Litigation funding – or as it is sometimes known third party legal financing – allows a party to litigate or arbitrate free from the upfront costs traditionally associated with bringing a claim.
Using a funder usually means that a claimant agrees to pay a percentage of the final amount awarded back to the fund if the case is successful. Where a case is unsuccessful the claimant is not required to pay.
To ensure that they make a return on their investment most third party legal financiers will have a set of criteria by which they judge the potential success of a case and using this they will select those claims which they feel have the most merit.
Pressure on fee income has never been higher for most law firms, especially with the constant emergence of new competitors in the market, while in-house counsels continue to be limited by their ever-shrinking budgets, which is why an ever increasing number of legal professionals have turned to litigation funding.
Law firms havebeen attracted to the prospect offered by litigation funding and many now advise clients to access finance where they feel it is suitable, particularly in larger cases or where there is a significant portfolio of legal work required.
The corporate world has taken a particular interest in litigation funding and while many of these firms could afford the costs, the funding allows them to defer them until a case is successful.
Those bringing a claim also feel more secure in setting a larger legal budget, allowing them in turn to enjoy a higher rate of success, ensuring they make returns on claims that may once have been ignored because of the lack of a guaranteed successful outcome.
These trends have led to a significant expansion of the litigation funding market, which is increasingly receiving investment thanks to the additional confidence in the sector.
One issue that all those who use litigation/third party funding must consider is the cost. Up until now the additional costs and risks of litigation funding have fallen on the claimant.This may be about to change.
At the end of 2016, an ongoing dispute between Essar Oilfield Services and Norscot Rig Management Ltd was settled when the High Court ruled that Essar must pay the litigation funding costs of Norscot. This is the first time that a losing party has become liable for a claimant’s third-party legal financing costs.
In theproceedings Essar Oilfield Services v Norscot Rig Management Ltd,the court found in favour of Norscot Rig Management Ltd. However, an arbitrator subsequently ruled that Norscot’s £1.94 million in litigation costs should be recoverable in full against Essar under both the Arbitration Act 1996 (the Act) and the ICC International Court of Arbitration Rules.
Essar Oilfield Services appealed against the ruling, but the arbiter argued that the additional litigation funding costs were fully recoverable as “other costs of the parties” under Section 59 of the Act and refutedEssar’s claims that it amounted to a ‘serious irregularity’.
The ruling was then taken to the High Court, which concluded that the arbitrator had not exceeded theirjurisdiction and that it was not an “erroneous use of an available power” for them to interpret that Norscot’s third party funding legal financing costs fall under the definition of ‘other costs’.
This ruling does not offer any binding precedent beyond the boundaries of the relevant arbitration forum, and yet the implications for this decision may be far reaching.
By making this judgement the High Court has shown that it is willing to accept the idea that third party/litigation funding costs, are in limited circumstances, recoverable from the losing Defendant.
It is almost certain therefore that more parties using litigation funding will test and extend the circumstances where costs of third party funding are recoverable. Possibly one day developing the doctrine to a point where the recovery of third party costs from an unsuccessful party becomes almost common place.
It is likely then that more funders will look to enter the market as it continues to grow, backed by the knowledge that cases, such as Essar Oilfield Services v Norscot Rig Management Ltd, will make their funding options far more attractive.
It is clear then that litigation funding is no longer a last bastion of cash strapped company – as the common misconceptions suggest – but is now in the process of becoming an established way of seeking redress.
Sterling gets vaccine boost to hit 8-month high vs euro
By Joice Alves
(Reuters) – Sterling rose to a fresh eight-month high against the euro on Wednesday as Britain’s faster COVID-19 vaccine rollout than in the European Union offered support to the pound.
Although Britain’s deaths from the coronavirus pandemic passed 100,000 on Tuesday, its faster initial vaccine rollout has fuelled hopes for economic recovery.
Sterling was up 0.3% at 88.28 pence at 1049 GMT, after hitting a fresh eight-month high of against the single market currency.
Graphic: Sterling 27 Jan, https://fingfx.thomsonreuters.com/gfx/mkt/jbyvrnbbbve/Sterling%2027%20Jan.png
Geoffrey Yu, senior EMEA market strategist at BNY Mellon, said “the general theme of UK doing well with vaccinations is playing a role” in lifting the pound, which is “not expensive and not over-owned yet”.
On the other hand, “the euro is clearly being undermined by ongoing concerns over vaccine rollout speed and supply,” Yu added.
Versus the greenback, sterling was flat at $1.3736, not far off a May 2018 high of $1.3759 touched earlier.
