The Third Party Litigation Funding Law Review: Brazil

Market overview

It has been almost two years after covid-19 pandemic changed (and is still changing) the world. Hopefully, with vaccination in progress, the health impact of the pandemic is expected to end in a near future. The economic impact, on the other hand, may take a little longer to adjust, since the disruption caused to supply and logistics chains all over the globe, inflation and unemployment will likely persist for the next few years.

The impact of covid-19 on third party funding (TPF), however, cannot be fully determined yet. In attempting to assess the potential impact of this crisis, we have updated the research on TFP published in last year's edition of this chapter2 and conducted with the major arbitral institutions acting in Brazil: (1) Center for Arbitration and Mediation of the Chamber of Commerce Brazil–Canada (CAM-CCBC); (2) the Market Arbitration Chamber (CAM) of the B3 – Brasil Bolsa Balcão SA; (3) the Business Arbitration Chamber (CAMARB); (4) the Chamber of Conciliation, Mediation and Arbitration CIESP/FIESP (CMA CIESP/FIESP); (5) the Brazilian office of the Secretariat of the International Court of Arbitration of the International Chamber of Commerce (ICC); and (6) the FGV Mediation and Arbitration Chamber (FGV).

As reported in the last edition, among all these institutions, in 2020, there was only one new (disclosed) case involving TPF. However, the updated research for 2021 reported five new cases involving TPF, a considerable increase. Interestingly, one of the institutions reported that TPF was provided to the respondent of the dispute, which is unusual.

It is early to ascertain whether this surge of arbitration proceedings involving TPF is a direct consequence of the impact caused by covid-19 or it is only a natural growth of the Brazilian market. Research in the following years may help us to determine which it is. In any event, even though no firm conclusions may be reached yet regarding the connection between TPF and the covid-19 pandemic, it is already possible to foresee what impact covid-19 may have on the TPF market (see Sections VI and VII).

For clarity, it is important to explain from the outset that all references to TPF throughout this article refer to the traditional method of TPF. In this type of funding, the funder pays the litigation costs of a non-related party involved in a specific dispute, and receives in consideration a stake of the final amount to be awarded to that party3 (in contrast to a loan, this method imposes no obligation on the funded party to repay the money received if it does not succeed in the litigation).

Therefore, unless otherwise mentioned, references in this chapter to TPF do not include other methods of funding (funding by lawyers, funding to law firms, funding by parent companies, funding of multiple cases, etc.).

In general, with regard to the Brazilian TPF market, the comments and conclusions presented in last year's edition remain applicable in 2021. Brazil is fertile ground for TPF, with considerable potential for growth in the coming years, especially in light of the significant amount of ongoing litigation in Brazil or involving Brazilian parties.

For example, in 2020, the ICC reported that, in terms of the number of parties involved in ICC arbitration proceedings by country, Brazil ranked second (only behind the United States), moving up one position since last year.4

The Center for Arbitration and Mediation of the Chamber of Commerce Brazil–Canada (CAM-CCBC), one of the main arbitral institutions in Brazil, reported that in 2019 it administered 413 arbitral proceedings, 97 of which were initiated that year. The total value of the cases lodged with the CAM-CCBC in 2019 amounted to approx. US$1.57 billion.5

When it comes to litigation before judicial courts (as opposed to litigation before arbitral tribunals), Brazil also has huge potential for TFP since it has a significant number of lawsuits ongoing before federal and state courts (in 2020, there were 75.4 million ongoing lawsuits)6.

Notwithstanding this potential, to date we are not aware of TPF provided to a party involved in litigation before judicial courts. As was explained by one of the major participants in Brazil's TPF market, the lack of predictability regarding the duration of lawsuits in the Brazilian courts is the biggest challenge to overcome when making a decision about whether to fund a case in the country.7

Therefore, in the absence of any information about the use of TPF in disputes in the judicial courts, this chapter concentrates on TPF in disputes heard by arbitral tribunals, since this seems to be the principal arena for TPF in Brazil.

