How Litigation Funding Is Used in International Arbitration

International arbitration provides a time-tested forum to resolve contractual disputes between entities in different countries. But not all law firms have the means to enter this lucrative practice arena, and even firms with more than adequate capital may prefer to direct their liquid assets elsewhere.

That’s where litigation funding comes in.

International arbitration litigation funding has long provided strong financial underpinnings for commercial and governmental entities alike in international arbitration proceedings around the globe. Disputes in venues like London, Paris, New York, and others are often backed on one or both sides by litigation funding partners.

The Landscape for International Arbitration

In our global economy, businesses must act quickly to take advantage of windows of opportunity. Contracts must sometimes be drafted quickly, and established relationships may not be available when needed. These uncertain circumstances create fertile ground for conflicts.
International arbitration is particularly well-suited to resolve disputes that arise out of these uncertainties. When an international contract includes an arbitration clause in countries that honor the New York Convention, the benefits are many:

  • Streamlined decision-making, which may help preserve important business relationships;
  • Less expense than traditional litigation;
  • Avoidance of a home court advantage for either party;
  • Party input in selecting the decision-maker;
  • Party input in establishing the terms of reference, which control the arbitral proceedings;
  • Finality of the arbitrator’s decision; and
  • Enforceability in the more than 150 countries that have agreed to abide by the New York Convention.

Importantly, courts in these countries will issue a stay of litigation to allow the parties to receive the benefits of an international arbitration clause.

However, despite the advantages of this method of alternative dispute resolution for parties to a dispute, the international arbitration process can be costly for law firms working in this area.

Costs of International Arbitration

Resolving complex legal matters through legal proceedings is often expensive, and international arbitration is no exception. A law firm representing a client in an international arbitration commonly faces many costs during the pendency of the proceeding, including administrative and filing fees, expert witness fees, information technology purchase and use, and travel, all in addition to personnel costs and other overhead. These burdens can create challenges in allocating law firm financial resources.

The Role of Litigation Funding in International Arbitration

Litigation funding has served as a strong financial resource in international legal matters for decades, helping to alleviate financial burdens like those above while allowing counsel to achieve other important goals, as well:

  • Meeting critical arbitration deadlines;
  • Managing client expectations;
  • Leveraging the speed and efficiency of international arbitration;
  • Helping clients obtain, enforce, or avoid arbitration awards; and
  • Helping clients preserve vital business relationships.

Litigation funding provides an alternative means to finance international arbitration, and it carries many benefits not offered by traditional funding mechanisms.

How Litigation Funding Works for International Arbitration

Perhaps the most significant benefit of litigation funding in the realm of international arbitration is that it is non-recourse, so it is risk-free to firms that use it.

Capital secured through this method is collateralized only by strong legal cases or matters chosen by the firm. If collateralized matters are unsuccessful, no repayment is required.

During the due diligence process, litigation funding companies usually consider a wide range of factors like these:

  • The nature of the underlying dispute;
  • The merit of the law firm’s legal position in the arbitration;
  • The firm’s track record in similar matters;
  • The procedural posture of the matter;
  • The seat of the arbitration;
  • The country in which enforcement is anticipated; and
  • Relevant case precedent, governing laws, and rules.

When working with Pravati Capital as your litigation funding provider, you need not worry about relinquishing control over your legal matters. We have a strong history of helping law firms prevail in international arbitration matters by providing only the financial support they need. We leave the lawyering to you.

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