The role of litigation funds in advancing impact litigation

Welcome to Impact litigation voices newsletter on democratising funding for impact litigation and leveraging private capital for these lawsuits!

In this edition, we delve into the world of litigation funding with our guest, Susan Dunn, founder of Harbour Litigation Funding, the first litigation fund established in the UK. Susan shares her unique journey into litigation funding, the evolution of this industry, and the critical role it plays in supporting impact litigation.

Summarised transcript below-

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1. Could you give a bit more background about who you are, what you do and what is the Harbour litigation fund?

Susan Dunn

Background and career :

• I'm a lawyer who entered litigation funding by accident 22 years ago when it was a brand new field. At that time, the only place with litigation funding was Australia, starting around 1998-99.

• In 2002, a chance encounter on a tube train led to setting up the first funder in this jurisdiction and outside of Australia. We started with just a million pounds, focusing on claims arising from insolvencies where funding was evidently needed.

Establishing Harbour and the growth of litigation funding :

• In 2007, I set up Harbour, which is now the world's largest private funder with about $1.8 billion across various funds. We fund litigation in up to 17 different jurisdictions.

• Over time, litigation funding has grown significantly, funding every type of claimant and claim imaginable. It's not just for those without money, but also for those with finite legal budgets who need assistance in running their claims.
• Our expertise helps determine whether a piece of litigation is likely to be successful and its potential value.

Impact cases:

• Funding for impact cases is indeed possible, demonstrating that it is feasible to be profitable for us while addressing social injustices. Claimants understand the significant costs involved and rely on funders like us to bring their claims to fruition.
• Without our funding, many claims wouldn't proceed, especially small individual claims that, when grouped together, become substantial.

2. How would you define the term ESG in the context of litigation funding, because today that term means everything and nothing at the same time.

Susan Dunn

ESG means so many things to different people, which can be frustrating. Some might say it’s about bringing environmental claims against oil companies or governments for not honouring their net zero commitments.

Breaking down ESG:

• Environmental: In our Montara claim, 15,000 Indonesian seaweed farmers were affected by an oil spill caused by negligent maintenance of an oil rig. The case took eight years to conclude, with the defendant using delaying tactics even after losing at trial. It cost around $20 million to bring the company to account, eventually resulting in over $180 million being paid to the farmers.
• Social: This includes cases like Uber or Amazon drivers not being paid minimum wage, or funding 100,000 women’s equal pay claims against companies failing to honour equal pay requirements.
• Governance: Every dispute involves governance issues where one party fails to act properly in a relationship. This encompasses the responsibility and proper conduct expected in legal disputes.

3. In a society driven by private markets and capital, it's crucial to leverage that capital as a force for good. There's often tension between maintaining a commercially viable entity for funding impact litigation and the negative perception that funders and lawyers are only in it for the money. What are your thoughts on this, and how do you approach it?

Susan Dunn:

Litigation is expensive and we need to find ways to conduct it more efficiently. It's too costly to resolve issues between parties, so changes are necessary. We find it frustrating due to massive inefficiencies and insufficient use of technology to manage cases cost-effectively.

High hourly rates and lack of efficiency:

• The hourly rate disincentivizes efficiency since lawyers make money by charging by the hour. Less work means less pay, which goes against human self-interest.
• If cases were more cost-effective, we could take on more cases. Many potential cases are not pursued because the costs are disproportionate to the size of the claims.

Challenges with defendant behaviour:

• We often see defendants adopting a scorched earth approach, prolonging litigation unnecessarily. They do not seek early resolutions, causing high costs to be incurred needlessly.
• This behaviour is a significant barrier, making it difficult to justify the cost of running certain cases, even when we believe the case would win.

4. What are your thoughts on the behaviour of defence lawyers and how it impacts the litigation process, especially regarding ethical conduct?

Susan Dunn:

Ethical discrepancies:

• Many law firms pledge to uphold diversity and ethical business conduct, yet they often engage in prolonging litigation unnecessarily.Defense lawyers need to reflect on their practices and how they advise clients. Cynical tactics, like using technical applications to delay and divide claimants and their funders, should have no place in litigation.Legitimate defences are important, but the scorched earth approach needs to stop.
• The Post Office case revealed that some firms aim to outspend claimants, hoping they run out of funding and have to discontinue their claims. This is deeply cynical and inconsistent with their stated ethics.
• For example our Montara case took eight years because the defendant used delaying tactics, showing how drawn-out litigation benefits no one.Our goal is not to go to trial but to empower claimants financially to resolve claims quickly and move on.