In this context, the major participants in the Brazilian market remain those reported last year: Leste Investimentos, the first investment fund specialised in providing this type of service in Brazil;8 and LexFinance, a Peruvian-based investment fund specialising in investments in Latin America, Portugal and Spain.9

It is also important to mention that in recent years we have seen a number of new market participants arriving and investing in disputes within the Brazilian territory, such as the British firm Harbour Litigation Funding, which has already invested in two disputes in arbitration in Brazil.10

In short, the significant position occupied by Brazil in the international arbitration landscape (second, as per the ICC), the arrival of new market participants and the consolidation of traditional actors in this area confirm the country's potential to attract TPF and develop here an industry that is already well established in other countries.

Legal and regulatory framework

Brazil does not have any statutes or regulations dealing specifically with TPF and there is no case law discussing its use in Brazilian litigation practice. As mentioned above, in Brazil, TPF is mostly used to fund arbitration disputes. As such, the existing TPF legal regime is based on guidelines and international soft law issued by arbitral institutions and international bodies.

The guidelines and soft law applicable to TPF in Brazil are mainly concerned with the disclosure of the existence of a third-party funder to allow the members of the arbitral tribunal to assess any conflicts of interest with the funder.

For instance, Administrative Resolution No. 18/2016 of CAM-CCBC recommends the disclosure of TPF at the first opportunity.11 Resolution No. 6/2019 issued by the CMA CIESP/FIESP, updating the CAM CIESP/FIESP Code of Ethics, provides a similar recommendation.12 Also, CAMARB published Administrative Resolution No. 14/20 to the same effect.

The new 2021 ICC Arbitration Rules has a provision that expressly encompasses TPF and the duty to inform arising from it. As per Article 11(7),13 the party is obliged to inform the Secretary, the Arbitral Tribunal and the parties involved in the arbitration about (1) the existence and identity of the funder; and (2) its economic interest in the outcome of the dispute.

Accordingly, the 2021 ICC Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration confirms and reiterates the duty to inform about TPF.14 Section II(D), Article 21, of ICC Notes indicates that the duty to inform about any funder provided in Article 11(7) of ICC Arbitration Rules does not encompass '(i) inter-company funding within a group of companies, (ii) fee arrangements between a party and its counsel, or (iii) an indirect interest, such as that of a bank having granted a loan to the party in the ordinary course of its ongoing activities rather than specifically for the funding of the arbitration'15. The inclusion of these provisions in 2021 ICC Arbitration Rules and ICC Note confirms the growing trend of TPF and the need of regulations and specific guidelines regarding the matter.

Although the applicability of international soft law to domestic arbitration is questionable (if it is not expressly referred to in the parties' agreement), it is worth mentioning that the IBA Guidelines on Conflicts of Interest in International Arbitration provide that third-party funders should be put in a position of equivalence with the party to the arbitration when assessing any potential conflicts of interest with the arbitral tribunal.16

The discussion about the duty to disclose the existence of a funder is relevant in the Brazilian context, since the lack of disclosure in a timely manner may, in some cases, jeopardise the integrity of the arbitral award. The Brazilian Arbitral Act (BAA) provides that individuals should not act as arbitrators if their involvement with either the dispute or the parties to the dispute would disqualify them from acting as a judge.17 The standards for disqualification, or to cause the recusal, of a judge are provided in the Brazilian Code of Civil Procedure (BCCP).18

Specifically, Article 145, items II and IV, of the BCCP provide that the recusal of a judge may occur when 'she or he provides funds to bear the litigation expenses' or 'she or he has an interest in adjudication of the case in favour of any of the parties'. As such, if a judge has invested in a litigation fund, for instance, and this fund is funding a dispute that is to be adjudicated by that judge, a conflict of interest can be inferred and the judge should not be allowed to hear that case.

Although TPF (as defined above) is not commonly used to fund cases in federal and state courts in Brazil, it should be noted that contingency fees (or honorarium quota litis) are well established and widely used in Brazil's litigation practice. In this type of agreement, the lawyer usually agrees to receive its legal fees (in total or in part) as a share of the economic benefit to be received by the client at the end of the proceeding. Thus, the lawyer shares the risk with the client, since the lawyer will not be paid if the client does not ultimately receive any economic benefit.

