Those who fund commercial litigation in the hope of profit should take note of a case in which financial supporters of a wholly unsuccessful claim to a stake in highly lucrative oil fields ended up facing legal costs bills in excess of £20 million.
In litigation which it was hoped would yield an award of about $1.6 billion, a company had made a contractual claim to a share in a number of oil fields in Kurdistan. The claim ultimately failed on every point and the company was ordered to pay costs on account of £17.5 million and to provide security for a further £5.6 million.
That security was never provided and the successful parties took action to recover their costs from various individuals and corporate entities (the funders) who had contributed to the company’s war chest in return for a share of the fruits of the litigation, if successful. The High Court found that the funders were liable to pay those costs on the punitive ‘indemnity’ basis.
The Court recognised that there was a public interest in the professional funding of certain commercial claims which might otherwise be impossible to litigate. However, the pursuit of ‘speculative’ claims was ‘to be viewed in the same way as impropriety’. The case could not have been brought without the funders’ assistance and ‘they stood to benefit from its success to the tune of a healthy multiple of their investment’. It was therefore right that they should pay for the consequences of failure.