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Innsworth to back Mastercard action as IMF launches new fund

US Supreme Court: Appeal rejected in funded claim

The third-party litigation funder that stepped in late in the day to fund the appeal in the groundbreaking £14bn Mastercard consumer claim is backing the entire case, it has confirmed.

Innsworth Litigation Funding said it has agreed to “fully fund” the action, in a move that places it firmly in the funding big league.

It is understood that Innsworth has not yet sought to hedge the risk with after-the-event insurance.

Innsworth used to be called Bentham Europe, which was a joint venture between IMF Bentham, the leading listed Australian funder, and US hedge fund Elliott Management. IMF sold its 50% [1] to Elliott in 2016, and it was renamed a year later.

In April, the Court of Appeal overturned [2] the Competition Appeal Tribunal decision that stopped what is the biggest opt-out claim in English legal history.

It held that the tribunal’s 2017 judgment denying the representative claimant, solicitor Walter Merricks, a collective proceedings order, contained errors of law and that the tribunal mis-directed itself in applying the new regime.

The court ordered that the application for an order be remitted to the tribunal for a re-hearing.

Mastercard has applied to the Supreme Court for permission to appeal.

Ian Garrard, managing director of Innsworth Advisors, advisors to Innsworth, in London, said: “We are one of the only funders in the top end of the market with the resources and expertise to fund a case as complex as the £14bn Mastercard claim.

“The development of a class action regime in the UK provides Innsworth with an opportunity to grow its investments in litigation, on high-value and large-scale cases such as this where its resources can best be put to work.”

Boris Bronfentrinker, the partner at Quinn Emanuel Urquhart & Sullivan acting for Mr Merricks, said: “We are very pleased that Innsworth decided to step in to fund the claim following the initial decision of the Competition Appeal Tribunal to refuse the grant of the collective proceedings order.

“Following that initial decision, we were disappointed that Burford decided to no longer support the case and take up the funding of an appeal.

“Mr Merricks only had a very short period – three weeks – in which to seek permission to appeal from the tribunal, and the decision of the previous funder left Mr Merricks in a difficult position.

“The decision by Innsworth to step in on such short notice shows its ability to assess and make focussed and swift decisions, as well as its belief in the claim. There are not many funders out there that could do this, and we are pleased to have Innsworth alongside us going forward.”

Innsworth is also funding shareholders claims against Volkswagen and Porsche arising out of the emissions scandal, and in February announced it was backing a £400m claim [3] being prepared against oilfield service company Petrofac arising out of an alleged bribery scandal.

Meanwhile, IMF Bentham has launched a $500m (£393m) fund to underwrite non-US disputes around the world, although investors have the option to roll into a successor fund on the same terms, to increase the overall new capital commitments to $1bn.

‘Fund 5’ is IMF’s second non-US fund. The first was launched less than two years ago and then increased in January.

Headquartered in Australia, and with offices in the UK, US, Canada, Singapore and Hong Kong, IMF now has close to A$2bn (£1.1bn) in combined funds under management globally.

IMF managing director and CEO Andrew Saker said: “IMF is experiencing strong market demand for funding across all jurisdictions. Since 2015 IMF has recorded an 85% increase in the number of non-US funding applications and a 149% increase in US funding applications.

“Demand for dispute resolution finance is growing as a result of increased awareness, the increasing costs of arbitration and litigation and regulatory changes in some jurisdictions which now allow parties to seek dispute resolution finance.

“Demand is particularly strong in Asia and Canada where dispute resolution finance is still relatively new but it is becoming a mainstream global financial product.”

IMF committed $100m in cash to Fund 5 and remaining funds were contributed by external investors, primarily funds managed, and investors represented, by international firm Partners Capital Investment Group, as well as funds managed by US-based Harvard Management Company, Amitell Capital in Singapore and Canada’s Balmoral Wood.

In other news, listed funder Litigation Capital Management Limited (LCM) has signed an agreement to fund a corporate portfolio transaction with an unnamed “leading global aviation business”.

This will fund 38 worldwide disputes and contractual claims arising from the operations of the company. It is for an initial five-year rolling period with the option to extend the number of cases and the size of finance available.

It is LCM’s second corporate portfolio transaction and said it had a further eight in the pipeline.

Nick Rowles-Davies, LCM’s executive vice-chairman, said: “Aviation is one of many sectors that will benefit from corporate portfolio funding, the continued awareness of legal financing solutions and how legal financing can minimise risk for corporates across sectors.”

Finally, Burford Capital has sold another chunk of its interest in a massive US investment, pocketing a further $100m as a result.

The Petersen claims relate to the 2012 expropriation by Argentina of a majority interest in YPF, the New York Stock Exchange-listed energy company formerly owned by Spain’s Repsol.

At the time of the expropriation, Repsol owned more than 50% of YPF and the Petersen Group owned 25%. After suing, Repsol ultimately settled its claims and received a payment of approximately $5bn from Argentina and YPF.

Burford has been appointed under the authority of the Spanish bankruptcy courts to provide financing to the liquidators of the Petersen Group, which went bankrupt after the expropriation.

The liquidators are bringing claims against both YPF and Argentina, and the US Supreme Court has now declined to hear Argentina and YPF’s appeals against decisions finding jurisdiction for Petersen’s claims in the US. The case will now return to the trial court.

Burford has sold a further 10% of its entitlement in the case into the secondary market it has been developing, retaining a 61.25% of its original entitlement. The sale price of $100m implies a value of $1bn for Burford’s entire original Petersen stake, a figure that has increased over the years [4].

Burford has now generated $236m in proceeds from selling parts of its interest, although the funder has committed always to hold at least 50.1% of its original “economic entitlement” in the case.

The sale was to 11 institutional investors and was significantly over-subscribed. Including prior purchasers, there are now approximately 40 institutional investors participating in the Petersen secondary market.