Clifford Chance and partner Alex Panayides have been ordered to pay £50,000 each by the Solicitors Disciplinary Tribunal (SDT) for their roles in the controversial Excalibur dispute.

Clifford Chance admitted that the conditional fee arrangement it entered into with its funders was “unlawful and unenforceable”, and that it had produced a document to a potential litigation funder which contained the firm’s advice to the client, without disclosing that the first draft was crafted by one of the client’s owners.

The firm also admitted that it made payments from sums held on behalf of litigation funders in a way that did not accord with normal funding arrangements.

The SRA’s findings did not show that the firm had any conflict of interest, and it did not criticise its actions during these proceedings.

Panayides, who helped to secure around £50m of litigation funding to get the case off the ground, was ordered to pay a personal fine of £50,000 on the same grounds as his firm.

Clifford Chance has long been criticised for its role in the row. In September 2013, Lord Justice Christopher Clarke issued a crushing defeat for Excalibur and the magic circle firm, throwing out a raft of claims against Texas Keystone and Gulf Keystone that concerned the interest in rights to exploit and develop petroleum fields in Iraqi Kurdistan.

Clarke LJ found the claims to be “an elaborate and artificial construct…replete with defects, illogicalities and inherent improbabilities” resulting in the case being “essentially speculative and opportunistic”.

He said the financial group had pursued its case against oil rights “as if it was an act of war”, and ordered it to pay a further £5.6m in indemnified costs on top of the £17.5m already handed over in December.

Following the dramatic defeat, the litigation funders, which included shipping tycoon Adonis Lemos’ Psaris Holdings, served a claim against the magic circle firm after the High Court ruled that the nine third-party funders were liable to pay £23m in indemnity costs.

In 2015, that professional negligence claim, the second Clifford Chance faced over a two-year period, was settled for an undisclosed sum.

The following year, in November 2016, the Court of Appeal ratified that the funders must be liable for the costs.  It said investors must “follow the fortunes” of the backed entity in the event of a defeat, unsettling those considering litigation funding in the UK.

Clifford Chance said in a statement: “We take our obligations to our clients and the profession extremely seriously and are committed to upholding the highest standards at all times. We accept the SDT’s findings that some aspects of our conduct in this matter did not meet these high standards.  The issues referred to the SDT were not prompted by any complaint but had all been identified and self-reported to the SRA by the firm following our own prompt and thorough internal review.

“We are pleased to note that the honesty and integrity of all parties is nowhere in question and that none of the original judicial criticism, which prompted the SRA investigation, is reflected in the SRA’s findings.”

“While it was found that our systems and controls were appropriate, as a firm we are committed to further developing and promoting market-shaping practices in relation to ethics and professional standards.”

The Excalibur dispute

Excalibur sued Texas Keystone and Gulf Keystone several years ago over their interest in rights to exploit and develop petroleum fields in Iraqi Kurdistan. The case went through a number of stages before reaching the High Court. In July 2011 Mrs Justice Gloster halted Excalibur from launching arbitration proceedings against the defendants in New York by granting an anti-arbitration injunction in London

In June 2012, the defendants successfully applied for specific disclosure from Excalibur of documents primarily bearing upon the claimant’s ability to raise funds for both the concession rights and to pursue the case. This included detail of its financial capability to participate in the oil concession and third party funding arrangements for the litigation.

The defendants followed this in January 2013 with an application for additional security for their costs of the Commercial Court proceedings. In September 2013 Clarke LJ threw out Excalibur’s claim before making the indemnity costs ruling last October.

Coffin represented two of the third-party funders behind Excalibur’s claim, Psari Holdings and Adonis Lemos. The  professional negligence claim was on behalf of Lemos and his family.

The funders were dragged into the litigation after Excalibur refused to adhere to a court order demanding it pay out £5.6m in indemnity costs on top of the £17.5m in costs already paid to the winning defendants.