In recent months the team at TheJudge have arranged several arbitration finance deals, which are a hybrid of a monetization arrangement and a traditional litigation finance deal. While these arrangements were novel only a year or two back, we are seeing increasing demand for such structures, at least for certain categories of case types.
The following is one such example. We were approached by the claimant seeking to pursue a commercial arbitration. While the counterparty in the dispute was considered credit worthy, and thus capable of enforcing an award against, it was anticipated from the outset that they will likely make the claimant’s life difficult at every step, including potentially resisting enforcement of any award. The claimant themselves were in a relative “David v Goliath” scenario financially. With limited available assets, the claimant required the support of a litigation funder.
The structure ultimately executed with the claimant provided four key components.
- Firstly, the funding reserve for the legal budget to finance the arbitration to a final award, i.e. a traditional funding arrangement.
- Secondly, a separate reserve budget for enforcement expenses. As an aside, it’s still somewhat startling that cases with known enforcement challenges aren’t having a decent enforcement reserve factored into the budget planning at the outset.
- Thirdly, a “closing advance” was agreed in order to reimburse the claimant for their initial investigation outlay and also to provide some immediate working capital, i.e. a payment was made directly to the claimant upon executing the funding agreement.
- Fourthly, a second advance payment was reserved, with a payment to the claimant being triggered upon them successfully obtaining an award in their favour, i.e. a further payment would be made to the claimant ahead of any onward enforcement of the award. These latter two reserves/payments are essentially partial monetisations, one pre-award and the other post award.
Arrangements such as this illustrate how arbitration finance can be applied creatively to provide additional benefits to claimants beyond simply funding the legal budget. Such interim payment structures can help alleviate some of the tension of arbitrations taking a longer time to conclude than anticipated.
Have a case? Speak to us first to learn about the full range of options
If you have a client considering pursuing a commercial or international arbitration claim and would like to better understand their funding and insurance options (it’s important not to overlook the latter), then speak to one of our specialist team: