Apoorva Patel is a Vice President responsible for assessing and underwriting legal risk in international arbitration matters as part of Burford’s investment team.
You’ve previously worked with clients in the construction sector. What’s a challenge that parties in construction disputes routinely face that can be alleviated with legal finance?
Contractors and owners in large construction projects frequently encounter cost and time overruns that lead to commercial disputes. Contractors often face delayed interim payments, unpaid additional work outside the contract’s scope or other funding shortfalls on a project. They may also lack the working capital necessary to commence and sustain arbitration or litigation to enforce their rights. Legal finance helps solve those problems because it allows parties in construction disputes to offload the cost and risk of pursuing meritorious claims and to better manage cash flow.
In addition, construction and engineering companies often engage in multiple disputes across several projects, including both affirmative claims and defensive matters. Pursuing and defending numerous high cost litigation or arbitration matters place a considerable burden on a company’s legal expense budget. Portfolio financing can relieve this pressure and also provide companies with the flexibility to use the financer’s capital for other business purposes.
In the latest GAR 100 survey, 71 firms said they used financing, compared to just 60 in 2020 and 53 in 2019. What is driving the growth of arbitration financing?
International arbitration can be complex and costly, and legal finance is a necessary tool for parties in investor-State and commercial arbitration proceedings. The use of arbitration finance has grown due to the fact that the market now encompasses a variety of funding models that address a range of needs and situations.
Law firms and their clients alike increasingly recognize that using external funding when pursuing arbitration claims makes good sense from a business and risk management perspective, even if a company is financially sound. For example, monetizing a pending claim or uncollected arbitral award can allow a company to obtain immediate liquidity on an accelerated basis, ahead of the final resolution and payment of the claim in question.
According to Jus Mundi’s Industry Insights on Construction Arbitration report, material shortages and supply chain disruptions deeply affected the construction industry’s ability to recover in 2021. What trend do you think will most impact the industry this year?
Sustained global supply chain disruptions, challenges in sourcing materials and labor cost pressures will continue to delay and affect the profitability of construction projects this year. These and other pandemic-induced factors have led to a growing number of commercial disputes among contracting parties. Over the past two years, many parties have attempted to settle such disagreements through project-level negotiations and contractual early dispute resolution techniques.
However, a growing number of large and complex disputes have now become intractable and require formal dispute resolution procedures. As a result, contracting parties in the international construction sector will increasingly submit pandemic-era commercial disputes to binding arbitration. We may continue to see an uptick of construction disputes, especially within leading arbitral institutions such as the ICC.
Many consider obtaining a favorable award as the most challenging aspect of the arbitration process, when, in fact, award enforcement can be equally challenging. How can parties prepare for the enforcement process?
Award enforceability is a defining feature of international arbitration and one of its principal advantages over other forms of resolving cross-border disputes. That said, many claimants prevail in an arbitration only to face a recalcitrant respondent and the prospect of a drawn-out battle to secure compliance with the award.
Parties should consider potential enforcement issues at a dispute’s outset. It is crucial to understand—well before an award is issued—what assets the counterparty has, where those assets are located and the requirements for enforcement in those countries. Parties should then determine where and how best to enforce an award, which often requires a multi-jurisdictional strategy. In planning for enforcement, important questions include how to navigate judicial enforcement mechanisms in the anticipated jurisdictions, how to obtain disclosure or discovery that can inform enforcement efforts, and for disputes involving foreign States, how to identify and attach assets that sit outside sovereign immunity protections.
These issues often require specialized knowledge as well as the ability to foresee tactics that an award debtor may employ to avoid or delay enforcement. Burford’s in-house asset recovery team has a wealth of experience in enforcement matters across the globe and can help clients and firms effectively navigate complexities in the enforcement process.
You are a Global Advisory Board Member for the International Centre for Dispute Resolution’s Young & International Group. What is one way to create greater representation of women and racially diverse arbitration practitioners?
Gender and racial disparities have been the subject of much discussion in the international arbitration community over the last decade, particularly with respect to the appointment of diverse arbitrators to tribunals. Several significant efforts in recent years—including by groups and initiatives such as ArbitralWomen, The Equal Representation in Arbitration Pledge, Racial Equality for Arbitration Lawyers and Arbitrator Intelligence—have made major strides in combating the lack of diversity in arbitrator appointments.
Beyond the composition of arbitral tribunals, however, there is also an enduring diversity gap within the law firms that serve as counsel. For instance, the National Association of Women Lawyers’ most recent survey of demographic data from leading US law firms found that, while about half of all law firm associates are women and about 25% are people of color, the representation of women and diverse attorneys at more senior levels has remained largely unchanged for over a decade. Among equity partners, only 21% are women and 9% are people of color; the makeup of law firm leadership roles (e.g., practice group leaders and firm management committees) reflects similarly low levels of diversity.
These figures suggest that, despite the many meaningful diversity and inclusion programs at law firms and in the broader legal community, the pace of change has been slow and incremental. Expanding the representation of women and people of color in partnership and leadership positions requires prioritizing initiatives to address the obstacles and biases that hinder these lawyers’ career advancement. One of the core obstacles is economic: Business development is imperative to one’s long-term success in a law firm, but women and racially diverse lawyers have historically been at a disadvantage in how firms award origination and client development credit. Burford’s award-winning initiative to promote diversity in law, The Equity Project, tackles this specific issue.
5… tips for expecting parents?
I’ve been a parent for all of four months, so I’m usually the one asking for tips! Here are some reflections on the newborn and early infancy stages:
- Trust your instincts and be kind to yourself. Nobody has all the answers, and there is no one “right” way to parent.
- This is all new for your baby as well, and many things will require practice and patience.
- The adage “sleep when the baby sleeps” may be too aspirational, but it helps to establish a routine based on the baby’s own patterns of eating, sleeping, and alertness (until the baby decides to change things up).
- Embrace the chaos and be flexible.
- All things pass—and some all too quickly, so cherish even the seemingly mundane moments as your baby grows and develops.