Global litigation financiers plan India entry to target company disputes

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Some of the world’s top litigation financiers, such as Australia’s Omni Bridgeway, plan to tap the Indian market by funding the legal costs of disputes that embroil companies, executives told Reuters.

The concept of litigation finance is widely prevalent in Australia, the United Kingdom and the United States, where such financiers pay legal fees and other costs of commercial lawsuits, arbitration or shareholder disputes and in return get a share of the award from a settlement or a win.

So far in India, however, it has been a little-known concept, with cases few and far between.

While companies stand to gain by safeguarding themselves against costs of fighting big-ticket claims, financiers and their investors stand a chance to get higher returns on their investment when a decision favours those they are backing.

Omni Bridgeway, the world’s second-largest litigation financier with more than $1.5 billion in funds under management, and Abu Dhabi-based Phoenix Advisors said they plan to set up India operations soon. Omni is already in talks with prospective clients.

“We are talking to various Indian corporates about their case load and how we can help de-risk that or monetise that,” Tom Glasgow, Omni’s chief investment officer for Asia, told Reuters. He declined to name any of those companies.

U.S. insurance broker Marsh Inc, which operates its litigation finance arm from its London office, said its executives will start visiting India more often to hold talks on offering funding to companies.

The coronavirus pandemic has crippled economic growth in India and hit businesses hard, sparking more contractual disputes and bankruptcy-related cases.

“The pandemic just sped things up,” said Marsh’s head of litigation insurance and funding, Sanjay Desai. “Businesses have less money and there is more litigation. Funding provides the answer.”

The financiers said they initially plan to focus on international arbitration cases involving Indian parties as these have a far quicker resolution time than traditional court matters, which can drag on for years in India.

Desai added that he hopes that in a few years, when the financiers get more comfortable with local issues, they can then “start looking at funding local Indian arbitration and litigation”.

In one case, as part of its financial turnaround, India’s Hindustan Construction Company last year raised $238 million by selling its rights on arbitration awards to a consortium of investors led by BlackRock.

Omni, Marsh and Phoenix said they will also join hands with consultants and law firms to set up an Indian Association for Litigation Finance to promote their business in the country.

The association also aims to resolve complaints against its members and create a framework for self-regulation, said Prateek Bagaria, a partner at Indian law firm Singularity Legal, which is part of the group.

Talking about how IALF will be a game changer for the Indian Market, Bagaria says, “Indian law has been a frontrunner in accepting litigation finance since 1876, when it was confirmed by Privy Council. To add to this, international disputes have seen a huge growth in India today. Therefore, the Indian market couldn’t be more ready for the funders to tap on this lucrative jurisdiction to fund Indian disputes and parties. Through IALF, the funders, service providers, practitioners and arbitral institutions will set themselves up as progressive, knowledgeable and ethical service-providers whom clients can readily engage.”

Meanwhile, Dilip Massand, another member of the group and managing partner at Phoenix Advisors, says, “I see no reason that litigation funding in India cannot be as robust, diverse and scale to the size of the litigation funding industry in the United States or the UK. I believe that sophisticated financial investors will be attracted to the asset class in India itself.” He believes that IALF will be a game changer for this move and serve as a focal point for the development of third party funding in India and an avenue for discourse with regulators and Indian lawyers to collaboratively develop the proper structures and alignment of economic interests, as well as the avoidance of conflicts. “In fact, Phoenix intends to set up a domestic vehicle in India for litigation funding and asset recovery in 2021,” he adds.

Having similar opinions is managing partner of PSL Chambers, Sameer Jain. He says that good legal representation is expensive and due to non-availability of litigation finance in India, a lot of meritorious claims either go uncontested or inefficiently contested. According to him, “IALF brings together industry leaders in litigation finance and law to study the legal landscape for litigation finance in India, suggests amendments and regulatory framework, and also acts as a self regulating body for entities providing litigation finance/ third party funding in India. I think India is ready for this big leap!”

Montek Mayal, senior managing director, FTI Consulting says that this expected rapid growth will need to be supported by development and adoption of rules, soft laws and best practices for the industry and a mechanism to help constantly educate the wider market of the use of such financing.

“Similarly, there needs to be constant interaction between the users and providers of litigation financing and, separately, with various regulatory bodies, judiciary and governments to help ensure that the wider legal and regulatory regime in the country is supportive of the growth of litigation financing (and perhaps ever the other way around),” Mayal adds. “This is where I see IALF playing a rather important role: providing a platform for such discussions, conversations, education and, importantly, self-regulation of the relevant market participants in, and users of, litigation financing.”

To contact the editorial team, please email ALBEditor@thomsonreuters.com.

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