Hugh Dickson is the global leader for Grant Thornton’s restructuring and recovery services worldwide, and is currently pursuing asset recovery on multibillion-dollar fraud and insolvency cases such as Saad International, Singularis and Stanford International Bank. His experience outside formal insolvency appointments includes roles for the International Monetary Fund, World Bank and the European Union, as well as advising eight governments and regulatory bodies on restructuring, financial sector intervention and related legislation.
Describe your career to date.
Varied! I started with Arthur Andersen in the United Kingdom while training for my chartered accountants qualification, largely dealing with trading receiverships. I then moved to advisory work for distressed banks in Central and Eastern Europe, before moving to Asia at the outset of the Asian financial crisis. I helped set up and run the Thai Financial Restructuring Authority before doing similar asset recovery and realisation work in Korea and Indonesia. After Andersen, I ran my own governmental advisory consultancy, working in Turkey, Georgia and South Africa, on areas as diverse as aviation and power as well as banking and finance. I joined Grant Thornton in 2006 to establish an offshore insolvency and asset recovery practice in the Caribbean.
What motivated you to specialise in asset recovery?
It was a natural segue. The essence of formal insolvency appointments is recovery of value for creditors and stakeholders. That often requires both asset tracing and recovery, which includes recovering value by litigation against those involved.
How has the market changed since you first started practising?
In three main ways. First, globalisation and the increased use of multi-jurisdiction structures means that major case work often involves cross-border issues. Second, litigation has become a principal means of recovering asset value, reflected in the growth of the litigation funding market. And last, the rise of the secondary debt market has led to a sea change in creditor and stakeholder relationships, both in concentration of debt and in a different mindset and activist approach to recovering value.
What makes Grant Thornton stand out from its competitors in the market?
We have the benefits of a boutique in that our recovery practices are highly specialised teams emphasising partner and director involvement – we don’t leverage off general practice or junior staff to the same extent that the Big Four do – but we have a significant global network comparable to a Big Four firm. And while hourly rates shouldn’t be the main reason for selecting an asset recovery professional, our rates are extremely competitive.
How is technological innovation revolutionising the practice area at the moment?
Digital forensics has changed the ability to both trace asset flows and support consequent litigation, and cross-border working has been made far easier by IT innovations allowing seamless working on case files and sharing of data. However, a lot of what we do comes down to experience and instinct – the technological support is a great tool, but you need to know what to look for and how to apply it.
Are there any particular challenges faced when working on asset recovery matters in emerging markets?
The biggest issue is usually the strength of the local judicial system – in terms of both the available law and the judicial process to enforce it. Those problems are then further complicated by relatively limited uptake or effectiveness on cross-border legal cooperation mechanisms. To be fair, the latter problem is not confined to emerging markets!
How do you see your practice developing over the next five years?
A greater emphasis on offering solutions to resolve problems and recover value outside formal insolvency or enforcement. The market is concerned about costs and delays, and whereas it’s arguable that in some cases there may be no alternative, the market would welcome an option. We have introduced company director services for distressed situations – placing experienced and independent professionals into entities that will bring the same judgement and knowledge to bear in designing a mechanism for recovering value, without first reaching for a formal insolvency appointment. The plan may utilise insolvency or litigation, but they will be part of a suite of measures being considered, and the emphasis will be on cost-effectiveness and speed of recovery. And third-party funding of asset recovery will develop. Funding currently focuses on litigation, but money is fungible, and funders are as interested in cost-effective and speedy recovery as the original stakeholders. Increased competition in the funding space will drive down costs of funding, and practitioners with strong track records will look to leverage their reputations in attracting finance. Grant Thornton is already engaged in this area, developing an in-house fund to finance hard costs as well as investing time on contingency. We have set up a co-financed vehicle to provide general funding for recovery cases. The market will gravitate towards those who can not only demonstrate skill but co-invest or arrange financing of a recovery operation at the most cost-effective price.
What advice would you give to younger practitioners hoping to one day be in your position?
Travel – get as much experience in working in different jurisdictions and on cross-border cases as you can. Not only do we face a truly globalised world in terms of asset recovery, but the personal networks you will build, and the experience of different cultures and working practices, will prove invaluable, both in marketing your skill and in delivering results.
Hugh Dickson has over 30 years’ experience providing specialist asset recovery expertise, with a particular focus on emerging markets. He is widely regarded as one of the top names in the offshore world.
Hugh Dickson is the global head of Grant Thornton’s restructuring and recovery service, covering 140 jurisdictions. His asset recovery cases include multibillion-dollar asset recovery cases, such as Saad International, Singularis and Stanford International Bank. His current litigation caseload for the recovery of assets or damages totals nearly US$5 billion, spanning seven financial institutions in six jurisdictions. He also sits on the take-on panel for Grant Thornton’s asset recovery fund, which funds asset recovery cases.
How has the market changed since you first started practising?
Surprisingly little, given that I have been in practice for over 30 years. We have seen the Big Six reduced to the Big Four, and the growth of specialist insolvency boutiques – but the basic issues involved in asset recoveries remain largely unchanged. There have been major developments in case law and precedent, and the means by which people seek to defraud others or conceal or protect their assets may have become more sophisticated (Charles Ponzi would have loved the idea of an ICO!), but the mechanics of identifying, tracing and recovering assets remain the same. The most striking aspect is probably scale – globalisation and the proliferation of ultra-high-net-worth individuals have led to significantly bigger cases in terms both of geographic coverage of cases and quantum. The other factor is the amount of litigation – not just in terms of enforcement and recovery of assets, but in terms of recovering value by seeking damages against third parties rather than direct asset recovery and realisation.
Which cases most stick in your mind and why?
