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There are various names such as litigation finance, litigation fund, third party funding (here, it is referred to as third party funding (TPF)), but it takes over the high legal fees in international litigation and international arbitration. The proceedings have become popular in the United Kingdom, the United States, and Australia in recent years, and are spreading in Singapore and Hong Kong in Asia.
Proceedings against companies that hesitate or give up on reasons such as "patent proceedings are expensive" or "we are not prepared to bear a large amount of legal fees" despite contract violations and patent infringement. Instead of taking over the costs of arbitration, the TPF will receive 10-40% of the compensation that will be obtained if the case is won, or the legal office and the TPF will split the court costs in half and bear the amount if the case is successful. We provide services such as receiving several times as much from the company side.
At FRONTEO, we invited Quinn Emmanuel Arkhart Sullivan Foreign Law Office Tokyo Office Representative / Partner Ryan Goldstin, US Attorney and IMF Bentham Chief Investment Officer (Asia) Tom Glasgow, respectively. New litigation / arbitration strategy-How to use third parties in US litigation that even beginners can understand- "" Funding for dispute resolution-Risk management, cost reduction, monetization of dispute resolution- " He talked about how to use third parties to prepare for offense and defense, as well as the basic concepts of third-party litigation / arbitration costs and how to use them to reduce the burden on legal budgets and internal resources. ..The contents of the seminar are summarized below.
"New Proceedings / Arbitration Strategy of Japanese Companies-Third Party Utilization in US Proceedings That Even Beginners Can Understand-"
(US Attorney Ryan Goldstin)
I want Japanese companies to know
Companies in the United States, China, and South Korea will immediately file proceedings as a business strategy.If you have the right to sue, the idea is to take advantage of that right.However, Japanese companies, even if they have the right to sue, prefer to discuss it before filing a proceeding.If the other party is an international company such as the United States or China, negotiations will be postponed for a year or two, and even if you try to claim damages, it will be late and you will miss the opportunity to put pressure on it.I think there are two reasons why Japanese companies do not file proceedings from the beginning.One is that it costs a huge amount of money.Sure, American proceedings are expensive, but if you win or reach a settlement, you can get more than the legal fees.Another reason is that we are afraid of counterclaims from the other party.If it is related to intellectual property, the other party may have a patent, but there is still plenty to fight.After all, the biggest reason is legal costs, but if you do not take advantage of the right to sue, it will be disadvantageous for the company, so if you have the right to sue, I would like to think together and think of a solution.
TPF concept
In the United States, there is an idea that if there is a merit claim (contract breach, patent infringement), it should be resolved in a proceeding.Businesses investing in litigation and arbitration (TPF) are beginning to invest as if they were buying stock. If you can get 2 million yen or 6 million yen by investing 8 million yen (payment of litigation and arbitration costs), you want to invest. In TPF, instead of paying the full cost of proceedings and arbitration, there is a way to charge 〇〇% of the amount to be entered when the case is won, or the law firm and TPF do not form a partnership with the company and TPF. There is also a way to divide the success fee from the company between the law firm and the TPF.Even if it's not a performance fee, the lawyer can rest assured that TPF will pay the attorney's fee in typical funding.
However, since it is an investment, the TPF emphasizes the winning percentage of proceedings and arbitration and the amount of damages that can be obtained.We decide whether to invest from various perspectives, such as where to file a proceeding, the content of the proceeding, how long it will take, and the quality of the lawyer.
Legalization of TPF
In the past, third-party litigation funding was prohibited under the "Maintenance and Champerty" proceedings on the common law in the United Kingdom.Nowadays, the law is being revised and the TPF is legalized, and most of them are not illegal (not allowed in certain states in Ireland and the United States).Japan is currently undergoing a debate.
"Funding for Dispute Resolution-Risk Management, Cost Reduction, Monetization of Dispute Resolution-"
(Mr. Tom Glasgow)
From the standpoint of a TPF operator
IMF Bentham is one of the largest TPF operators in the world, undertaking legal costs such as inter-company disputes, arbitration, bankruptcy claims and class actions, and receiving a portion of the recovery amount in return.In the case of a loss, we will not ask the business operator for any repayment or financial burden, and we will recover the cost at a predetermined rate only when we get compensation for winning or reconciling.
