INTERNATIONAL ARBITRATION 1/3LY
IN CONVERSATION WITH NICK ROWLES-DAVIES 03
IN CONVERSATION WITH NICK ROWLES-DAVIES MANAGING DIRECTOR OF BURFORD CAPITAL Ben Knowles, Co-Chair Global Arbitration Group, in conversation with Nick Rowles-Davies, Managing Director at Burford Capital.
BEN Is there any forum where you speak directly to companies about this or do they mainly learn about this through law firms? NICK I think it’s mixed. We spend a lot of time talking to finance and General Counsel (GC) of big corporates. One of the biggest issues we face is that GCs may or may not get it as they tend to be biased against litigation. A lot of GCs in Europe are corporate rather than litigation lawyers. I think you’ll find that in the States we get a different response because they tend to be more focused on litigation. That might be a bit of a generalisation but it feels that way. BEN Will the UK be like the US in five years? NICK I don’t think it’ll ever get there, despite what you read. The UK doesn’t have a litigation culture in the same way as the US. The biggest reason is that there are no adverse costs in the States, so a lot of cases are being brought in the States rather than in London. If you go up against a firm in the UK and they are quoting £20-£90m in adverse costs, there’s no way you can take that risk as a claimant, a claimant group, or as a funder because there just isn’t enough capacity in the market to put up adverse costs insurance of that nature. Securities litigation is very much looked at from the US side now, because of the adverse costs issue and I don’t think that’ll change. The UK won’t end up like the US, but it will become more sophisticated. I suspect these deals will be going on in the UK finance wise for longer and there will be more of them, but that may not be in the public domain.
THE STORY SO FAR
BEN The general impression in the market is that people are warming up to the idea of third-party funding. They are becoming more informed and in turn, they seem to be more comfortable with it. What in your view has been the main reason for companies to see this as an option? Why are corporates looking at what you do in a different light? How big a factor is the downturn in the economy over the last few years presumably leading to tighter budgets? NICK I think it’s a combination of things. There has always been a huge misconception as to how much budget corporates have to spend on claimant work. The majority of the budget is taken up by defence work and they actually lack appetite for the other side. Although most want to concentrate on their core business, which is not being a litigator, they’re beginning to see the opportunities out there. If you compare the market to how it was five or six years ago, funding is still hidden, but it’s more common place. I think the difference is that, nowadays, everybody knows what it is, or at least thinks they do. The reality is there is still a lack of awareness of its potential. Their typical view of third-party funding is miles away from the sophisticated bespoke products now on offer. It’s going to take another few years for people to become familiar with it and understand that it is not a panacea for all litigation finance ills. Ultimately, some people are not going to like it and they are never going to want to do it for all sorts of reasons.
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