The mainstreaming of Litigation Finance is expected to continue long after COVID. The practice’s use in arbitration has become increasingly common, despite an overall dearth of legislation to regulate it.
An LFJ Conversation with Michael Kelley, Partner, Parker Poe
The mainstreaming of Litigation Finance is expected to continue long after COVID. The practice’s use in arbitration has become increasingly common, despite an overall dearth of legislation to regulate it.
Stockholm Chamber of Commerce Arbitration Institute details that while third-party legal funding is no longer a new industry, the number of cases in which parties disclose funding agreements is rising. In the early days of funding, such disclosures were left up to individual courts to order, or not.
Another initial source of contention was the recoverability of costs paid to funders by clients. The question of whether funders should be limited in the fees and percentages they take remains largely unanswered today—as do questions surrounding security for costs in funded cases. Typically, third-party funding is not reason enough to order security for costs.
As a rule, arbiters don’t have authority to identify, or request the identity, of a third-party funder. This led to the SCC encouraging disclosure of any parties with a financial interest in the outcome of a dispute. This includes not just funders, but parent companies and owners.
Typically, claimants are offered funding for arbitrations, but in rare cases respondents can receive funding as well.
