Posted in Arbitration Law, Litigation

Third-party funding of arbitration: the risks

Another trend lots of legals are not aware of  is the funding of litigation (and prisons) from third parties.

Although on the one hand it allows short-resourced parties to afford litigation, this phenomenon also sets some worrisome issues:

  • firstly, what if “investors” decide to fund only litigation where sucess’ rate is higher?
  • on top of percentages on awarded damages, additional expenses are  required (and render the process less profitable): upfront due-diligence, NDA drafting and  the funding agreement.
  • Although in English litigation, a third-party funder of an unsuccessful litigant could be liable to contribute towards the costs of the other side in proportion to the initial contribution, within arbitration boundaries, this is less clear and it may force the funder to resort to security for its costs.
  • conflict(s) of interest may arise
  • Privilege and confidentiality may vary across countries.

Further issues come along and the question is once again: is more regulation the answer?

Source

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Junior Legal Counsel with a remarkable lust for legal and business knowledge

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