Third-party Funder Research Articles

UNPACKING PACCAR: STATUTORY INTERPRETATION AND LITIGATION FUNDING

AbstractIn the most important funding decision in 20 years, the UK Supreme Court has declared in R. (PACCAR Inc. and others) v Competition Appeal Tribunal and others [2023] UKSC 28, [2023] 1 W.L.R. 2594 that, as a matter of statutory interpretation, a third-party funder’s litigation funding agreement (LFA) is a damages-based agreement (DBA) because third-party funders are offering “claims management services”. This decision, which overturned both the earlier Divisional Court and the Competition Appeal Tribunal decisions, and long-held industry and judicial understanding, has had an immediate impact upon UK litigation. Many LFAs will require immediate re-negotiation, given their non-compliance with the DBA legislation; but for some, the ramifications are much more serious. This article traces the legislation, soft law and law reform activity which preceded this momentous event; it suggests that a key principle of statutory interpretation which governed the outcome might arguably be re-evaluated in future case law; it discusses the possibility of legislative reversal; and it predicts the ramifications of the PACCAR decision upon (especially consumer) litigation unless reversed.

INDIA: THIRD-PARTY FUNDING IN PRACTICE OF INTERNATIONAL ARBITRATION

High expenses are associated with international investment arbitration. To save the additional expenditure of the adjudication, parties typically prefer sponsored third-party ar bitration proceedings. On the other hand, the third-party funder is interested in funding the arbitration to benefit significantly from the dispute’s resolution. Interestingly, the arbitrators should be able to overlook the Third-Party Funding [TPF] issue to gain the necessary compe tency. Their competence is limited to disputes between the foreign investor and the host state only. This article discusses the concept and legal status of the third-party funder in arbitration. Keywords: Arbitration, third-party funding, expenses, adjudication, disputes, dispute resolution.

The impacts of third-party funding on cost decisions in investment arbitration

ABSTRACT The involvement of Third-party Funding (TPF) in investment arbitration disrupts the balance between the parties to an arbitration. Though a party’s reliance on external funding represents its impecuniousness to participate in an arbitration, many financially sound investors take TPF to reduce the risk associated with bringing a claim or are unwilling to stick their working capital in arbitration. The existence of TPF in arbitration is a material factor in deciding an order for security for arbitration costs. The third-party funder funds an investor to initiate arbitration and gets benefits from a cost award. However, the funder does not share an investor’s responsibility to pay an adverse cost. The funder’s immunity from adverse costs aggravates the demand for security for costs in a funded arbitration. While a claimant’s reliance on TPF is considered a material factor in issuing an order for security for its cost, this consideration, counter-wise, legitimizes the cost of funding as arbitration costs. Accordingly, the funding cost can be recoverable through an adverse cost award. The TPF consideration in an order for security for costs makes the funding arrangement a part of the arbitration proceedings. If the funding position of a party is considered in deciding an application for security for costs, it deserves equal consideration in awarding adverse arbitration costs. Establishing the funding cost as arbitration costs will increase the cost of the international arbitration and unjustly transfer public money to private entities.

A figura do third-party funding no processo arbitral brasileiro: natureza jurídica do contrato de financiamento e os efeitos processuais

The increasing use of arbitration in Brazil arouses the need for the permanent development of arbitration doctrine. In this perspective, the promotion of skillful measures to encourage the use of arbitration. To clarify, the presence of third-party investors has great aptitude for the development of this dispute settlement mechanism. Under that context, methods should be devised in order to enable the third-party funder to have the legal security necessary to carry out its investment, so as not to suffer undesired procedural effects. A controversial issue in the specialized literature, the participation of third parties in arbitration, defended in this article as an alternative to the financier, presupposes knowledge of the nature of the legal business and the broad view of the concept of part of the arbitration clause, which was sought to outline in this work. By considering all the values involved in the theme, Brazilian national arbitration will have a great ally in favor of its development.

