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Should Judgement Enforcement Move In-House?

By John Freund |

According to a recent Burford Capital survey, more than half of in-house lawyers say their company has awards and judgements that have remained uncollected—often to the tune of $20 million or more. That’s a staggering number of successful cases that go unfulfilled, from a collectability standpoint.

The role of a judgment enforcement team is to advise clients and funders on the feasibility of collecting an award or judgement, and overcome a variety of obstacles that stymie or prevent a successful recovery. Asset tracing, collection of evidence (digital and documents), and intelligence gathering all fall under the purview of enforcement. Lawyers and researchers leading the team seek out actionable leads on debtors, then employ a strategy (or series of strategies) for collection, often across multiple jurisdictions.

Earlier this month, Litigation Finance powerhouse Omni Bridgeway announced the launch of a US Judgement Enforcement arm. Omni already had the largest global judgement enforcement team with 50+ dedicated professionals, as well as a strong track record of success in global enforcement since 1986, spanning over 100 jurisdictions. The 2019 merger with IMF Bentham, which had maintained a US-presence under the banner of Bentham IMF, solidified Omni’s foothold in the US market. And this recent announcement further cemented the funder as an attractive option for litigation funding and enforcement in the United States.

Burford Capital, another leader in third-party litigation funding, has maintained its own in-house judgement enforcement team since 2015. The recent high-profile Akhmedova divorce case generated a slew of headlines for Burford’s enforcement team, which combed jurisdictions as wide-ranging as London, Turkey and Dubai, in an effort to seize assets including the Luna: a superyacht valued at over $200 million (along with its Eurocopter and torpedo speedboat).

From a litigation funder’s perspective, collectability is integral to the decision of whether to fund a claim. After all, there’s no ROI in simply winning a case.  Funders must therefore consider the collectability risk in every case they finance. Given this, we at Litigation Finance Journal wondered if Burford’s success and Omni Bridgeway’s recent expansion of its Judgement Enforcement division might foretell an industry trend. Will other funders start moving enforcement teams in-house? What exactly are the advantages of doing so, as opposed to working with third party enforcement firms?

We did some investigating of our own to find out the answers.

May the Enforcement Be with You

Enforcement is a complex, laborious process, and comes on the heels of what is often a long, drawn-out legal proceeding. This enables defendants to deploy tactics simply meant to wear a plaintiff out. Many plaintiffs are keen to focus on growing their business, as opposed to the particular minutiae of asset tracing. Thus, debtors will go to great lengths to hide assets—sometimes legally, sometimes not so much—in the hopes a creditor isn’t up for arduous task of tracing those assets.

The goal of judgement enforcement is to combine data-driven analysis with human experience and intelligence, to discover actionable insights with which to locate assets and ensure funds reach the deserving parties. This is often achieved by putting pressure on defendants, essentially by making it so cumbersome to continue to hide assets (also an expensive, complex process), that they simply opt to pay the judgment or award. Essentially, the job of an enforcement team is to make a defendant feel the way defendants often try to make plaintiffs feel—weary-eyed, and ready to throw in the towel.

“Judgement enforcement can be an uphill battle,” explains one Omni Bridgeway rep. “Although we prefer to solve matters quickly, we are in it for the long run.”

Since every case is bespoke, there is no playbook for how enforcement plays out. Typically, however, enforcement involves several key strategies:

  • Researching the historical behavior of the defendant (What types of claims did the defendant have previously? Did those claims go paid or unpaid? How did the defendant respond to prior enforcement actions, if any?).
  • Identifying a subset of jurisdictions where the defendant’s assets are located, and where enforcement measures can be used to collect those assets.
  • Structuring a multi-district, often cross-border enforcement and collection strategy.
  • Highlighting additional pressure points, outside of litigation, that can be leveraged to impel a defendant to make good on their debts.

