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Third parties cover arbitration costs: advantages and disadvantages for justice

Even access to justice involves, in most cases, the use of economic resources. These are not always available to the plaintiff. Payment of professional fees to lawyers, cancellation to request or legalize documents, or other costs must be assumed to start any process. International Justice cases usually involve more expenses, due to the number of people involved and situations to be faced.

In recent years, solutions have emerged to address these limitations. Through third party financing called litigation funds. This practice has spread in the United States and some European countries. such as England, Germany and more recently Spain.

Faced with the need for justice felt in international jurisdiction cases, the injection of resources to cover legal expenses is, above all and in the first instance, a support for access to justice. These litigation funds are specifically investment groups specialized in providing financing for various legal processes, especially in cases of international arbitration and commercial disputes.

These funds have no interest per se in the substantive aspects of the arbitration. So they invest with the intention of making some percentage of profit when the case is closed. If one of them evaluates the legal process and agrees to finance it, it suggests that the case has a high probability of winning, since the financial company is investing resources in it.

In third-party funding of international arbitration, also known as Third Party Funding, the range of procedural expenses covered by the agreement is very diverse and includes even the future condemnation if it should be the decision of the court.

Advantages of third-party financing for justice

The main benefit of this figure lies in the possibility of increasing access to justice for individuals or groups of people who are unable to finance litigation, which, especially in the case of International Jurisdiction, usually requires a large investment of economic resources.

For those who finance litigation, it is important to reduce the time of the process. This avoids lengthening the time and thus the economic costs. In this sense, the interest is to obtain a legal result without the litigation extending beyond the established time, which of course translates into faster and more efficient access to justice.

Likewise, obtaining funding for litigation opens the possibility for other just causes to be heard and various cases of International Jurisdiction can find light in legality.

Some risks to pay attention to

The presence of Third Party Funding also poses some risks in legal practice. One of those that has been quickly visualized is the possible generation of a significant increase in litigation in the field of international arbitration. In order to reduce this possibility, the financing companies should carry out a thorough evaluation of the case to ensure the security of the investment.

However, perhaps the one that is of most concern refers to important ethical dilemmas when including a third-party funder in the legal process and which may influence the relationship between the client and his lawyer. In that sense, the risk that these relationships may condition the decision making during the procedure, or the violation of the confidentiality rules established between the lawyer and the client, has been brought to the discussion.

The figure of the financier may also entail a possible conflict of interest with respect to the arbitrators. This would be detrimental to their impartiality, integrity and independence, qualities that cannot be ignored in an arbitration proceeding.

The possibility of these actions requires that the financing be reviewed and studied within the framework of the law. Even proposing legal instruments that contribute to regulate in some way this figure that undoubtedly also represents a gain for access to justice.

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