Originally from Handbook on Third-Party Funding in International Arbitration, Second Edition

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Charles Agee and Wendie Childress

I.  Overview

Claimants and law firms use third-party funding to finance both commercial and investor-state international arbitration matters. Given the significant costs associated with these cases, funding can provide access to justice for claimants who cannot otherwise bear the costs. Likewise, it allows claimants and their counsel to mitigate the risk of pursuing a matter, while preserving the ability to collect significant proceeds and fees in the event of a significant award.

But securing funding can present many challenges as the market is dynamic and opaque, with the process often being inefficient, laborious, and riddled with unnecessary mistakes. Clients and counsel typically approach the process with insufficient knowledge of the market or how best to secure funding on terms that are favorable to the client and consistent with the market. They also often approach the wrong capital providers, which can mean a significant loss of time and even impairment of their ability to get funding at all.

Third-party funding advisors serve to alleviate these challenges by providing independent expertise on how to navigate the market most efficiently, including who to approach, how to streamline diligence, and how to secure the best financing terms for clients. They also serve to help counsel avoid conflicts inherent to advising clients on a funding transaction.