The Saad case because of its sheer size and complexity. Perhaps the world’s largest ever Ponzi scheme, with an estimated throughput of over US$330 billion and the shortfall to the final creditors believed to exceed US$25 billion. The proprietary tracing claim against the various insolvent estates, coupled with wholesale removal or destruction of the accounting records, added major complexities in their administration and the utilisation of the assets. Resolving the tracing claim has to date taken over 10 years and hundreds of millions of dollars in legal and professional costs, and is still unresolved. The entities I am appointed to are engaged in numerous, large-ticket litigation cases involving novel points of law with disputes in the hundreds of millions of dollars range on issues as wide as banker liability (the seminal Daiwa case on banker liability is part of the Saad family), common law trusts and the interaction between Saudi and common law on trusts and compensatory damages. As liquidators, we have broken new ground in liquidation law by devising a scheme that will allow a special distribution to creditors despite the overarching proprietary claims.
Which key parallels can you draw between the financial crisis of 2008 and the financial crisis caused by the covid-19 pandemic?
Obviously, the liquidity pressures and government intervention to support business, although in both cases, the scale now is far larger than 2008. Currently banks and financial institutions are not those immediately affected, although given the scale of the economic impact, wide-scale distress in the financial sector seems inevitable. The differences are more striking than the parallels. Rather than a single sector, the crisis is general, affecting nearly every business and hitting several sectors – tourism, retail, energy and aviation – extremely hard. Unlike dealing with a single business failure, where you may be able to fix the business model and rescue the entity – or even a single sector, where government sectoral support programmes, such as those seen in the response to the financial crisis, may get traction – the scale of the damage, and the potential long-term changes in patterns of demand and supply that may completely revolutionise entire industries, make support and bailout programmes of any duration extremely difficult. Added to the challenges faced by industry, we face the prospect of a follow-on financial crisis, as the impact on ability to service debt has a major impact on financial institutions, resulting in further difficulties in restoring liquidity. I think we will be looking at a major worldwide depression, and we will be handling the fallout in the insolvency world for years to come – far longer than the carry-over from the financial crisis.
How significant will the use of litigation as an asset recovery tool be in a post-covid-19 world?
Very. The combination of increased availability of risk financing for litigation has combined with developments in case law as courts have extended liability to make litigation financing a boom market even before the crisis. Being able to pursue third parties for damages obviously adds a significant option when faced with difficulties in tracing and recovering assets and cash, particularly if those have been dissipated or concealed.
Grant Thornton is currently working on co-financed vehicles for asset recovery cases. To what extent do you expect this to increase in significance in the new normal where a tsunami of litigation is expected?
Insolvency experts are best placed to assess and price risk in such cases and should be able to extend funding on commercially competitive terms and with a greater strike rate. So far practitioners have been surrendering significant value to funders, while still doing the same amount of work to manage the litigation and deliver results. I believe most of the boutiques and eventually the larger firms will move into this space, probably risk sharing with financiers. While this raises issues around potential conflicts, at its heart, it is no different to the issues raised by success fees, and the conflict issues are also significantly less in a pure asset recovery case where there is no issue of a parallel, statutory appointment. The massive disruption to the world economy is going to lead to an exponential increase in the demand for financing. Creditors will have their own liquidity challenges in funding recovery actions, and distressed estates are likely to be critically short of liquidity as well. I think the next three years are going to see a boom in distressed situation financing, for both specific asset recovery and litigation-based projects.
What advice can you offer on how to act effectively when pursuing cross-border assets?
Be flexible – try to think beyond the immediate issue of recovering an asset as to how you can recover value. Cross-border enforcement using recognition and comity is time-consuming, with ongoing risk of asset dissipation or outright concealment. Consider alternatives – perhaps commercial agreements or settlements rather than pure enforcement, with enforcement used as leverage rather than for execution, or workarounds in which you target money flows or alternative assets in easier jurisdictions as a proxy. There are always two sides in a such a situation – try and understand the other side’s position and what leverage you have (or how you can develop it) in addition to your pure legal remedies. For example, I have seen yachts recovered from jurisdictions where obtaining recognition would be problematic by the simple expedient of agreeing to settle the crews unpaid wages, and potential threats to loss of reputation or face used to find an alternative solutions to long-lasting and bitterly contested asset battles. Be creative!
Hugh Dickson has over 30 years of experience of restructuring and insolvency issues in the financial sector, with a particular flair for the identification and restructuring of distressed assets.
Hugh Dickson is the global head of Grant Thornton’s restructuring and recovery service, covering 140 jurisdictions. His current asset recovery cases include multibillion-dollar asset recovery cases such as Saad International, Singularis and Stanford International Bank.
Hugh was an early adopter of third-party funding to finance recoveries in estates with limited liquidity, including hallmark cases such as Daiwa bank – a landmark case where a bank was found liable under the Quincecare principle for a common law duty of care to a client company, notwithstanding exculpatory contractual clauses and an illegality defence – recovering over US$150 million, and litigation to recover several hundred million dollars frozen by a Department of Justice MLAT process.
Hugh’s current litigation caseload for the recovery of foreclosed assets or damages totals nearly US$5 billion in damages, spanning seven financial institutions based in six jurisdictions. He sits on the panel for Grant Thornton’s asset recovery fund, a vehicle to finance asset recovery cases.
Hugh has extensive cross-border experience working in common law and other jurisdictions where traditional cross-border recognition approaches may be impossible or unwieldy, ranging from the recovery of a superyacht subject to a Turkish shipyard lien through to recovering the control and realisation of a US$100 million investment in a Peruvian business enmeshed in local control issues.Hugh’s other experience ranges from trading large distressed corporates to governmental interventions into state-owned enterprises or distressed sectors. The latter includes roles for the IMF, World Bank and the European Union, as well as advising eight governments and regulatory bodies on restructuring, financial sector intervention and related legislation.