With litigation funding agreements, for Turkish
We offer a significant opportunity to investors.

Contingency fee arrangements are most commonly associated with the United States, where they have developed in response to the highly competitive nature of the legal market and the often substantial costs of litigation.

In practice, lawyers entering into such agreements assume the full risk of the proceedings. This typically includes covering all litigation-related expenses, such as court fees, expert or forensic costs, and enforcement or collection expenses. As a result, claimants are able to pursue their claims without bearing any upfront financial burden.

In return for assuming this risk, lawyers are entitled to a percentage of the amount recovered—provided that the case is successful and enforcement is achieved. This success-based percentage constitutes the lawyer’s sole remuneration, and no additional fees may be claimed beyond this agreed share.

The primary advantage of this type of arrangement is that it enables claimants to pursue their case at no upfront cost. For this reason, it is particularly attractive not only to potential claimants who lack the financial resources to cover litigation expenses, but also to large companies that prefer not to allocate budget to high legal costs or assume the financial risks associated with litigation.

Another key benefit is the strong alignment of interests between the lawyer and the client. Under such agreements, the lawyer is only remunerated upon successful recovery. This naturally incentivizes counsel to pursue the claim in the most efficient, proactive, and results-oriented manner possible, aiming for a swift and favorable outcome.

One of the defining features of contingency-based litigation funding arrangements is their non-recourse nature. In the event of an unsuccessful outcome, lawyers have no entitlement to any payment. Their remuneration is strictly conditional upon both a successful result and actual recovery.

Accordingly, if the claim fails, all costs and investments undertaken by the lawyers remain entirely at their own risk. In such cases, they absorb the loss of their investment and have no right to seek reimbursement from the claimant.

Under this model, lawyers assume not only their own fees but also the full risk of all litigation-related expenses. In the context of arbitration, these costs typically include institutional administrative fees, arbitrators’ fees, expert and forensic costs (which can be substantial), as well as logistical and administrative expenses associated with the proceedings. In a contingency-based arbitration funding arrangement, all such costs are initially borne by the lawyers.

If the case is successful and recovery is achieved, the agreed contingency percentage is first deducted from the gross recovery as the lawyers’ fee. The remaining amount constitutes the client’s share. Litigation costs are then deducted from the client’s portion.

By way of example: assume a total recovery of 100 units and a contingency fee set at 30%. Upon recovery, 30 units are first allocated as the lawyers’ fee. The remaining 70 units represent the client’s share, from which the incurred costs are subsequently deducted. The balance constitutes the client’s net recovery.

It is important to emphasize that the costs deducted from the client’s share do not include any additional legal fees. The lawyers’ sole remuneration is the agreed contingency percentage (in the example above, 30 units). Another key point is that costs are recoverable from the client only if the case is successful and recovery is obtained. In the event of failure, the client bears no responsibility for these costs. Accordingly, the non-recourse principle applicable to legal fees equally applies to expenses.

This structure not only eliminates the client’s financial risk but also incentivizes cost-efficiency in the conduct of the proceedings. Since all expenses remain at the lawyers’ risk until recovery is achieved, they are motivated to manage both their own work and third-party services in the most efficient and cost-effective manner. Furthermore, under contingency-based funding arrangements, lawyers regularly document and report all incurred costs to the client, ensuring full transparency throughout the process.

Contingency-based litigation funding does not reduce the likelihood of settlement; on the contrary, it often increases it. Under such arrangements, both the lawyer and the client share a common economic objective: to reach a settlement as quickly as possible and on the most favorable terms for the client. Their interests are therefore closely aligned when it comes to resolving the dispute efficiently.

This alignment becomes clearer when compared to traditional hourly billing models. In the conventional structure, lawyers’ financial incentives may be tied to the duration of the proceedings, which can—at times—discourage early settlement. By contrast, in a contingency-based model, lawyers are incentivized to keep the door to settlement open and actively pursue resolution opportunities.

That said, settlement negotiations are not solely controlled by the lawyers. Ultimately, the claim belongs to the client, and no settlement can be concluded without the client’s explicit consent. In other words, any settlement agreement must be approved by both the client and the lawyers.