Benefits of using TPF
When the IMF interviewed corporate legal advisors, CFOs, and CEOs about their litigation and arbitration efforts, what is currently required of businesses is 1) to achieve much with less resources 2) complex Managing risks in the international community, protecting corporate interests, and creating a stronger corporate image than competitors 3) Monetizing litigation was often mentioned.
With limited resources, there is an urgent need to utilize internal resources, but some modern companies have challenges that cannot be dealt with by themselves, and as a result of considering the balance of profits, some companies choose to avoid conflicts. That's what Glasgow says.They stop pursuing or reconcile with unfavorable conditions.This exposes a vulnerable image that is unprepared for the benefit of the enterprise.
However, if the method of proceedings is selected, many companies will rely on their own capital, so the companies will take risks at once, and the budget that should be used for the main business must be diverted to the proceedings. In reality, there are many situations.
Therefore, by utilizing TPF, it is possible to secure the budget required for the main business and create value without taking risks regarding billing.In terms of corporate reputation, filing a claim can bring a strong corporate image to the market.By working with an experienced TPF in litigation and arbitration around the world, we can inform the market that we have succeeded in gaining a strong and highly specialized resource on our side.
Not limited to small and medium-sized companies
It is not limited to small and medium-sized companies that are exposed to litigation and arbitration cases and have difficulty raising funds.Large-scale enterprises and conglomerates also have budget restrictions, and when it comes to large-scale enterprises, the business divisions are subdivided and strict budget control is carried out there, so there is flexibility to respond to proceedings. It may be scarce.Law firms are no exception, and if you have a performance-based contract, you won't get paid until the case is resolved.In the meantime, you also have to pay labor costs, rent and other overhead costs, which becomes a certain risk. In this way, TPF serves not only the finance and legal departments, risk compliance and procurement departments of companies of various sizes, from small and medium-sized to large-scale multinational listed companies, but also lawyers' offices. By providing, we are searching for the optimal solution for risk management and cost management of each company.
The best one for the company from various methods
IMF funds various cases such as commercial proceedings, dispute cases, international arbitration (including arbitration based on investment agreements), class proceedings, bankruptcy cases, alternative dispute resolution, ADR, and simple debt collection.The simplest way is to support a single claim, but there is also a way to make up a portfolio of proceedings.Even if you don't win all the proceedings, if you win some of them, you can recover the cost from them.
Having said that, since it is a business, the IMF will also seek a certain return.Since there is a non-recourse condition, if you lose the case, you will not be asked for a return, but if the case is closed in the form of a win, you will be asked to recover the cost.The payback method is to apply a certain percentage to the outcome, set a ratio to the investment, or a combination of them (generally, whichever is higher).As with any investment product, the higher the risk, the higher the return rate, and the longer the investment period, the higher the return rate.In funding highly specialized disputes, it is generally 1 to 4 times the invested capital, or 10 to 40% of the outcomes such as compensation.
Exmaples
Here are some examples of two international arbitration cases that actually occurred in Singapore.In both cases, the long-term project was unfairly terminated.The amount of the proceedings is US $ 2 million and US $ 3000 million.The cost of the lawyer requested by the company is about US $ 1 million. As a result of the IMF's assessment of the project, we decided that one was a project with a high probability but the other was weak, so we treated it as a package and diversified the risk. The IMF offered to cover all costs and ask for 2000% if the case was won, but the client side strongly resisted and proposed an approach of sharing costs. The IMF returns are reduced, but risks can be diversified.
Finally, a simulation of the impact of cash flow was presented when the IMF funded it, when the company funded it, and when it was split in half.If a company has abundant funds, it is often asked whether it is necessary to obtain litigation finance from outside, but in such cases, the impact of cash flow during the proceedings will be impacted. You need to be aware.By examining the investment, return, and ROI of the main business and selecting the best scenario, it is possible to avoid risks and obtain a certain return.