The Superior Court of Justice (STJ), Brazil's highest court for non-constitutional matters, has confirmed the validity of contingency fees contracted by lawyers.19

Resolution No. 02/2015 of the Federal Council of the Brazilian Bar Association of 19 October 2015 (the Brazilian Bar Association Code of Ethics) authorises the existence of quota litis fees but establishes that (1) the fees should be paid in cash (goods or assets are only admissible as payment in exceptional circumstances), and (2) when there is a contingency fee, and the lawyer also receives the 'loss of suit' fees from the opposing party (i.e., an award of legal fees for the prevailing party, determined by the court and paid by the losing party), the amount received by the lawyer should not be greater than the amount received by the client.20

The matter of the award of legal fees for the prevailing party is peculiar to Brazil's legal system. At the end of the proceeding, the judge orders the defeated party to pay an amount to the lawyer for the prevailing party as legal fees. The judge will determine the amount to be paid, but it should not exceed 20 per cent of the value of the judgement, the economic benefit or the value of the dispute ascertained in the complaint.21

In this context, given that (1) the award of legal fees for the prevailing party should not exceed 20 per cent; and (2) Article 50 of Brazilian Bar Association Code of Ethics provides that the lawyer should not receive a greater amount than the client, taking into account any contingency fee and the award of legal fees for the prevailing party, it is possible to conclude that the contingency fee should usually be limited to 30 per cent of the amount in dispute (i.e., a 30 per cent contingency fee plus a 20 per cent award of legal fees for the prevailing party equals a value of 50 per cent in legal fees to the lawyer).

Of course, a contingency fee of 30 per cent should not be interpreted as a cap since in some situations the legal fees of the prevailing party may be awarded as a percentage smaller than 20 per cent or may not be awarded at all (in arbitration, for instance, there is no legal obligation for the arbitral tribunal to make an award of legal fees for the prevailing party, and the parties are free to contract otherwise).

However, a 30 per cent contingency fee probably serves as a reasonable standard, since the STJ has stated that a quota litis of 50 per cent would be excessive and reduced a fee of this amount to a percentage of 30 per cent in a specific case.22

Finally, from a business perspective, it should be noted that a contingency fee of 30 per cent may also sound reasonable, since the funders usually want the party to the arbitration to remain with a larger sum of the economic benefit, so the party would remain engaged in the litigation.

Structuring the agreement

As reported, Brazilian law does not have any regulation concerning TPF. In the absence of specific legislation, the parties are free to choose their own binding contractual provisions, as long the general principles of Brazilian law are observed, together with the requirements established in Article 104 of the Brazilian Civil Code (BCC)23 for the validity of legal transactions.

In this context, as discussed by legal scholars, the TPF can be interpreted as either an atypical contract (i.e., sui generis) or it can fit into a pre-existing contractual type under Brazilian law (such as an assignment of credit or partnership contract).24 We are not aware of any case law discussing or interpreting the legal contractual framework applicable for TPF under Brazilian law.

Although not legally required, it is recommended that TPF agreements are made in writing, so the parties have no doubts regarding the terms. Furthermore, it is important to preserve written evidence of the TPF agreement (if not in writing itself), in the event that it is necessary to prove the contractual relationship before a court of law. This precaution would avoid any debate on whether the TPF agreement could be proved through oral evidence alone.

Generally, the negotiation of the provisions of a TPF agreement will be within parties' discretion and may vary from case to case. It is recommended that the main terms (i.e., total amount funded, how the funds should be applied, the share or amount to be received by the funder, payment events, and dispute resolution methods) are thoroughly negotiated by the parties and written in a clear manner. Some additional best practices regarding TPF agreements are detailed below.

i Confidentiality

It is advisable that, before disclosing information to a potential funder, the parties enter into a non-disclosure agreement (NDA). This is important because almost all arbitration proceedings in Brazil are confidential. Here, it is important to note that although the BAA does not impose a specific and express duty of confidentiality in relation to the proceedings, the parties are free to contract otherwise. An agreement on confidentiality is usually made in the arbitration agreement (directly or by reference to arbitral rules providing for confidentiality).

