While I was considering joining the exciting new world of dispute resolution funding, I was primarily interested at first with my peers’ reservations about this new and growing industry as the advantages were already obvious to me without much investigation.
Although I must be fair, most of the seasoned dispute resolution practitioners that I have been discussing my decision with were very enthusiastic about the prospects of dispute resolution funding and the cutting edge aspects of the practice.
However, once a contentious lawyer, always a contentious lawyer, so I was keen to play the devils’ advocate and explore the objections or concerns that I heard (sometimes overheard) about third party funding and come to my own conclusions before making the jump.
Interestingly, the objections were often a little vague. It transpired that, mostly without any concrete cause for concern, there is an “Ick Factor” associated with third party funding.
I have therefore tried to clarify the elements giving rise to the “Ick Factor” and set out to describe certain of them simply below along with my findings when digging further into the industry practice.
The reality is that a funder that has made a serious and well analysed investment decision will never, and cannot stop, a good settlement. First, when examining the quantum of a case, a funder will always take into account, and discuss with a claimant, settlement options and make sure that the realistic quantum figures at play will always leave enough room to satisfy both the funder and the claimant if a settlement offer arises. Secondly, it is also in the funder’s best interest to recover its investment and a return of its investment earlier rather than potentially hoping for a greater amount later given the inherent risk factor linked to dispute resolution. Finally and more importantly, a settlement decision is always that of the claimant. The claimant does not have to involve the funder in anyway if it does not wish to do so. Simply put, the consent of the funder is not required to settle a dispute.
I have been asked whether the funder chooses the lawyer. The answer is no. However, a funder may refuse to fund a good case if it believes that the claimant is not adequately represented. The lawyer / funder relationship is fundamental to the success of a case. One should strive to build trust and a collaborative atmosphere as opposed to an adversarial relationship.
Serious funders make sure that the claimants they finance are as well represented as possible with the best legal team available. The claim is an investment for the funder which pays for legal fees amongst other things. This is not a tool to take control but a right to get the best representation for the claimant that their money buys. Therefore, with this mind, it is in a funder’s best interest to let the best legal team get on with their work without getting in the way. All a funder needs is regular contact with the legal team and to be kept abreast of all relevant issues that arise.
The strategy, choice of experts and witnesses are issues for the claimant and their lawyers to ultimately decide. However, within a good collaborative relationship, a funder could also bring a helpful set of extra eyes or share relevant past experiences that may help the decision making process.
These issues vary according to each jurisdiction and upon each lawyers ethical rules. The best practice is therefore to adapt each relationship to the particular circumstances of each case. For instance, we have had the occasion to review the particular requirements of the French bar and we adapted the terms of the relationship with French lawyers in order to make sure that we all respect at all times their ethical rules. Although the respect of ethical rules is not strictly speaking the funder’s responsibility, we had at heart to ensure that no unwelcome claims of unethical conduct could ever taint our involvement in a dispute. We treat everything our clients say and every piece of information they send us with the highest level of confidentiality. We store all documentation securely on our bespoke case management software platform (VCMS) which uses 128 bit SSL encryption and sits on our own secure virtual private network (VPN).
Responsibility and flexibly must be key when examining these important issues.
There are risks associated with each course of action for a claimant. The reason for requesting disclosure is that the information may give rise to the knowledge of a potential conflict of interest which can thereafter be disclosed and dealt with appropriately, depending on the situation, without jeopardising the integrity of proceedings or more importantly of the consequential decision.
Disclosure may however either lead the court or the tribunal to award security for costs or to draw inferences from the existence of the funder which may modify its appreciation of the facts and the law.
We are only too aware if these issues and we strive to have carefully considered these issues before they even arise. Therefore, funding a case when it may give rise to a potential conflict of interest would be unwise and similarly, to not inform the claimant that a particular choice of arbitrator may give rise to a potential conflict would also be unwise and very poor management of a dispute. The funder would then be gravely jeopardising its own investment.
As a preliminary conclusion and before I report further on these and other issues which are brought to my attention, it is clear to me that all the elements of the “Ick Factor” are essentially contingent to the funder used and the relationship established between funder, claimant and lawyer. When a responsible and serious funder is involved, all of these issues should have been considered, discussed and addressed before a problem ever arises.
I have naturally selected the top “Ick Factors and I would be delighted to engage with any readers on any aspects discussed above or any other issues they have identified.
For more information on Vannin Capital, please contact: Leanne Harker, Marketing at Vannin Capital, T: +44 (0)1624 615 111, E: firstname.lastname@example.org