Russia - Part II Country Report - Handbook on Third-Party Funding in International Arbitration
Originally from Handbook on Third-Party Funding in International Arbitration
1.1. TPF Regime in Russia
1.1.1. Is TPF commonly used in your Jurisdiction? If yes, since when (is it a new trend or a well-established practice)?
TPF is not practiced in Russia as an industry.
There are ad hoc options to obtain financing claims that otherwise would be not feasible to claimants because of the litigation costs. These aspects have been less of a barrier to claimants than they might otherwise have been because court fees are low and fees of high street lawyers are affordable. In addition, fee shifting is restricted (see further).
There are vulture investment groups/individual entrepreneurs that would buy into the claim or provide their lawyer services/support/money in return to assignment of part of the proceeds. This is particularly common on retail scale in insurance claims and depositors/borrowers disputes with banks over commissions and charges.
Claimants in Russia are able to fund arbitration or litigation through contingency fee agreements with their legal counsel as the professional ethical standards and rules applicable to attorneys practicing in Russia do not prohibit contingency fee agreements in which the attorney’s fee depends on winning the case. Both pure contingency fee and alternative fee arrangements are practiced.
Unenforceability of contingency fees through a court of law is a limitation of these practices. Contingency fees can be withheld by counsel from escrowed funds due to be released to the client, paid by the client voluntarily, but cannot be collected through a judicial process. The rule on unenforceability of contingency fees is based on two main propositions. First, the doctrinal view is that the client pays for the service (time and attention) and not for the outcome of the case. Second, the compensation an attorney receives based on what a judge decides may create an appearance of impropriety/corruption.
Conventional litigation funding is likely to fall under the unenforceability on contingent fees exception because it is not the attorney, but investor who shares the proceeds, particularly where the attorney’s fees do not depend on the outcome of the case, but rather are simply paid by a third party – the litigation funder.