Economics at your fingertips  

Third party funding: The minimum claim value

Ugo Merlone and Matteo Lupano

European Journal of Operational Research, 2022, vol. 296, issue 2, 738-747

Abstract: Third Party Funding (TPF) is an agreement between a claimant and a funder, where the funder provides money to pursue or defend a lawsuit in return for a financial reward, usually a percentage of the sum recovered by the claimant. TPF is a useful tool to improve access to justice and through which the funded party can better allocate its financial resources. It is widely used in international arbitration and, in some countries, even in domestic litigation and arbitration. Many factors affect the decision of funding a lawsuit, in the first place its value, which has to be high enough to justify funder’s allocation of capital. In this paper, we analize litigation from the certainty equivalent perspective and provide interpretation on how differences between the parties may affect the size of the pie. Furthermore, we formalize TPF and – considering Italian costs, cost shifting rules and length of trials – derive a formula to compute the minimum value of a claim suitable for the funding agreement. Finally we use the formula to provide estimates for three-stage proceedings before two jurisdictions with different length of proceedings.

Keywords: Finance; Alternative dispute resolution; Litigation; Arbitration; Third party funding (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

DOI: 10.1016/j.ejor.2021.04.059

Access Statistics for this article

European Journal of Operational Research is currently edited by Roman Slowinski, Jesus Artalejo, Jean-Charles. Billaut, Robert Dyson and Lorenzo Peccati

More articles in European Journal of Operational Research from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

Page updated 2021-10-16
Handle: RePEc:eee:ejores:v:296:y:2022:i:2:p:738-747