Therefore, considering that the majority of the parties agree to maintain the confidentiality of the proceedings, the potential funder should execute an NDA to have access to the relevant documents. The duty of confidentiality should be reinforced in the funding agreement itself. In the research conducted for last's year review, an arbitral institution reported to us that, in one case, the funder was expressly asked to sign an NDA before being granted access to the documents.

ii Independent counsel

It is also recommended that the party seeking funding is advised by independent counsel during the negotiations with the funder. Depending on the context of the case, it may even be advisable for this independent counsel to be different from the one handling the litigation, to avoid any conflicts of interest between the litigation counsel and the client.

iii Award of legal fees for the prevailing party

The agreement should also clearly establish entitlement to the award of legal fees for the prevailing party (if any). That is, the parties should expressly agree that these fees are to be awarded to the lawyer handling the dispute, and should agree on whether this amount is to be taken into consideration when calculating the funder's share in the dispute. This is crucial, because under Article 23 of Federal Law No. 8,906 of 4 July 1994 the lawyer for the prevailing party is entitled to the award of legal fees for the prevailing party and has the autonomous right to claim these fees in court from the convicted party, without needing the client's authorisation.

iv Additional funding sources

Parties interested in obtaining TPF should disclose any other sources of funding that they may be receiving at the time of concluding the agreement. For instance, if the party's lawyer is to receive any amount as a contingency fee, the funder should be informed of this arrangement and potentially it should be referred to in the funding agreement.


As mentioned in Section II, disclosure of the existence of TPF is recommend, since the lack of disclosure may, in some cases, jeopardise the enforceability of an arbitral award and compromise the integrity of the proceedings. It is precisely for that reason that Brazil's main arbitral institutions have issued administrative resolutions recommending disclosure of third-party funders. The new 2021 ICC Arbitration Rules take this one-step further and expressly provide for the duty to disclose the existence of TPF. By inserting this in the Arbitration Rules, the ICC creates the duty of disclosure binding between the parties.

Apart from express provisions in the arbitration rules chosen, there is no obligation under Brazilian law to disclose the funding agreement in litigation. In this context, an arbitral institution reported to us an instance where the opposing party requested the disclosure of the financing agreement, but the arbitral tribunal denied the request. Conversely, it was reported that in another case, before a different arbitral institution, the arbitral tribunal granted the request for information.

Given that the main purpose of disclosure of TPF appears to be to check for possible conflicts of interest, production of the agreement may appear irrelevant at first glance. It is, however, within the judge's or arbitrator's discretion to determine whether production is needed based on the case before them.

In relation to confidentiality, as most arbitration proceedings in Brazil are confidential (not by law but by agreement of the parties), it is important to sign a NDA to have access to the arbitration documents and information (in one case, reportedly, the signing of a confidentiality clause was needed to allow access to the documents).

Finally, it is important to mention that under Brazilian law, communications between lawyers and their clients are protected by professional secrecy, pursuant to Articles 35 and 36 of the Brazilian Bar Association Code of Ethics. Disclosure of certain confidential information between the lawyer handling the litigation and the funder, however, would probably not be viewed as a violation of professional secrecy – especially after the execution of an NDA – since assisting the client in the process of obtaining TPF can be seen as part of the lawyer's role in providing legal services to the client.


As a general rule in Brazilian litigation practice, the defeated party should bear the costs of the litigation by reimbursing the prevailing party for the costs it incurred. In cases of partial victory, reimbursement should be proportional to the degree of success. Further, it has been decided by the STJ that the legal fees paid by the party for its attorneys are not reimbursable.25

The general term 'litigation practice' is used here because this rule, established in Articles 82 and 86 of the BCCP, is applicable to all civil and commercial cases, in both state and federal courts. Considering that most lawyers working in arbitration come from a litigation background, this practice is also reflected in some arbitration proceedings.

Nevertheless, it should be pointed out that neither the BAA nor the majority of the arbitration rules have any provision determining how costs should be awarded by arbitral tribunals. This is left primarily to the will of the parties or otherwise to the discretion of the arbitral tribunal. The parties are free to agree, for example, that no reimbursement shall occur, regardless of the final result. The parties may also agree that the defeated party shall reimburse the winning party for the legal fees charged by its lawyers.

We are not aware of any case law discussing potential liability of funders for adverse costs (if any).

Finally, in the interviews we conducted with Brazil's major arbitral institutions, we were informed that in 2020 there were no requests for security for costs or discussions on the matter arising from the involvement of a funder in the dispute.

The year in review

With the economic downturn resulting from the covid-19 pandemic, many prospective parties may find in TPF an alternative to hedge their risk. It is still early to assess the impact of covid-19 on litigation practices and, more specifically, on TPF, since we are still living during the pandemic. However, it is likely that some of the changes imposed during the covid-19 period may remain in place even after the pandemic.

