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Commercial Special Features

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 Special Features

Key Highlights from the Inaugural LF Dealmakers European Edition

By John Freund |

Last week, the LFJ team attended the inaugural LF Dealmakers European Edition, held across two days at the Royal Lancaster in London. Building on the longstanding success of Dealmakers’ New York event, the first edition of the European conference brought together an impressive selection of leaders from across the industry.

Spread across two days, LF Dealmakers featured an agenda packed with insightful conversations between some of the most prominent thought leaders in the European litigation finance market. An array of panel discussions covered everything from the looming potential of regulation to the increasing corporate adoption of third-party funding, with these sessions bolstered by a keynote interview between two of the key figures in the Post Office Horizon litigation.

A long road to justice for the postmasters

In a conference that managed to fill every single panel discussion with speakers engaged in some of the largest and most influential funded disputes taking place in Europe, the standout session of the two days provided unparalleled insight into one of the most famous cases of recent years. The keynote interview on ‘The Future of Litigation Funding in the Wake of the Post Office Horizon Scandal’ saw James Hartley, Partner and National Head of Dispute Resolution Freeths, and Neil Purslow, Founder & CIO, Therium, offer up a behind-the-scenes tale of the sub-postmasters campaign for justice.

Going back to their first involvement with the case, James Hartley reminded attendees that whilst those looking at the case post-judgement “might think it was a slam dunk”, this was not the viewpoint of the lawyers and funders who first agreed to lead the fight against the Post Office. As Hartley described it, this was a situation where you had “a government owned entity who would fight to the end”, with a multitude of potential issues facing the claimants, including the existence of criminal convictions, the limited amounts of documented evidence, and the fact that the Post Office was the party that had ninety percent of the data, documents, and evidence.

Hartley also offered his own perspective on the legal strategy adopted by the Post Office and its lawyers, noting that at every stage of the litigation, “every single issue was fought hard.” He went on to explain that whilst he was “not critical” of the defendant’s strategy in principle, there remains the underlying issue that “the arguments they made were not consistent with the evidence we were seeing.” Hartley used this particular point to illuminate the issues around defendant strategies in the face of meritorious litigation that is being funded. He summarised the core issue by saying: “There is nothing wrong with fighting hard, but it’s got to be within the rules, and in a way that helps the court get to a just outcome.”

Offering praise for the support provided by Purslow and the team at Therium to finance the case, Hartley stated plainly that “without Therium’s funding it would not have gone anywhere, it would not have even got off the ground.” Both Purslow and Hartley also used the case to highlight problems around the lack of recoverability for funding costs and how that incentivises defendants such as the Post Office to prolong litigation and inflate legal costs. Hartley said that he would welcome a change to rules that would allow such recoverability, arguing that in this case “it would have neutralised the Post Office’s strategy to just keep driving up costs on the claimants side.”

What problem is regulation solving?

It was unsurprising to find that questions around the future of regulation for the litigation funding industry were a regular occurrence at LF Dealmakers, with the event taking place only a few days on from the House of Lords’ debate on the Litigation Funding Agreements (Enforceability) bill. From the opening panel to conversations held in networking breaks between sessions, speakers and attendees alike discussed the mounting pressure from government and corporate opponents of third-party funding.

The view from the majority of executives at the event seemed to revolve around one question, which was succinctly put by Ben Moss from Orchard Global: “What are the specific issues that require regulation, and what is the evidence to support those issues?”

This question became somewhat of a rallying cry throughout the conference, with suggestions of increased scrutiny and oversight being turned back on the industry’s critics who make claims of impropriety without citing evidence to back up these claims. Whilst several speakers referenced the recent LFJ poll that found a broad majority are open to the potential for new regulation, Ben Knowles from Clyde & Co described a lot of the discourse around the issue as “a fairly partisan debate.”

