Advantages And Disadvantages Of Third Party Funds

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Third party funding in Arbitration
When a person, institution or organisation not involved in the arbitration provides to a party of that arbitration for an agreed return it is termed as third party funding. The third party usually covers the party’s legal fees and expenses incurred in the arbitration.
Insurance agencies, venture banks, law offices have now entered the third party funding market. Third party funding or “case fund” as it is referred to have undergone an era of development it is being utilised for a more extensive scope of purposes.
Law in India
In India with the advent of the Arbitration and Conciliation (Amendment) Act, 2015 and the establishment of the MCIA , India has expressed its inclination towards Arbitration. The concept of third party funding is still an unexplored concept in
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Further, in the face of so much pressure and seemingly endless resources, defendants could feel pressured to settle for far more than they should. Conversely, plaintiffs could be pressured to settle for less, in order for the fund to safely recoup as much of the initial investment as possible, as soon as possible.
Advantages and Disadvantages of third party funding
There are certain focal points that due to which a potential inquirer may approach a funder for different reasons like – Risk Management, validation and necessity.
Necessity - Arbitration is an expensive affair; if the claimant does not have the necessary means to pursue the claim funding might be the only option.
Validation – The party funding the Arbitration will conduct extensive due diligence and extensive research on the merits of the case before agreeing to provide funds. They are interested only in good claims. This helps the claimant as it shapes the case procedure and the backing of the funding party empowers the position of the
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