Enforcement issues with Third Party Funding / Litigation Funding

Kindly recorded by Conventus Law in Hong Kong, Olivia de Patoul, Senior Legal Counsel at Deminor talk about enforcement issues with third party funders #TPF #LitigationFunding Read full article Pandemic to drive Asia’s adoption of Third Party Funding - https://www.conventusleadership.com/post/pandemic-to-drive-asia-s-adoption-of-third-party-funding

Key extracts:
Although funders use different value-based criteria to decide which cases to take on, de Patoul said the decision to back a claim hinged on risk vs reward considerations, with funders tending to gravitate towards cases where damages can be objectively calculated.

She added: “We have seen a lot of construction claims recently in arbitration, where the amounts are generally high. The major difficulty with construction claims is having a proper claim value that can be objectively assessed and not only depends on expert opinions.”

Winning a case and not being able to enforce it is also a major concern for funders and weighs heavily on their due diligence process. “Jurisdiction and place of enforcement are key. A major question is always: ‘Can we enforce the award and make sure that payment will occur?’,” de Patoul said.

She added: “The current downturn has obviously affected questions about enforcement. For example, when the defendant is specialised in an industry that has been hit particularly hard by the pandemic, such as aviation, it might affect our decision process. If you compare this to a couple of years ago, aviation wasn’t considered risky in the slightest.”

Other potential enforcement red flags typically include whether a counterparty will go the distance of the case and whether the defendant is able to pay out at the end. She said: “If the defendant is an empty shell, with no assets, this is obviously a no-go.”

Third-party funders have also begun reviewing their strategies, with a growing number of players opting to co-fund cases and share the risk.

“Many funders, including Deminor, are investing smaller amounts in more cases. While we’re not risk adverse, we are approaching our risks differently by opting for co-funding and having other funders involved in the process,” de Patoul said.

Interest in TPF has been growing in line with the rising number of arbitration cases in Hong Kong and Singapore, with the downturn only expected to stimulate awareness in the coming years. Another long-term driver of interest in external funding will likely be mainland China’s trade and development programmes.

For more details on Deminor's litigation funding solutions, please visit: https://drs.deminor.com/en/commercial-litigation

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