Of course, with the proliferation of new technologies such as crypto and other blockchain-based innovations, the game is getting trickier, as more opaque avenues for shielding assets arise. Thus, the ability for an enforcement team to be nimble, flexible and adaptive is paramount. Much like a chess player anticipating her counter-party’s next move, a solid enforcement team must have both a plan of action in place, and an eagerness to break from that plan should the process lead in an unforeseen direction. Omni Bridgeway, for example, has assembled a robust team that can comfortably navigate a multitude of scenarios, comprising lawyers from diverse legal backgrounds, and researchers from a multitude of disciplines, including banking, science and economics.

Bringing it In-House

Third-party funders outsource an array of legal and financial services, including research, cultivating and preparing experts, Legal Tech development, and more. For some, especially smaller funders, it makes sense to outsource judgement enforcement as well. But for larger, more established funders and their clients —an in-house judgement enforcement arm offers numerous benefits:

  • A judgement enforcement team can be as valuable at the beginning of a case as it can after the case’s conclusion. Input from enforcement professionals can help determine the defendant’s ability to pay, which can then be used as a factor in whether or not to fund a specific case. If the case gets funded, this same information can be used when estimating a budget with a clear eye of what steps need to be taken to enforce a judgement.
  • An in-house enforcement team acts as a conversation partner for claimants and attorneys. Such teams are intimately familiar with the people and processes of the funders, case types, and workplace culture. This helps establish an internal knowledge base that can provide a seamless transition from one facet of the case to the next.
  • Multidisciplinary collaboration. In-house teams have the benefit of being able to rely not just on in-house legal resources from many jurisdictions, but also a research team with additional abilities and language skills, whose members can advise continuously on assets and asset movements, and enable the enforcement team to act quickly on opportunities if and when an asset is identified.
  • Litigation funding is an increasingly competitive business. When funders compete for clients, having a judgement enforcement division helps establish a funder’s commitment not just to the case, but to the final collection. Having an in-house enforcement team shows clients that the funder is able and willing to do the hard work necessary to trace assets and collect those unpaid judgments or awards.

One of the more overlooked benefits of an in-house enforcement team is its expansion of access to justice. While the enforcement team’s assessment of a defendant’s collectability risk can be used to eschew cases classified as high risk, it can also be leveraged in the opposite direction—to help funders finance cases that might otherwise appear too risky. In-house teams are intimately familiar with their organization’s risk appetite, and therefore can make recommendations to the investment committee based on the particulars of that specific appetite. The end result being that funders with in-house teams can finance cases that would otherwise go un-funded due to a high collectability risk. Omni Bridgeway has confirmed that it does have a specific appetite for enforcement or collectability risk. Having an in-house team with a deep understanding of that risk appetite benefits prospective clients, as the in-house relationship can help get their cases funded.

Omni shared this summation of the benefits of having an in-house enforcement team: “Omni is a formidable ally to everyone involved, sharing in both the recovery and risk, and only getting paid its fee if real recoveries are made. That alignment of interests with clients means that once we step in, clients know we believe in their case and will only advise a strategy that directly increases the chances of recovery. For us, [enforcement] is our core expertise.”

Looking Ahead 

Two of the largest litigation funders have successfully created and maintained in-house judgement enforcement teams. While it’s hard to know what the future holds for this rapidly-evolving sector, it is possible this will set off a trend among large and medium-sized third-party funders, as competition for clients is fierce, and funders must do all they can to stay apace. This, in turn, is likely to aid not just the enforcement of awards—but case selection and how funds are deployed.

As a rep from Omni points out, “The judgment enforcement capabilities do not just benefit clients with an existing judgment or award, they help us fund new ‘merits’ cases that might otherwise be considered too risky (because of a perceived collection risk), with the client knowing that the case is in safe hands from start to finish, should active enforcement be required.”

We’re not in the business of prognosticating, so we won’t predict what the future holds. We will, however, point out that methodologies adopted by one funder can often become industry trends (portfolio funding, secondaries investment, and the push towards defense-side funding are all examples). It’s been demonstrated that in-house judgement enforcement leads to increased client satisfaction, and—as third-party legal funding has always centered on—increased access to justice. After all, a favorable judgement has very little value if it remains uncollected. As such, a proliferation of in-house enforcement teams (should that indeed come to pass) will be a boon to clients, lawyers, and the funders who utilize them.

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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.