Crowdfunding For International Arbitration Introduced
A new website, called Invest4Justice, which has been in development for over one year, has recently been opened to provide access to peer-to-peer funding and crowdfunding for international arbitrations, as well as funding for all other types of dispute resolution, globally.
It is available to litigants, lawyers and individual investors in all jurisdictions where using crowdfunding to raise funds is legal, which covers most countries in the world today (NDLR: William Kirtley, a member of the International Arbitration Attorney Network, serves as legal counsel for this project). Lawyers or Claimants apply for the funding, which is then promoted globally via the internet to potential investors.
The primary goal of the website is to provide access to funds for claimants who have claims that are too small for third-party funding (typically under GBP 20 million), or who would like to obtain better rates than those offered by traditional third-party funding. Typically, third-party funders take a substantial cut of the amount recovered by the Claimant.
The idea is that by providing a platform that allows anyone to purchase a stake in an international arbitration, or a domestic or international litigation, users of international arbitration will not find themselves in situations where they have a strong claim but cannot find a good way to pay for it. In addition to providing access to funds, the platform also allows users to review individual dispute resolution lawyers with respect to their work, bringing international arbitration into the 21st century and creating a new way to measure a litigator’s track record. (The website indicates that dispute resolution lawyers can contact the webmaster to dispute reviews they can prove were unfair.)
As lawyers are well-placed to gauge the strength of the case, it is expected that lawyers themselves may end up being investors in individual disputes. In order to allow for due diligence on a given dispute, individuals searching for litigation funding are given a platform that allows for e-mails, instant messaging, videoconferencing and the sharing of documents concerning the dispute, and a variety of technical measures are taken to reduce privacy concerns. Financial information on the return on investment per arbitration is also automatically generated, and individual stakes can be purchased for as little as USD 50.
The website is not intended to make a profit, and it charges only a 4% fee on the amounts that are transferred to pay for the costs of an international arbitration, along with the reward that is offered to investors, which is chosen by Claimants and can be as low as 5%. From 1 to 10,000 “stakes” in a claim can be issued by the individual litigant, meaning that up to 10,000 people can invest in a single international arbitration. This also means that individual investors can purchase a basket of stakes in different arbitrations to diminish the risk of a single arbitration losing.
Claims that are currently listed on Invest4Justice include investor-State arbitrations and commercial arbitrations, although domestic arbitrations, domestic litigations and international litigations involving litigants in any country are also open to the platform. Lawyers can be chosen from those who have registered for free on the platform, which indicates if a claimant needs a lawyer.
While the founders of Invest4Justice expect it to take months, or even years, to prove the viability of crowdfunding for international arbitration, as the crowdfunding of lawsuits has been proven to be viable and third-party funding has been shown to be viable, it is hard to see a reason why this will not work.