Popularity of arbitration finance

The arbitration finance industry is growing at an ever-increasing pace, and it sets to become considerably more popular in 2019 and the years ahead. There are different factors that attributing this rise. We take you through some of the main reasons.

Growing awareness

People are becoming increasingly aware of the benefits of arbitration finance, in part due to the geographic expansion of this product. For example, we have seen that this year in Hong Kong, it recently launched its Code of Practice for Third Party Funding of Arbitration, which has opened the doors to the arbitration finance sector. This has had huge implications as it means that Hong Kong will now be at the forefront with other international arbitration leaders such as Singapore. Due to the new interest in arbitration finance and the variety of regulatory reform surrounding it across the globe, it has led experts to confidently predict that this type of funding will grow ever more popular.

Favourable perception

Another key factor attributing to the growing popularity of arbitration finance is that experts have shown that the more people encounter this type of finance, the better their perception of it becomes. When it comes to investor-state as well as commercial arbitrations, this type of finance is becoming a common practice.

Arbitration is becoming more favourable with claimants as they get more familiar with it.

In terms of peoples perception of it, once encountered it is received in an overwhelmingly positive way. A recent International Arbitration Survey carried out by Queen Mary and White & Case showed that over 97 per cent of those surveyed were aware of arbitration, and had a positive perception of it too. Furthermore, in a similar survey carried out in 2015, the overall perception of third-party funding had shifted from simply neutral to positive.

Increased focus on monetisation

To be clear, monetisation enable a claimant to be able to receive the financial benefit of an arbitration award with out the risk of annulment or set aside. As a result, this increased focus has helped arbitration finance to be seen favourably with businesses, as being able to pursue unpaid arbitration awards clearly has huge advantages for firms. Given that in 2019, some of the largest arbitration awards are pending in set aside or enforcement proceedings in court across The Hague, the UK, the US and Sweden, it is likely claimants will continue to pursue the option of arbitration finance in the future.

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