Alain has served as co-founder of Profile Investment and various regulated funds (Luxembourg) dedicated to the third-party funding of international arbitrations since 2009. Before this, Alain was development director of the corporate and investment bank of the banking group Natixis. Within the task force on third-party funding of international arbitrations set by the International Council for Commercial Arbitration and Queen Mary University of London, he headed the sub-committee focused on best practices.
What inspired you to co-found Profile Investment (PI)?
When I met Iain McKenny, with his long experience of third-party funding, I realised we shared the same conviction for a business model based on transparency, integrated expertise and regulation compliance, in a merits-driven business model. Bringing together our respective experiences, we created PI together.
What types of cases and parties are you seeing currently attracting third-party funding?
SMEs looking for funding to bring their cases before a tribunal remain the bulk of the matters coming across our desks. More recently, we have experienced a steady increase in well-performing, large companies looking for risk/cost externalisation with capital allocation policies. Our regulated status is attractive for larger corporates, judicial administrators and public entities.
What criteria do you look at when deciding which cases to fund?
We systematically run a thorough due diligence on jurisdiction and merits; quantum; recoverability; the ethical environment of both the parties and the dispute; stakeholders; reliability of the arbitration institution; and the governing law and seat.
How has the market changed in recent years as jurisdictions around the world have increasingly permitted third-party litigation funding?
From a few ad hoc investors in the 1990s, the industry has crossed maturation stages: preventing conflict of interest biases, and keeping at arm’s length with lawyer counsels. The industry has now grown to a considerable volume of capital ready to invest in dispute resolution. In the past few years some players have become multinational companies with multiple locations. The industry is flourishing.
One part of the sector is heading to an insurance-driven model, based on a large number of cases of portfolio funding; another part is more finance-driven (with maximised risk externalisation); and another part is built on a merits-driven concept which, instead of a risk-pricing volume model, selects the strongest cases on more favourable terms consistent from one case to the other, derived from the cost of capital.
How do you see the third-party funding market developing in France over the next few years?
Third-party funding in France is not an issue when focused on international arbitration: many players are already foraging in Paris, with most of them coming from outside. The real issue is with court litigations. A third-party funder needs to map its risk assessment on objective criteria and will want to limit the different risks at stake (time, procedural hazards, consistency between case theory and judgment, etc). The French judicial system tends to cost less but often takes longer and still needs improvements for better reliability, which may be considered a deterrent for many professional funders. However, it continues to develop and may render it more attractive in the future.
How has your background in the banking group Natixis honed the skills you are able to bring in your current role?
I have mostly worked on the financing of industrial projects, thus assessing project sustainability, long-term market accuracy and solvency risks. I also developed full-fledged corporate financing activities for the industry in Germany, including leveraged buyouts and international trade finance. That all provided me with the corporate experience to assess the real value of contractual losses from commercial disputes. Also, it gave me a sense for commercial strategy assessment, which helps me to understand the business environment of a dispute between two international contractors. I have direct knowledge and experience of the drivers that can lead two companies towards a dispute, and how best to avoid or resolve it.
What types of cases would you like to see more of?
I like dispute cases where there is an opportunity for commercial reason to prevail, or where our investment can help prevent deep pockets from defeating good claims.
I would like to see more judicial administrators using third-party funding as a tool to bring their strong cases in receivership before tribunals/arbitration, thus enabling the opportunity for fair compensation or even company revival.
What tips would you give to a lawyer or client looking to bring a claim to a funder for consideration?
Check the availability and origin of the equity capital to be committed to the case. Ensure the funder’s team is qualified to understand and assess the case they would commit to funding; and that the client/lawyer relationship is preserved in the funding arrangement. Have direct discussions with the third-party funder – don’t let the matter be fully intermediated by the lawyers.Consider the proportionality of the contractual remuneration of the third-party funding, versus the realistic value of the damage to be compensated.