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Access to Justice for Developing Countries: Third Party Funding for Sovereigns in WTO Disputes

October 4, 2017

Access to Justice for Developing Countries: Third Party Funding for Sovereigns in WTO Disputes

Guest Post by Mauritius Nagelmueller, who has been involved in the litigation finance industry for more than 10 years. Access to justice remains one of the prevailing issues within the WTO Dispute Settlement Body (DSB), especially for developing countries. To enforce the promise of a fairer trading system, developing country participation in the DSB must be improved, given that relationships between WTO members are predicated on power dynamics, rather than adherence to the rule of law. Third party funding has provided access to justice for claimants with meritorious claims, but with limited financial capacity in the private sector, as well as in investor-state disputes. The industry is also capable of leveling the playing field in the DSB, as it can be utilized by developing countries to finance a WTO dispute. An expansion of the current third party funding business model to include financing sovereigns in WTO disputes would create a win-win situation, by allowing developing countries to bring claims which they otherwise could not afford, and by granting third party funders the opportunity to adopt a more neutral stance towards sovereigns by providing their services in support, rather than in mere contention (as is the case today). And demand is significant, given that most obstacles to developing country participation in the DSB are related to costs, such as high-priced experts that must be brought on to account for a lack of expertise, the fear of economic pressure from the opposing state, and the lengthy proceedings which often place a strain on a developing country’s resources (member states estimate a time frame of 15 months from the request for consultations to the report of the Appellate Body. A period of at least 6 to 14 months should be added to this, as a reasonable period for the implementation of recommendations. Although this time frame is short in comparison to other international procedures, the financial hardship for developing countries can be fatal). The costs of initiating a dispute of medium complexity in the WTO are in the region of $500,000, however legal fees can sometimes exceed $10,000,000. In many cases, developing countries are forced to rely on the financial support of local industries affected by the dispute. This begs the question, why hasn’t there been an influx of third party funders into WTO dispute resolution? There are two chief concerns which seem to keep funders shying away. The first involves the typical remedies in WTO disputes, which regularly circumvent a direct financial compensation that the funder could benefit from. Still, complainants seek monetary benefits, be it through concessions (the losing country compensates the winning country with additional concessions equal to the original breach), or retaliation (the winning country withdraws concessions in that amount). A simple solution to this issue is for the winning party to provide a share of those benefits to the funder. One possibility is to assess the level of harm caused by the illegal measure challenged in the dispute, and accept that as a basis for the compensation of the funder. If the WTO Panel decisions are implemented, and the disputed measures that were found to be inconsistent with the WTO are withdrawn, a certain value of trade is not affected by those measures anymore and can be realized again. Affected industries, or the affected country, can set aside part of the gain to compensate the funder. In the case of compensation or the suspension of concessions, the complainant gains from increased tariff revenue, and is able to compensate the financing entity from a portion of the same. In any event, financial benefits of a winning party can be measured, and any compensation for the funder will represent only a minor percentage of the gained value of trade. The second main concern surrounds the area of enforceability, and whether WTO mechanisms would allow financing agreements. But those would have to be enforced in local courts, and the WTO DSB technically cannot rule on non-WTO agreement issues. However, there are provisions that allow the DSB to engage in arbitration if the parties both agree. A practical solution would therefore be to include an arbitration or dispute settlement provision in the financing agreement that operates outside of the DSB. Based on the aforementioned demand, as well as the practical solutions which can mitigate possible concerns, it is clear that external funding of WTO disputes can provide a flexible, independent and powerful alternative for developing countries to increase access to justice, as well as for developed countries to “outsource the risk” of a WTO dispute. It’s only a matter of time before third party funding makes its way into the WTO. ** A version of this article first appeared in International Economic Law and Policy Blog

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Commercial

Insurance Industry Groups Push for Federal Court Rule Requiring Litigation Funding Disclosure

By John Freund |

A coalition of business and insurance organizations is calling on the federal judiciary to adopt a uniform rule requiring disclosure of third-party litigation funding arrangements in civil cases, arguing that the current patchwork of approaches across federal courts undermines fairness and transparency.

As reported by Insurance Journal, the Lawyers for Civil Justice and the U.S. Chamber of Commerce Institute for Legal Reform submitted a joint letter to the Advisory Committee on Civil Rules urging the creation of a disclosure requirement. The American Property Casualty Insurance Association has also thrown its support behind the effort, with executive vice president and chief legal officer Stef Zielezienski stating that "transparency about who has a financial stake in litigation is essential to fairness, accountability, and the effective administration of justice."

The push comes amid growing evidence that the absence of a federal standard has created inconsistent outcomes. A recent study cited in the letter found that federal district judges granted only 40% of motions seeking some form of TPLF disclosure, leaving litigants and courts without clear guidance.

The financial stakes are significant. Research from EY, presented at APCIA's annual meeting, found that average commercial claim costs have risen 10% to 11% annually since 2017. The analysis projects that third-party litigation funding could cost the insurance industry up to $50 billion in direct and indirect expenses over the next five years.