Emerging trends among younger lawyers?

• Encouragingly, surveys show younger lawyers increasingly refusing to represent certain types of clients based on ethical considerations.These younger lawyers are likely to question litigation behaviours and push for more ethical practices as they take on leadership roles.
• Ethical conduct and profitability are not mutually exclusive; our experience shows that it is possible to behave ethically while making money.

5. What's your fund's approach to impact litigation, and what specific criteria do you look at before funding a claim?

Susan Dunn:

We don't look at these cases differently from other cases we assess. Success in impact cases, like the Montara case, brings a higher level of satisfaction and encourages our organisation to consider more impact cases.We look at the following metrics:?

Defendant's ability to pay:?

• Who is the defendant ? Can they pay the claimed amount? Where are their funds located? Without this information, the rest of the case is irrelevant. And too often still, people come to us not having the answer to how the defendant is going to pay the amount of claims.?

Claim value:

• What is the realistic minimum value of the claim? Law firms often overestimate claim values. We need a clear, realistic value, not inflated figures.

Budget to run the case:?

• What will it cost to run the case? Lawyers often underestimate costs. It's crucial to have accurate budgets upfront to avoid doubling costs mid-case.The worst scenario for a funder is discovering midway that the budget needs to double, while the claim value remains unchanged.

Legal fees vs. Claim values:

• We avoid cases where legal fees are much higher than claim values. Such cases often just maximise lawyers' fees without benefiting the claimant.

Jurisdiction:

• Where is the claim's jurisdiction?How predictable are outcomes there?What is the likely duration?

Legal strengths and weaknesses:

• We need a clear statement of facts, applicable law, and analysis of strengths and weaknesses.Put yourself in our shoes: What would you want to know if asked to spend millions on a case?

Understanding and expertise:?

We want to be sure that the law firm running the claim has sufficient expertise in the area of law to which the case relates. It is inevitable that some cases we fund will lose because litigation, even when it is a good case, is inherently unpredictable

● We've stopped funding certain types of cases, like bilateral investment treaty cases, where we consistently lost and couldn't understand why.?

● We avoid jurisdictions where we lack experience, such as Thailand, Vietnam, and the Middle East.We've funded Brazilian arbitrations but not Brazilian litigation due to lack of experience in those jurisdictions.?

● We focus on jurisdictions where we have experience, like the UK, Hong Kong, Australia and the US, to better predict outcomes and protect our investors' money.

6. What trends are emerging in the field of impact litigation, specifically in the climate litigation space? It's a topic everyone is talking about, but it's quite complicated to fund these claims at this stage because they are very new. How do you think litigation funding will need to evolve to potentially fund these claims?

Susan Dunn:

We've seen law firms, like Leigh Day, bring claims against Shell for oil spills in Nigeria, helping impacted communities. The Brazilian dam case is another example, being tried in this country due to parent company liability. These cases have clear financial outcomes.

Declaratory relief:

• Cases seeking declaratory relief (getting someone to honour a promise without financial outcomes) will struggle to get funding from litigation funds.
• Litigation funds look for cases with a clear financial return, making it hard for declaratory cases to attract investment.

Need for momentum:

• Countries like the Maldives, affected by rising sea levels, seek to hold oil companies responsible for climate change damage, assigning fractional responsibility due to fossil fuel burning.These cases are at the cutting edge of litigation, with no precedent on how to allocate responsibility and require momentum to set precedents, encouraging judges in other forums to hold companies accountable.
• For now, these cases are still very difficult to bring and need more development before they can be funded meaningfully.

7. What final advice would you give to the litigation groups in our network? This includes NGOs, small, and medium law firms looking to access funding for their litigation.

Susan Dunn:

Early engagement to avoid wasting time :

• Engage with us early. We don't need all the details initially, just the headline facts of the case. Early conversations can help guide the law firm on what information to gather to secure funding and ensure that your case can fit our criterias.

• Don't spend huge amounts of time preparing a case with a fundamental flaw from a funding perspective.
• We're happy to discuss preliminary ideas without needing a fully prepared document. It saves time and effort.