When searching for third party Funding, prospective litigants often lack information on the requirements and knowledge of what is required to fund arbitration successfully. Though obtaining third-party funding for international arbitration is not an easy process, by composing the following list, we hope to demystify the process of obtaining third-party funding for international arbitration –

 Find a Reliable and Reputable Law Firm

Prospective litigants should take into consideration the role of a law firm during the funding process. Most litigants are required by third-party funders to be represented by counsel and frequently contact third-party funders through counsel. The time spent by arbitration lawyers on preparation and correspondence with the funder may be considerable. Some firms may charge for this, some such Aceris may not. Others firms may not charge for this, but then demand to be compensated by the third-party funders for their time, which makes successful funding more difficult.

Find a Third Party Funder

The specialized third-party funding companies are not extremely common and form a rather narrow and closed market. Therefore, they are competitive amongst one another, although funding terms are largely similar. A litigant need only email a third-party funder in order to present their case, preferably accompanied by a legal memorandum of a reputable arbitration practitioner, attesting to the merits of an international arbitration.

Success of Arbitration

 While there is no hard and fast rule, it is certain that only very strong cases will be funded. For a funder to decide it is willing to fund an international arbitration, the highest possible chance of success is crucial. Even if the chance of success is never 100% for an international arbitration, the chances of winning the case still need to be very high and to include considerable compensation. Doubt with respect to a single legal issue may be sufficient to undermine the possibility of third-party funding.

Cost of funding the dispute

 The lower the cost of funding the dispute and the greater the amount of potential compensation, the greater will be the chances that a third-party funder will actually fund a dispute. Funders are very cautious and demand hard evidence of potential damages, while discounting claims for lost profits, moral damages and other forms of compensation that are less frequently awarded in practice.

Enforcement Risk

 There may still be uncertainty for funders regarding the risk of enforcement even if a case is straightforward. The enforcement of arbitral awards depends on national judicial systems. Eventual success may depend on the accessibility and transparency of a judicial system, or the availability of assets in multiple jurisdictions. Moreover, it might occur that the successful litigant is merely one of many creditors waiting for enforcement on the same capital of a company that decides to be liquidated following a negative arbitration ruling. While insurance may be available to hedge against such risks, this issue needs to be explored with the funder at the outset.

 Funder’s Success Fee

Litigants should also be aware of the success fees to be paid to the funder when searching for third-party funding. These fees typically represent 20%-45% of the amount of compensation to be awarded, depending on the ratio of the amount of potential compensation to the cost of the dispute.

Interestingly, at least one ICC arbitration lawyer has ruled that the costs of funding may be recuperated from the losing party, but there is no constant jurisprudence in this regard. The arbitrator’s decision in that case was appealed unsuccessfully and the judgement.

To learn more, feel free to visit https://www.international-arbitration-attorney.com.