For instance, almost all Brazilian arbitral institutions moved to 100 per cent electronic-based proceedings, which is more efficient and tends to reduce costs. Even nowadays, with loosening sanitary and social distancing measures, the new arbitrations filed remain 100 per cent electronic-based proceedings.

Of course, when it comes to arbitration, freedom of contract shall prevail; however, these wholly electronic-based proceedings are likely to remain in place in the coming years, putting an end to the common (and old) practice of sending hard copies of the main submissions and attached documents to the parties and members of the arbitral tribunal (entailing significant costs for the preparation and review of these copies).

Even before the onset of the pandemic, wholly electronic-based proceedings were already the reality in state and federal courts. This initiative was improved and consolidated in 2021.26

Another innovation that also may stay in place after the pandemic is virtual hearings. Again, it will require case-by-case analysis to determine whether a virtual hearing is appropriate. Nevertheless, virtual hearings can be a good option to reduce costs otherwise incurred for travel, hotels, transportation and food, for example. Also, in some cases, virtual hearings may help streamline proceedings, since the arbitrators and the parties are not going to spend any time in transit, making it easier to coordinate and align the schedules of those involved.

During covid-19, virtual hearings were also held very successfully before federal and state courts, courts of appeal and superior courts.

These potential reductions in costs may also affect the TPF market positively, since, in theory, the amount spent on each case would be reduced, allowing more cases to be funded.

Conclusions and outlook

In conclusion, TFP is still a recent phenomenon in Brazil, but undoubtedly the country has a huge market to develop, especially in light of the volume of ongoing litigation. To date, TPF has mostly been used in arbitration by sophisticated market participants. Perhaps for this reason (and because there are no specific laws on the practice) there are no publicly available cases discussing, for example, the use of TPF, its limits or the funding agreements.

With TPF expected to grow considerably in the years to come, it is likely that new rules, cases and regulations will arise, providing more guidance on the use of this important mechanism.

As mentioned in the opening section of this chapter, even after almost two years after the start of the pandemic, it is still too early to assess the impact of covid-19 on TPF, if any. Nevertheless, the increase of arbitration proceedings with TPF from 2020 to 2021 may indicate trend and allow us to image potential consequences and scenarios for the future derived from the pandemic. For example, a reasonable assumption is that more parties may be classed as impecunious as a direct consequence of the economic challenges wrought by the crisis. Those parties, which before the pandemic were not looking to be funded, may prove to be in need of TPF to move their claims forward. Other parties may turn to TPF just to allow them to save some of their cash flow for their core business.

Modifications to proceedings imposed by the onset of covid-19 may also impact funders' assessment of cases. Virtual hearings and exclusively electronic-based proceedings may bring a reduction in the direct and indirect costs involved in certain disputes.

In contrast, with increased numbers of companies and people in financial difficulty, it is likely that creditors will have a harder time collecting monies awarded by judicial and arbitral tribunals. These factors may produce modifications to or even restrictions on funders' approach to potential cases, despite the scope for the initiative of stress funds.

It is thus difficult to predict the future effects of the pandemic, but the examples above show that, as for almost every kind of business on the planet, TPF may be affected by the pandemic. We are optimistic, though, that TPF will consolidate its position in Brazil, given its still unexplored potential in the field. Just how this potential will be developed is a question that will be answered definitively in the years to come.


1 Rodrigo de Magalhães Carneiro de Oliveira and Eider Avelino Silva are partners and Rafael Curi Savastano is a senior associate at Pinheiro Neto Advogados.

2 Last year's edition of this chapter is available at: (accessed on 8 October 2021).

3 For a full review of the main types of funding available, see Cardoso, Marcel Carvalho Engholm. Arbitragem e financiamento por terceiros. São Paulo. Ed. Almedina. 2020. pp. 53–76.

4 Information from the ICC Dispute Resolution Statistics: 2020. Available to download at: (accessed on 8 October 2021).

5 Information available at: (accessed on 8 October 2021).

7 As explained in a webinar held on 18 August 2020, and available at:

9 (accessed on 8 October 2021).

