Annual James Muiruri Lecture: The Economics of Litigation Funding

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Event details

Monday 13 May 2024
3:00pm
Moot Court, Bartolomé House, The University of Sheffield, Winter Street, Sheffield, S3 7ND
Free
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Description

SCIEL has invited Professor Paul Lewis, who is Professor of Law and Director of the Center for International Law, School of Law, University of Illinois Chicago to deliver the Annual James Muiruri Lecture.
 

About the speaker

Paul Lewis is Professor of Law and Director of the Center for International Law. He is a graduate of Northwestern University with Highest Distinction and of Yale Law School, where he served as Senior Editor of the Yale Law Journal and worked as a research assistant for Professor Drew S. Days III. Following graduation, Professor Lewis served as a law clerk to the Honorable David A. Nelson of the U.S. Court of Appeals for the Sixth Circuit, worked as an Associate at Mayer Brown, and was Assistant General Counsel of Rotary International, where he did transactions in countries on six continents. Professor Lewis writes primarily in the area of international bankruptcy and insolvency. He has also written and spoken in the areas of climate change and the lawyering of international commercial transactions. His articles have appeared in journals in numerous European countries as well as in Australia and the United States. He has also spoken at universities and conferences throughout Europe and Australia, as well as the United States. In recent years, Professor Lewis has served as a visiting professor at numerous institutions, including the Institut D’Etudes Politiques D’Aix-en-Provence, Sciences-Po Aix (France), the University of Luzern (Switzerland), the The University of Cagliari (Italy), and the Universite Catholique de Lyon (France).
 

Abstract

This paper is primarily concerned with the question of how judges make decisions. The particular focus is on the application or the lack thereof of basic economic principles in judicial decision-making. The paper addresses this issue through an examination of decisions on insolvency litigation funding. While third-party funding of commercial litigation as an investment vehicle has been well-established in certain jurisdictions for some time, its use in the United States in the insolvency context is still a relatively recent phenomenon. Litigation funding allows litigators to move forward when they may otherwise be financially precluded from doing so. While litigation funding may provide benefits which could ultimately yield greater assets for creditor distribution, insolvency litigation funding also comes with a host of legal, ethical, and financial concerns. United States bankruptcy judges have been somewhat routinely authorizing requests for litigation funding without much analysis to justify their decisions. In particular, judges have frequently both overlooked basic economic considerations and failed to recognize the potential impact on all relevant parties. The decisions in these cases follow an unfortunate pattern in U.S. insolvency law. In two other critical areas of insolvency – the so called “new value” exception to the absolute priority rule and cross- collateralization – judges have been similarly short-sighted and flawed in their reasoning.

This paper begins by analyzing the economics and ethics of bankruptcy judges authorizing third party litigation funding in insolvency. In particular, the paper will examine the incentives of all of the parties, the potentially significant externalization of costs, and the imbalance between the incentives of the decision-makers and those who are likely to suffer financially in the event of adverse consequences. After considering the implication of these issues for United States law, the paper concludes with a comparative examination of the these issues in Australia, England, and Wales, jurisdictions where insolvency litigation funding is far more established.

About the Annual James Muiruri Lecture 

The annual lecture is named after Dr James Muiruri, one of Sheffield School of Law’s former PhD students, who was tragically killed in Kenya in January 2009 only a couple of months after completing his doctoral studies. His thesis was entitled ‘African Regional Peace and Security Under the AU’s Constitutional Framework: Conflict or Compatibility Within the UN and International Law’. The Dr. James Muiruri Foundation, established in James’s memory, was founded to bring the youth of Kenya together in an effort to increase opportunity for children with the greatest of needs. Find out more at https://www.drjamesmuirurifoundation.org/

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