Jams Dispute Resolution -- Spring 2012


In This Issue:

IN DEPTH -- Growing Trend of Third-Party Litigation Funding Creates Mixed Opinions; ADR CONVERSATIONS -- JAMS Panelists Receive Prestigious ADR Award; ADR NEWS & CASE UPDATES; DOMESTIC FOCUS -- Good Faith Requirements Must Be Based on Objective Criteria; GOOD WORKS -- JAMS Pays Tribute to Ray Shonholtz, Founder of Partners for Democratic Change; INTERNATIONAL FOCUS -- Germans Propose Law to Increase Use of Mediation; and WORTH READING -- The Social Animal: The Hidden Sources of Love, Character and Achievement.

Excerpt from Growing Trend of Third-Party Litigation Funding Creates Mixed Opinions

Third-party litigation funding, also referred to as third-party financing of lawsuits, alternative claims financing or alternative litigation funding, is a growing business in international arbitration, particularly in Australia and the United Kingdom, and is now being looked at domestically by investors and law firms.

In general, the process involves an outside investor with no connection to the dispute, most likely a corporation that specializes in funding lawsuits or a hedge fund with the same investment strategy. That entity contracts directly with the claimholder (sometimes funders contract with the law firm, but there are fewer conflicts and ethical issues if the contract is between the funder and the claimholder) to provide funding for the claim, and in return, the investor would be entitled to recovery of the principal advanced and a percentage of any recovery. However, in the event a claimant is unsuccessful, the investor would receive nothing.

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