For many businesses, the single greatest barrier to pursuing a valid international claim is the daunting cost of legal proceedings. The expense of a complex arbitration can strain resources, even for successful companies. However, a powerful tool has firmly established itself in the dispute resolution landscape to address this very problem: Third-Party Funding.

Once a niche concept, TPF has matured into a mainstream financing solution that levels the playing field and transforms how businesses can approach high-stakes disputes. This newsletter explains what it is and why it might be a strategic option for your company.

What Exactly is Third-Party Funding?

In simple terms, third-party funding is a financial arrangement where a specialist commercial entity (a "funder") agrees to pay some or all of the legal costs associated with an arbitration claim. In return, if the case is successful, the funder receives a pre-agreed share of the financial award or settlement sum.

The most critical feature of this arrangement is that it is typically "non-recourse." This means if the case is lost, the claimant owes nothing to the funder. The funder bears all the financial risk of the investment.

Why Should Your Business Consider Third-Party Funding?

The benefits of securing TPF extend far beyond simply covering legal bills. It offers several strategic advantages:

• Access to Justice: TPF enables claimants with strong cases but limited capital to pursue meritorious claims that they would otherwise be forced to abandon.

• Risk Mitigation: By transferring the financial risk of the dispute from your company's balance sheet to the funder, you can protect your cash flow and budget with certainty, regardless of the arbitration's outcome.

• Case Validation: Reputable funders conduct rigorous due diligence before investing. Their decision to fund your case acts as a powerful, independent validation of its strengths and chances of success.

• Levelling the Playing Field: Funding allows smaller companies to confidently take on larger, better-resourced opponents, ensuring that a case is decided on its merits, not on the size of a party's bank account.

The Evolving Landscape: Disclosure and Control

As funding has become more common, the world of international arbitration has adapted. A key "hot topic" within this trend is transparency. Many arbitral institutions and national courts are now moving towards requiring the disclosure of the existence of a funding agreement and the funder's identity. This is done to prevent potential conflicts of interest between an arbitrator and a funder.

A common concern for clients is whether accepting funding means losing control of the case. In reputable funding agreements, this is not the case. The client, advised by their legal counsel, almost always retains control over key strategic decisions, including settlement offers.

Is Your Case Suitable for Funding?

Funders are selective and typically look for specific criteria, including:

• A high potential claim value.

• Strong legal merits and clear, available evidence.

• A defendant with the ability to pay the award.

• Enforceability of the potential award in the defendant's jurisdiction.

How KarSen Legal Can Guide You

Navigating the world of third-party funding requires specialist knowledge. At KarSen Legal, we can help you:

• Assess the viability of your case for funding.

• Prepare a compelling case presentation for potential funders.

• Navigate the due diligence process and negotiate favourable terms with a reputable funder.

If you have a high-value claim but are concerned about the costs and risks of arbitration, third-party funding may be the solution. Contact us for a confidential evaluation to explore your options.

Disclaimer: This newsletter provides general information and does not constitute legal advice. For advice on your specific circumstances, please contact us directly.

Unlocking Justice: A Guide to Third-Party Funding in High-Stakes Arbitration