Third-Party Funders for International Arbitration • Arbitration

Third-party funders for arbitrations, nearly all of which are listed below, may agree to finance all or a portion of one party’s legal costs for a given international arbitration. A third-party funder typically earns an agreed percentage of any award or a fee based on a multiple of the funding provided, or a combination of the two, in the event of a successful case. Should the case fail, the funder loses its investment and is not entitled to payment.

The compensation earned by the third-party funder in the event of success is always significant – usually 25% to 45% of the amount of compensation awarded in a case – although its compensation can also be a multiple of the amount invested by a third-party funder. Returns on investment of three times the amount invested by third-party funders are generally sought by funders, as in private equity or project finance.

If a claimant is unwilling to part with 25% to 45% of its expected compensation and has the financial resources to partially fund its case, then less expensive options to resolve an arbitration are available, such as procuring international arbitration lawyers on a partial success fee basis. Third-Party Funding Arbitration

Third-party funding is difficult to obtain for all but the most black-and-white cases. Third-party funders will rarely fund international arbitrations where the amount in dispute is less than USD 3 million, they will only fund cases against respondents with assets that an arbitration award can almost certainly be enforced against, and it can take many months for a third party funder’s due diligence to be completed. Factors taken into consideration by funders when deciding whether to fund an international arbitration include (1) the value and complexity of a claim, (2) the amount of funding needed and the litigation budget, (3) the likelihood of success of the claim, (4) whether other parties have an interest in the claim, (5) the jurisdiction in which the arbitration takes place, (6) the arbitral institution that administrators a case, (7) whether counterclaims may be made and (8) the ease of enforcement of the arbitral award to be rendered. Funders who are potentially interested in a case generally request an exclusivity period to consider it.

Third-party funders generally require a legal memorandum analysing jurisdictional issues, the merits of a case and quantum, prior to agreeing to initiate due diligence on a claim or to consider funding. Some leading arbitration law firms, such as Aceris Law LLC, do not charge to assist clients in need of third-party funding, for commercial arbitrations or investment arbitrations.

While third-party funding raises issues concerning confidentiality, legal privilege, disclosure, conflicts of interests, cost issues and the attorney-client relationship, third-party funding plays an important role in many arbitrations today and is widely accepted both for commercial and investment arbitrations. When it can be obtained, third-party funding permits greater access to justice for claimants, permitting meritorious claims to proceed that could not otherwise be pursued for purely financial reasons. It also levels the playing field so that cases will not be resolved on the basis of unequal economic resources. The terms of litigation funding agreements between funders and clients typically set out the agreed conduct of each party, the payoffs to the funder, the circumstances and conditions in which the funder can exit the case, and the reporting and updating requirements of the funder, lawyers and client.

Below please find a list of the primary third-party funders and third-party funding brokers for international arbitration today. This list was last updated in October 2023.

Third-Party Funders and Third-Party Funding Brokers for International Arbitration:

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