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Driving value: delivering redress

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Energy Global,


Recent European Commission decisions for anti-competitive activity have resulted in users of trucks, including those in the oil and gas sector, being able to claim substantial damages from the largest European truck manufacturers. With the help of litigation funding, claimants can recover what is due to them with no cost exposure to their business.

Introduction

The European Commission had issued decisions (the Decision) against all of the leading European truck manufacturers for their involvement in a 14-year cartel, among other things, to co-ordinate truck prices across Europe and deliberately delay the introduction of emission-reduction technologies.

The Decision means that all truck users across Europe, including those in the oil and gas sector, can claim damages against the truck manufacturers identified in the Decision for the damages the truck users are likely to have suffered as a result of the unlawful behaviour identified in the Decision.

The Decision is an important starting point for any claim for damages by users of trucks, because it can be relied on by the truck users, to establish liability (normally one of the key battle grounds in bringing a claim) against the truck manufacturers. The fact of the Decision means that the truck manufacturers cannot deny that their unlawful behaviour took place.

The level of damages remains to be confirmed – this is likely to be the key battleground in the claim. However, given the duration of the cartel (14 years) and its European-wide scope, the damages that can be claimed by individual users of trucks are likely to be significant.

Claiming damages

Despite the Decision having established liability against the truck manufacturers, to claim damages for the losses that they have suffered as a result of the unlawful behaviour identified in the Decision, truck users will need to issue a court claim against the truck manufacturers. The costs of bringing such a claim can be significant and can often make doing so unattractive.

Funding and how it works

A recent development in the litigation landscape is the establishment and growth of litigation funding companies who fund the costs of bringing claims on behalf of claimants.

The funding is provided on a fully non-recourse basis. This means that the costs of the claims, including lawyers’ fees and all associated costs, are paid for in full by the litigation funder and the claimant pays nothing.

If the claim loses, the funder loses its investment. The claimant has to make no financial contribution to the claim and does not have to reimburse the funder for the costs it invested. The risk sits entirely with the funder.

If the claim wins, and there is a damages recovery, the funder receives repayment of its investment and a return for its investment from the damages payment received.

The return that the funder receives varies on a case by case basis. In the context of claims against the truck manufacturers, Vannin Capital is working with a law firm, Collyer Bristow, and advisory firm, Grant Thornton, to bring a group action on behalf of claimants affected by the truck manufacturers’ behaviour. Being part of a group like this enables claimants to benefit from funding while also enabling them to benefit from economies of scale by sharing the costs of bringing the claim with other businesses. This reduces the level of funding required for each individual claim and therefore reduces the return payable to the funder from any damages received by each claimant.

Bringing value to the bottom line

Using funding to bring meritorious claims, such as the one that trucks users have against the truck manufacturers following the Decision, generates value for companies without the need to invest any of its own money: enabling companies to view litigation as an asset rather than a liability.

This means that any damages recovery will have a direct benefit to profit and loss accounts, balance sheet value, EBITDA and cash flow, without any need to account for the potential costs of bringing the claim. These clear financial and accounting benefits have resulted in executives increasingly feeling a duty to their shareholders to bring these types of claim where the financial investment requirement has been taken away and the potential upside rewards are enormous.

At a time where many businesses, including large, well-capitalised organisations, are struggling for liquidity and margins are increasingly squeezed, bringing a claim on a fully funded basis creates real, otherwise unrealised, value for companies. There is a direct benefit to a claimant’s bottom line in bringing a claim on a funded basis, without any of the financial concerns that normally exists when seeking to generate value.

For oil and gas companies, for whom transport and infrastructure costs are such a key part of their ongoing business costs and liabilities, bringing a claim as a result of the Decision, on a fully funded basis, to recover what may transpire to be very substantial damages for losses arising directly from those transport and infrastructure costs, should be viewed as a benefit for those companies, generating real value from an asset which, in the normal course, would be considered as a necessary cost liability.

Next Steps

Vannin Capital’s approach to the claims against the truck manufacturers is to work closely with Collyer Bristow, as the instructed lawyers, and Grant Thornton as advisory and financial experts to help companies claim damages as a result of the Decision as easily and swiftly as possible. The group is exclusively for end users of trucks, eliminating the complexities and risks associated with groups made up of companies at different levels of the supply chain. Grant Thornton’s forensic teams manage the process of extracting and analysing the relevant data needed to evidence claims to ensure minimum time investment is required from the company.

The group is engaging with many companies across Europe with significant claims, often in excess of €10m. This underlines the true value that can be brought to bear for companies in bringing these claims with litigation funding and the importance of carefully considering whether to bring them.

By Rosemary Ioannou, Managing Director, Vannin Capital: ri@vannin.com

Read the article online at: https://www.energyglobal.com/pipelines/special-reports/28052018/driving-value-delivering-redress/

 

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