When is enough, enough and when is it too much? When considering the merits of a case, funders want to know as much as they can about the claimant, respondent, the lawyers, the adjudicators and that’s just to tick a few first level review boxes.
Then the probing starts and our foundational issues are discovered by digging deep into areas of quantum, enforcement, jurisdiction, liability and causation. This is in its essence the basic outline of all good merits reviews that most contentious lawyers are familiar with. However, time is a factor and an incredibly important one in the funding world. Unlike in private practice, merits reviews are often taking place alongside other funders who are undertaking the same merits review. It’s like making the transition from ordinary chess to speed chess. As soon as the NDA is signed, the clock starts. Long gone are the days where funders can proclaim that they love a case and tie a claimant into a three month exclusivity period as they leisurely trawl through each document only to raise questions that should have been raised at the outset. The market is maturing and there is little tolerance for such tactics. It is incumbent on funders to front load due diligence as much as possible in order to compress the exclusivity period into an examination of key points where external expertise can be reasonably incurred, when required. It is an exercise that should give comfort to both the claimant and their lawyers as much as to the funder and it should be short. By the time exclusivity and terms are being discussed, a funder should understand the foundational points on which a dispute will stand. Exclusivity should not be the beginning of a voyage of discovery. Exclusivity is the phase where you have enough information to identify the points that need stress testing. Given the importance of time in deciding whether to fund a case, when is enough information simply too much information?
In economics and science fields practitioners are familiar with the concept of the inverted U curve. It is a concept that funders should embrace and graft onto their minds for effective case assessment. The inverted U curve models the inflection point at which the addition of units, for our purposes, information in the form of documents, pleadings and correspondence, stops making something better or clearer and actually makes something worse and less clear. Effectively, it is the tipping point at which optimal information for clarity becomes too much information and leads to obscurity. The inverted U curve for case assessments is composed of three parts. There is the left side where having more information, more documents, more correspondence, makes the dispute clearer. There is the flat middle, where more information does not make much difference. And there is the right side, where more information actually makes the dispute less clear.
The right side of the graph is the proverbial inability to see the wood for the trees. It is of course a tough balance to strike but a funder who asks for too little information is effectively gambling (left side of the graph). Whereas a funder who asks for too much information slows the process down and is increasingly at risk of chasing non points and adding little value. As funders our assessments can add value and should beyond the return on investment. The claimant should feel that he is getting not only financing but an experienced extra set of eyes. Furthermore, the lawyer running the case should not feel burdened by irrelevant or unnecessary probing of peripheral issues. An effective case assessment needs to know when enough is enough. When is that exactly? It is at the point where the foundational issues of a dispute have come to light.
Recently at a conference hosted by Freshfields the question was put to an eminent arbitrator – how often have you seen a case decided on an issue that wasn’t a core issue? The answer was an uncategorical never. The point that was being made was that 300 page briefs identifying 30 issues in contention are often not a sign of a robust pleading and more a sign of a costly and inefficient pleading. The same principle applies to funders when grappling with assessing investment risk. The objective of effective case assessments is to identify the core issues on which the dispute turns and to track them over the life of the dispute. The foundational issues must be identified at the funders risk to mimimise the exclusivity period where the foundational issues are stress tested. It is a funders non-financial value add and when done well it means that a funding agreement can be put in place quickly and with minimal disruption to the progress of the dispute. It is the sweet zone at the pinnacle of the inverted U curve where enough really is enough.
For more information on Vannin Capital, please contact: Meika Aysal, Marketing at Vannin Capital, T: +44 207 099 5180, E: email@example.com