The Center on Civil Justice

Emerging Trends in Third-Party Funding

Emerging Trends in Third-Party Funding

Date: February 3, 2023

Location: Greenberg Lounge, 40 Washington Square South, New York, NY 10012

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The third-party funding industry is changing rapidly, and it is causing rapid changes in the legal profession.  However, law schools and legal academia are paying insufficient attention to the changes in the legal profession being brought about by third-party funding.  The Center on Civil Justice at NYU School of Law will host a five-panel conference to bring some of the emerging trends in third-party funding to the attention of the academy.


9:00 AM - Breakfast

9:30 AM - Panel 1: Disclosure and Discovery

Debate over disclosure in third-party financing of litigation and arbitration can is conducted across at least four distinct dimensions.  First, there is the simple question of whether to treat third party financing as a special category at all:  that is, why should there be special rules that apply to information simply because it is connected to funding?  Second, assuming that special rules sometimes are warranted, to whom should disclosure be provided?  Third, assuming that special rules sometimes are warranted, what should be disclosed?  Fourth, assuming that special rules sometimes are warranted, should their content vary based on the whether the funding occurs in connection with litigation or arbitration, or depending on the object of the funding (so that profit-motivated funding is treated differently than funding not motivated the prospect of securing financial share of the outcome of the dispute).

The debate along each of these dimensions has been fierce and has occurred in a variety of fora.  Sometimes the answer to the baseline question -- should there be special rules that apply to information simply because it is connected to funding – gets conflated between different types of dispute resolution or types of information, so that nuance is lost and positions get unnecessarily hardened. This panel will attempt to reintroduce nuance and carefully separate each dimension identified above.  Special attention will be paid to the costs and benefits of disclosure of third party funding not only to the courts and parties, but also to society in general, in terms of the potential effect of access of justice where disclosure becomes burdensome and/or a tool of strategic discovery practice. 

Moderator: Anthony Sebok (Professor, Cardozo Law)


10:45 AM - Panel 2: International Arbitration

Once an emerging trend, third-party funding is now a mainstay in international arbitration.  Yet, funding remains on the leading edge of dispute settlement worldwide with innovative financing structures, solutions for a wide range of parties and law firms, and a constantly emerging (new) and merging (old) cadre of global funding entities.  Moreover, as funding matures, regulatory interest has intensified, and new sources of regulation are poised to act, including national and local governments, courts, arbitral institutions, and funders self-regulating.  With this backdrop, this panel will address the future of the international arbitration third-party funding industry from the perspectives of independent arbitrators and current and former executives from major global third-party funding entities.

Co-Moderators: Bernardo Cremades (Senior Partner, Cremades y Asociados) and Victoria Sahani (Associate Provost for Community & Inclusion, Boston University)


12:00 PM - Luncheon

1:15 PM - Panel 3: Law Firm Ownership

Capitalization, and therefore ownership, of law firms has long been an issue.  As law firms’ need for capital has increased with the rise in technology and the persistent desire of law firm partners to take as much money as possible “off the table,” law firms are running up against long-standing strictures against ownership of law firms by non-lawyers, leaving only three sources of capital: partner capital contributions, loans and, increasingly, third-party litigation funding.  This “perfect storm” appears to be culminating in a slow but discernible move to abolish those prohibitions. Starting in 2001 in Australia and 2007 in the UK, non-lawyers have been permitted to hold ownership stakes in law firms.  And, in a significant further development, since 2011, the UK has permitted law firms to solicit funding from outside investors.  More recently, in laws enacted in 2020, Arizona and Utah each opened the doors to non-lawyer ownership of law firms.  The same year, the California State Bar Board of Trustees set up a “study group” to examine the issue.  

This Panel will examine the developments in Australia, the UK and now the U.S against the backdrop of the long-standing prohibition on fee sharing and non-lawyer ownership, and the reality of the litigation funding industry.  It will then look at possible scenarios going forward, especially as non-law firms, especially the Big Four accounting firms, increasingly encroach on the traditional areas of law practice, and the history of the investment banking industry especially, which underwent a similar transition in the 1990’s.

Co-Moderators: Mark Jacobs (Co-Founder and President, Arrowhead Capital) and Maya Steinitz (Professor, Iowa Law)


2:30 PM - Panel 4: Insurance, Risk, Securitization, and Capital Markets

Since litigation funding was introduced in the United States, much attention has been paid to how it is shaping the practice of law. As the industry evolves, a second question is coming into focus: how are other financial markets shaping the practice of funding? Litigation funders are expert at selecting meritorious cases, but the risks of litigation are legion. Apart from the obvious risk of an unexpected loss on the merits, litigation funders are exposed to significant counterparty risk (particularly in the context of settlement, where funders lack control over key decisions) and duration risk (even routine delays in court proceedings can impact a funder’s rate of return). Funding is also a notoriously “lumpy” business; investments often take years to resolve, complicating cash management efforts.

Insurers, lenders and litigation funders themselves are beginning to explore ways to help funders off-load some of these risks and manage cash flows. Whether by insuring against a risk of loss, borrowing against portfolio assets, monetizing pieces of an investment or securitizing funding transactions, funders now possess a critical toolbox for addressing fundamental risks.

This panel will introduce the financial tools available to funders through a short series of use scenarios. Relying on their first-hand experience in the field, the panelists will then explore the benefits and disadvantages of the solutions currently available to funders at length. Finally, the panel will consider where the secondary market is headed.

Moderator: Alan Zimmerman (Managing General Partner, Law Finance Group)


  • Andrew Mutter (Senior Vice President, CAC Specialty)
  • Boris Ziser (Partner, Schulte Roth)
  • Justin Brass (Managing Director and Co-Head Litigation Finance Group at Stifel Financial Corp.)

3:45 PM - Panel 5: Shedding Light on the Funding Contract Process

Among the most frequently voiced complaints about the litigation funding process are that it is too time consuming and inefficient and that there are few if any recognized structures for term sheets and funding documents.  Law firms and litigants alike have requested that funders agree and share standardized documents and deal terms, while funders often have responded that each transaction is bespoke, requiring documentation and terms unique to the particular situation. Conflicts frequently arise from the mismatched expectations (both legal and economic) and experience of funders and the transactional lawyers representing litigants and law firms, with the attendant delays and frustrations that can overly complicate the process and lead to failed deals.  That process often is complicated by the presence of unsettled  legal and ethical issues that arise late in the negotiations and that one party did not anticipate.

This panel addresses the perceived need for greater transparency and efficiency in the funding process from the perspective of experienced deal lawyers, funders and law firms.  The panelists will share experiences, both positive and less positive, in attempting to close funding transactions and offer suggestions and potential solutions to the delays and disconnects that many view as endemic to the process.  The panel also will examine opportunities to reach a working consensus on basic deal structures and to refine the expectations of both funders and parties seeking funding alike.  It also will seek to define and consider the core issues that can arise in sophisticated commercial funding transactions and how all of the parties involved can seek to identify and resolve them early in the discussion.

Moderator: Andrew Langhoff (Managing Director and Founder, Red Bridges Advisors) 


CLE readings here.