Meet Omni Bridgeway, the litigation funder eyeing up to a $260 million windfall from Tata Power arbitration award
MUMBAI: The $650 million arbitration award against Tata Power Company Ltd has brought the spotlight on Sydney-listed Omni Bridgeway Ltd, which funded the legal proceedings against the Indian utility and stands to walk away with as much as $260 million upon successful payout.
Omni Bridgeway is one of the world’s largest litigation-funding firms with over $4 billion in assets under management and has been bankrolling a case by Kleros Capital Partners against Tata Power.
This is a rare instance of a litigation finance firm’s role becoming public in a dispute involving a top-tier Indian company. Omni Bridgeway does not disclose the litigation it funds.
Litigation funding firms typically charge 20-40% of the final settlement amount, as agreed between the parties prior to funding, experts said. Considering the payout of over $650 million in this case, which includes an arbitration award of $490 million, litigation costs and interest, Omni Bridgeway’s share of the payout could range from $130 million to $260 million, according to industry estimates.
This compares with the litigation cost of about $6.4 million, as mentioned in the original award by the Singapore International Arbitration Centre (SIAC), which first ruled in favour of Kleros Capital. In other words, the firm could walk away with 20-40x returns on its investment in a case that started in November 2020.
“It can turn out to be a good investment for Omni Bridgeway. However, it is contingent on successful execution,” said Amrita Grover, investment manager at ELF Partners, a Singapore-based litigation finance consulting firm.
Litigation funders generally anticipate a recovery period of one to five years from the start of a dispute, depending on the stage of litigation. However, where proceedings extend beyond an anticipated timeframe, as in the Tata Power case, funding agreements may incorporate escalation clauses entitling the funder to a higher percentage of the eventual recovery.
Such provisions compensate the funder for the additional time value of capital, prolonged deployment of funds and the associated opportunity cost of a longer investment cycle, Grover said.
Not guaranteed
Pay day for Omni Bridgeway is not guaranteed. While the Singapore International Chamber of Commerce (SICC), a unit of the Singapore High Court, dismissed Tata Power’s challenges to the SIAC ruling in August, the company has moved the Singapore Court of Appeals, which is the island nation’s highest court.
An adverse ruling there could result in the Australian firm walking away with nothing, absorbing the litigation cost as a loss. The hearing in Singapore’s apex court is scheduled for 19 January.
In the interim, SICC has directed the city’s sheriff to attach Tata Power’s shares in two of its Singapore-based subsidiaries to recover the money owed to Kleros Capital. Tata Power said that the shares are pledged with banks and it was unlikely that they will be seized before it gets to put its case before the court of appeals in January.
A spokesperson for Omni Bridgeway did not respond to Mint’s request for comment.
The dispute between Tata Power and Kleros stems from a failed Russian coal mining venture dating back to 2013. Kleros, an investment firm incorporated in the British Virgin Islands, alleged that Tata Power misused confidential information shared with the Indian company and acquired the mining license independently in December 2017.
Omni Bridgeway’s role in the dispute became prominent after Tata Power accused the firm of colluding with Kleros Capital and two former employees of the Mumbai company to commit a large-scale financial fraud against the company. The allegation was made in a police complaint filed by the company in Mumbai earlier this month.
Separately, Tata Power also alleged conflict of interest against Lawrence Boo, the presiding arbitrator of the three-member SIAC tribunal that ruled against the company. It said Boo had a close connection with Benjamin Hughes, a member of the investment committee of Omni Bridgeway, creating a conflict.
The SICC found no merit in this allegation in its ruling dated 26 August.
The company’s challenge in the appeals court also hinges on allegations of conflict of interest against two of the three arbitrators, Praveer Sinha, the managing director of Tata Power, said on Wednesday.
Nascent asset class
Litigation funding is an alternative asset class where investors can financially back petitioners in commercial disputes in exchange for a share in any potential award. While the concept is well established in Singapore and the US, it is nascent in India, largely due to lack of regulation and legal ambiguity.
At least two firms, Five Rivers, a Mumbai-based alternative investment fund (AIF), and ELF Partners are testing the waters with litigation funding in India. The concept not only gives investors access to an asset class that is relatively insulated from the capital markets, but also levels the playing field for under-funded litigants when going up against deep-pocketed rivals.
Kleros Capital had wound down its operations in Russia and had also been removed from the British Virgin Islands’ register of companies from 2017 to 2019 for not paying its annual filing fees. The company was restored in November 2020 and just days later it moved the SIAC against Tata Power.
Litigation funding firms typically look to make a 50-70% internalized rate of return (IRR) when they consider funding a dispute. After adjusting for adverse decisions, where they write off the funding costs, the IRR comes down to 30-40%.
Omni Bridgeway reported an IRR of 40% over the past five years. It reported a 2.3x multiple on invested capital across 80 of its investments that paid out during FY26.
The company was set up in Australia in the 1990s as IMF Bentham. In November 2019, it acquired Omni Bridgeway, a company founded in the Netherlands in 1986, and renamed the merged entity Omni Bridgeway. The company is listed in Sydney and has a market capitalization of just under $350 million.