Dmitry Kaysin, Partner and Head of dispute resolution practice at Rybalkin, Gortsunyan, Dyakin and Partners law firm (RGD), has shared his thoughts and recommendations at the session on third-party funding in court and arbitration proceedings, which took place as part of the X St. Petersburg International Legal Forum. In his speech, Dmitry Kaysin shared his experience of how communications with institutional players is organized and revealed general conditions under which parties can arrange funding.
Dmitry has described the generic communication procedure with the financing party (funder), where the law firm prepares a memorandum-portfolio disclosing the essence of the requirements, the jurisdiction of the proceedings, the question of the enforceability of the solution based on practice and the budget not only at the stage of proceedings, but also at the execution stage, which allows the funder to assess the cost of the process and financial solvency of the defendant.
The variability of methods for determining the remuneration of funders is never limited, but according to practice, funders are open for a deal if the returned funds exceed the investments by 3-4 times, and the funder itself will have certain guarantees that allow strategic control over the course of the proceedings, including conditions of the settlement agreement.
Participation of the funder could potentially create a conflict of interest within the arbitral tribunal, however, the situation has begun to change recently and the arbitration rules oblige the parties to disclose the fact of third-party funding, including the information about ultimate beneficiaries.
Dmitry Kaysin noted that he has never been supportive of the excessive interference of the regulator into legal relations, however, he believes that in relation to the third-party funding within arbitration disputes, it is necessary to resolve three main issues: (1) the obligation to disclose the fact of funding and the information about the ultimate beneficiaries; (2) fixing exceptional grounds for terminating the financing agreement, as well as the limits of the funder's intervention in the course of arbitration proceedings in cases involving a weak party that seeks funding; (3) establishing the funder's eligibility for a success fee. All these proposals can be adopted by amending the relevant laws. According to Dmitry, other regulation of this specific area is currently redundant.
The session was represented by leading Russian and international arbitration experts, representatives from major international arbitration centers, including Deputy Secretary-General at Hong Kong International Arbitration Centre (HKIAC) Eric Ng, and members of academic community.
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