Litigation funds turn spotlight on Britain

* Litigation funds step up UK activity

* Proposed shift from insurance based to fund based system

* New rules would make UK litigation funding more profitable

By Chris Vellacott

LONDON, Jan 27 (BestGrowthStock) – A review of civil litigation in
Britain that seeks to overhaul the “no win, no fee” legal
culture is attracting a rush of funds that finance lawsuits in
return for a cut of payouts.

Industry analysts said the report by senior British judge
Rupert Jackson, who wants to slash legal costs to promote access
to justice, endorses the use of litigation funds that can offer
corporate claimants the cash needed to fight costly law suits.

“You are going to get more and more people coming into the
(litigation) market and wanting to exploit it,” said Ian
Rosenblatt, a London lawyer who founded the UK-focused Alvaro
litigation fund late last year.

So-called “ambulance chasers”, lawyers who try to persuade
people suffering injuries to launch a lawsuit by promising not
to charge fees if the suit is lost, are blamed for inflating
fees which defendants are left to pay if they lose.

The Jackson report recommends a raft of reforms, including
ensuring legal fees are paid out of damages awarded to claimants
in the hope this will bring fees down.

While some lawyers have argued this could dissuade some from
pursuing claims for fear of the heavy costs, claimants can seek
funding help from litigation funds. In return, the funds will be
paid part of any damages awarded.

Alvaro is running roadshows for a 50 million pound ($81
million) public listing that will be completed within six weeks
and is being marketed exclusively to institutional investors.

Rosenblatt said the Jackson review had increased litigation
funds’ appeal as an asset class that was previously the preserve
of specialists and hedge funds.

PROFITABLE DISPUTE

Funds are scenting greater profits if Jackson’s proposals
are implemented and legal fees are paid out of awarded damages,
because it brings the promise of larger payouts.

Two litigation funds listed in London — Juridica
Investments (JIL.L: ) and Burford Capital (BURF.L: ) — both have
shareholder registers dominated by large British institutional
investors such as Invesco Perpetual, Baillie Gifford and
Fidelity International (FIDLI.UL: ).

Despite their London listings, both funds have focused on
the United States. But last week, Juridica said it planned to
divert up to 50 million pounds to British civil cases.
[ID:nLDE60L1EF]

Juridica’s Chief Executive Richard Fields said the decision
reflected the growing interest of British domestic litigation as
an investment strategy if Jackson’s proposals are implemented.

Some lawyers say Jackson’s proposals also point to a
proposed shift away from a funding system that relies partly on
“after the event” insurance premiums, which has further inflated
the costs defendants have had to meet when losing legal battles.

“This is where the Jackson review is relevant (to litigation
funds) because clearly he decided he did not much like
after-the-event insurance and proposes to restrict that,” said
Vincent Smith, a partner at London lawyer Hausfeld.

One chief executive at a litigation fund, which concentrates
on the United States, welcomed the British reform but warned it
could take years to impose the proposals.

“At least in the near-term, the return profile for an
investment fund is better in domestic U.S. litigation than it is
in UK domestic litigation,” he said.

Investment Advice

(Editing by David Cowell)
($1 = 0.6197 pound)

Litigation funds turn spotlight on Britain