Research on the Procedural Status of a Third-Party Funder as a Legal Financier

Research on the Procedural Status of a Third-Party Funder as a Legal Financier

Third-Party Funding in International Arbitration: Ownership of the Claim, Consequences for Costs Orders, and Regulation

Abstract The increasing use of third-party funding in international arbitration has given rise to a myriad of challenges. Many of these remain unaddressed. Even though some jurisdictions have sought to regulate the sphere of third-party funding in international arbitration, it remains largely unregulated. The result is that a third-party funder is not held accountable. This article examines the issue of ownership of a funded international arbitration claim, and the consequences of that finding on an arbitral tribunal’s ability to impose costs order on a funder. The objective is to ensure that a funder is playing a role in the arbitral process merely to facilitate access to justice, and nothing more. The examination in this article comprises a review of case law, primarily of English courts, in the context of litigation funding, and then determining whether it is possible to transpose the learnings therefrom to the arbitration context. A brief discussion on the applicability of the doctrine of res judicata, in the context of the issues raised in this article, is undertaken. Finally, the article also considers the best way to regulate the specific question of imposing costs on a third-party funder in international arbitration.

Striking the right balance: disclosure of third-party funding

ABSTRACT Much debate exists in the field of arbitration as to whether general disclosure of third-party funding is needed. In 2017, Singapore and Hong Kong were the first jurisdictions to introduce obligations to disclose the existence and identity of a third-party funder at the outset of arbitration proceedings. In contrast, there is little debate as to whether general disclosure of third-party funding is needed in the litigation context. This article aims to address this gap by highlighting relevant concerns about non-disclosed third-party funding in litigation proceedings in general, and in England and Wales in particular. The article also examines the scope and character of the new disclosure obligations in Singapore and Hong Kong and provides a comparative analysis of differences and cross-cutting issues regarding third-party funding disclosure in litigation and commercial arbitration.

Diclosure Of Thirs-Party Funding Arrangements aand The Existence of Third-Party Funders in International Investment Arbitration

Third-party funding has been commonly used in International Investment Arbitration. Third-party funders increasingly usually finance the claimant who either (i) does not have sufficient funding to start legal proceedings, or (ii) adequately capitalized, but seek funding in order to minimize cash flow disruption and share risk during their arbitration proceedings. However, the notion of third-party funding gives rise to several issues; first, should funded parties be required to disclose their funding arrangements? Following the first research question, when does the funded party need to disclose the existence of a third-party funder? Then what legal measures can be taken to tackle the concern of transparency and disclosure in cases involving third-party funding? This research concentrates on the transparency and disclosure requirements, which is the central issue that influences further development and use of third-party funding arrangements in international arbitration. Analysis of relevant treaties, laws, guidelines, and case laws drives us to the conclusion that there exist measures and several drains the current international arbitration system that will serve a transparency system to control third-party funding. Hence, it would be appropriate for arbitration institute or investment treaties to take these tools into account in order to provide legal certainty for the disputing parties, arbitral tribunal, and ultimately, for the legal framework of third-party funding in investment arbitration..

Third-Party Funding of Arbitration and Alternative Dispute Resolution in Hong Kong

In June 2017, Hong Kong passed legislation amending the Hong Kong Arbitration Ordinance to permit third-party funding of arbitration, mediation, and related proceedings.These amendments had all taken effect by February 1, 2019. Hong Kong’s regulatory regime requires third-party funders to comply with the financial and ethical standards set out in the Code of Practice for Third Party Funders of Arbitration, issued on December 7, 2018. This article explains why Hong Kong concluded that third-party funding of arbitration, mediation, and related proceedings under the Hong Kong Arbitration Ordinance should be allowed, why it needs to be regulated, and the key provisions at the heart of Hong’s Kong’s “light touch” regulatory approach embodied in the Code of Practice. The article also touches on a number of emerging issues, including whether an arbitral tribunal should have the power to make an adverse costs order against a third-party funder and the recoverability of the funder’s benefit under the funding agreement following Essar Oilfields Services Ltd. v. Norscott Rig Management Ltd.

The Full Recovery of Third-Party Funding Costs in Arbitration: To Be or Not to Be?

