As markets fluctuate and more jurisdictions emerge as hubs of commerce, we expect greater demand for cross-border enforcement and asset recovery solutions.
Why do firms and companies look to asset recovery services?
Law firms and companies continue to miss out on millions because of unenforced judgments and uncollected recoveries. In 2019, nearly two thirds (65.0%) of in-house lawyers reported that their companies had significant unenforced judgments or uncollected awards, a roughly 10 percent increase over a 2018 survey of in-house and law firm lawyers addressing a similar question.
Further, there is a growing acknowledgment by parties that they need to be proactive in enforcement and recovery matters. Sitting on awards simply because they are due is no longer the default position. Now, clients are savvier and more commercially minded—and they’re looking to get paid. Clients want to position themselves in the best situation and to do so, they are keen to learn about asset position and enforcement. Working with a team of specialists like Burford’s can help clients gather the actionable intelligence required to make smart legal decisions.
Economic pressures breed asset recovery demand
Ongoing global economic uncertainty and the disruption it causes in specific business sectors has led to mounting stressors that result in businesses not being able to satisfy debts. And the challenges from these unpaid debts can be huge. The creditor is often at a disadvantage compared to the debtor because the odds and the financial balance are stacked against the judgment creditor. The creditor is subject to rules that the other party is not, a reality that explains the tremendous demand for expert capability in asset tracing and judgment enforcement.
As the need for asset recovery and judgment enforcement grows, the need for diverse offerings has likewise grown. Burford recognizes this and provides these services on a funded basis in addition to its consultancy offering. As the only major legal finance provider with its own in-house corporate intelligence and asset recovery business, Burford is able to offer the benefit of combined capital, investment expertise and top-level global judgment enforcement.
NPLS increased in the UAE
In the past year, the UAE has experienced significant growth in non-performing loans (NPLs) —loans that are more than 90 days past due or otherwise unlikely to be repaid in full. Part of the NPL exposure is caused by a situation known as skip cases, in which a defaulter vacates the country, and which form a significant share of the overall NPL book in the UAE. Generally, NPLs are an attractive book of cases for an asset recovery team, because there is no question that at one point the debtor had the money to repay its loan. NPLs in the UAE, however, are more complicated from a recovery position due to the frequency of skip cases and defaulters’ tendency to flee to remote places in the world. Nonetheless, with the right global asset recovery team in place, recovering NPLs in the region is manageable.
States avoided paying arbitral awards
International arbitration is an increasingly popular means of dispute resolution. This increase has given rise to the challenge of the lengthy recovery process and unavoidable costs of enforcing valid awards in such cross-border disputes.
While two treaties—The New York Convention and the ICSID Convention—exist to govern the enforcement of international arbitration awards, there are several factors that complicate the recovery process. First, disparate national laws bog down the implementation process, with some jurisdictions having stricter limitation periods than others (varying from 12 months to 12 years). Second, states may avoid paying judgments upfront due to the size of the award and often, because delay and appeal are attractive options especially when anticipated changes in legislation are on the horizon. A complex recovery process is the reality of international arbitration, and clients can benefit from working with a skilled team that has specialized experience in difficult jurisdictions.
What to expect in 2020
Signs of life in Asia
Asset recovery cases tend to follow economic and political activity around the world. When the economy is down, the pursuit of recoveries is more aggressive. And when political activity is stabilized, unenforced judgments are more often sought after. In Asia, specifically Indonesia, Malaysia and India—countries whose political systems are stabilizing—it’s likely that we will see an increase in asset re covery activity as a result of a calmer political climate and a heightened attention to unpaid bills.
Looking at the economy of India, we are seeing a once fast-growing economy begin to slow. Estimates released by the Indian Government at the onset of 2020 forecast 5 percent gross domestic product (GDP) growth rate in 2020, the lowest growth rate since the financial crisis and a significant decline from 6.8 percent in 2019.1 With this decline and the resulting economic concern, financial issues that were overlooked in the flurry of a rapidly growing economy are now coming to light and receiving more political attention. To effectively pursue legal action, clients and firms will need a partner that can not only trace assets, but also use that information to realize the full potential of the legal judgment.
A rise in mediation
Since the Singapore Convention was opened fo r signatures in 2019, 51 nation-states have signed, including the US and China. Following the introduction of a new framework for the enforcement of international mediation settlement agreements, Burford expects to see an increase in the popularity of mediation as a form of alternative dispute resolution (ADR) in 2020, but not necessarily a slowdown in asset recovery demand. Ye s, mediation is a faster way to settlement, and while it’s a voluntary and bilateral process in which “enforcement” is merely a formality, parties still are commercially minded and want to know the assets, access to cash and commercial pain threshold of the opposing party before beginning mediation. To provide these insights and assurances, focused research and asset identification are required. In complex matters, working with a team of asset recovery specialists is a savvy decision that ensure s the thorough investigation, asset identification and intelligence that will inform an effective engagement strategy.
Growing opportunity in the Middle Easy
Burford expects Dubai to see more asset recovery disputes this year following the introduction of a new law known as “The Cabinet Resolution”. The law seeks to address enforcement problems that were common under the old regime. The changing legal situation in the UAE is part of a larger global trend where formerly “black hole” jurisdictions are looking to clean up their reputation. The UAE falls in this category, and as they work to improve their financial and legal reputation, more litigation is likely to arise—and with it a demand for asset recovery specialists.
Developments in nation states' asset recovery activity
In 2019, countries including Angola and Mozambique have been working to recover lost state funds—losses allegedly attributed to corruption and money laundering. The “Luanda Leaks” matter, a case involving allegations of nepotism and corrupt use of the Angolan state money, and the “Tuna Bond” scandal, a case involving allegations of kickbacks and bribery between Credit Suisse and the Mozambique government, have raised awareness of complex international cases and a growing effort by nation states to recover assets that have been moved overseas. Going into 2020, nation states’ asset recovery efforts and use of external finance will be of interest to Burford.
No firm or company wants to leave money on the table, but pursuing unenforced judgments can be difficult, time consuming and costly, especially in complex cross-border cases. The international nature of asset recovery requires an international approach. Parties need to first know what they are looking for, and then have access to the legal and enforcement mechanisms to proceed. Burford’s team, with over 20 asset recovery specialists, can recover the record and help clients address enforcement challenges, transforming judgment debt from “legal paper” into cash.
Daniel Hall is Director and co-head of Burford’s asset recovery practice. Prior to founding Focus, which was acquired by Burford in January 2015, he was a solicitor in London and Hong Kong for Stephenson Harwood, and a partner at a global risk management consultancy.
Michael Redman is Director and co-head of Burford’s asset recovery practice. He began his career in the Lloyd’s of London political risk insurance market and has worked in complex asset recovery and enforcement for well over a decade, holding senior positions in both Moscow and London.
 United Nations, The United Nations Convention on International Settlement Agreements from Mediation (2019).