a copy of the funding agreement. Similarly to HB336, this bill would prohibit the foreign funder from controlling the legal action in any way and also prohibits the funder from being ‘assigned rights in a civil action for which the litigation funder has provided funding’.

HB336 has been approved by the state House and was referred to the Senate Judiciary Committee, whilst SB355 has cleared the majority of procedural hurdles and now awaits a vote by the House.