The legal amendments relating to third-party litigation funding in both jurisdictions have fund managers investing in the space excited by the new options that could be presented.

“We’ve been following recent developments in funding activity with great interest and I expect that with the continued whittling away of traditional laws of maintenance and champerty in common law jurisdictions, we will see more funding activity going forward,” predicts Tania Sulan, chief investment officer, Canada at IMF Bentham.

IMF Bentham has been at the forefront of a move by hedge funds into litigation financing in recent years. Fortress Investment Group partnered with Bentham last year to launch a dedicated US fund with up to $200m in starting assets while the firm established Bentham Ventures with affiliates of Paul Singer’s Elliott Management in 2014, with Elliott understood to have purchased IMF Bentham’s stake in the entity two years later.

Other firms operating in the space include New York-based Tenor Capital, while BlueCrest founder Michael Platt has backed a new start-up, Curiam Capital, which was launched last week by former Grais & Ellsworth lawyers Owen Cyrulnik and Ross Wallin.

William Farrell, co-founder at commercial litigation funder Longford Capital agrees legal developments in Cayman and Hong Kong open the jurisdictions up to greater litigation funding activity. “While the allowances are not as clear-cut as the use of funding in the US or in the UK, the common law jurisdictions are quickly moving toward a more liberal use of litigation funding for companies to access justice. That is very encouraging.”

Of the Cayman decision, Christy Searl, a director of the litigation finance firm Burford Capital, which provided the funding in the Cayman case, says: “It removes the previous ambiguity about funding outside of insolvency. The court has said funding agreements will be accepted so long as the funders involved meet the laid out requirements, so I think with this guidance you will see more litigation funding agreements.”

Before the recent amendments in Cayman and Hong Kong, the main prohibition on third-party funding was the common law rules against maintenance and champerty.

Peter McMaster, a partner at law firm Appleby, explains that champerty is where a litigant party pays a third party a cut of its damages in return for the third-party funding litigation. Maintenance is where a third party provides funding to allow legal proceedings to be brought. “Not every circumstance where third-party funding is done is illegal; there are certain types of acceptable maintenance of legal proceedings and it’s a question of whether what is being proposed is contrary to the public policy outlawing maintenance,” McMaster explains.

In Cayman, the Grand Court has confirmed that litigation funding is not contrary to public policy on maintenance and champerty. In a recent landmark case, A Company vs A Funder, the court set a list of considerations when presented with a funding agreement and offered some circumstances under which the court may permit them.

Click below to read more. Feel free to get in touch with Peter McMaster for more information.

Read More 

Type

Insight

Locations

Cayman Islands

Share
Twitter LinkedIn Email Save as PDF
More Publications
27 Sep 2022

Similar but Different

While the basic features of the trust remain, there are some notable differences in how trusts can b...

30 Aug 2022

The Cayman Islands restructuring officer regime comes into force on 31 August 2022

These new proceedings will significantly enhance the Cayman Islands restructuring regime.

4 Aug 2022

Norwich Pharmacal orders: the right medicine for third party disclosure of information and documents in the Cayman Islands

A Norwich Pharmacal order (NPO) is a disclosure order available in the Cayman Islands to compel a th...

Contributors: Susan Fallan
1 Jun 2022

The 2022 Cayman Islands Real Estate Guide

The Real Estate 2022 guide provides the latest legal information on the impact of disruptive technol...

Contributors: Norman Klein
28 Apr 2022

Restructuring the offshore debt of Chinese Real Estate Developers

This article sets out how the current regimes in the Cayman Islands and the BVI can assist with rest...

Contributors: Crystal Au-Yeung
28 Apr 2022

Assignment, novation or sub-participation of loans             

Transfers of loan portfolios between lending institutions have always been commonplace in the financ...

26 Jan 2022

Appleby contributes four chapters to Global Legal Insights – Fund Finance 2022: Cayman Islands

2021 has been an incredibly impressive year for the global subscription credit and fund finance mark...

Contributors: Georgina Pullinger
27 Oct 2021

We hope this registers! A summary of Cayman corporate and partnership registers in a finance transaction.

Because we know that it can be a little befuddling, Appleby has set out a guide to the various Cayma...

7 Oct 2021

Regulatory Round-Up: Cayman Islands Q3 2021

Appleby Cayman’s Our latest Regulatory updates for the Cayman Islands up to Q3 2021.

13 Sep 2021

Loans & Secured Financing in the Cayman Islands 2021

First published in Getting the Deal Through 2021. This practice guide provides topical analysis of L...

Contributors: Alexandra Simpson