Companies in the UK and abroad often turn to commercial arbitration as a form of alternative dispute resolution rather than pursuing potentially expensive litigation through the court system.

It is essential for any party seeking to resolve a commercial dispute using arbitration to have sufficient resources to fund their case, whatever the outcome. However, there are those who do not have access to the legal finances required, and may have difficulty financing their case. A party undergoing a dispute could be liable for any costs incurred, unless an alternative method of arbitration and litigation finance is put in place.

Annecto Legal fills the gap when clients require access to professional legal advice on any business-related issue. We help to remove financial uncertainties and the need for balance sheet protection against unforeseen legal expenses at a low cost.

We understand that legal disputes can be disruptive and inconvenient, and that covering the cost of the legal support you need is not always easy.

What is commercial arbitration?

Disputes can be resolved outside the court room through an arbiter. An arbiter is one or more people, agreed upon by both parties, elected to hear both sides of the argument and come up with a resolution. The arbiter has an obligation to disclose matters which would or might lead to the conclusion that they are biased prior to arbitration proceedings.

Arbitration can be either mandatory (stipulated in a contract that the parties have already agreed to), or it may be entered into voluntarily. The final decision of an arbiter can be either legally binding or non-binding, depending on what has been agreed in advance. A binding decision cannot usually be appealed and can be enforced by the Courts, if necessary.

If arbitration is not stipulated in a contract as the preferred method of dispute resolution, it can still be chosen by the parties once a dispute has arisen. Either way, placing matters in the hands of an independent specialist makes it an attractive method of commercial dispute resolution, especially when it comes to highly technical and complex disputes. There are many forms of arbitration, including ICC arbitration and investment treaty arbitration.

Methods of commercial arbitration funding

Third party funding – Third party funding (TPF) is a funding agreement in which an independent funder with no prior connection to the dispute agrees to finance all or a part of the legal costs of the arbitration in return for a fee payable from the arbitration awards.

With the help of third party funding arbitration, you can avoid taking any financial risks as the funder pays for everything in return for a share of the damages. If the case fails, the funder bears all the costs – you pay nothing.

In return for taking the risk, the funder will typically seek in the region of a fifth to a third of any damages recovered. That means you keep up to 80% of the reward, having taken none of the risk. In larger cases the costs might be such that you actually keep well over 90% of the returns. Third party funding can also be used alongside other available funding arrangements, such as ATE insurance, conditional fee agreements and damages-based agreements.

Third party funding is a commonly used funding method in international arbitration proceedings. 

After the event insurance (ATE insurance) – After the event insurance provides financial cover against the costs incurred in bringing or defending legal or arbitration proceedings. It protects the insured from the exposure of having to pay adverse costs.

ATE can be used to pay the opponent’s costs in the event that you lose your case, and it can also be used to provide security for costs should that be necessary. Where freezing injunctions are necessary, insurance can also cover cross-undertakings for damages, as well as the risk of the injunction hearing itself.

After the event insurance can be taken out regardless of how a case is funded, whether the party is financing its own case, has involved a third party funder or involved its solicitors to act on the basis that their costs will be covered from the recoveries in the case under a damages based agreement or a conditional fee agreement.

How can Annecto Legal assist?

 Annecto Legal accesses scores of providers of commercial arbitration and litigation funding and can help you get the access to justice you need for your case. If necessary, we can also recommend specialists in the particular area of law that you need, including UK and international commercial arbitration.

Securing funding for arbitration is not straightforward, so having a partner that understands the concerns of financiers and can assist in how your case is presented, as well as negotiate the right deal for you is crucial.

Get in touch with an expert member of our team to find out which commercial arbitration cover is the right arbitration funding choice for you.

Call us today 0800 612 6587, or our director, Mark Beaumont, can be contacted by email mark.beaumont@annectolegal.co.uk