After covid-19: the next chapter for arbitration finance in Latin America
17 July 2020
In Latin America it is more accurate to speak of arbitration – as opposed to litigation – finance because no one really wants to finance never-ending legal fights in local courts. In fact, there is no need to, as court proceedings from Argentina to Mexico are relatively cheap compared to Anglo-American standards.
Therefore, the funding of legal costs in the region is shaped around arbitration (national and international). In recent years this had led to the establishment of some of the first local players – in Brazil in 2014 (Leste), Peru in 2016 (Lexfinance) and Chile in late 2019 (Hakamana). Another specialised funder is Carpentum Capital, founded in 2018, which operates out of Switzerland and has lawyers on the ground in Argentina, Brazil and Chile. Bigger international litigation funders like Burford, Woodsford or Harbour also operate in Latin American markets but mainly in the segment of pricey investor-state disputes driven by larger, international law firms.
Nevertheless, the awareness of arbitration funding as a financing tool is still very low if you carve international law firms out of the equation. Local claimants may never have heard of litigation funding at all. In the past, these claimants will either have avoided legal fights or worked with a lawyer willing to take a risk. But the latter does not always work for complex disputes with the necessity of larger legal teams. The capacity of a law firm to take risk may also be limited.