The Essar v. Norscot decision rendered by the High Court of England and Wales in 2016 has opened the door, or at least a window, for the recovery of the full fees of third party funding arrangements in international commercial arbitration. The recoverability of the success fees or premiums payable under a third-party funding (TPF) agreement as costs in arbitration can be criticized on three fundamental and overlapping bases. First, the distinction between funds actually advanced by the third-party funder and a premium is crucial. Secondly, the arbitrator’s discretion is defined and limited by law and should focus primarily on the allocation of costs rather than the definition of the recoverable costs. Finally, an award for the full recovery of third party funding fees should only be made on a clearly defined legal basis. In addition, there are a number of policy considerations which point against the recoverability of the full costs of TPF. The authors recommend modifications to institutional arbitration rules and national arbitration laws to clarify issues related to the recoverability of third party funding costs in arbitration. In the meantime, commercial parties may consider including more detailed contractual provisions to avoid any unforeseen or undesired liability for the costs of TPF.

Third-Party Funding in International Commercial Arbitration and its Impact on Independence of Arbitrators: An Indian Perspective

Third-party funding is becoming an increasingly common feature of international arbitration. Despite its increasing prevalence in both commercial as well as investorstate arbitration, currently there is no regulatory framework for third-party funding. In fact, many jurisdictions still consider third-party funding as equivalent to the tort of champerty or violative of the state’s public policy. Even though the involvement of a third-party funder can have serious implications for inter alia the prospects of settlement, independence of arbitrators, allocation of costs and security for costs; no national, international or institutional legal instrument requires mandatory disclosure of third-party funding. While some recent efforts have been made to mandate disclosure of third-party funding, these efforts are restricted to disclosure of funding in certain specifi c factual circumstances only. This paper discusses the question of validity of third party funding in leading common law jurisdictions and compares the same to the position in India. Further, the paper highlights the need for mandatory disclosure of third-party funding, focussing on funding’s potential impact on independence of arbitrators. Finally, the paper proposes a disclosure model which preserves independence of arbitrators while safeguarding the interest of all the stakeholders, including the funders.

Third-party funding in investment arbitration: how non-disclosure can cause harm for the sake of profit

This article highlights the need for a mandatory disclosure requirement with regards to a third-party funder in all cases where a funder is present. As it currently stands, the funder is not a formal party to the proceeding and has no blanket obligation to disclose its involvement. While the 2014 Guidelines on Conflicts of Interest in International Arbitration require the disclosure of a funder’s involvement, this requirement is limited to instances where a previous relationship between an arbitrator and a funder exists. In all other arbitrations, there is no disclosure requirement. In such cases, a funder is free to exercise a controlling interest over the proceedings while operating in the shadows unbeknownst to the tribunal or the opposing party. This article introduces a number of scenarios where a funder’s undisclosed involvement may harm the parties to the proceedings, including the funded party. In particular, undisclosed funders have the ability to use information against a formerly-funded party in a subsequent proceeding and even to fund both sides of the dispute in an effort to maximize profits.

Ethical implications of third-party funding in international arbitration

This article describes the phenomenon of third-party funding with a particular focus on its impact on the arbitral proceedings. After a general description of what third-party funding is and how it works, the article examines the possible implications that third-party funding may have on both the attorney–client relationship and the independence and impartiality of the arbitral tribunal. Since the involvement of a third-party funder may create different situations of conflict of interest for the arbitrators, which in turn may affect the entire arbitral proceedings and the final award, the article suggests that the disclosure of the existence of a third-party funder in arbitration is an essential step to safeguard the fairness and transparency of the arbitral process. A comparison of the advantages and disadvantages of such disclosure is offered, together with a proposal on how such duty to disclose should be articulated. The article concludes with an overview of the current status of the regulation of third-party funding in international arbitration, and with some thoughts about the desirability of a more accurate regulation of this important and constantly increasing phenomenon.

Reshaping Third-Party Funding

Third-party funding is a controversial business arrangement whereby an outside entity — called a third-party funder — finances the legal representation of a party involved in litigation or arbitration or finances a law firm’s portfolio of cases in return for a profit. Attorney ethics regulations and other laws permit nonlawyers to become partial owners of law firms in the District of Columbia, England and Wales, Scotland, Australia, two provinces in Canada, Germany, the Netherlands, New Zealand, and other jurisdictions around the world. Recently, a U.S.-based third-party funder that is publicly traded in England started its own law firm in England. In addition, some U.S. law firms are actively seeking advice (including from this Author) regarding partnering with third-party funders or starting their own internal third-party funders to fund their own cases, both of which are controversial practices. This Article analyzes the benefits and drawbacks of third-party funders becoming internal partners of U.S. law firms, rather than remaining as external investors. To that end, this Article diagrams the existing structure of the third-party funding transaction and suggests new possible structures. This Article then explores how those new structures may affect procedure, evidentiary, and ethics rules and reshape both the third-party funding industry and the legal services industry. This Article concludes that careful, limited experimentation would reveal whether such a practice is a viable, desirable addition to the menu of third-party funding transactions or whether the existing third-party funding transaction paradigm remains the best option. Ultimately, this Article aims to start a conversation about rethinking the structure of third-party funding transactions.

