Lack of economic resources and specific technical expertise prevent many town councils in Italy from protecting their interests in court, especially in relation to well-established organisations such as large companies and banking and insurance intermediaries: at risk are the rights and budgets of local authorities and consequently the financial well-being of citizens. Thanks to the agreement between ASMEL and LexCapital, the more than 4,000 town councils forming part of ASMEL will be able to reduce their legal costs by ceding to LexCapital the chose in action for disputes in which they are a plaintiff and, in some cases, where they are a defendant. LexCapital will sue in place of the town council, which will pay no charge for the service obtained. In the event of victory, most of the proceeds will go to the town council and only the remainder will go to LexCapital.
Milan, xx 2023 – Local authorities are more efficient and able to safeguard legality and enforce their rights at zero cost thanks to litigation funding. It is estimated that legal costs incurred by local authorities and the government cost on average €410,000 per authority ¹. This significant sum, however, does not tell the whole story. Every year, many town councils, particularly the smaller ones, forgo taking legal action, especially against large companies and financial and insurance intermediaries due to a lack of funds or the necessary technical expertise. This has major repercussions for budgets and taxpayers’ pockets. To remedy the problem, ASMEL, Association for the Subsidiarity and Modernisation of Local Authorities, has signed an agreement with LexCapital, an innovative start-up and Benefit Corporation operating as a litigation funder, which will allow the more than 4,000 associated local administrations to protect their rights at zero cost with a high probability of victory, supported by a team of experts.
How? Through litigation funding, which allows a third party, in this case LexCapital itself, to acquire the chose in action, acting in the proceedings in place of the local authority and providing financial resources as well as technical and legal expertise. The agreement covers disputes in which the authority is a plaintiff and, in some cases, also those in which it is a defendant. Thus, the local authority will be able to notably reduce its expenditure on legal fees and contingencies and will be able to rely on the experts at LexCapital (lawyers, accountants, economists, engineers, IT professionals and other expert litigation professionals) who will take charge of the disputes. In the event of a successful outcome, after deducting the costs incurred, LexCapital will receive only a portion of the proceeds, while the local authority will collect the larger share.
What types of disputes may be of interest? ASMEL and LexCapital have already identified some matters that could be of interest to local authorities, owing to the potential financial and economic benefits they could obtain. These include: bonds, credit facilities, loan agreements in effect or expired, reservations in public works contracts with the potential for counterclaims, planning agreements concluded with private enterprises that have not fulfilled their part of the obligations undertaken. The service also covers financial derivatives, high-risk investment instruments that have been declared null and void since 2020 following a landmark ruling by the Cassation Court, but which still have a significant impact on budgets and have given rise to many disputes between local authorities and banks.
¹ Sources: Scientific note of the Demoskopika Institute “Liti e contenziosi. La mappa degli esborsi della Pubblica Amministrazione italiana”. The period examined is between 2010 and February 2017.
“Every time a local authority fails to defend itself in court, it is the entire community that loses. Sometimes, initiating litigation can be too costly and complex, especially if there are large companies and banking and insurance intermediaries on the other side” commented Giuseppe Farchione, Chief Operating Officer at LexCapital. The agreement with ASMEL will allow us to offer its members free technical and legal support through litigation funding, which is already in vogue in the United States and has recently arrived also in Europe. Thanks to this service, local authorities will be able to use their resources more efficiently, without embarking on long, costly and unpredictable proceedings and, above all, without threatening the sustainability of their budgets or burdening taxpayers. We at LexCapital will act in their place, providing expertise and experience, and also assuming the risk and costs associated with a possible loss. A significant contribution, of which we are proud, to the efficiency of local authorities and to legal certainty.
Asmel
Established in Gallarate (VA) in May 2010, today its membership comprises 4135 associated local authorities. In addition to the institutional representation of the local authorities in all the designated locations, the Association promotes the digitalisation and simplification of procedures through the associated network management of municipal services. This is an alternative to the associated management of functions that the central apparatus and other associations seek to impose on town councils as the “definitive solution” for the purposes of the “spending review” and the “zeroing” of smaller councils. ASMEL’s action is based on the principles of subsidiarity in order to effectively safeguard the constitutionally guaranteed autonomy of town councils, and has led to the involvement of several communities in the associated management of municipal services. These include the continuous training of employees and local administrators, fulfilling formalities related to privacy, anti-corruption, planning, etc., as well as digitalisation and environmental transition, public procurement and recruitment and competitions.
LexCapital
Set up in 2021, LexCapital is an innovative start-up and benefit corporation that operates as a litigation funder, which aims to become the leading litigation funder in Italy. It evaluates, acquires and manages the chose in action (having a financial value and solvent defendants) from parties holding said rights: companies, public bodies, individuals, non-profit organisations, assuming the relative risks and costs and with the aim of making justice more accessible to all. The process of selecting and evaluating cases to be acquired is done through the company’s proprietary technology platform: LexCapital Litigation Assessment (LLA). It operates mainly in the areas of commercial law (breach of contract, harmful products), corporate law (antitrust, intellectual property/patents/trademarks, reservations in public works, compound interest and financial law, revocatory actions), bankruptcy and class actions. LexCapital was founded by a group of entrepreneurs and professionals working in the finance and legal sectors: Emilio Campanile (Presidente), Marcello Gallo and Maurizio Santacroce are the company’s directors. The management team is steered by Giuseppe Farchione (COO and CFO).
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