Finally, it should be noted that clients may also opt for non-pecuniary settlements. For instance, a contractor engaged in a dispute with a public authority may prefer to settle in exchange for being awarded a new project rather than receiving a monetary payment. In such cases, it is sufficient to determine a reasonable compensation for the lawyers by taking into account the economic value of the new arrangement, the agreed contingency percentage, and the costs incurred in pursuing the claim.

Investment arbitration—where investors seek compensation from host states for harm suffered to their investments—is a form of dispute resolution that entails significant financial exposure. Empirical studies examining more than 200 investment arbitration cases indicate that proceedings typically last between three to four years, with total arbitration costs—comprising legal fees, arbitrators’ fees, and expert expenses—averaging around USD 4–4.5 million.

These figures do not include the enforcement phase, i.e., the process of collecting the awarded compensation. This stage depends on several variables, including whether the respondent state is willing to comply with the award, whether it holds assets abroad, and if so, the extent to which those assets benefit from protections such as sovereign immunity. As a result, enforcement may take anywhere from one to three years, with additional costs potentially reaching USD 1–2 million.

Against this backdrop, entering into a contingency-based litigation funding arrangement in investment arbitration effectively shifts a total financial risk of approximately USD 6–6.5 million—or even more—onto the lawyers. In the event of an unsuccessful outcome, this entire financial burden is borne by the lawyers, while the client remains fully insulated from these risks.

Given the significant time and financial risks involved in investment arbitration, law firms generally tend to avoid contingency-based fee arrangements. Such agreements remain exceptional rather than common practice in this field.

From this perspective, our team’s collaboration with U.S.-based firms that specialize in contingency fee litigation creates a highly unique opportunity for Turkish investors, opening a rare and valuable pathway to pursue complex international claims without bearing the associated financial burden upfront.

Given the level of risk such arrangements entail for law firms, they are not offered for every dispute. Law firms typically consider proposing a contingency-based agreement only after conducting a thorough assessment of the case and reaching a favorable view regarding its prospects of success.

Accordingly, once discussions for such an arrangement begin, the law firm will first carry out a detailed due diligencereview of the dispute. This assessment is conducted at no cost to the prospective claimant. If the case is found to have strong merits and a reasonable likelihood of success, a funding proposal may then be made.

Importantly, this due diligence process also serves to identify and evaluate the risk profile of the case. Where an offer is extended, the contingency percentage proposed by the law firm will be calibrated in proportion to the level of risk involved.

Turkish investors interested in this type of arrangement may contact us directly. Following this initial outreach, a meeting will be scheduled promptly to conduct a preliminary assessment of the investor’s dispute.

Based on this initial review, disputes that demonstrate a reasonable prospect of success will proceed to a more detailed due diligence phase. At this stage, investors will be asked to provide all key documents and relevant information concerning the dispute. It is worth noting that if investors have already prepared a structured case narrative and carried out preliminary damage calculations, the review process can be completed more efficiently.

Following the due diligence stage, law firms will extend an offer for cases they consider to have a sufficient likelihood of success. The central component of such an offer is the contingency fee—expressed as a percentage of the total amount recovered upon a successful outcome. This percentage is determined by taking into account various risk factors associated with the dispute and may increase or decrease accordingly.

In the final stage, the parties negotiate the terms of the proposed agreement and finalize the contractual framework.

There are fundamental differences between these two models. Indeed, contingency-based arrangements can be seen as having emerged, in part, as a response to the limitations of traditional hourly billing.

Under hourly fee arrangements, clients face a lack of cost predictability, as they are billed for every hour spent by their lawyers. In practice, legal fees can escalate rapidly and become difficult to control. Moreover, this model may create a misalignment of economic incentives: while the lawyer’s financial interest may lie in prolonging the proceedings (thereby increasing billable hours), the client typically seeks to resolve the dispute as quickly and cost-effectively as possible.

