How to Structure Offshore Entities for Cross-Border Litigation

Cross‑border disputes can be won or lost before the first pleading is filed. The way you assemble entities, allocate rights, and plan for enforcement determines whether a judgment turns into cash or becomes a paper trophy. This guide walks through the practical playbook I use to structure offshore vehicles around litigation—what works, what to avoid, and how to move from claim to collected proceeds with minimal friction.

What “structuring for litigation” actually means

Litigation structuring is the deliberate setup of companies, trusts, contracts, and financing arrangements to:

• Safeguard assets and claim value through the life of a dispute

• Optimize the forum, law, and enforcement route

• Attract third‑party funding or insurance on competitive terms

• Manage costs, risk, and confidentiality

• Turn a judgment or award into money—where the defendant’s assets actually are

Think of it as building a financing and enforcement machine around a claim. Done early, it shapes the battlefield. Done late, it still mitigates risk and preserves leverage, but expect trade‑offs.

The goals that should drive your structure

Before you pick a jurisdiction or draft a trust deed, align on objectives. I usually map them into eight buckets:

• Enforcement reach

• Primary and secondary asset locations

• Recognition regimes for court judgments vs arbitral awards

• Availability of interim relief (freezing orders, disclosure orders)

• Funding and risk transfer

• Ability to use third‑party funding and contingency fees

• Access to ATE insurance and deeds of indemnity

• Local restrictions on maintenance and champerty

• Procedural advantage

• Speed and experience of the courts

• Availability and reliability of emergency relief

• Discovery tools (including U.S. §1782 for foreign court proceedings)

• Tax neutrality

• No incremental tax leakage on proceeds and funding flows

• Treaty access if needed (less relevant for pure litigation proceeds)

• Compatibility with CFC, hybrid, and BEPS rules of the investor’s home state

• Corporate governance and control

• Clear decision‑making on settlement, budget, and appeals

• Aligning incentives among claimant, funder, and counsel

• Insolvency resilience and director duties

• Confidentiality and privilege

• Common interest privilege recognition

• Treatment of in‑house counsel communications

• Data protection constraints (GDPR, PRC export rules, blocking statutes)

• Cost and speed

• Filing fees, court efficiency, delays

• At‑risk cost exposure and security for costs

• Reputation and optics

• Perception of “offshore” structures by courts and counterparties

• Avoiding any impression of asset‑shielding that undermines equitable relief

I keep these goals visible in a one‑page “dispute architecture brief” that all advisors can reference. It keeps the structure practical rather than theoretical.

Picking your jurisdictions: an honest comparison

No single jurisdiction wins on every criterion. Here’s how I think about common options—illustrative, not exhaustive.

• British Virgin Islands (BVI)

• Strengths: Fast injunctive relief, robust disclosure orders (Norwich Pharmacal/Bankers Trust), respected Commercial Court, cost‑effective. Good for holding SPVs and enforcement against BVI shares.

• Watch‑outs: Economic substance rules require thought; confidentiality vs disclosure obligations in aid of foreign proceedings.

• Cayman Islands

• Strengths: Sophisticated judiciary, investment fund ecosystem, portfolio funding familiarity. Purpose trusts and STAR trusts useful for holding litigation rights/proceeds.

• Watch‑outs: Costlier than BVI; careful on governance to avoid allegations of sham or control issues.

• Jersey/Guernsey/Isle of Man

• Strengths: Experienced in trusts/foundations, creditor‑friendly remedies, cooperation with English law practices.

• Watch‑outs: Higher costs; ensure fit with your enforcement route.

• Singapore and Hong Kong

• Strengths: Top‑tier arbitration seats; reliable emergency arbitrator relief; strong WFO practice; proximity to Asian assets.

• Watch‑outs: Funding restrictions differ. Singapore allows third‑party funding for international arbitration and certain proceedings; Hong Kong permits for arbitration and some insolvency matters but not general court litigation.

• England & Wales

• Strengths: Deep case law on funding/insolvency; High Court WFOs; strong disclosure tools; widely respected judgments.

• Watch‑outs: Post‑Brexit recognition in the EU is more complex; funding and DBAs are regulated; adverse costs risk is real.

• Delaware/US

• Strengths: Section 1782 discovery for foreign court proceedings (not available for private commercial arbitrations after ZF Automotive); powerful discovery once you anchor a U.S. connection (bank, server, parent).

• Watch‑outs: Fee exposure; caution around forum non conveniens and personal jurisdiction fights.

• UAE (DIFC/ADGM)

• Strengths: Common‑law islands with English‑language courts; gateway recognition of foreign judgments; growing arbitration ecosystem.

• Watch‑outs: Still maturing; evaluate enforceability onshore depending on asset location.

• Luxembourg/Netherlands

• Strengths: Helpful for holding and treaty access if needed; insolvency tools; established finance practices for waterfall/security.

• Watch‑outs: Coordination cost; ensure no unintended tax leakage.

