5 minutes with asset recovery and AI enthusiast Rupert Black
What global trends are you seeing in the asset recovery space right now?
On a jurisdictional basis, the asset recovery team are seeing a significant uptick in inquiries from India, China and Saudi Arabia from corporates and law firms seeking help with extra-territorial enforcement of domestic claims. Many are reluctant to litigate overseas to collect judgment debts. While most are in a position to front the costs, they may lack the internal capacity or expertise to oversee a multi-jurisdictional enforcement campaign through to recovery.
We’re finding that the debtors from these jurisdictions are organizing their overseas assets in more non-traditional, less sophisticated structures. Generally, they are less inclined to obfuscate ownership of property using common asset protection measures, favoring instead a more informal approach to managing their financial affairs involving close business associates, family and trusted third parties. This does not mean that enforcing against these assets is easier, but often a different evidential basis is required to pursue them.
Compared to a decade ago, there is vastly more information available to help build up a picture of a debtor’s assets and activities. Ultimate beneficial ownership registers, centralized property databases, transparency disclosures and offshore leaks all provide information that previously could only have been obtained through court-ordered disclosure. Although some debtors have responded to this by rearranging their affairs, debtors largely stick to what they know and are comfortable with, even if the result is that it affords creditors partial visibility of their interests.
Zooming out, the perennial trends in asset recovery remain; costs of litigating are high and getting higher, defendants are more informed and better advised and claimants and their legal teams must navigate the cross currents of changing regulatory regimes. All of this means duration and costs may spiral. This can be mitigated provided you have the right approach and expertise.
What are some recent developments in the legal treatment of cryptocurrency assets and how do they impact legal finance?
Apart from the Mt. Gox insolvency in 2014, the crypto boom of 2017 and 2018 and its subsequent fallout was the moment courts around the world were forced to grapple substantively with issues surrounding the treatment of cryptocurrencies and digital assets. Since 2020, various common law courts have established that cryptocurrencies are property, which makes them capable of being the subject of proprietary injunctions, and that they are situated where the owner is domiciled. Some notable cases have also expanded the person’s unknown jurisdiction, allowing claimants to notify and pursue defendants who are not easily identifiable. While the legal status of cryptocurrencies is now well established, where they are and how to get at them remains the challenge.
In terms of recovery, we generally view digital assets as simply another asset class available for enforcement alongside more traditional stores of value like cash, real property or securities. Although crypto has properties that make it exceptional, particularly when it comes to attribution and realization, every asset class arguably has its own unique characteristics that must be weighed against one another when developing an enforcement strategy. There are risks attached to charging shares in a Luxembourgish holding company as there are to freezing Bitcoin held in an exchange-hosted wallet. Each has realizable value, it just depends on the posture of the case.
A key consideration when financing a crypto claim is valuation. Issues arise from cryptocurrency’s inherent volatility when it comes to assessing quantum and security. Take, for instance, funding a conventional shareholder dispute claim, albeit between two cryptocurrency companies. A judge may decide to determine damages denominated in crypto, not dollars, as was recently the case in the UAE. This judgment would add a level of currency risk for a funder seeking to realize proceeds from their investment. Similarly, judges in England have declined to accept certain cryptocurrencies as security for costs given their unpredictable price fluctuations. These are the types of issues that any legal finance provider would have to consider when underwriting a crypto claim.
What do you anticipate being the biggest impact of AI on the legal industry and on enforcement specifically?
AI (specifically generative AI) is going to have a profound effect on the legal industry, not least because all legal tasks are essentially language tasks. Much like spreadsheets revolutionized quantitative work in the 1980s and ‘90s, AI will revolutionize legal and legal adjacent work in the 2020s. As many studies have shown, the biggest transformation will likely occur for practitioners at the lower end of the skills and experience spectrum, equalizing capabilities at a fundamental level. If an associate can undertake an AI-assisted document review in three hours that previously would have taken them 30 hours, what could they spend the other 27 hours focused on? Analysis? Strategy? Self-improvement? Demand for greater efficiencies will also come from clients too, who wouldn’t expect to be billed for 30 hours when that task could be accomplished in a tenth of that time.
There are several significant structural challenges AI will have to overcome before seeing Excel-like ubiquity in the industry. Questions remain over how best to mitigate “hallucinations”, bias and protect privacy and professional privilege. Additionally, AI’s backend costs and energy usage are enormous and potentially unsustainable. Nevertheless, I believe the things AI is best at are essential for all those working in the legal industry.
In terms of recovery and enforcement, a softer point but one that I believe will have greater significance for what we do is the coming AI content flood. Several studies indicate that AI-generated content could account for as much as 90% of the information on the internet within a few years. There will be a flood of automated content, the veracity of which will be questionable and likely indistinguishable from our own. This will pose significant challenges for us when conducting asset tracing and due diligence on enforcement matters in an information environment that is largely AI-generated. It is quite possible that bad actors could use AI to flood the internet with false information that would obscure our research or paint a wholly inaccurate or misleading portrait of that actor. Granted we will also have the tools to sift through larger quantities of information more easily, but we and the wider legal community are going to have to contend with these issues in the coming years.
What is the most rewarding part of your role at Burford and how have you seen it evolve since joining Burford nine years ago?
Since I joined Burford the size and scope of the asset recovery team has changed dramatically. We were only a small part of the wider group when I started, focused mostly on individual enforcement cases and advisory matters. Now there are more than 15 of us working on some of the largest and most notable enforcement cases/portfolios in the market. We’ve had some significant wins against some (very) recalcitrant debtors, and in the process recovered hundreds of millions of dollars in the last four or so years. We’ve learned a lot along the way as well, from the 60+ receiverships, attachments and charging orders we’ve assisted in obtaining in 25+ jurisdictions.
In many ways, my role's fundamentals have remained unchanged; we still must find assets and plot the best paths to recover them. The difference now is that we have the benefit of all this experience within a broader multi-disciplinary team of litigators and investigators. And without a doubt it’s working with this brilliant team who are constantly pushing the boundaries of what we can do that I find most rewarding.
5... facts about St. Paul’s Cathedral.
We’re incredibly fortunate that our office in London looks directly over St Paul’s Cathedral. As an unashamed history fanatic, here are 5 facts about what I consider to be one of the most beautiful buildings in the world:
- Phoenix - The cathedral as it exists now is actually the fifth church to sit on the site (the earliest may date back to 604 AD). Built following the great fire of London in 1666, it replaced what is now known as Old St Paul’s which itself was built by the Normans following the great fire of 1087. No wonder then that images of phoenixes adorn the sides of the building.
- Pineapples – If you’ve visited the cathedral, you may have noticed that on the west towers there are two huge golden statues of…pineapples. Architect Christopher Wren had originally intended to place a 60ft golden pineapple on top of the dome! Why pineapples? 17th century England was obsessed with the fruit after it had first been imported from the tropics, and at the time one pineapple would fetch as much as £5,000 in today’s money.
- Resilience - St Paul’s Cathedral came very close to being flattened during the Blitz. In September 1940, engineers successfully defused a time-delayed bomb that struck the cathedral which could have destroyed the entire building. It was struck several more times but the damage sustained was minimal.
- Engineering – Unusually for a cathedral of its size, St Paul’s has a crypt (the largest in Europe) running the entire length of the building. Its purpose is not religious, but rather to support the weight of the dome in London’s weak clay soil. Without this, we’d likely have a leaning tower of St Paul’s!
- Height – Wren was at one point an astronomy professor, and wove into many of his construction projects references to the stars. St Paul’s is no exception. The summit of the cross at the top of the dome is exactly 365 feet from the cathedral floor, an impressive detail!