11 'Article 4 – In order to avoid potential conflicts of interest, CAM-CCBC recommends the parties to report the existence of third-party funding to CAM-CCBC at the earliest opportunity. The complete qualification of the funder should be included in this communication.' Available at: (accessed on 8 October 2021).

12 Article 3-A.1 of the CMA CIESP/FIESP Code of Ethics states: 'The presence of a third-party funder may be relevant to an assessment of the arbitrator's independence and impartiality, especially if there is any previous or current relationship between the arbitrator and the third-party funder. Therefore, it is recommended that the party to the arbitration being funded by a third party reveals, in writing and at the first opportunity, the existence of the funding and complete qualifying information about the third-party funder' (free translation). Original Portuguese version available at: (accessed on 8 October 2021).

13 'Article 11(7) – In order to assist prospective arbitrators and arbitrators in complying with their duties under Articles 11(2) and 11(3), each party must promptly inform the Secretariat, the arbitral tribunal and the other parties, of the existence and identity of any non-party which has entered into an arrangement for the funding of claims or defences and under which it has an economic interest in the outcome of the arbitration.' Available at: (accessed on 8 October 2021).

14 'Section II(D) Article 20 – To assist arbitrators and prospective arbitrators in complying with their duty of disclosure (see section III(A)), each party must, pursuant to Article 11(7), promptly inform the Secretariat, the arbitral tribunal and the other parties of the existence and identity of any non-party that has entered into an arrangement for the funding of claims and defences and under which that non-party has an economic interest in the outcome of the arbitration. For example, the non-party is entitled to receive all or part of the proceeds of the award'. Available at: (accessed on 8 October 2021).

15 'Section II(D) Article 21 – Subject to any different determination that may be made by the arbitral tribunal in the circumstances of any given case, Article 11(7) would normally not capture (i) inter-company funding within a group of companies, (ii) fee arrangements between a party and its counsel, or (iii) an indirect interest, such as that of a bank having granted a loan to the party in the ordinary course of its ongoing activities rather than specifically for the funding of the arbitration'. Available at: (accessed on 8 October 2021).

16 'Third-party funders and insurers in relation to the dispute may have a direct economic interest in the award, and as such may be considered to be the equivalent of the party. For these purposes, the terms “third-party funder” and “insurer” refer to any person or entity that is contributing funds, or other material support, to the prosecution or defence of the case and that has a direct economic interest in, or a duty to indemnify a party for, the award to be rendered in the arbitration.' Available at: (accessed on 8 October 2021).

17 Article 14 of the BAA: 'The persons in any way related to the litigants or to the litigation itself in such a way as to fall within the applicable disqualification or recusation criteria shall be disqualified from acting as arbitrators, and shall be subject – to the extent applicable – to the same duties and responsibilities as set out in the Code of Civil Procedure' (free translation).

18 Article 144 and 145 of the BCCP.

19 See Special Appeal No. 805,919/MG, Reporting Justice for the decision: Justice Raul Araújo, Fourth Panel of the SCJ, judgment dated 13 October 2015.

20 Article 50 of the Brazilian Bar Association Code of Ethics.

21 Article 85, Paragraph 2 of the BCCP.

22 See Special Appeal No. 1.155.200/DF, Reporting Justice for the decision: Justice Nancy Andrighi, Third Panel of the SCJ, judgment dated 22 February 2011.

23 Brazilian Civil Code: Article 104. A valid legal transaction requires: I – a person with legal capacity; II – a lawful, possible, determined and determinable subject matter; III – a form prescribed or not proscribed by law.

24 Cardoso, Marcel Carvalho Engholm. Arbitragem e financiamento por terceiros. São Paulo. Ed. Almedina. 2020. pp. 91–102.

25 See EREsp No. 1.507.864/RS, Reporting Justice Laurita Vaz, Special Court of the SCJ, judgment dated 20 April 2016.

26 In 2021, measures stemming from covid-19 played a significant role in the litigation sector before judicial courts. For instance, the National Council of Justice enacted Resolutions No. 345/2021 and No. 385/2021, which gave rise to the initiatives such as 100% Digital Court (Juízo 100% Digital) and Judiciary Nucleus 4.0 (Núcleo de Justiça 4.0), respectively. Both projects consolidated electronic-based proceedings, virtual hearings and electronic-based trial sessions. For more information, see: (accessed on 8 October 2021).

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