Addleshaw Goddard has been at the cutting-edge of litigation finance for over a decade, quick to recognise the benefits it can offer to both the firm and its clients.
This led to the launch in 2008 of Control, an integrated solution bringing together the expertise, experience and flexibility of AG?s team to provide bespoke finance packages specific to the needs of its clients and their case. Managing Director, Andrew Jones met with Partner, Richard Wise to find out more about how litigation finance is helping AG and its clients to share risk, manage returns and inform strategy.
Andrew Jones (AJ): You first launched Control in 2008. How did the market react to it at that time?
Richard Wise (RW): The idea of packaging alternative fee structures and insurance solutions to proactively offer to clients in the manner we did with Control was regarded as very innovative and certainly as a departure for a practice focussed on commercial disputes. Whilst CFAs had been available for a number of years, they had been largely confined to personal injury cases and third-party funding was in its relative infancy - in fact The Association of Litigation Funders wasn't formed until three years later.
I was only a year qualified when Control launched and didn't fully appreciate quite how different it was until we were all trained on it and saw the reaction from clients: the first dispute I had worked on as a final seat trainee in 2007 was a group action involving a CFA and one of my first matters as an NQ was funded, so at that point I had naively assumed it was relatively normal!
I think the growth of the litigation finance market, and the fact that in that context Control is still recognised ten years later, is a good indicator of the impression it made and how forward thinking it was.
AJ: What were the most popular litigation finance arrangements during the ten years that the original Control product was in place?
RW: As a firm we have acted on more than 165 CFAs since 2008, including some of our biggest and most high-profile matters. Typically, those have been "no win, low fee" CFAs in tandem with ATE insurance.
In the period pre-2013 - before the Jackson Reforms coming into force - success fees and ATE premiums could be recovered from the other party so they were incredibly attractive to clients for tactical reasons as well as financially. After the Jackson reforms there was certainly a relative dip in the number of CFAs for a few years, but we have seen a renewed appetite for them in the last 18 months. That may have been spurred by the ever-increasing number of funded matters and also conversations with clients around DBAs raising interest levels.
AJ: How did client appetite for funding solutions develop over that period and how did that influence the design of the new initiative?
RW: As well as the abolition of the recoverability of success fees and ATE insurance premiums, the biggest changes have been the increasing maturity of, and capital available in, the third-party funding market and the introduction of DBAs. Over the last few years many of our corporate clients - a number of whom have been comfortable with CFAs for a long time - have shown an increasing interest in third-party funding in particular as they look for ways to manage the challenges put to them from their finance teams. As well as the chance to limit costs or take them off balance sheet, the importance of litigation teams being seen to add value or work as a profit centre means they are increasingly open to exploring litigation finance options. Competition follow-on damages claims are just one obvious example of this in action.
The same clients also know that they cannot afford to ignore litigation finance and need to understand it because litigation they are or will be facing involves it. Our recent work in successfully challenging the "Arkin cap" at the security for costs stage is a good example of clients expecting us to be able to use our understanding of funding arrangements and ATE insurance in defending cases. We have worked hard to reflect all of this in the ten-year update, as well as ensuring we have the relationships with the funders and insurance brokers to back it up.
AJ: What has the new Control product done to facilitate better client conversations and drive work-flow?
RW: Control has always been about having commercial rather than legalistic conversations with clients and listening to what works for their business. Refreshing it was about trying to keep those conversations up to date with the changing litigation finance environment. We use the term litigation finance deliberately in Control, because it is a much broader topic than third party funding and encompasses other forms of finance, insurance arrangements and alternative billing structures, all of which impact on claimant and defendant litigation strategy.
Our experience is that existing and new clients are really interested in understanding what is available in the market and how it can be deployed as a claimant to turn litigation from a cost into a revenue generator, as well as how it can be challenged on the defendant side in light of the developing law.
I mentioned competition and antitrust cases earlier, but as well as follow on damages and stand-alone abuse of dominance claims in that area, we are also seeing Control driving work in large tort claims, including shareholder, data breach and product liability actions. It probably doesn't need saying that arbitration - and particularly investor state - is a key area for third party funding as well.
AJ: How have you been able to utilise funding solutions to deliver the best results for your clients?
RW: The temptation is to think about some of the larger cases we have worked on, or the slightly nervewracking experience of our first DBA. However, some of the more interesting solutions have been where we have been able to put together portfolios of CFAs for institutional clients that effectively become self-funding out of their own recoveries or where funding has enabled claims that might have been stifled because of impecuniosity or even monetary exchange controls.
AJ: What can we, as a global provider of litigation finance, do to assist in making Control even more successful?
RW: As anyone who has been involved in litigation or arbitration knows, it rarely runs entirely smoothly. There is a temptation to focus on pricing when looking at funding options, but it is vitally important to have strong relationships with funders who understand the process and trust in the case and team running it.
Funders generally have a mix of people with different experiences from private practice, in-house or in business, and a desire to innovate to stay ahead of the competition. As a result, those with a relationship focus, like Vannin, can add real value to our thinking on market trends and opportunities, as well as on specific cases. Given the direct relationships funders also have with many corporates they are also very well placed to promote the wider litigation finance market and of course to act as work referrers.