Another major distinction concerns costs beyond legal fees. In hourly billing arrangements, all litigation or arbitration-related expenses—such as institutional fees, arbitrators’ fees, expert costs, and administrative or logistical expenses—are borne entirely by the client. By contrast, under contingency-based litigation funding, these costs are assumed by the lawyers.

A further critical difference relates to the enforcement and recovery phase. In many hourly fee arrangements, enforcement (or recognition and execution of an award) is either excluded from the scope of representation or subject to additional fees. Conversely, in contingency-based models, lawyers are compensated only if the case is successful and recovery is achieved. As such, the entire enforcement process also falls within the lawyers’ scope of responsibility and risk.

In light of these distinctions, it is clear that while hourly billing leaves the entire financial risk of litigation or arbitration with the claimant, contingency-based litigation funding effectively reduces the client’s financial exposure to near zero, transferring the risk to the lawyers.

Capped fee arrangements were developed to mitigate the disadvantages of open-ended hourly billing. Under this model, lawyers continue to charge on an hourly basis and/or for specific phases of the case, but subject to a pre-agreed maximum fee cap.

While this approach introduces a degree of cost predictability for clients, the financial risk up to the capped amount remains entirely with the client. In addition, clients are still responsible for all litigation or arbitration-related expenses. Moreover, many capped fee arrangements do not cover the enforcement or recovery phase, or require separate fees for that stage.

Another important consideration is that capped fee agreements often include exceptions and carve-outs. In many cases, the cap may cease to apply if a certain time threshold is exceeded, or if unforeseen and significant developments arise during the proceedings, allowing lawyers to exceed the agreed limit. As a result, even the predictability offered by this model may be limited in practice.

By contrast, contingency-based litigation funding provides full cost predictability and shifts the entire financial risk of the dispute onto the lawyers. In essence, while capped fee arrangements introduce a degree of certainty, they still leave the client exposed to financial risk; contingency-based agreements, on the other hand, effectively eliminate that risk altogether.

There are fundamental distinctions between success fee arrangements and contingency-based litigation funding.

Success fee agreements typically предусматри a baseline payment structure, under which the client pays a fixed fee regardless of the outcome, supplemented by an additional “success premium” if the case is won. In other words, the client remains obligated to make payments in any event, with the success fee serving primarily to adjust or supplement the overall remuneration.

In addition, under success fee arrangements, all costs beyond legal fees remain the responsibility of the claimant. In the context of arbitration, this includes institutional administrative fees, arbitrators’ fees, expert costs, and all logistical and administrative expenses. By contrast, under contingency-based litigation funding, these costs are fully assumed by the lawyers.

A further critical difference concerns the timing of payment. In most success fee arrangements, the success premium becomes payable upon a favorable award, regardless of whether recovery (i.e., actual collection) has been achieved. Conversely, under contingency-based funding, lawyers are entitled to remuneration only if both success and recovery occur.

In light of these differences, it is clear that while success fee arrangements may reduce the claimant’s financial burden to some extent, they do not eliminate risk. Contingency-based litigation funding, on the other hand, effectively reduces the client’s financial exposure to near zero by transferring the entirety of the risk to the lawyers.

Another mechanism available to claimants who either lack sufficient funds or prefer not to assume the financial risks of litigation is third-party litigation funding. Under this model, specialized funding entities finance the proceedings in exchange for a percentage of the eventual recovery. In this respect, both models share a common objective: shifting financial risk away from the claimant.

However, there are important distinctions between the two.

First, third-party funders typically require a higher share of the proceeds. This is because they are not law firms themselves; rather, they invest in the claim and separately retain legal counsel to handle the case. As a result, the percentage offered to the claimant must account for both the funder’s return and the legal fees of the law firm, making the overall cost structure less favorable.

Second, third-party funding introduces an additional layer between the client and the legal team. This tripartite relationship (client–funder–law firm) can, in certain cases, lead to coordination challenges or misaligned expectations.

By contrast, contingency-based litigation funding eliminates the intermediary funder layer, allowing for more competitive pricing and preserving the client’s direct control over the proceedings.