Third party funding has become an increasingly popular feature of both commercial arbitration and investment treaty arbitration.

Over the past 10 years, the global funding market has developed significantly. With that, the range and sophistication of funding products and structures available to clients involved in arbitration have broadened.

Stewarts has a wealth of experience and expertise in funding. We can offer clients a wide range of innovative and flexible cost and funding arrangements to manage risk or suit the economics of our clients’ businesses.

What is third party funding?

In general, third party funding in international arbitration involves a commercial funder agreeing to pay some or all the legal fees and disbursements of (usually) a claimant. Under most funding agreements, the funder’s fee is contingent upon the claim being ‘successful’ and obtaining recovery from the respondent. This fee is usually made up of (i) reimbursement of the funding directly deployed and (ii) a multiple of the amount of funding directly deployed or a percentage of the amount recovered.

The benefits of third party funding include providing access to justice to parties that would not otherwise have the means to pursue claims and enabling parties to offset potential legal costs and the risk of pursuing a claim in arbitration.

As third party funding is not accepted in every jurisdiction, consideration needs to be given as to whether it is a viable option. Also, depending on the relevant jurisdiction’s institutional rules or law, a third party funding arrangement may need to be disclosed to the tribunal and the opposing party. This may be a factor to consider when deciding whether third party funding is a suitable option for a given dispute.

How we can help

Our London-based International Arbitration team has considerable experience assisting clients in securing funding arrangements for commercial and investment treaty arbitrations. We have unrivalled experience and relationships with third party funders that enables us to secure the best available funding terms for our clients.

Alternative fee arrangements

In addition to assisting clients secure third party funding, we offer clients alternative fee arrangements. In such circumstances, clients will have a combination of a funding arrangement with a third party funder and an alternative fee arrangement with Stewarts. That way, the risk can be spread for all parties involved.

Our carefully developed cost and funding arrangements include damages-based agreements, contingency fee agreements and global contingency fee agreements. Please see here for more information on our offering regarding alternative fee arrangements.

ATE insurance

After the event (“ATE”) insurance is where an insurer provides cover against adverse costs (usually up to a set limit). ATE insurance can also act as security for costs.

As the use of third party funding in arbitration increases, ATE insurance is becoming more prevalent in arbitration particularly for parties that had to resort to financing owing to cashflow issues.

Importantly, Stewarts has created its own ATE insurance facility known as Stewarts Litigate, which is also available in respect of arbitration. Stewarts Litigate was launched with Arthur J Gallagher Insurance Brokers Limited and provides our commercial disputes clients with market-leading policy wording to reduce the risk of litigation and arbitration costs. The facility is designed to work alongside Stewarts’ alternative fee arrangements. It provides a solution that balances the risk, cost and impact of commercial disputes and enables our clients to litigate, arbitrate or negotiate their disputes from a position of financial strength.

Contact us

To find out more about third party funding, ATE insurance, Stewarts Litigate and what we can offer in terms of alternative fee arrangements, please contact one of the members of the International Arbitration team or see here.