Understanding the Balance in Third-Party Funding Arrangements: an approach.

Unlock your Assertiveness: Embrace the Frankness!

You read in the first post the Benefits of using a partnership with Third-Party Fundings (TPF) arrangements in your litigation/arbitration processes, while in the second one about the Costs of using such a same partnership to deal those processes. As a matter of fact, any financial arrangement is indeed an arrangement first and a specific kind of arrangement second.

Getting a Balanced situation among the parties takes similar requirements of any other agreement and similar behaviour among the parties: (i) mutual transparency, fair collaboration, and acting with honesty by the side of respective performance; (ii) achieving common main goals by the side of the aims and spirit; and (iii) improve trust and strength confidence by the side of the entrepreneur venture.

This third post aims to discuss how to approach a balanced relationship in an agreement like that signed with a third-party funder. The smart way of explaining that proach to them is by drafting some lines about the parties, the objective pretended in common, and the weaknesses and threads that aroses in the agreement frame.

I mean, for cases like the one described in the previous post about a conflictive situation and different circumstances engaged in the business schedule, the filters to overcome in the process or the claim and the counterparts requested for guarantees. They all are a matter of negotiation, and more of them go by the side of the claimant quality and the claim qualification. On the other hand, there may be a chance the third-party funder would have been working in their own interest, not only in terms of financial revenue but, unfortunately, in hidden interests against the claimants’ own. And, while third-party funders may act in their own financial interests, there is indeed a risk that these interests could conflict with the interests of the claimants they're funding. Thus, Alertness and Awareness from claimants are a must; they have to stay dynamic and above their natural claimants' biases.

[note: to talk about biases in market relationships, deserves different posts, and not only a series of three, but that is not the purpose of this one]

Transparency, collaboration and mutual good faith behind every party’s actions are drivers streaming their influence in two directions for a Balanced relationship. Both parties, in conclussion, should emcompassing a common pace to reach their respective achievements without compromising the common goal, and under the premise that a successful exit is not warned in a litigation/arbitration conflict any kind. A balance relationship is not an issue of succeding, but a matter of having matched a common criteria about the overall chances in a reliable way. Second intentions or lateral outcomes are not a different way to named warrantees for assuring unwilling fruitful options for one-party only.

Generally speaking, conflicts among the parties could manifest in various ways:

1. Settlement Pressure: Funders may push for settlements that maximise their financial return, even if those settlements aren't in the claimant's best interest. This could lead to premature or unfavourable settlements prioritising the funder's economic interests over the claimant's legal rights or long-term objectives. Public policies involving monetary issues, money prices (interest rates), changing banking rules, and changing financial controls are beyond many of the pressures here. It is hard to forget what happened in 2007-2008, with many financing projects close to collapse in those months and the precedents of public debt, credit expansion, money purchase power, and assets valuation.

2. Litigation Strategy: Funders may exert influence over the litigation strategy pursued by the claimant, potentially prioritising strategies that offer the highest chance of financial recovery rather than strategies that align with the claimant's broader objectives or values. In such cases, there is no possible conversation between one of the parties and supporters of hidden agendas.

3. Confidentiality Concerns: Funders may require access to sensitive information about the case, raising concerns about confidentiality and potential conflicts between the funder's interests and the claimant's legal strategy or reputation. This is the ordinary issue the funder should comply with in the early stages when filtering the claimant project for suitability venture.

4. Hidden Interests: In some cases, third-party funders may have additional, undisclosed interests or relationships that could influence their decision-making or actions in ways that aren't transparent to the claimant. This lack of transparency can exacerbate conflicts of interest and undermine trust in the funding arrangement. Hidden interests are something that influences all the possible conflict items in a transversal way.

[note: if you think, there is another conflict set not mentioned above, don’t hesitate to pointing it out in the comments].

These potential conflicts highlight the importance of (i) transparency, (ii) clear communication, and (iii) robust ethical standards in third-party funding arrangements. Claimants should carefully vet potential funders, thoroughly review funding agreements, and ensure their interests are adequately protected throughout the litigation or arbitration process. Additionally, legal regulations or industry standards (my driver of preference when drafting guidelines) that promote transparency and accountability in third-party funding can help mitigate these risks and foster greater trust in the system.

An abstract pattern of conflict to serve as a sample: hidden agendas (manifests #2 and #4 above)

It is delicate to show as a Pro to pursuing justice if this 'justice' ends in searching for the one by funding partners in the head of their particular purpose vehicle -SPV-, usually another partnership for the venture, instead of those requested explicitly in the claimant's position. I mean, portray third-party funding as a pro for pursuing justice while acknowledging the potential risks of conflicts of interest or hidden agendas.

