Don’t entrust litigation risk to lawyers – it’s the treasurer’s problem!
Harbour Solutions Group offers corporate clients the problem-solving skills of a team of commercially experienced litigation risk management experts.
We recently presented at the Association of Corporate Treasurers’ Annual Conference on how companies are increasingly able to manage the financial risks associated with legal disputes. This event is a focal point of the corporate treasury calendar and the biggest treasury conference and exhibition in the UK, bringing together over 1,100 treasury peers.
Our guest speaker was Stewart MacDonald who is the Chief Financial Officer of Rockhopper Exploration plc, an international oil and gas exploration company. Stewart provided a CFO’s viewpoint on why well-resourced, multinational companies (including FTSE 100 constituents) may elect to use non-recourse funding and litigation focused insurance strategies to manage the costs and financial risks associated with commercial litigation.
“From our perspective, Rockhopper operates in a highly capital-intensive industry and there is a strong investor focus on capital allocation. We are well placed to manage risks such as exploration risk, construction risk and our exposure to changes in commodity prices, but we are not litigation experts. Before we commenced our international arbitration seeking significant monetary damages under the Energy Charter Treaty, third party validation of our case was important, and Harbour performed an independent, expert review on all aspects of the claim. They also have economic ‘skin in the game’, which means that our interests are aligned. Having said that, Rockhopper retains full involvement and control over the legal process, with absolute authority over decisions on strategy and whether to settle. In the event that we are successful in the case, then (above a nominal threshold) Rockhopper retains a very material proportion of any award.”
Darrell Porter, Senior Director of Business Development, said “the use of litigation funding amongst corporate clients is becoming increasingly common as more companies become aware of its benefits. Even the most solid litigation or arbitration claim is not guaranteed, and likewise no defence can be certain of success. Apart from the savings in legal expenses, non-recourse litigation funding and insurance strategies provide a powerful risk management tool, protecting stakeholders by transferring the financial risks (such as those of an adverse costs award) away from the company’s balance sheet.”
Further information about the event session and what was discussed can be found in the Treasury Magazine here.