Third-party funding “fuelling increase in litigation against top companies”

Bank litigation: on the rise

The number of major claims against the UK’s biggest companies continues to rise, with the growth of third-party litigation funders one of the reasons, it has been claimed.

It comes amidst a flurry of activity around the world that is seeing litigation funding becoming more accepted.

According to research by Thomson Reuters, the number of High Court cases involving FTSE100-listed companies last year hit a five-year high of 279, up 6% on the previous year and nearly 150% up on the 114 cases of five years ago.

The legal disputes the big UK-listed banks are still facing almost decade after the banking crisis was a key reason cited by Thomson Reuters – 179 of those 279 cases involved FTSE100 banks, and in three-quarters of them, they were the defendant.

They are claimants in several cases against professional services firms such as accountants or surveyors, “suggesting that the banks retain an appetite to pursue professional negligence claims against advisers”, the company said.

Other factors included “the increasing number of litigation funders helping fund cases that might not otherwise have been pursued”, and more generally “the increased legal risks that UK-listed businesses face” as they operate across a growing number of jurisdictions.

“Banks appear to be taking a robust view about their prospects of defending themselves in court, indicating a willingness to fight claims all the way to trial, rather than settle early,” said Raichel Hopkinson, head of the Practical Law dispute resolution service at Thomson Reuters.

“Increasingly it seems that banks involved in litigation are less concerned about the sort of adverse publicity that can be associated with the public disclosures and cross-examination that come with court hearings.

“Whether this is because the claims are perceived as unmeritorious or because banks no longer feel quite as sensitive to exposure, having been in the spotlight for so long, it is difficult to say.”

Meanwhile, the Paris Bar has confirmed that third-party litigation funding does not contravene French law, and the Dubai International Financial Centre Courts has introduced a new practice direction that requires any party entering into an agreement with a litigation funder must notify every other party of this.

They must disclose of the funder’s identity but not the detail of the agreement.

Steven Friel, chief executive of Woodsford Litigation Funding, said the Dubai move was “yet further recognition that third-party funding is viewed as crucial to the development of international dispute resolution centres around the world”.

He continued: “Singapore and Hong Kong are in a race to accommodate third-party funding for international arbitration, and the DIFC refuses to be left behind.”

Separately, Woodsford has announced a tie-up with Leste Global Investments, a Brazilian company that manages financial products related to arbitration and litigation. They sim to serve “the growing market for third party funding of international arbitration and litigation related to Brazil and Latin America”.

Finally, the wind-down of AIM-listed funder Juridica continues. Its annual results, published last month, showed that it paid 40p per share in dividends during 2016 – amounting to $60m (£46m) – bringing total dividends over the life of the company to £1.036 per share.

During 2016, there were final settlements in the last two cases in Juridica’s large antitrust and competition investment; the net proceeds of $46.5m funded part of the dividends. Three investments, with a net asset value of $1.1m, were written off due to either adverse judicial decisions or “adverse market conditions”.

It has 11 investments still live, worth $20m. The company is looking to resolve and monetise them by the end of this year.

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