When my phone rang one afternoon in February 2008 with a request from a lawyer at a major New York law firm for me to take on a role as a non-executive director on the listing on the Alternative Investment Market in London of a 'third party funder', all I could think to say was: 'What is third party funding?'
Since then, with my partners at Calunius, I have raised hundreds of millions of pounds for three private funds that have successfully completed their investment periods, acted as Chairman of the Association of Litigation Funders of England and Wales (ALF) from its foundation in November 2011 until September 2019, been instrumental in the ALF's intervention in the Court of Appeal's leading case on third party litigation funding (TPF), known universally as Excalibur,1 and have been one of the leaders in evidence before the Competition Appeals Tribunal in the Trucks Cartel case.
What a journey!
The essence of TPF remains the deployment of capital to fund the realisation of assets that are contingent on the resolution of some form of legal process. If the assets are sufficiently attractive, things other than (or instead of) legal costs can be funded, including corporate expenses.
Legal capital is (almost) invariably invested on the basis that the investor is without recourse, other than to the proceeds of the legal asset whose realisation is being pursued. The investor's recovery is therefore limited to what can be realised in cash or kind from the legal asset itself. In the absence of breach, the funded party is not personally liable to the funder and therefore it would (almost) always be a major solecism ever to describe a TPF investment as a loan.
There are of course fundamental differences in approach between jurisdictions following the common law and those where civil law principles rule, but even within those two broadly distinct systems, there are a host of differences. In the United States alone there are 50 states each with a different approach to describing TPF and how it should be regulated (if at all).
In general, all common law jurisdictions are subject to the effects of the varying degrees to which the ancient doctrines of maintenance and champerty survive. Historically these prevented third parties from intervening in litigation in which they were not already directly involved as parties, although, having said that, maintenance and champerty have been abolished in Australia. On the other wing of opinion, TPF is absolutely forbidden in the Republic of Ireland, following the Supreme Court ruling in the Persona Digital case. It seems that, in the Republic, TPF must wait for the legislature to permit it. The civil law, on the other hand, has never held significant reservations about TPF in principle, although each jurisdiction, as will be clear from this book, has its own nuanced attitude.
Then there are a variety of controversies faced by TPF, which are generally resolved by individual jurisdictions in individual ways that suit them, thus defying any attempt to identify general principles that apply globally. Currently, those controversies tend to revolve around four issues: the regulation of TPF providers; whether a provider of TPF should be liable in unsuccessful cases to pay the costs of a victorious defendant or to give security for costs (and if so, in what circumstances and according to what principles); whether disclosure to the court or the arbitral tribunal of the fact of TPF being used by a party is required; and the issue of privilege and confidentiality with reference to documents that are disclosed to a funder by a party to funded litigation or arbitration.
TPF provides access to justice for those who could otherwise not afford to fight their claims and it brings access to rational commercial risk management for eminently solvent entities that do not wish to expose themselves to the significant cost risks of resolving their disputes from their own resources. TPF thus serves both those who are unable and those who are unwilling to fund the resolution of their disputes.
Demand grows as acceptance of TPF spreads. Acceptance spreads as law firms increasingly perceive that unless TPF becomes part of their offering, they will become less able to compete for valuable work from every kind of client.
This is a global phenomenon, but the resolution of every dispute by the principal international dispute resolution mechanisms of litigation and arbitration will be rooted in the law of a particular jurisdiction, and this is the landscape across which this book will travel. Enjoy your journey.
Calunius Capital LLP and Association of Litigation Funders of England and Wales
1 Excalibur Ventures LLC v. Texas Keystone Inc  1 WLR 2221 (CA).