Global litigation financiers plan India entry to target company disputes | Economic Times

MUMBAI: They punt on winning big court cases, investing litigation costs upfront while the payoff is the court financial award. They put money into legal battles they have no involvement in, bar the prospect of a good RoI. Their targets — big companies, institutions and banks, governments and their agencies, and even the odd football club. Long a Western niche business, where the investor loses money if the party it has backed loses the case, litigation financiers are now coming to India.Four of the largest global litigation funds — Australia-based Omni Bridgeway, UK-based Innsworth Capital and Profile Investment, and UAE-based Phoenix Advisors — are together creating an India-focused litigation financing platform. These players, along with Mumbai-based Singularity Legal as well as UK-based risk advisory firm Marsh, have created the Indian Association of Litigation Funders (IALF).Globally, these firms have financed cases involving Volkswagen, Mastercard, Oracle, Salesforce and Petrofact, among others. Indian law doesn’t bar litigation financing by third parties. However, protracted legal proceedings were a disincentive for litigation funders, who would have to wait for years or decades for a payoff. Now, with some heavy-duty commercial disputes involving businesses — such as those under the insolvency code — being heard under pre-fixed deadlines, a market is opening up. Arbitration is another opportunity for these financing firms.Litigation financiers are also looking for cases, people familiar with the matter said, where a potential litigant, say, a group of consumers targeting a big institution, is disincentivised by the costs involved. These litigation financiers are looking at some two dozen cases, people quoted earlier said. The principle on which litigation financing is based is called champerty, which is legally a bargain struck between someone who’s filing a suit and an unrelated individual or firm. The latter bears the litigation expenses.“Recent bank frauds, along with amendments allowing sale of illiquid assets under the Insolvency and Bankruptcy Code, have invigorated the litigation funding market in India,” said Prateek Bagaria, partner, Singularity Legal.Wider Adoption“This is opening doors to insolvency and collective action claim financing,” said Bagaria of Singularity. Omni Bridgeway, which says it is the global leader in litigation funding, told ET it is already dealing with several India-related international cases. It “expects to see much wider adoption (of litigation funding) by corporations and financial institutions… to better manage their risk, cash flow and balance sheets.”Sindhu Sivakumar, senior investment manager at Innsworth Advisors, said, “India is a major player in the global economy. It is a major destination for cross-border investment in a wide range of sectors. Indian companies, of course, have a long history of being significant outbound investors… Such cross-border activities inevitably give rise to complex, high-value, cross-border disputes of the type Innsworth specialises in investing in.” “I think we will see a sharp and steep rise in the number of disputes, specifically the number of funded disputes,” said a global head of Marsh. “Litigation funding will create opportunities to Indian businesses to pursue good claims where they may otherwise have not bothered. I think we will also see a quick evolution of the Indian market as companies look to take assignment of claims as well as of funding them.”