A leading Australian litigation funder has pulled out of its European joint venture less than six months after it set up, the Gazette can reveal.

In a blow to the nascent third-party funding market, IMF has withdrawn from Claims Funding International (CFI), which it formally launched in the summer with Australian class action law firm Maurice Blackburn.

CFI, which is based in Dublin for tax reasons but was targeting cartel actions in the UK, is now in the sole ownership of ‘interests associated with Maurice Blackburn’. This is essentially a company whose shareholders are the law firm’s partners. It will not be taking on new cases in the near future.

IMF spent several years looking at the English market before launching CFI. Chief executive Rob Ferguson told IMF’s annual general meeting last week, ‘the environment is a lot tougher in terms of the law than we anticipated’, and that the Australian dollar’s depreciation against the Euro had increased costs. IMF was also more confident than it had been of growing its domestic business. Ferguson conceded that CFI had been an ‘expensive exercise’.

CFI managing director Peter Koutsoukis, a former Maurice Blackburn partner, said the firm ‘still believes strongly in the business’, adding that economic conditions had not deterred it. ‘We have no reason to believe the business won’t be very successful,’ he said.

Over the coming months, CFI will be talking to other investors and funders, and in the meantime will handle only ongoing air cargo cartel claims in the UK and the rest of Europe.

James Delaney, a director of litigation funding and after-the-event (ATE) insurance broker TheJudge, said the pull-out and talk of other constrictions in the market are evidence of ‘the calm following the storm’ of publicity around third-party funding, which was ‘disproportionate to the number of deals that have been done’.

A survey of FTSE-350 companies by national firm Addleshaw Goddard this week indicated little interest in third-party funding and a consensus that funders demand too high a return.

(See News, Editorial)