The groups are recommending that current disclosure rules be expanded beyond insurance contracts to include any entity or individual providing funding or holding a financial interest in the outcome of litigation. The Advisory Committee is expected to consider the proposal at its upcoming April meeting.

Commercial Special Features

Smarter Intake for Litigation Finance Firms

By Eric Schurke |

The following piece was contributed by Eric Schurke, CEO, North America at Moneypenny.

From the very first interaction, litigation finance firms and legal teams should be capturing structured, decision-ready information that enables early case assessment, risk evaluation, and efficient routing. 

This typically includes:

• Who the potential claimant or referrer is and their preferred method of communication
• The context of the matter, including jurisdiction and type of claim
• The stage, urgency, and timeline of the case
• Key parties involved and any relevant documentation
• How the opportunity originated

When captured consistently, this information allows for faster triage, more effective screening, and quicker progression from initial enquiry to investment decision. 

What are the most common mistakes organizations make when handling inbound investment or M&A inquiries?

In litigation finance, the most common mistakes are operational but they have direct commercial and reputational consequences:

1. Slow response times
Prospective clients often contact multiple firms at once. Delays can signal lack of availability or interest.

2. Unstructured information capture
Inquiries can come in over the phone, through email, website forms and LinkedIn, resulting in fragmented or incomplete information.

3. Over-automation or under-humanization
Generic automated responses can feel impersonal, while entirely manual processes create inconsistency and delays.

4. Poor routing and follow-up
Without clear ownership, communications can sit in inboxes or be passed between teams meaning opportunities can stall or be lost internally.

Ultimately, the biggest mistake is treating first contact as administrative rather than strategic, when, in reality, it is the starting point of deal quality.

The most effective approach is a hybrid one - using technology for speed, structure, and consistency and people for judgement and relationship-building.

Technology can:
• Capture and structure case data
• Provide immediate acknowledgement
• Ensure questions are routed quickly and consistently
• Create a clear audit trail

People can:
• Understand nuance and context
• Build rapport and trust
• Ask the right follow-up questions
• Represent the funder’s brand and values

At the start of any case or investment journey, relationships matter. Technology should enhance that experience, not replace it.

What measurable impact can better first contact have on pipeline strength, relationships, and deal outcomes?

Stronger first contact directly improves:

  • Pipeline quality: better intake leads to more qualified, investment-ready opportunities
  • Conversion rates: fast, more professional responses increase engagement and exclusivity, as well as the likelihood of securing instructions
  • Investor confidence: structured early-stage data improves decision-making
  • Operational efficiency: less time chasing incomplete information and faster conflict checks
  • Deal velocity: quicker progression from enquiry to evaluation and funding decision.

Small improvements at the top of the funnel compound across the entire investment lifecycle.

If firms could make just one or two changes today to improve their approach to inquiries, what would you recommend?

1. Create a standardized intake framework
Define the essential data needed for case screening and risk assessment, and ensure it is captured consistently across every channel.

2. Treat first contact as a strategic touchpoint
Ensure every enquiry receives a prompt, professional and human response that reflects the firm’s brand and client-care standards.

In litigation finance, early impressions don’t just shape relationships, they shape deal outcomes. These two changes alone can significantly improve conversion, efficiency and client relationships.

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Eric Schurke is CEO, North America at Moneypenny, the world’s customer conversation experts. He works with legal firms, litigation funders, and professional services to transform how they manage and qualify inbound opportunities. Eric is passionate about helping organisations strengthen deal flow, improve first impressions, and deliver exceptional client experiences from the very first interaction.

Commercial

Cartiga Closes Inaugural Private Credit Fund, Explores Public Listing via SPAC

By John Freund |

Litigation finance firm Cartiga has closed its inaugural LBS Income Fund and is now exploring a public market listing through a potential combination with Alchemy Investments Acquisition Corp 1, a special purpose acquisition company.

As reported by Stock Titan, Cartiga describes itself as a data-driven, tech-forward asset management platform for investing in legal claims and law firms. The company reports having deployed more than $1.9 billion over its 20-year history, participating in matters generating over $20 billion in estimated settlement values.

The newly closed LBS Income Fund is a private credit vehicle anchored by a major alternative asset manager, designed to give institutional investors exposure to Cartiga's litigation finance platform. The fund complements the firm's two core business lines: direct asset origination across consumer pre-settlement advances and commercial attorney financing, and fee revenue from synthetic equity participations in law firms and cases.

Alchemy Investments is evaluating a potential business combination with Cartiga and has initiated PIPE (private investment in public equity) discussions to support the transaction. No definitive agreement has been reached, and no assurance has been given that a deal will be completed.

If consummated, the transaction would represent another milestone in the maturation of litigation finance as an institutional asset class, following a broader trend of funders seeking public market capital to scale their platforms. Cartiga's combination of consumer and commercial funding, paired with its proprietary data analytics, positions it as a diversified player in an increasingly competitive market.