December Edition 2019

19 FUNDING FOR INTERNATIONAL ARBITRATION Arbitrationprovidesanalternativeto litigationpursuedthrough jurisdictional courts, which offers flexibility and control to the parties involved in a dispute, but which is often costly due to the complex commercial nature of the dispute (particular where the dispute involves transnational parties and raises issues of conflicts of laws) and the sophisticated, specialist counsel at premier law firms engaged by the parties to assist in its resolution. What is Litigation / Arbitration Funding? Litigation / Arbitration funding, also known as ‘litigation / arbitration finance’ or ‘third-party funding’, is an alternative means for claimants to fund the costs of a legal dispute, including the costs associated with litigation and arbitration. A third-party funder, otherwise unconnected to the dispute, will usually enter into an agreement (referred to as a funding agreement) with a prospective claimant or law firm to provide funds for the claimant’s legal costs. In return for the funding provided to the claimant, the funder will be entitled to a share of an award or settlement in the event that the claim is resolved successfully in the claimant’s favour, pursuant to the terms of the funding agreement. The investment by the funder is typically non-recourse which means that if the claim is lost, the claimant is not liable to reimburse the funder’s investment. Why is Third-party Funding Advantageous in Arbitration? Funders will often invest in many different types of claims in many different jurisdictions, including international commercial arbitration and investment treaty arbitration. In a typical funding arrangement, the third-party funder, such as Woodsford, shoulders the majority of the risk. The advantages of arbitration funding for both lawyer and claimant are substantial. Most fundamentally, third-party funding facilitates access to justice. A capital constrained claimant who might not otherwise have the resources to prosecute its claim(sometimes as adirect result of thedefendant’swrongful conduct) is given the opportunity to have its day in court. This is particularly true in “David v Goliath” cases where a smaller claimant takes on a bigger, better-resourced defendant, who may use a strategy of attrition to exhaust