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Litigation funding in international dispute resolution

   Apr 08, 2019
Credit : GMI Post

Among the biggest challenges of international dispute resolution is reformulating an efficient and less complex framework for awarding damages, particularly in commercial arbitration. Regardless of where it takes place, international arbitration cases involve highly elaborate proceedings that require specialized expertise, which results in higher costs.

For instance, a standard $10 million commercial dispute handled by a three-member tribunal at the International Chamber of Commerce would cost around $397,000, which includes the fees of arbitrators and administrative expenses. Then, there is the additional costs of gathering the testimonies of witnesses, the opinion of experts, pieces of evidence, as well as the fees of the legal team.

It is not unusual that, in the course of litigation or at the conclusion of proceedings, parties may exhaust all their financial means. Then, in some cases, companies are unwilling to direct funds from their operating expenses to fund this sort of litigation for fear of upending their bottom line.

Within this context, the International Council for Commercial Arbitration organized the Third-Party Funding Taskforce. The financing model aims to secure funding for litigation based on a non-recourse model, which means the funder is only reimbursed for its investment (legal fees and other expenses) in any specific dispute if and when there are proceeds to recover. 

After assessing the merits of the case (done after due diligence is performed on both parties) and studying projected expenses, the third-party will channel its funds to its client or the law firm handling the case. The funds are, in principle, released as expenses are incurred, but oftentimes are deposited to an escrow agent.

If the claim is successful, the funder is compensated according to an agreed multiple applied upon the expenses incurred (usually, $1 for every $3 spent) or to a given share of the proceeds (usually between 10% and 30%). Variations on the multiple or the share may also depend on how long arbitration takes. On the other hand, if the claim is not successful, the funder is not entitled to recoup its investment from the funded party.

Another compensation model is the monetization court decisions where funders may anticipate the amount of the award in the court decision and agree to remuneration based on a discount of the award.

In Portugal, BCH Lawyers specializes in international dispute resolution. Among its experts in the field is Duarte G. Henriques, who is a member of ICCA QMUL Task Force on Third-Party Funding in International Arbitration and co-promoter of the “Third-Party Funding Online Observatory.”

Recognized as one of the country’s top lawyers, Henriques’ areas of practice include Litigation & Arbitration, International Arbitration & Litigation, Banking & Finance Arbitration, IT & IP Law, Copyright Law, Corporate & Commercial Law, Entertainment Law, Technology Disputes.

Supported by Joana Albuquerque, BCH Lawyers has a proven track record in securing funding for clients and monetizing international arbitral awards and foreign court decisions.

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