As per a report by the International Council for Commercial Arbitration (ICCA) - Queen Mary Task Force on TPF, the term “third-party funding” refers to an agreement by an entity that is not a party to a dispute to provide to a party, an affiliate of that party or a law firm representing that party,
a) funds or other material support in order to finance part or all of the cost of the proceedings, either individually or as part of a specific range of cases, and
b) such support or financing is either provided in exchange for remuneration or reimbursement that is wholly or partially dependent on the outcome of the dispute, or provided through a grant or in return for a premium payment.
In other terms, third-party funding is the process by which an unrelated party (third-party) to a dispute agrees to pay whole or part of the cost to contest the litigation, with an aim to make a profit from the proceeds of such litigation. For a third party funder, it is an investment in a worthy claim that can generate a profitable return on investment from the amount of award or settlement.
Third-party funding is a process by which a party unrelated to a dispute funds the cost of contesting the claim (such as litigation cost, counsel fee, tribunal fee, arbitral institution management fee etc.) in order to make a profit from the resulting award or settlement.
Under a contingency fee arrangement the legal counsel’s fee is dependent on the outcome of a case. In such arrangements, the counsel agrees to be paid only upon achieving the client’s desired outcome, such as a favourable monetary award or the successful completion of a sale and agrees that their fee would be a percentage of such award or sale amount and not their usual hourly rates.
No. While third party funding does assist indigent claimants in pursuing their claims, well capitalised companies often opt for third party funding for the numerous advantages that it offers.
Indeed. Several well capitalised companies opt for third party funding as it frees up their working capital to be utilised for other purposes instead of tying up capital for payment of legal fees and costs.
No. Funding can be obtained by Respondents too.
Every funder has its own internal process to determine whether a case is a worthy investment or not. However, there are three broad categories which we believe are common for every funder and every case;
Legal Merits – How strong is the case on its merits?
Quantum Analysis – How strong is the evidence to support the quantum of the claim?
Location of assets and Enforcement Jurisdiction – Does the other party have enough assets and where are these assets located?
No. The funding is provided on a non-recourse basis.
It depends on the terms agreed between the parties in the funding agreement. In our experience, funders often agree to pay adverse costs (if any).
No. A litigant can approach a funder at any stage of the matter.
Yes. It is indeed possible to get only a part of the case funded.
For example, a claimant can opt to only procure funding for the interim injunction through emergency arbitrator proceedings in the initial stages for a matter.
Another example of partial funding is when the funder agrees to pay a certain predetermined percentage of each invoice raised by the counsel.
In our experience, a typical funding agreement would cover the following costs:
Counsel Fee
Queen’s counsel/senior counsel/barrister fee (if any)
Expert fee
Tribunal Fee
Arbitral institution/court fee
Please note this is not an exhaustive list.
Separately, it is possible for litigants to secure funds to be used as working capital against the value of the claim(s).
Yes, funders often agree to reimburse the legal costs which have already been incurred by a litigant.
The funder gets paid once the award is executed against the other side or from the proceeds of the settlement amount.
While there is no fixed time, most funders endeavour to complete the assessment within 3 to 6 weeks.
While all settlement discussions would depend on the parties and their appetite, we have noticed that settlement discussions often get accelerated in cases where a third party funder has invested a case.
As much or as little as the client wishes. The involvement of the funders in the proceedings of a case will always depend on the terms agreed between the parties. Usually, funders maintain a hands off approach, unless agreed otherwise. A funder will always act in the best interest of the client and the matter.