Among the few speakers in attendance who offered a contrasting view on regulation, Linklaters’ Harriet Ellis argued that “regulation done right would be good for the industry.” However, even Ellis acknowledged that any rules would have to be carefully crafted to provide a framework that would work across the wide variety of funded disputes, saying that a “one size fits all approach does raise issues.”

Regarding the government’s own approach to the issue through the draft legislation making its way through parliament, all of the executives in attendance praised lawmakers’ attempts to find a solution quickly. Alongside these government-led efforts, there was also a feeling among legal industry leaders that funders and law firms have to be part of the solution by promoting more education and understanding about how litigation finance works in practice. Richard Healey from Gately emphasised the need for firms to engage in “hearts and minds work” to change wider perceptions, whilst Harbour’s Maurice MacSweeney emphasised the need to “create the environment where law firms and funders can flourish.”

Innovation through collaboration

Outside of the narrow debate around legislation and regulation, much of the conference was focused on the speed at which litigation finance continues to evolve and create new solutions to meet complex demands from the legal industry. This was perhaps best represented in the way speakers from a variety of organisations discussed the need for a collaborative approach, with executives from funders, insurers, law firms, investors and brokers, all discussing how the industry can foster best working practices.

The interplay between the insurance and funding industry was one area that offered plenty of opportunity for insightful discussions around innovation. Andrew Mutter from CAC Speciality noted that even though “insurers are not known for being the fastest and moving the most nimbly,” within the world of litigation risk “the insurance markets are surprisingly innovative.” This idea of an agile and responsive insurance market was backed up by the variety of off the shelf and bespoke products that were discussed during the conference, from the staples of After-The-Event and Judgement Preservation Insurance to niche solutions like Arbitration Default Insurance.

Delving into the increasingly bespoke and tailored approach that insurers can take when working with funders and law firms, Jamie Molloy from Ignite Speciality Risk, described how there are now “very few limits on what can be done by litigation insurers to de-risk.” Whilst there is sometimes a perception that insurers are competing with funders and lawyers for client business, Tamar Katamade at Mosaic Insurance offered the view that it is “more like collaboration and synergy” where all these parties can work together “to help the claimant and improve their cost of capital and reduce duration risk.”

Class action fervour across Europe

Throughout both days of the LF Dealmakers conference, the volume and variety of class actions taking place across the European continent was another hot topic. However, in contrast to an event focused on the American litigation finance market, the common theme at last week’s forum was the wideranging differences between large group claims across individual European jurisdictions. In one of the most insightful panels, the audience were treated to an array of perspectives from thought leaders practicing across the UK, Spain, and the Netherlands.

The example of Spanish class actions provided an incredibly useful view into the nuances of European claims, as a country that is still in the process of implementing legislation to comply with the EU’s collective actions directive, but has already evolved routes for these types of actions over the last decade. Paul Hitchings of Hitchings & Co. described how the initiative to innovate has come “more from the private sector than the legislature”, with domestic law firms having become “experienced with running massive numbers of parallel claims” as an inefficient, yet workable solution. Hitchings contrasted Spain’s situation with its neighbouring jurisdiction of Portugal, which he argued has been comparatively forward thinking due to the country’s popular action law.

Speaking to the Dutch class actions environment, Quirijn Bongaerts from Birkway, argued that the “biggest game changer” in the country was the introduction of a real class actions regime in 2020. Bongaerts explained that the introduction of this system allowed for “one procedure that fits all types of claims”, which allows not only claims for damages, “but also works for more idealistic cases such as environmental cases and ESG cases.”

LFJ would like to extend our thanks to the entire Dealmakers team for hosting such an engaging and insightful event, which not only offered attendees a view into the latest developments in litigation finance, but also created a plethora of networking opportunities throughout both days. LFJ has no doubt that after the success of the inaugural LF Dealmakers European edition, a return to London in 2025 will cement the conference as a must-attend feature in the litigation funding events calendar.

