THIRD-PARTY FUNDING: CAN COSTS BE AWARDED AGAINST THIRD-PARTY FUNDERS BY AN ARBITRAL TRIBUNAL?
Third-party funding has seen incredible growth over the last few years with traditional funding arrangements moving toward more novel structures, such as corporate financing models. Burford, a leading funder, has recently offered corporate portfolio funding, financing both BT’s portfolio of pending litigation matters and a £9m insolvency portfolio financing deal with Grant Thornton.
This is a profitable business, with funders usually seeing a return (in traditional plain vanilla arrangements) of 300 percent of the funds advanced by the funder or approximately 35 percent of the amount recovered in the event of a successful outcome.
In the recent case of Essar Oilfields Services Limited v. Norscot Management Pvt Limited, the English High Court held that, in the context of a London-seated arbitration, a successful claimant could recover the costs of its third-party funding (for example, the uplift payable). However, to date we are not aware of any arbitral award ordering a third-party funder to pay adverse costs.
So that leaves open the following question: if a funded party is now able, in an English-seated arbitration, to recover its cost of funding (thus encouraging more parties to seek funding) is there any other way of putting funders on the hook, either directly or indirectly, in the event that a claim is unsuccessful?
Jan-Mar 2018 issue
O’Melveny & Myers LLP