Third-Party Funding in International Commercial Arbitration and Arbitrator Conflict of Interest

Third-party funding in international commercial arbitration is one of the most current and controversial issues in international arbitration. Third-party funding is the system whereby a third-party funder finances, partly or fully, one of the parties' arbitration costs. In case of a favourable award, the third-party funder is generally remunerated by a previously agreed percentage of the amount of the award. In case of an unfavourable award, the funder's investment is lost. One of the numerous issues raised by the involvement of third-party funders in international commercial arbitration proceedings is arbitrator conflict of interest due to nondisclosure of the involvement of the third-party funder in the process. In this article, we first explain the concept of 'third-party funding in international commercial arbitration.' Then we examine arbitrator conflict of interest implicating third-party funders. Finally, we discuss the need to create an obligation to disclose the involvement of third-party funders in arbitral proceedings as a predicate for arbitrator conflict of interest.

Justice Dealers: The Ecosystem of American Litigation Finance

People litigate for various reasons. Some want to right wrongs, others – make precedents. But most, at least in the civil realm, sue to protect economic interests; and they are motivated by pragmatic considerations rather than abstract notions of justice. One fruit of the mercantile approach to civil litigation is the nascent market where third parties provide financing for litigants (or their lawyers) and profit from a successful resolution of the funded claims. Through the lens of a third-party funder, justice is a mass-market commodity, and its value depends on laws of men and laws of probability alike.The ways of litigation funders create multiple points of tension for the legal process and its participants, and laws on the book offer little guidance on how third-party interests should be treated. Resulting procedural and ethical dilemmas have stirred a debate among scholars who rushed to offer conflicting opinions and advice. Critics demand that litigation investing be banned, calling it a travesty of justice that turns courts into casinos. Enthusiasts want the practice formally recognized, asserting that it levels the playing field for weaker parties.The discussion on litigation financing does not lack vigor; but it does lack hard facts. Drawing from first-hand empirical data on the practice of litigation funding in the United States, this paper explains how the market for legal claims actually works. First, I describe the entire ecosystem of actors who apply the logic of asset management to uncertainties of individual lawsuits – litigants; litigators; funding companies and their investors; and their “entourage” providing additional, specialized services. Then I segment the market and explore different strategies of third-party investing. Finally, I list American litigation funders and group them based on what they do.Based on the descriptive findings, I claim that modern civil litigation engages multiple, often undisclosed stakeholders with complex financial motivations. I argue that such interests should be recognized by the legal system as legitimate and ultimately regulated. The first step in that direction should be making sure that third-party involvement in a dispute is disclosed.

PRM133 - Predictive Modelling: Predicting Hospitalisation And Estimating The Cost And Risk To The Third Party Funder

PREDICTIVE MODELLING: PREDICTING HOSPITALISATION AND ESTIMATING THE COST AND RISK TO THE THIRD PARTY FUNDER R CELLIERS (MSC. (MATHEMATICAL STATISTICS) UNIVERSITY OF PRETORIA) In the third party funder environment most analyses focus on retrospective claims analyses; the aim of predictive modelling is to estimate future claims or current risk, based on the probability of a hospital event using historical data. A logistic regression approach is followed where the likelihood of a hospitalisation event is established and mapped to a cost estimate. The modelling process involved establishing a development and validation sample, identifying the predictor variables, building and lastly validating the sample. During the model building process the development and validation population consisted of 149 416 and 47623 beneficiaries respectively; where the data was obtained from a third party funder consisting of 3 years of data. During the building process the dependant variable (Y=Logg (odds) ) takes on the value 1 or 0 depending on whether or not a hospital event occurred. To calculate the cost per beneficiary a weighted probability was multiplied by the average cost of a hospital authorisation. Beneficiaries were classified as high risk if log (odds) >=0.7. The final model is: Log (odds) =-0.11X1+0.00576X2+0.409X3+0.179X4+0.614X5 where X1-X5 denotes the predictor variables. X1 denotes an indicator variable for gender, X2 the predictor variable for age, X3 the HIV indicator variable, X4 the diabetes indicator variable and X5 the chronic indicator variable. The strongest predictors were the chronic indicator variable and age. The validation process resulted in 79% of the beneficiaries being correctly classified and the cost estimation resulted in totals within 3-5% of the actual values. The proposed model predicts hospitalisation efficiently at a beneficiary level and can be implemented to monitor risk and the associated cost (hospital or total) for individuals, employer group or the third party funder. Third party risk management and cost estimation are other applications of the model.