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Commercial Regulatory Issues

The Dangers of Retrospective Legislation in Litigation Funding

By John Freund |

The debate around whether the Litigation Funding Agreements (Enforceability) Bill should be retrospective is a complex one, with valid arguments on both sides. A recent op-ed makes the case that retrospectivity poses significant dangers and unfairness.

Writing in LegalFutures, Jeremy Marshall, Chief Investment Officer of Winward UK, argues that the core issue is whether it is unfair to allow litigation funders to rely on contractual agreements that were freely entered into by both parties, even if those agreements were based on a mistake of law.

Marshall claims that the common law right to recover money paid under a mistake only applies when the mistake led to one party receiving an unintended benefit. In the case of litigation funding, the only benefit that has accrued is the one that was explicitly drafted into the contract. Allowing retrospectivity would open the door to satellite litigation and unreal counterfactuals, according to Marshall.

Claimants who have already received funding and won their cases are now arguing for the "right" to renegotiate and keep all the proceeds for themselves. But what about the funders' arguments that cases may have gone on longer or become more expensive than intended? Fairness demands that both sides' positions be considered.

Marshall insists that the true drawback in retrospectivity is the inherent danger of prejudicing one party to the exclusion of the other, or conferring an unexpected benefit to one party at the expense of the other. Ironically, this is precisely what those challenging the bill are attempting to do. So while the debate is a complex one, one can make a compelling case that retrospectivity in litigation funding poses significant dangers and unfairness.

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Commercial Regulatory Issues

The CJC’s Review of Litigation Funding Will Have Far-Reaching Effects

By John Freund |

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

Reform is on its way for the UK’s litigation funding sector, with the Civil Justice Council firing the starting gun on its review of litigation funding on 23 April.

The advisory body set out the terms of reference for its review, commissioned by lord chancellor Alex Chalk, and revealed the members of its core working group.

The review is working to an ambitious timetable with the aim of publishing an interim report by this summer, and a full report by summer 2025. It will be based on the CJC’s function of making civil justice ‘more accessible, fair and efficient’.

The CJC said it will set out ‘clear recommendations’ for reform in some areas. This includes consideration of a number of issues that could prove very significant for funders and clients. These include:

  • Whether the sector should be regulated, and if so, how and by whom;
  • Whether funders’ returns should be subject to a cap; and if so, to what extent;
  • The relationship between third party funding and litigation costs;
  • The court’s role in controlling the conduct of funded litigation, including the protection of claimants and ‘the interaction between pre-action and post-commencement funding of disputes’;
  • Duties relating to the provision of funding, including potential conflicts of interest between funders, lawyers and clients;
  • Whether funding encourages ‘specific litigation behaviour’ such as collective action.

The review’s core working group will be co-chaired by CJC members Mr Justice Simon Picken, a Commercial Court judge, and barrister Dr John Sorabji. The four other members are:

  • High Court judge Mrs Justice Sara Cockerill, who was judge in charge of the commercial court 2020 – 2022, and who is currently involved in a project on third party funding for the European Law Institute;
  • Academic and former City lawyer Prof Chris Hodges, chair of independent body the Regulatory Horizons Council which was set up to ensure that UK regulation keeps pace with innovation;
  • Lucy Castledine, Director of Consumer Investments at the Financial Conduct Authority; and
  • Nick Bacon KC, a prominent barrister and funding expert who acts for both claimants and defendants

The CJC had said that it may also bring in a consumer representative, as well as a solicitor experienced in group litigation.

In a sign that the review seeks to be informed by a wide range of views, the CJC has also extended an invitation for experts to join a broader consultation group, which will directly inform the work of the review and provide a larger forum for expert discussion. Meanwhile the advisory body has said there will also be further chance ‘for all to engage formally with this review’ later this year.

Given the broad remit of the review and significant impact that its recommendations may have on the litigation funding industry, litigation funders, lawyers and clients would be well advised to make the most of these opportunities to contribute to the review.

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