Removing the costs and financial risks of legal disputes
CFOs no longer need worry about the costs and financial risks of legal disputes. Darrell Porter outlines how strategies that for decades have been deployed by Treasurers to manage a company’s exposure to interest or exchange rates are now available to litigators.
As experts in dispute risk management, at Harbour Solutions Group we have the knowledge to tailor a solution to a dispute to deliver your business objectives. Whether that is paying for a complex claim or portfolio of litigation, unlocking the value in awards, reducing the potential liability for opponent’s costs or capping damages should you become a defendant at trial.
We are frequently asked to help corporate and institutional clients by paying the legal expenses and disbursements of their litigation or arbitration, as they fall due. We have done this since 2007, in more than 100 cases. If the particular case is lost then these costs are borne by Harbour. That is our risk. If the case is won, then Harbour earns a pre-agreed portion of the proceeds. Treasurers will recognise the similarities to deal contingent foreign exchange rate hedging in M&A situations. Its litigation funding equivalent is an equally popular solution for the following reasons;
- Cost reduction
The company’s budget for litigation costs can be reallocated for other purposes, either within the legal division or elsewhere in the company.
- Improved EBITDA
As this legal expenditure no longer features in the financial accounts, the company’s EBITDA improves and potentially its valuation.
- Financial certainty
Expenditure on legal claims is unpredictable, endures for years and comes with the risk of an adverse costs award. These concerns are all removed.
- Removal of accounting asymmetry
Legal costs are usually recorded as expenses whereas litigation recoveries are often recorded ‘below the line’ as non-recurring or extraordinary items. This asymmetry is eliminated as the legal expenses are borne by Harbour and so don’t feature in the company’s financial statements.
- Fresh insights
Access to our team of professional litigators, who independently review the claim, may lead to the identification of new issues or invaluable new perspectives.
We frequently act on a non-disclosed basis, but where our involvement is announced our significant experience and financial firepower can demonstrably level the playing field
Occasionally General Counsels are of the view that by involving Harbour we will get heavily involved in the litigation itself. This is a myth. It is the claimant who selects their legal team, manages the litigation and has sole discretion over settlement decisions. If an offer is made, it is the claimant’s legal team that provides their client with an opinion about whether the offer is reasonable and whether to settle. Unless we are requested to act in another capacity, Harbour is merely an interested observer.
Managing the costs and financial risks associated with litigation is becoming increasingly crucial to corporates. If you would like to learn more about what we can offer, please get in touch.