Five minutes with: Nick Rowles-Davies, CEO, Chancery Capital

Energy companies are increasingly finding themselves with a full book of litigation and are looking for a more economical and viable model to finance their disputes.

Chancery Capital was formed in May 2017 with a facility of 2bn to finance litigation. Nick Rowles-Davies is the former managing director of Burford Capital.
Chancery Capital was formed in May 2017 with a facility of 2bn to finance litigation. Nick Rowles-Davies is the former managing director of Burford Capital.

You set up your firm Chancery Capital last year – what do you do?

Chancery Capital provides finance to corporate clients secured against their disputes. Most companies view their litigation or disputes as a problem. We assist them to view their disputes as an asset against which they can raise capital. That money can be used not just in funding the running of the disputes – that is, paying the legal fees and experts’ fees – but also for other purposes. Our approach allows us to spread our investment across cases, reducing our risk and therefore the cost to the client.

How does portfolio litigation financing impact the oil & gas sector?

The oil and gas industry is a sector which is very familiar with disputes – litigation and arbitration. The legal spend on those disputes can be extremely expensive.

Using portfolio litigation finance provides significant accounting and cash-flow benefits which improve earnings before interest, taxes, depreciation, and amortisation (EBITDA). It provides certainty for budgeting and it allows financing for disputes of differing sizes, subject matter and strengths by spreading the risk across the book. It also allows financing for defence matters.

Do you work with energy firms in the Middle East?

There has been a significant level of interest in our finance offering in the energy sector, particularly in the Middle East. We offer financing at a price which allows businesses to make use of our capital on an ongoing basis. We have developed good relationships here and have already seen a keen appetite for our funding on a regular basis. I am sure that over time, when looking at their annual legal spend, businesses will make a conscious decision to use external financing. By taking our financing, companies can focus on using their own money in their core business – which is not financing litigation and arbitration.

The rate of E&P activity  is accelerating – do you foresee increased litigation in title disputes or operating agreements?

This industry has always seen a regular volume of disputes. The number of those disputes is dependent upon the level of activity in the market. So it would not be a surprise to see an increase in those matters, given the increase in E&P activity. Usually though, these matters take some time to emerge after an increase in activity and the rise in the number of disputes is likely to follow later on.

Asset recovery is often a necessary outcome in your specialism – what is your view of the likely success of the procedure in the Middle East?

We have been very impressed by the quality, speed and efficiency of the legal process, particularly in Dubai and Abu Dhabi. The collection risk – that is, actually receiving money – is the most important part of a dispute and we consider that very carefully in our due diligence process.

The key difference in portfolio financing, as opposed to traditional single case litigation funding, is that if we experience difficulty in collection in one matter, it is not a disaster as we have a number of disputes in the portfolio.

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Oil & Gas Middle East - September 2020

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