India appears ready for litigation funding, but there are regulatory grey areas

(By Elizabeth Beattie) Top litigation financiers are pushing into the India market, and this is generating buzz and interest around opportunities in the market — particularly in the climate of the COVID-19 pandemic, where there have been more contractual disputes and bankruptcy-related cases.

Omni Bridgeway, the world’s second-largest litigation financier and Abu Dhabi-based Phoenix Advisors plan to set up operations in India soon, according to Reuters. Meanwhile, U.S. insurance broker Marsh Inc, told Reuters its executives will visit India more often to hold talks on offering funding to companies.

The concept of third-party funding (TPF) is not exactly new to India, with courts since the 1870s at least cautiously exploring its legality. But with other Asian jurisdictions such as Singapore and Hong Kong greenlighting third-party funding, perhaps the time for TPF in India has come.

A number of organisations, including law firms, have been involved in setting up the Indian Association for Litigation Finance (IALF) – due to launch on Feb. 11 – which calls itself “the industry’s ‘one voice.’”  

Prateek Bagaria of law firm Singularity Legal, one of the founding members of IALF, says he sees “massive” appetite for litigation funding, and his view is echoed by Montek Mayal of another member firm, FTI Consulting, who points out that litigation and arbitration can be expensive, particularly for cross-border and international disputes.

However, given how rarely TPF has been tried so far in India, a number of legal and regulatory question marks remain.

Among the areas which would benefit from clarity, Mayal says, are “issues of confidentiality, privilege and disclosures in the context of funding arrangements, conflict of interests that might arise through funding arrangements, penalties for duress and threat, and the right to terminate the funding agreement.”

“More broadly. it might be also necessary to provide clarity on types of disputes and forums where litigation financing might or might not be used,” Mayal adds.

For Bagaria, one area that should be under the magnifying glass for regulators is the B2C market.

“When it is a B2B market, it can be pretty much done by contact negotiation... where I do see advantage of certain best practices being adopted is in the B2C market,” he says. “In this space, I do see a potential of abuse, if not regulated, or a level playing field made between the funder and the market at large. We do identify this space as requiring immediate attention of regulations.”

What’s happening: The get-well-soon budget

                                                                                                    REUTERS/Anushree Fadnavis

The big news in India this week has, of course, been the annual budget. Aimed at creating “wealth and wellness,” in the words of Prime Minister Narendra Modi, the budget boosts spending on healthcare by 135 percent. Another key takeaway is that the foreign direct investment (FDI) cap for the insurance sector is being increased to 74 percent from the existing 49 percent.

The budget also looks to cut down the amount of tax litigation in the country by setting up a dispute resolution committee for small and medium taxpayers that will prevent new disputes and settle issues at the initial stage. There is additionally an attempt to clean up India’s bad debt problem – estimated at some $100 billion – with the creation of an asset reconstruction company (ARC) for lenders to offload soured assets. We’ll have more reactions on the budget from lawyers next week, so watch this space.

Not included in the budget, though, was any mention of cryptocurrencies, an interesting development given that India is looking to ban the same. The ban is expected to happen via the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, set to be introduced in the ongoing budget session.

Further afield: Are clients panicking about Hong Kong?

Companies are considering writing Hong Kong out of legal contracts over autonomy concerns, with some looking to Singapore as an alternative reports the FT.

Barclays has revamped its legal function, striving for a ‘more joined-up legal ecosystem’ that the firm says will help cut back in-house teams’ working time, according to the Law Society Gazette. 

Some companies are expecting their outside law firms, to cut carbon emissions, Reuters reports.

Despite the pandemic, Law Fuel reports that 2020 wasn’t necessarily all bad for law firms; Kirkland & Ellis is set to hit $5 billion in revenue for the year ending January.

But clearly many are still feeling the pressure, with Morrison & Foerster laying off staff and undergoing a “redundancy consultation review”, the American Lawyer says.

Your need to read: Five links to improve your life

Law firms in the U.S. saw impressive growth in profits last year, courtesy a pandemic-driven drop in expenses, Reuters reports. Here's how you too can ramp up profitability in a down market.

Lawyers Weekly has ideas for squeezing in learning time at work.
 
It may only be February but if you’re already feeling the strain, CMI has techniques to help your team beat burnout.

On the in-house side, companies can extract more value from the legal function by beginning with a cultural reboot, says Forbes in a piece on demonstrating the business value of legal. 

And London Business School has advice for rethinking your organisational culture that involves “bringing back the fun.”

And finally: What you might have missed on the ALB website
The recent push to compete with multi-disciplinary firms like the Big Four has resulted in law firms planning their own forays into non-law services, but what’s the right approach for you? | We speak to human rights lawyer Archana Kotecha on the role that lawyers can play to help their clients remain vigilant against exploitation risks. | And don’t forget that submissions are open for the ALB Employer of Choice 2021, ALB Super 50 Disputes Lawyers 2021 and ALB Firms to Watch (India) 2021 listings. 

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