Lex Finance is the first third-party funder focused exclusively on arbitration financing related to Ibero-America. Two years on from its foundation, Narghis Torres shares his views on the business.
Leaders League. Two years after launching have you identified other financing needs concerning arbitration financing?
Narghis Torres. Yes. For example, debt financing. Some people say we don’t need to finance the whole procedure but they need some money to pay part of the arbitration. In that case we lend them some money and they give us the award as a guarantee – they will pay us win or lose. We’ve also started the practice of purchasing the arbitration award. This is where a party has won the arbitration but doesn’t want to spend more time and/or money to execute the award or the other party doesn’t want to pay or doesn’t have the money to pay upfront or can only partially pay. We remove the execution risk. Some clients really appreciate that because they need liquidity and are risk averse.
Leaders League. Besides debt financing and award acquisition financing have you identified any other products linked to arbitration in need of financing?
N.T. Definitely. We started with one product and we now have nine. Besides non-recourse financing, debt financing and award acquisition financing, we are now offering six more: pre-arbitration financing, advisors fee financing, distressed claim financing, working capital financing, multiparty arbitration financing and settlement financing. In the case of pre-arbitration financing you can finance two situations. First, several disputes are settled before arbitration but for that the party needs money to finance the costs of the negotiations and agreement and we can provide that. Second, when you have a complex arbitration the first thing is to determine if there is a claim and the amount of the damages. For that, it is necessary to pay lawyers and experts to determine breach of contract and the amount of the claim. These costs can be very expensive so we propose financing these kinds of expenses too. If there is a settlement agreement we take a percentage of it, if they decide to go on with the arbitration the grant would be the award.