A recent verdict in a Spanish court potentially leaves UK litigation funder, Therium Capital Management, in a precarious position. The court ruled Spanish arbitrator, Gonzalo Stampa, guilty of contempt of court, sentencing him to six months imprisonment and prohibiting him from practicing as an arbitrator for a year. Stampa had been the arbitrator for an international contract dispute, a role that had seen him award claimants $14.9 billion and zealously enforce payment in various European jurisdictions. Read the source article here.
The case Stampa had arbitrated alleged a breach of contract against Malaysia, filed by the descendants of a late 19th-century Sultan. Stampa’s guilty verdict could drastically impact the chances of enforcing his findings related to the case — putting Therium Capital Management’s $20 million investment in serious jeopardy. Therium has funded nine iterations of the claim since 2017, according to a Reuters report.
While a criminal conviction does not automatically nullify Stampa’s conclusions and rulings, the practical implications of enforcing them, especially in a neutral and fair forum, could be near to impossible, says James Boykin, chair of Hughes Hubbard’s international arbitration practice, a professional who is not directly involved in these proceedings.
The descendants of the Sultan expressed vocal disdain for Stampa’s conviction, in part lamenting the potential discrediting of Spain as a neutral dispute resolution site. Simultaneously, Stampa’s legal representative, Sofia Parada Cano-Lasso, announced an impending appeal, critiquing the Spanish judgment’s interpretation of the arbitration sphere.
The foundation of the claim steems from late 19th-century agreements involving the Sultan of Sulu, who had leased his territory, present-day Malaysia, to European explorers. Successive generations of the Sultan’s descendants have received annual recompense for the leased land, only interrupted in 2013 after a violent uprising. In reaction to the violence, Malaysia ceased payments, triggering the descendants’ legal claim for breach of agreement.
The legal proceedings and accusations have led to strenuous legal battles and enforcement activity across Europe. In response, Malaysia took legal action against Stampa, accusing him of flouting Spanish court orders. Whilst the turmoil continues, it remains unclear whether the claimants will persist in enforcing an arguably blemished award.
While reluctant to comment on Stampa’s arbitration fee or their overall funding arrangements, citing confidentiality, Therium must be acutely mindful of the potential repercussions of this ordeal. The continued credibility of international arbitration as a means of resolving such disputes hangs in the balance.