AN EMERGING SECONDARY MARKET FOR INTERNATIONAL ARBITRAL AWARDS
Third-party funding (TPF) is a business transaction whereby a funder pays the litigant’s costs and expenses in exchange for the assignment of a share of the litigant’s recovery. If the funded litigant loses, the funder will lose the investment; if the claim is successful, either in litigation or settlement, the funder will receive a portion or percentage of the recovery. A twist on TPF is the assignment of the arbitral award for a discounted price of the award’s face value to a third party purchaser. This occurs particularly in cases where the enforcement of the arbitral award may pose a significant challenge to a claimant who has emerged successful after a possibly long, arduous and expensive arbitration proceeding. Indeed, a financially exhausted claimant may face an ordeal in finding assets of the losing party in different jurisdictions and then enforcing the award against these assets. Enforcement proceedings are not always easy or free from motions to deny such enforcement. With a host of litigation financiers ready at the sidelines to convert such potential difficulties into potential profits, a burned-out and depleted claimant can recover a significant portion of its award almost instantly by selling its arbitral award. An arbitral award may be sold or assigned like any other commodity – a practice which is becoming increasingly common today.
Apr-Jun 2015 issue
B. Cremades & Asociados