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Law360: Third-Party Funders' Business Is Booming During Pandemic


Reign Mack

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The economic turmoil unleashed by the COVID-19 pandemic has left few businesses throughout the world untouched, but for arbitration and litigation funders, the past few weeks may mark the beginning of a boom.

Even as uncertainty about the future has gripped the global marketplace, one certainty has pervaded the minds of many business owners and lawyers: Disputes are going to be inevitable as global supply chains break down and the hospitality, tourism and other industries struggle to keep their heads above water.

But even among enormous multinational corporations, the question of how they're going to fund the likely expensive and lengthy litigation and arbitration brought about by the current crisis has become a more pressing inquiry in recent weeks. It’s prompted many of them to begin turning to third-party funders.

"Frankly, we're drinking from a fire hose," said Allison Chock, U.S. chief investment officer for funder Omni Bridgeway. "One of the things we've been talking about for some time now is the trend in corporations that historically paid for the legal expenses beginning to explore using litigation financing instead. ... That is now becoming a more urgent trend."

And it's not just for new cases. In fact, many inquiries being fielded by Burford Capital for potential funding relate to claims that are underway. These potential clients may be midway through the process or have an arbitral award already in hand, said Jeffery Commission, a director for Burford who oversees the firm's underwriting and investment activity in investor-state and international commercial arbitration.

"In the last few weeks, there's definitely been a significant uptick in inquiries," he said. "Increasingly, we are seeing claimants or their counsel reaching out to us at various stages. ... They're under some stress to find ways to save capital, and one way to do that is to seek funding."

Third-party funding is somewhat unique among industries in that it's countercyclical, or at the very least uncorrelated to what the markets are doing generally, Chock said, referring to the fact that the value of claims in litigation and arbitration remains the same regardless of what the market is doing.

 
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