The role of litigation funding in competition litigation and collective actions
This month we speak with Simon Latham, the head of competition/antitrust and group dispute investments at litigation funder, Augusta. In this interview, Simon tells us about his journey to becoming a litigation funder, the growth of competition litigation in Europe, and the opportunities and challenges in the sector.
Q) Simon, how did you get into litigation funding and competition litigation?
I started as a trainee lawyer at Hausfeld (a leading litigation firm that specialises in competition litigation). I had wanted to be a commercial lawyer, rather than a litigator, as I (naively) thought it would allow me to be more entrepreneurial. However, since the firm was a dispute boutique, it couldn’t lean on the clients of other departments for work in the way that a full service firm could. This enabled me to nurture my talent for originating business, be it through traditional networking or creating ideas for new claims.
Even as a trainee, I was working to secure clients, going to meetings alongside partners and meeting potential claimants, GCs, and CFOs of major corporates. As such, I saw the benefits and powers funding had for those clients.
As the firm worked with several funders, I also got to see how they all worked and their different processes. I saw that there was a huge opportunity in the market. I knew the risk appetite of the funders operating at that time and thought it was just the tip of the iceberg. There was so much more that I thought litigation funding could do and it was always a sector I would want to get into in the future.
Q) What interested you in Augusta?
Although I’d not worked with Augusta whilst I was in private practice, when the opportunity to join them arose it was an easy ‘yes’.
Augusta had historically been set up to target smaller cases at volume – unlike many funders at that time. Due to the volume of cases that they worked on, there was lots of data to support their business case and goals. At the time I joined, they’d just secured another round of funding to focus on bigger claims like group actions and competition litigation. Larger investments like that have since become our bread and butter.
I also hit it off with the team from day one. It felt like a very natural step. It allowed me to make a career out of all the elements of being a litigator that I felt I was good at – strategy, networking, and identifying opportunities or the ‘hidden’ value of corporate legal assets. It also allowed me to step away from the things that I didn’t want to do …. Like disclosure!
It was an exciting and inventive time (and still is). There was a lot of innovation for Augusta, the first type of X claim or the first claim in X jurisdiction. Louis Young (Augusta’s co-founder, and CEO) and I would just bounce ideas off each other – a dynamic thought process which has only been enriched by the addition of our CIO (Gian Kull) and a team of stellar investment managers. There’s rarely a ‘no’, it’s usually either ‘good idea – but maybe not the right time’, or we brainstorm something and then find a path to execute it together. Sure, there have been highs and lows in that time, but to succeed in funding, you can’t just be knowledgeable or skilful, you need to be focused, resilient and have the conviction to follow through. We’ve covered a lot of new ground together and have built a fantastic portfolio of investments.
Q) Why did you focus on competition litigation?
Initially, it made sense to focus on funding competition litigation as it was the lowest hanging fruit for me – it was what I’d worked on at Hausfeld, it was what I understood best and the sector where the majority of my relationships were. The combination of the collective action regime in the CAT, and the implementation of the Damages Directive across Europe has enabled me to build from those early days. Playing a hand across both of those frontiers is challenging but enables me to keep a fresh perspective on things. Different regimes are all doing similar things but in different ways, and you have to understand the nuances across jurisdictions.
Q) With these changes, do you have a favourite jurisdiction?
This will sound like a cop-out, but there genuinely are lots of different ‘favourites’ for lots of different reasons. I like some jurisdictions because I have clients there that have become friends and I enjoy building a business together. You know that time spent together will generate ideas and have a great synergy. In other jurisdictions the law is rapidly transforming, with a lot of fertile green space, and funding is a one of the tools that can help shape that litigation landscape.
From an investment perspective, some jurisdictions move faster than others, some are more scalable, some have a stronger settlement culture, and all carry their own unique risks. But one of the things I love about this job is the challenge of finding ways to not only mitigate those risks but to turn them into opportunities.
Q) What class actions are you working on in Europe at the moment?
As a business, we’ve funded class actions across the world (particularly in Australia, Canada, and the UK). It’s always been at the core of our business to provide access to justice and help bring these types of claims. In the UK, that includes Which?’s collective action on behalf of c. 29m consumers against Qualcomm in the Competition Appeal Tribunal (CAT) at the moment. In Europe, we’ve tended to finance more corporate claims, but some of those include group actions like the Trucks cartel, the German ‘pesticides cartel’, or various ‘diesel-gate’ claims. In terms of class actions specifically, we’re at advanced stages on a few collective actions in several jurisdictions which are not yet public – so watch this space.
Q) What role does technology play for you as a litigation funder?
We use technology across a range of departments within our business. Data is hugely important. The growth trajectory of the business is based on data. Investors coming into this sector love that, because you can speak on a granular level of how your business is doing and have better/more sophisticated analysis for your predictions.
It plays a huge role in the growing world of class actions/mass damages actions – particularly in opt-in – where there are lots of people affected and you may need to aggregate claims and quickly assess the quality of their evidence to reach a critical mass. In those scenarios technology is a key feature in allowing the claims to operate. It is the future, because (a) we are going to have more regimes that provide redress on a mass scale and (b) sadly, I suspect there will always be incidents where lots of people are negatively affected by something that gives rise to a claim for damages.
Q) What do you see as the biggest challenges in your space?
There is a huge amount of money targeted at the legal sector through funding at the moment. Are there really enough high quality investments for all of that money to be put to work? As a sector, we will need to be more creative in how we deploy capital. Funders who are unable to secure their preferred investments, will have to devise ways to invest in claims they haven’t touched before where the margins may be tighter, or possibly reposition themselves as a secondary investor.
At Augusta, we’re fortunate that we already have many entry points to the market, so there are multiple ways to deploy capital. We’re well set up to work around the saturation issues that some of our competitors might find themselves in.
Q) What’s the future for class actions/group claims in the next five years?
It’s taken about five years to get to the point of cases being certified in the CAT, so I’m sure many sceptics would say to not expect much! I think it’s reasonable to assume that another five years will yield some successful resolutions when I think about the actions that are currently pending. A number of the class actions in Europe relate to historic misconduct which the defendants have already been found liable for. A class-wide settlement will give them the means to bring closure to those historic issues, rather than fighting piecemeal litigation on multiple fronts, so that they can focus resources on taking their business forward.
That said, from a UK-perspective, if you think about the CAT’s specific remit and the volume of claims with novel market definitions and/or theories of harm, one or two will likely be unsuccessful – simply because the stakes may be too high to settle and then the parties are effectively in a 50/50 scenario at trial if the claim is that novel.
Personally, I’d like to see some successful claims with monies distributed to the affected class (and that doesn’t necessarily need to be a claim Augusta is funding). I think everyone is looking to see that – including judges, legislators and even defendants and their counsel. It will give us all a bit more certainty on how these cases work in a ‘European’ context, which will enable us all to devise more nuanced views for dealing with future situations of a similar nature.