Third party funding in litigation or arbitration: a look at Turkey’s approach

Our latest article “Third party funding in litigation or arbitration: a look at Turkey’s approach” by Serdar Paksoy, Simel Sarıalioğlu and Doğuhan Uygun is published on Lexology.

Access to justice is not always equally achievable for all parties, considering the expenses attached to seeking relief through legal proceedings, in most cases litigation or arbitration. The parties to litigation or arbitration proceedings may not be in a position to cope with advance costs, and most significantly attorney fees. This may be due to financial distress, or a party may prefer not to allocate its available funds to lengthy legal battles. The parties’ desire to retain control of their exposure to loss while proceeding with a dispute resolution process has led them to seek outside financing. The third party funding (“TPF”) mechanism enables an impecunious party to pursue a claim thanks to financing provided by a non-party financial institution, in return for a share of the potential dispute resolution proceeds.

Besides reducing the parties’ exposure to loss when resolving disputes, TPF brings financial institutions an attractive investment opportunity that is not subject to global market fluctuations or any other external financial variable. TPF has thus witnessed a swift development, now reaching a USD 10 billion market value globally. Lawmakers have however failed to keep pace with the growing popularity of TPF, giving rise to controversies around the disclosure of the funder’s identity, and the nature and validity of the funding agreement

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