Not the only possible, but here's a nuanced perspective on how to frame this 'Pro': Access to Justice and Risk Mitigation junction:

[note: any other proposal from readers will be very welcome to discuss; save it as comments]:

• Third-party funding can provide crucial financial support for individuals or entities with valid legal claims but limited resources, enabling them to pursue justice in litigation or arbitration. By partnering with funding entities, such as special purpose vehicles (SPVs), claimants can access the necessary funds to cover legal expenses, expert fees, and other litigation costs. This can help level the playing field and ensure that justice is not only available to those with deep pockets.
  

• However, it's essential to recognise that while third-party funding facilitates access to justice, it also introduces complexities and potential conflicts of interest. Claimants should carefully evaluate funding agreements, maintain transparency in their dealings with funders, and ensure that their interests are protected throughout the legal process; thus, alertness is key here. By navigating these challenges thoughtfully, claimants can leverage third-party funding to pursue justice effectively while safeguarding their rights and objectives; so, awareness is a must here.
  

Measures proposal to put into practise to minimised unwilling effects in the arrangements

There are some issues for tagging: (i) in the evaluation of the funding agreements, (ii) in the request for transparency in dealing with funders, and (iii) in ensuring the proper protection of claimants throughout the legal process. The three are duly hints to tag as the funder's partners (claimants) must ensure in the funding agreements. Key aspects of the above address the issues of evaluation, transparency, and protection, and all match with the virtues in business dealing with Assertiveness in your queries and Frankness in your requests::

[Assertiveness: Assertiveness is the personal ability that allows us to express feelings, opinions and thoughts, at the right time, in the right way and without denying or disregarding the rights of others.]

[Frankness: Frankness is the voluntary practice of a sincerity that cannot be harmful. It is a firm will to keep words in agreement with the truth, taking into account the limits outside which it changes its name.]

(i) Evaluation of Funding Agreements:

1. Terms and Conditions: Clearly outline the terms and conditions of the funding agreement, including the funding amount, repayment terms, and the funder's share of any proceeds.

2. Exit Clauses: Include provisions for terminating the funding agreement, such as in the event of a settlement, adverse judgment, or changes in circumstances.

3. Conflicts of Interest: Specify mechanisms for identifying and addressing potential conflicts of interest, ensuring that the funder's interests align with those of the claimant.

4. Costs and Fees: Detail all costs, fees, and expenses associated with the funding arrangement, including management fees, success fees, and reimbursement of expenses.

(ii) Transparency in Dealing with Funders:

1. Disclosure Requirements: Require the funder to disclose any potential conflicts of interest, affiliations, or additional interests that could affect their objectivity or decision-making.

2. Communication Protocols: Establish clear communication channels between the claimant and the funder, including regular updates on the progress of the case and any significant developments.

3. Access to Information: Specify the scope of information sharing between the claimant and the funder, ensuring that sensitive information is protected while still allowing for transparency and collaboration.

4. Independent Advice: Encourage claimants to seek independent legal advice before entering into the funding agreement, ensuring that they fully understand their rights, obligations, and potential risks.

(iii) Ensuring Proper Protection of Claimants throughout the Legal Process:

1. Confidentiality Safeguards: Implement measures to protect the confidentiality of information shared with the funder, including confidentiality agreements and data security protocols.

2. Litigation Control: Clarify the respective roles and responsibilities of the claimant and the funder in decision-making processes related to litigation strategy, settlement negotiations, and case management.

3. Ethical Standards: Require the funder to adhere to ethical standards and industry best practices in their interactions with the claimant and throughout the legal process.

4. Dispute Resolution Mechanisms: Include provisions for resolving disputes or disagreements that may arise between the claimant and the funder, such as through mediation or arbitration, to ensure timely resolution and minimize disruptions to the litigation process.

By incorporating these elements/drivers, or others, into their funding agreements, claimants can mitigate risks, promote transparency, and safeguard their interests throughout the legal process when engaging with third-party funders. Suppose both parties, after the signing, feel relief, having done their respective best in the funding contract. In that case, both can afford the venture of the .processes with the same spirit, even though the future is not written in advance nor can they ensure success in any venture.

Four hints to grab about the theme and the post series:

1. The series of three posts discuss the importance of achieving a balanced relationship in agreements involving third-party funding for litigation or arbitration processes. They highlight the necessity for mutual transparency, fair collaboration, and acting with honesty among the parties involved. 

2. The last one post emphasizes the need to align common goals, address weaknesses and threats, negotiate effectively, and be cautious of potential conflicts of interest, especially from third-party funders. 

3. The overarching goal is to establish a balanced relationship where both parties work towards their respective achievements without compromising the common goal. It stresses the importance of avoiding hidden agendas and focusing on genuine collaboration to ensure reliable outcomes.

4. These potential conflicts underscore the significance of transparency, clear communication, and strong ethical standards in third-party funding arrangements. Claimants must rigorously assess potential funders, meticulously review funding agreements, and safeguard their interests throughout the legal process.

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