(March 26): Litigation funder Therium Capital Management Ltd is fighting a lawsuit alleging that it played a “central role” in a cross-continent conspiracy to get a US$14.9 billion arbitration payout from Malaysia.
Therium has asked a Channel Islands court to reject the claims brought by Malaysian state-owned oil and gas firm Petroliam Nasional Bhd (PETRONAS), which accused it of conspiring with descendants of a defunct sultanate and their lawyers.
The Jersey suit stems from a dispute over Malaysia’s Sabah state, where heirs of the former Sulu sultanate claimed rights to the territory under a 19th-century agreement. Before the latest round, the legal wrangling has jumped from court to court.
The heirs won a French arbitration award in 2022 and later sought to enforce it against PETRONAS assets in Luxembourg, prompting the firm’s legal challenge. A Paris court annulled the award last year.
Tens of millions of dollars poured into the initial claim by Therium were “at the heart” of the “unlawful means conspiracy” that included “inducing” the arbitrator to defy a Spanish tribunal’s order to stop the arbitration, lawyers for PETRONAS alleged in Jersey court documents seen by Bloomberg.
Therium denied the allegation and said Petronas’ claim wasn’t based on facts and must be struck out. Its founder Neil Purslow declined to comment citing the ongoing case.
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The Jersey lawsuit puts a spotlight on the risks in the US$20 billion and growing market of litigation funding, where investors pay the legal costs of a lawsuit in exchange for a portion of any award or settlement. It’s common for funders to lose their investment or even have to pay the legal costs of the opposing side when they lose. But PETRONAS’ suit tests the extent to which financiers and lawyers can be directly liable for pursuing such claims.
Two lawyers, Paul Cohen and Elisabeth Mason “recruited the Sulu claimants to bring the claim” against Malaysia, lawyers for PETRONAS alleged. Part of the money was spent on hiring a private investigation firm about a decade ago and in “unusual transactions,” such as purchasing two cars for a Sulu heir and at least one cash payment of about US$8,000 to a Philippine law firm, the company’s lawyers allege in the documents.
“The enterprise was funded through Jersey,” said William Redgrave, a lawyer for PETRONAS, referring to the self-governing island off the coast of France. “They all knew the facts that made their combination unlawful,” Redgrave said in a filing.
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Therium and the lawyers named as defendants in the lawsuit denied the allegations. The legal proceedings and submissions made to courts and tribunals in good faith are covered by judicial immunity, Therium’s lawyers said during a hearing last week. Independent tribunals “were not ‘induced’ to reach their decisions in any meaningful sense,” said Oliver Passmore, a lawyer representing Therium in Jersey.
The allegations are “abusive and without merit,” Paul Nicholls, representing Cohen and Mason, said in a court document. The lawsuit is “wholly misconceived” and the case will be “vigorously defended” if it is allowed to proceed, Nicholls said in an emailed statement.
PETRONAS’ Caucasus and Azerbaijan units suffered “significant losses” due to proceedings in Luxembourg, according to a Petronas spokesperson. “Both entities are seeking to recover the losses.”
Madrid law firm B Cremades y Asociados and its lawyers, who were also accused of taking part in the conspiracy, denied any wrongdoing. They accused PETRONAS of “seriously inaccurate and incomplete submissions” to the Jersey court.
Participation of lawyers in the Sulu arbitration “was in strict accordance with the law and their ethical duties,” lawyer Bernardo M Cremades Román said in an email.
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