Energy LItigation Contracts Explained

Litigation Contract Assets (LCA) bridge the gap between specialist litigation funders and the capital markets. In the same way a Mortgage Contract centralises the funding, the insurance, the liabilities, the valuation and the responsibilities, the LCA does the same for Litigation funding. The comparisons of the two funding contracts gives a good basis for investment. Mortgages are 100% financed thereby having a 1:1 cover for capital, they are insured through the property asset, the value of the asset may go up or down depending on how well it is maintained and the revenue depends on the people paying the mortgage. Mortgages are long term funding contracts often bundled into ‘tranches’ of multiple mortgages accumulating enormous values for utilisation and financing by the capital markets.

Litigation Contract Assets are only funded to 25% of the claim value thereby giving a 4:1 cover of capital against contract. There is no price fluctuation, maintenance or risk to this funding capital as it is 100% insured through an A-Rated Insurer. This Capital Cover insurance includes a 12% interest rate should the claim fail. Litigation Contract funding is for 12 to 36 months historically. Litigation funding returns are considerably, and historically, higher than mortgage funding returns. Essentially, when LCAs are compared to Mortgage Contract funding, they outperform with essentially no risk to principle. Energy Claim Litigation Claim Asset Data Sheet

Risk Factor Mitigation

Principal Loss None. 100% of the invested principal is insured by an A-Rated Insurer. In the unlikely event of a claim failure, the insurer pays the principal plus a 12% interest.

Claim Failure Mitigated. Claims are subjected to a rigorous vetting process using proprietary AI and independent expert analysis, ensuring a high probability of success. The investment is backed by established case law and Supreme Court rulings.

Issuer Default None. The investment is attached to the claim itself, not the issuer's balance sheet. Furthermore, the principal is 100% insured, providing a layer of protection against any issuer insolvency.

Market Risk None. The value of the claim is established by court-set fixed fees and is not subject to market fluctuations.

Borrower Set-off None. The legal framework and nature of the claim prevent set-off.

Energy Claim Genre Explained

Energy was sold to businesses in the UK through brokers who have not disclosed their commissions which has significantly impacted energy prices to those companies. Further to the Supreme Court decision on August 1st, 2025, any broker who has supplied a product to a UK business without complete disclosure of their commissions where a fiduciary relationship is established shall have the whole contract cancelled with over-payment and interest due back to the business owner.

The Legal Representative will collate all of the required evidence for the claim, the contracts, the Letters of Authority, banking information and communications and then assess the claim to ensure that it meets the strict litigation criteria. Any claims that do not meet the criteria are rejected. An independent expert rating then further assesses and rates the claims to ensure that they can be successful in court and meet the insurable standards. At this point an LCA is issued to finance the claim.

There are somewhere close to 8 million UK business that are believed to have viable energy claims against brokers and energy companies. Historically these companies have 2.4 claims each totally 0ver 19 million claims. The average value of the claims is £52,000 giving an estimate of almost £900 billion in claims. Perhaps 30% - 40% of these will be processed successfully establishing a funding demand of close to £240 billion. It is estimated that the current litigation funding is below 4% of this amount.

Legal Representative and Claims Management.

The Energy Claims are processed by a panel of Legal representaives that have demonstrated they have the knowledge to litigate these claims and have systems such as AI to handle large case volume.

In many cases, Energy Claims settle before court as there is little defense to undisclosed commissions where the alternative is an expensive court process through the fixed fee costs regime set by the courts which will increase the costs to the defendants significantly. The LCA is attached to the claim, not the Legal Representative. Only one funder is attributed to each LCA. The assignment rights for the Claim remain with the LCA funder until paid in full and closed at settlement including principle, interest and fees. The LCA has an agreed interest rate paid against the funded amount, 100% capital cover and coupon is placed immediately.

Upon funding, the LCA Claim will proceed through the Claims Process which is directed down the Court established Fixed Fee Regime in the Fast-Track, Intermediate and occasionally Multi-Track channels. This is important as it establishes the legal fees specific to the claims. This increases the commercial pressure on the defendants towards settlement before court proceedings, especially when Supreme Court Judgements have set a legal precedent.

The Litigation Claim Asset Lifecycle

A Litigation Claim is established when a claimant contracts with a Legal Representative to recover undisclosed commissions. In many cases, this only occurs when a claimant realises they have been the mis informed by the broker.

Reporting

Each LCA has its own data which is supplied to each funder through their own dashboard covering all of their funded cases in the Tranche. The status and progress of each claim is therefore transparent in real time.

Energy Claim Litigation Asset Data Profile

LCA-25% of claim value as Max.

Avergage Claim Value £52,000

Interest Rate- By Bids

Insured Cover-100% plus built in 12% if case fails

Ratio 4:1 >80% 12- 36 Month

LCA Asset Summary

Transaction Type: Issuer packages Litigation Contracts with principal insured and revenue confirmed from barristers and experts in the field , boasting a 80% likelihood of successful settlement or litigation.

Key Parties:

Issuer: Legal Representative (Solicitors or Barrister Chambers)

Seller & Servicer: Legal Representative

Arranger: LITDAQ Exchange and Rivermead Auditor

Joint Lead Managers: Legal Representative

Security: A-Rated Insurer

Class A: GBP single LCA or bundles (or larger on request), Fixed APR (Variable and Negotiable), Rated by A rated Insurance, Green by Litigation (>80% success forecast), Matures 36 months max, average 12 to 18 months.

Class A pays interest upon settlement of the claim.

Security: Investors benefit from security cover:

 Capital Cover Insurance

Key Risks:

Issuer Default: None, 100% insured. Investor principal is insured, relying on court-directed fixed fees per claim.

Subordination: None - all are primary fee-collecting claims.

Market Risk: None - value established by investment for claim disbursements costs only, 100% covered by insurance.

Borrower Set-off: None

Conflicts of Interest: None

STS Compliance: Transaction should meet EU "Simple,Transparent, Standardised" (STS) standards.Risk Retention: None to principal. Claim success risk at court is mitigated by Supreme Court Decisions, established case law.