Judging Third-Party Funding

Third-party funding is an arrangement whereby an outside entity finances the legal representation of a party involved in litigation or arbitration. The outside entity — called a “third-party funder” — could be a bank, hedge fund, insurance company, or some other entity or individual that finances the party’s legal representation in return for a profit. Third-party funding is a controversial, dynamic, and evolving phenomenon. The practice has attracted national headlines and the attention of the Advisory Committee on the Federal Rules of Civil Procedure (Advisory Committee). The Advisory Committee stated in a recent report that “judges currently have the power to obtain information about third-party funding when it is relevant in a particular case,” but the Committee did not provide any additional guidance on how to determine the relevance of third-party funding. What information should be obtained, and from whom? This Article offers that needed guidance by setting forth revisions and reinterpretations of procedural rules to provide judges and arbitrators with disclosure requirements and a framework for handling known issues as they arise. By revising and interpreting the procedural rules as suggested in this Article, judges and arbitrators will be able to gain a better sense of the prevalence, structures, and impact of third-party funding and its effects (if any) on dispute resolution procedures. Over time, these observations will reveal the true systemic impact of third-party funding and contribute to developing more robust third-party funding procedural regulations.

Cost-effectiveness analysis of screening for lung cancer with low dose spiral CT (computed tomography) in the Australian setting

Low dose spiral computed tomography (CT) is a sensitive screening tool for lung cancer that is currently being evaluated in both non-randomised studies and randomised controlled trials. We conducted a quantitative decision analysis using a Markov model to determine whether, in the Australian setting, offering spiral CT screening for lung cancer to high risk individuals would be cost-effective compared with current practice. This exploratory analysis was undertaken predominantly from the perspective of the government as third-party funder. In the base-case analysis, the costs and health outcomes (life-years saved and quality-adjusted life years) were calculated in a hypothetical cohort of 10,000 male current smokers for two alternatives: (1) screen for lung cancer with annual CT for 5 years starting at age 60 year and treat those diagnosed with cancer or (2) no screening and treat only those who present with symptomatic cancer. For male smokers aged 60-64 years, with an annual incidence of lung cancer of 552 per 100,000, the incremental cost-effectiveness ratio was 57,325 dollars per life-year saved and 105,090 dollars per QALY saved. For females aged 60-64 years with the same annual incidence of lung cancer, the cost-effectiveness ratio was 51,001 dollars per life-year saved and 88,583 dollars per QALY saved. The model was used to examine the relationship between efficacy in terms of the expected reduction in lung cancer mortality at 7 years and cost-effectiveness. In the base-case analysis lung cancer mortality was reduced by 27% and all cause mortality by 2.1%. Changes in the estimated proportion of stage I cancers detected by screening had the greatest impact on the efficacy of the intervention and the cost-effectiveness. The results were also sensitive to assumptions about the test performance characteristics of CT scanning, the proportion of lung cancer cases overdiagnosed by screening, intervention rates for benign disease, the discount rate, the cost of CT, the quality of life in individuals with early stage screen-detected cancer and disutility associated with false positive diagnoses. Given current knowledge and practice, even under favourable assumptions, reductions in lung cancer mortality of less than 20% are unlikely to be cost-effective, using a value of 50,000 dollars per life-year saved as the threshold to define a "cost-effective" intervention. The most feasible scenario under which CT screening for lung cancer could be cost-effective would be if very high-risk individuals are targeted and screening is either highly effective or CT screening costs fall substantially.