Go First bankers hire Burford Capital for litigation against Pratt & Whitney

Lenders to bankrupt airline Go First have appointed Burford Capital, a US-based litigation finance firm, to bankroll the arbitration case against engine maker Pratt & Whitney (P&W).

People aware of the development said the creditors committee has approved the arrangement under which Burford will pay $ 20 million in the first tranche.

Go First, formerly owned by the Wadia group, shut its business last year and is now embroiled in a legal battle with International Aero Engines, the maker of Pratt & Whitney engines. At the Singapore Court of Arbitration, the airline has claimed about $1.5 billion in compensation, blaming its bankruptcy to the failure of P&W engines which forced grounding of many Airbus A320 aircraft.


The concept of litigation finance is widely prevalent in Australia, the United Kingdom and the United States, where such financiers pay legal fees and other costs of commercial lawsuits, arbitration or shareholder disputes and in return get a share of the award from a settlement or a win. However, so far in India it has been a little-known concept, with cases few and far between

Earlier this month, the creditors committee unanimously decided in favour of liquidating the company as bids by prospective resolution applicants were below expectations.

The committee consists of the Central Bank of India, Bank of Baroda, and IDBI Bank to whom the airline owes around Rs 4,000 crore. Besides the compensation from the case, the bankers can cover their loss from a prime 94-acre land parcel in Thane which was a collateral with the lenders.

Shailendra Ajmera of consultancy firm EY is running the process.

“The creditors committee decided to safeguard itself from rising costs of litigation and hence appointed the firm. This is a costly litigation to fight but with a favourable outcome, the returns will be higher than what Go First owes to the banks,” said a person aware of the development.

A second banker said the advantage of appointing a litigation financier is that it will allow banks to concentrate on running the liquidation process while the costs of litigation will be taken care by the funders and the claims are processed by professionals who ensure that they are taken to a logical conclusion.

“Burford is a reputed litigation finance firm. That they have agreed to invest in the case shows that there is merit in it and the chances of getting the compensation is big,” he said.

Experts said that legislative changes and recognition of third party funding has contributed immensely to the growth of jurisdictions like Hong Kong, Singapore, and London as arbitration hubs.

“Considering the progression of the rule-making process, the domestic arbitration landscape may see incorporation of requisite regulations to enable third party funding for both domestic and international commercial arbitrations seated in India,” said Yogendra Aldak, partner at Lakshmikumaran & Sridharan Attorneys.