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Legal finance and the energy sector

October 11, 2019
Emily Slater

In an article written by Emily Slater, first published on Law360 (available here), Emily analyzes a few cases that reflect the new ideas that have recently evolved within the energy sector. As litigation finance continues to spread across various industries, legal teams at energy companies and law firms engaged in energy-related litigation are sure to fall behind if they don't become familiar with the practice of litigation finance. 

The use of litigation finance—in which companies and law firms obtain capital in connection with pending litigation or arbitration matters—has been increasing across industries for the last decade. For a variety of reasons, the energy sector is an especially fertile test bed for exploring the reach and application of these legal funding mechanisms.

This should come as no surprise: Litigation finance provides one method of managing the cost and risk of litigation, and the vagaries of the energy business are many, from price fluctuations to high infrastructure costs, from the risk of dry wells to the complexities of international deals with multiple partners, even sometimes including nation-states. Because energy markets are subject to shifts in global politics and economics as well as the blunt realities of demand and supply, there can be much more uncertainty than in other industries.

Add to that the complex, often remote and always expensive infrastructure required to produce energy products, and the risky, time-consuming extraction and distribution activities needed to discover and deliver the goods—not to mention compounding issues such as permissions and rights, both public and private.

In the energy sector, this constellation of issues creates a perfect storm for high-stakes disputes with partners, distributors and even nation-states—and expensive and risky commercial litigation and arbitration may affect energy companies’ ability to maintain optimal positioning and may thwart or even cannibalize other business needs. As often occurs when businesses have complex needs, the dynamic scenarios facing the beleaguered energy industry have drawn it toward new ways of looking at old problems, including litigation finance.

To read the article in its entirety, please click here. (Subscription required)