Third-party Litigation Funding gets formal green light in BVI.
Woodsford’s Alex Hickson looks at recent developments in the British Virgin Islands and how they provide welcome clarity around the permissibility of litigation funding.
In September, the BVI’s Commercial Court, In the Matter of Exential Investments Inc (In Liquidation) and in the matter of the Insolvency Act, 2003, approved a litigation funding agreement, in the first written judgment of its kind in the BVI. The Commercial Court had previously sanctioned the use of third-party litigation funding, but no written judgments confirming the Court had this power had been recorded in the jurisdiction.
In a brief judgment in response to an application made by the liquidators of Exential Investments Inc., the Court considered whether it was lawful for the liquidators to enter a funding arrangement whereby the funder receives a share of the recovery in the litigation.
Arguments as to the impermissibility of litigation funding were rooted in historic doctrines of maintenance and champerty. Maintenance describes third-party support of another’s litigation. Champerty is a form of maintenance in which the third party supports the litigation in return for a share of the proceeds. In England and Wales, the Criminal Law Act 1967 abolished the crimes and torts of maintenance and champerty and in 1997 the BVI followed suit and abolished the doctrines. While this meant that there was no longer criminal liability in respect of maintenance and champerty in the BVI, there remained some ambiguity as to the permissibility and enforceability of third-party funding arrangements under common law, due to the lack of judicial consideration.
The Court noted that there was a distinction between the England and Wales and BVI statutes which abolished prohibitions against maintenance and champerty, in that the English legislation retained a rule of public policy against maintenance and champerty, whereas the BVI legislation did not expressly do so. As such, the Court interpreted that the legislature was not concerned with any breach of public policy from the making of litigation funding arrangements. In any event the Court went on to find that the funding arrangement in the case was not contrary to BVI public policy. Based on the evidence of the liquidators, the Court was also satisfied, that the liquidators had tested the litigation funding market and had obtained the best deal available.
In concluding, the court stated that “without the funding, the liquidators would be unable to obtain recoveries for the benefit of the creditors of the company” and that “approving the funding arrangement is in the current case essential to ensure access to justice.”
Woodsford has significant experience of funding claims in offshore jurisdictions and claims by insolvent estates. If you have any questions or would like to discuss a claim (or claims) you’d like us to fund, contact Alex directly at firstname.lastname@example.org