In its process of identifying a potential investment for the Fund, the Adviser spots and analyzes potential cases for funding and/or enforcement, and submits to the Fund’s Investment Committee those cases which it considers appropriate. In that task, the Adviser performs an initial review of the claim – potential or real – in order to assess its strengths and weaknesses, its realistic quantum and its likely duration. The claim may have reached any stage in the proceedings (for example, an award/decision may already have been rendered), or the case may be one in which proceedings are being contemplated but have yet to be commenced.
In order to facilitate the initial review, a confidentiality agreement is signed by the Adviser and the Fund’s potential client. The initial review by the Adviser will include inter alia:
- a review of the business, financial and ethical standing of the potential client and its debtor
- a review of the standing of the potential client and its debtor
- a review of the quality of the supporting evidence (documentation, availability of witnesses, experts and so forth)
- a conservative assessment of the likely amount to be recovered (quantum)
- a mandatory due diligence in accordance with anti-money laundering (AML) and financing of terrorism regulations
- a verification that the underlying contract(s) or investment(s) comply with the Fund’s ethical principles. These principles prohibit the Fund’s involvement in certain industries such as weapons, tobacco, gambling, alcohol, pornography, the manufacture or distribution of addictive substances, or environmental activities deemed to be harmful generally or to a local population specifically
- a preliminary identification of assets of the debtor against which the award or judgment could be enforced
Depending on the complexity of the case and the adequacy of the documentation made available, the initial review by the Adviser is usually performed in less than four weeks. If deemed appropriate, the case is then submitted to the Fund’s Investment Committee. The Fund’s Investment Committee, which is comprised of experienced professionals, may decide to reject the case altogether, consider it acceptable for a funding proposal, or request further information.
The Fund’s Investment Committee bases its decision on ethical considerations, the likelihood of success and on the financial conditions under which the Adviser recommends it to finance the case. As part of the review, the Fund, through the Adviser, prepares an estimate of the costs likely to be incurred in respect of the contemplated proceedings. The various components of the costs are then incorporated into a budget for discussion with the potential client and its legal counsel for inclusion in a Funding Agreement to be entered into with the potential client.
The potential client is promptly informed of the Investment Committee’s decision. The Funding Agreement will establish the Fund’s contractual relationship with its client onwards and until the conclusion of the case. It is tailor-made so as to take into account the characteristics of the case.