08:49, July 06 130 0

2017-07-06 08:49:08
CC hires Clydes as SRA launches probe into firm’s handling of Excalibur

The SRA is investigating Clifford Chance over a controversial litigation funding deal relating to the long-running $1.5bn Excalibur dispute, causing the firm to hire Clyde & Co to act in its defence.

This latest development, which was first reported by Financial News today, claims that the SRA will also examine the relationships between the partner leading the case and one of the funders of the litigation.

Five investors provided £31.75m to fund a claim by the magic circle firm’s client Excalibur Ventures, which sued Texas Keystone for $1.6bn over an alleged entitlement to part of a share in an oil exploration block in Kurdistan.

Excalibur claimed that it had introduced management of Gulf Keystone Petroleum to opportunities for oil exploration in Iraqi Kurdistan and together they had agreed to share any plans to develop the region. The defendants denied any agreement ever existed.

In September 2013, Lord Justice Christopher Clarke issued a crushing defeat for Excalibur and Clifford Chance, throwing out a raft of claims against Texas Keystone and Gulf Keystone that concerned the interest in rights to exploit and develop petroleum fields in Iraqi Kurdistan.

Clarke LJ found the claims to be  “an elaborate and artificial construct…replete with defects, illogicalities and inherent improbabilities” resulting in the case being “essentially speculative and opportunistic”.

He said the financial group had pursued its case against oil rights “as if it was an act of war”, and ordered it to pay a further £5.6m in indemnified costs on top of the £17.5m already handed over in December.

Following the dramatic defeat, the litigation funders, which included shipping tycoon Adonis Lemos’ Psaris Holdings, served a claim against the magic circle firm after the High Court ruled that the nine third-party funders were liable to pay £23m in indemnity costs.

In 2015, that professional negligence claim, the second Clifford Chance faced over a two-year period, was settled for an undisclosed sum.

The following year, in November 2016, the Court of Appeal ratified that the funders must be liable for the costs.  It said investors must “follow the fortunes” of the backed entity in the event of a defeat, unsettling those considering litigation funding in the UK.

Lord Justice Tomlinson, hearing the appeal, also strongly criticised the conduct of both the funders and Clifford Chance. He said it was “surprising and depressing” to report the “aggressive and unacceptable correspondence from Clifford Chance, the product of the misplaced zeal of the partner responsible, Mr Alex Panayides”, while highlighting that firm had an “acute conflict of interest which worsened as their own investment in the case increased over time”.

He added that the funders ought to have known better, saying: “It should  have been obvious to any astute businessman, not least to Mr Lemos, a trained barrister who had undertaken a pupillage in commercial chambers.

“The funders here were inexperienced and did not adopt what the ALF membership would regard as a professional approach to the task of assessing the merits of the case.”

The SRA’s rare decision to investigate will be an added blow to Clifford Chance, which has faced a series of costs and question marks over its conduct since the case began, with some sources in the market saying it had brought the issue of third-party funding into disrepute.

If referred to the Solicitors Disciplinary Triubunal (SDT), the firm could be hit with an unlimited fine.

Clifford Chance and the SRA declined to comment.