Calunius: investors find German litigation market “attractive alternative to UK”

Wells: certainty of German market attractive

The certainty provided by Germany’s legal services market makes it a viable alternative to the UK as a location for big-ticket investors, according to the head of a major third-party litigation funder.

Speaking at the recent listed law conference in London, investment banker Mark Wells, managing partner of Calunius Capital, said that the German litigation market was 85% as big as the UK’s, and was “particularly attractive” for a number of reasons.

Calunius had decided to focus on Europe and avoid the US market – far and away the world’s largest – because “we know enough about the US know that we know nothing”, he said.

He pointed out that the first litigation funder to list in Europe was in Germany, in 1999 – eight years before the first to list in the UK.

Among several reasons for litigation funders to find Germany appealing was that there a third party can own a claim, “so as an investor we can take absolute control of the claims”, he said.

Also in Germany, apart from a small number of exceptions, conditional fee agreements were not allowed. “If you want to retain the lawyer you have to pay them cash money… The good thing from a funder’s point of view is that there is no competition from law firms… who are able to offer a ‘no win, no fee’ arrangement.”

Lastly, Mr Wells said, “In any investment an attractive feature is certainty as to what the project costs are going to be”.

In Germany, legal fees were fixed by statute, including adverse costs, and capped. “So in the very large claims the costs per unit claim compare very favourably with investments in Anglo-Saxon markets. The great advantage to an investor of the German system is certainty… a very significant advantage.”

However, the benefit of certain fees was double-edged, he said, because it made litigation “pretty cheap”. He added: “The challenge is that a lot of claimants who would be priced out of the UK market can get into the German market.”

In another disadvantage, whereas in England and Wales and high-value cases would be heard invariably by expert judges, in Germany the federal courts system meant that a junior judge might be allocated to a high-value case.

Concluding, Mr Wells said while Germany had some pros and cons, “it does open up to some business opportunities that would be exceptionally difficult to replicate in a UK or Anglo-Saxon context”.

Meanwhile, AIM-listed Burford Capital has raised £175m through an oversubscribed issue of bonds on the main market of the London Stock Exchange.

The bonds will pay interest at an annual rate of 5% and mature on 1 December 2026.

Burford said the new capital will allow it to continue growing its legal finance business, which already stands at more than $2bn invested and available.

The money will also be put towards repaying early the $43.75m of loan notes due in 2019 which were created as part of the December 2016 acquisition of Gerchen Keller Capital.

Christopher Bogart, Burford’s chief executive, said the issue had exceeded both of its previous issues.

“Law firms and corporate clients are coming to us with needs which have evolved far beyond the single-case financing model on which this industry is founded – although that remains a core area of our business.

“This additional long-term capital will enable us to continue to meet the global demand for Burford’s services and further solidifies our position as the industry leader with the industry’s lowest cost of capital.

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