Hopes for a large U.S. fiscal stimulus package has fuelled risk sentiment in markets in recent weeks, benefiting sterling. Market participants are expecting Federal Reserve Chair Jerome Powell to renew a commitment to ultra-easy policy.
“It’s FOMC today so the adjustment in dollar positions may be playing a role as well,” Yu said.
As Britain left the bloc in December, the City of London said the capital’s loss of some financial business due to Brexit has not been catastrophic and it will thrive even if the European Union “irrationally” blocks access.
“For now Sterling continues to trade more on hope, vaccines, than current reality,” said Jeremy Stretch, head of G10 FX Strategy at CIBC Capital Markets.
(Reporting by Joice Alves in VARESE, Italy. Editing by Alexander Smith and Andrew Cawthorne)
Dollar advances as investors shy away from risk
By Saqib Iqbal Ahmed
NEW YORK (Reuters) – The dollar edged higher against a basket of currencies on Monday, as a burst of volatility in stock markets around the globe sapped investors’ appetite for riskier currencies.
Concerns over the timing and size of additional U.S. fiscal stimulus sent major U.S. stock indexes briefly more than 1% lower before they recovered to trade little changed on the day.
The sharp move in stock markets soured FX traders’ appetite for risk, Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto, said.
“Your high beta currencies – currencies that are highly correlated with equity markets and global risk appetites – are tumbling in synchrony with equity indexes,” Schamotta said.
Market sentiment turned more cautious at the end of last week as European economic data showed that lockdown restrictions to limit the spread of the coronavirus hurt business activity.
The U.S. Dollar Currency Index was 0.19% higher at 90.396, after rising as high as 90.523, its strongest since Jan. 20.
The euro was down around 0.28% against the dollar. German business morale slumped to a six-month low in January as a second wave of COVID-19 halted a recovery in Europe’s largest economy, which will stagnate in the first quarter, the Ifo economic institute said on Monday.
The Australian dollar – seen as a liquid proxy for risk – was 0.16% lower against the dollar.
U.S. stocks have scaled new highs in recent sessions even as concerns about the pandemic-hit economy remain. Investors are trying to gauge whether officials in U.S. President Joe Biden’s administration could head off Republican concerns that his $1.9 trillion pandemic relief proposal was too expensive.
Despite the dollar’s recent rebound – the dollar index is up about 1.3% since early January – analysts expect a broad dollar decline during 2021. The net speculative short position on the dollar grew to its largest in 10 years in the week to Jan. 19, according to weekly futures data from CFTC released on Friday.
The U.S. Federal Reserve meets on Wednesday and Chair Jerome Powell is expected to signal that he has no plans to wind back the Fed’s massive stimulus any time soon – news which could push the dollar down further.
Sterling strengthened on Monday against the weaker euro as Britain’s COVID-19 vaccine rollout over the weekend offered support to the British currency.
(Reporting by Saqib Iqbal Ahmed; Editing by Andrea Ricci and Sonya Hepinstall)
London and New York financial services treated the same, EU says
By Huw Jones
LONDON (Reuters) – An EU forum for discussing financial services with Britain will be similar to what the United States has, and it must be in place before market access will be considered, the bloc’s financial services chief said on Monday.
Britain’s Brexit trade deal with the EU from Jan. 1 does not cover financial services, leaving its City of London financial center largely cut off from the EU.
Both sides are committed to creating a forum for financial regulatory cooperation by March, but talks have not started yet, the EU financial services commissioner told the European Parliament.
“What we envisage for this framework is similar to what we have with the United States, a voluntary structure to compare regulatory initiatives, exchange views on international developments and discuss equivalence related issues,” Mairead McGuinness told the European Parliament.
U.S. and EU regulators took about four years just to agree on rules on cross-border derivatives.
Trading in euro shares has already left London, along with a chunk in swaps trading. That questions the value of any future EU access given that many banks and trading platforms from the UK have opened units in the bloc.
McGuinness said regulatory cooperation will not be about restoring market access that Britain has lost, nor will it constrain the EU’s unilateral equivalence process.
Equivalence refers to EU access when Brussels deems a non-EU country’s rules are similar enough to the bloc’s.
“Once we agree on our working arrangements, we can turn to resuming our unilateral equivalence assessments… using the same criteria as with all third countries, including anti-money laundering and taxation cooperation,” she said.
Britain plans to amend some EU rules.
“The United Kingdom intention to diverge requires a case-by-case discussion in each area. Equivalence and divergence are polar opposites,” McGuinness said.
“I am optimistic that over time, through cooperation and trust, we will build a stable and balanced relationship with our UK friends.”
(Reporting by Huw Jones; Editing by Dan Grebler)
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