The Importance of Dispute Resolution System
Dispute resolution is one of the most important means that guarantees individuals obtainment of their rights, whether litigation is before the judiciary authority or arbitration bodies, as both are a way for the disputing parties to obtain their rights before a fair body that is responsible for resolving a dispute with complete impartiality and independence. Third-Party Litigation Funding can often play a crucial role in enabling the process.
Challenges Facing a Party in a Dispute
The problem appears if one of the parties wishes to obtain or defend his rights, while he does not have the financial resources that enable him to proceed with the litigation procedures related to his dispute. His rights may be exposed to the risk of violation and total loss. Here, the role of the litigation financing system appears to us in protecting the weak party in the dispute and enabling him to defend his rights by financing his dispute with the necessary financial resources in accordance with the specified controls and conditions. Third-Party Litigation Funding is vital in this context.
The Purpose of Third-Party Funding System
The purpose of the litigation financing process or financing from Third-party funding is to protect the weak party who is not financially able meanwhile the costs of resolving disputes should not prevent him from obtaining his rights. In case he is involved in a commercial dispute; he can resort to the commercial litigation financing system without exposing his money to risk and/or loss.
This system enables those who are not able to bear the costs of litigation or arbitration by seeking justice and equality between the parties, TPF is increasingly welcomed as a smart business model, which allows companies to maintain liquidity and continue their profitable projects; by using external capital to finance their legal disputes, they do not tie up their money in arbitration or lose credit ratings. Competitiveness (which usually deteriorates when participants participate in legal proceedings, as the value of their claims cannot be assessed through traditional commercial loan services).
Absence of TPF Regulations in Egypt
Due to the lack of legal regulations for the litigation financing system in Egypt and the Arab countries, we will follow the fundamentalist approach in establishing the idea of the litigation financing system and explaining its nature and the importance of the role it plays in achieving justice.
Until 2018, there was no mention of third-party financiers in Egyptian case law. However, in 2018, the principle has been demonstrated that third-party funders might be found and active in the Egyptian arbitration market. In this regard, the Al-Kharafi case included a request from a third-party funder to be included in the annulment procedures of the USD 1 billion investment treaty arbitral verdicts. This demonstrates the emerging presence of Third-Party Litigation Funding in Egypt.
In this case, the Court did not have much opportunity to debate the framework of third-party fundraising; Fast forward to year 2020, and his request was plainly denied this time without the Court delving into a thorough review of the framework of third-party funding from an Egyptian standpoint.
Furthermore, the same third-party funder re-applied to join the annulment procedures in 2020, but his request was flatly denied this time without the Court delving into a thorough examination of the structure of third-party funding from an Egyptian viewpoint.
Conclusion
Finally, the Egyptian judiciary was unable to adequately explore the problematic aspects that may have arisen because of third-party funding. However, this judicial stance does not stop arbitration panels from adopting this increasingly important practice of Third-Party Litigation Funding.
This article offers a general overview of the subject matter and is not a substitute for legal advice. For guidance tailored to your specific circumstances, professional consultation is recommended.
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