How Defence-side Funding Can Benefit Respondents in ADR

  • August 13, 2019
  • Athanasios Papadas, LLB, LLM (CIV. PROC.; INTL BUS. LAW)

The concept of non-recourse dispute funding is not new; numerous claimants in Canada have been contacting third-party funders seeking to hedge all or part of their legal costs exposure upon commencing or continuing legal proceedings. Others are keen to monetize awards issued in their favour, because their opponents have applied for some type of review or simply are not willing to comply voluntarily, which may lead to protracted enforcement proceedings. This type of award monetization is also desirable in situations where settlement monies are wired to prevailing parties long after they enter into an agreement.

In a similar vein, lawyers frequently wish to offload all or some of the risk that contingency fee arrangements entail. Further, those who charge flat or hourly fees may be able to take on meritorious cases even if clients are not comfortable paying sometimes astronomical amounts out of their own pocket. Alternatively, legal practitioners might be able to have a funder provide them with working capital. This way, for instance, they can branch out into other jurisdictions and/or areas of law, advance a higher number of claims, and hire more staff; in short, develop their business with funds that a traditional lender would not typically offer. In the latter scenario a funder would likely use as collateral all or part of the practitioner’s cases, whether ongoing or future, claimant or defence-side.

You read that right: defence-side. Although third-party funding (TPF) in the context of financing claims is now well entrenched in legal services (including ADR) on a global scale, it fails to capture a high percentage of the total addressable market: defence-side financing is another, yet frequently overlooked, facet of TPF.