A practical benchmark: arbitral awards are generally easier to enforce than court judgments because of the New York Convention—over 170 countries are parties. The UNCITRAL Model Law on International Commercial Arbitration is adopted in over 100 jurisdictions, which typically helps with supportive court measures. If enforcement is global and messy, I lean toward arbitration unless a specific court path gives superior interim relief.

The building blocks of a litigation‑ready structure

1) The litigation SPV (L‑SPV)

• Purpose: Isolate the claim from operating risk, facilitate funding/insurance, and simplify distributions.

• Typical form: BVI/Cayman exempted company or Jersey/Guernsey company. Singapore or English SPVs are fine if local tools are needed.

• What goes in: The chose in action (assignment of claims where permitted), funding agreements, ATE policy, security documents, counsel engagement letters, and waterfall arrangements.

• Who owns it: Often a holding company (MidCo) or a purpose trust to ring‑fence proceeds from claimant group insolvency or creditor interference.

Practical tip: If security for costs is likely, an under‑capitalized L‑SPV can backfire. You may need a deed of indemnity from a creditworthy parent, a bank guarantee, or ATE insurance wording acceptable to the court.

2) Holding and MidCo layers

• HoldCo: Sits above L‑SPV; may own other assets. Pick a jurisdiction aligned with the parent group’s tax and governance.

• MidCo: A clean company to separate legacy liabilities. Useful for security packages and intercreditor arrangements with funders.

Keep it simple: two layers are usually enough. Over‑engineering triggers judicial skepticism and operational delays.

3) Trusts or foundations

• When useful: To separate claim economics from operating companies, protect proceeds against claimant insolvency, or meet funder requirements.

• Vehicles: Cayman STAR trust, BVI purpose trust, Jersey/Guernsey trusts, or Liechtenstein foundation.

• Keys to credibility:

• Real trustee independence and records of decision‑making

• A clear purpose tied to litigation and proceeds distribution

• Avoiding “sham” indicators (beneficiaries exercising de facto control)

I’ve used purpose trusts to hold the shares of an L‑SPV so the claimant’s creditors—or a hostile receiver—can’t quietly derail settlement.

4) Funding stack

• Third‑party funding: Non‑recourse financing secured on case proceeds. Structures vary: single‑case, portfolio, or monetizations.

• Counsel economics: Conditional fees, damages‑based agreements (where permitted), success fee uplift.

• ATE insurance: Covers adverse costs/security for costs. Insurer may require co‑control or veto on settlement below certain thresholds.

• Interplay: Intercreditor deed to rank funder returns, law firm success fees, and ATE repayment.

Market guardrails: Funders typically target 20–40% of net proceeds or a 2–4x multiple, adjusted for risk, duration, and quantum. A solid enforcement plan lowers pricing.

5) Security, waterfall, and escrow

• Security over proceeds: Debenture over L‑SPV rights and receivables; assignment of insurance proceeds; charge over bank accounts.

• Priorities: Clear waterfall—costs, ATE premium, funder return, counsel success fee, then residual to claimant.

• Escrow: A neutral account for settlement funds; release mechanics tied to consent orders or award satisfaction.

Don’t skip an intercreditor agreement. Misaligned priorities are the single biggest cause of funding deals collapsing at the finish line.

A step‑by‑step blueprint

Stage 1: Pre‑dispute planning (or as early as possible)

• Map the asset geography and pressure points

• Where does the counterparty bank? Where are their shares registered? Any upstream guarantees? I often draw a heat map with primary, secondary, and tertiary enforcement avenues.

• Decide court vs arbitration

• Arbitration if you need cross‑border enforceability and confidentiality. Court if you need strong disclosure or injunctive relief in a specific jurisdiction.

• Choose your core jurisdictions

• Pick a seat for arbitration or court system for primary proceedings.

• Select an L‑SPV domicile with fast interim relief and straightforward governance (BVI and Cayman are frequent choices).

• Draft a funding and control architecture

• Who decides settlement? Who approves budget changes or counsel switches? Put it in a shareholder agreement or trust deed with clear voting thresholds.

• Prepare for substance and KYC

• Offshore entities now require basic economic substance (board minutes, local registered office, sometimes local directors). Budget for it and keep records consistent.

Stage 2: Early dispute onset

• Incorporate L‑SPV and MidCo

• Keep beneficial ownership registers current. Expect enhanced AML/KYC for litigation funding inflows.

• Transfer or confirm rights

• Assign claims to the L‑SPV where legally permitted, or issue a power of attorney and economic participation agreement if assignment is restricted.

• Ensure joinder rights so the L‑SPV can sue or be substituted as claimant.

• Lock in funding and ATE

• Bring funders into diligence early with a data room. A robust merits memo and enforcement memo can shave weeks off term sheet negotiations.

• Evidence and disclosure plan

• Identify banks and service providers in the U.S. for possible §1782 applications (for foreign court actions). Remember: after the U.S. Supreme Court’s ZF Automotive decision, §1782 is not available for private commercial arbitration.

• For offshore, prep for Norwich Pharmacal or Bankers Trust orders to identify recipients of misappropriated funds.

• Interim relief

• Draft the first‑strike package: ex parte worldwide freezing order (WFO) in your chosen common‑law hub, with immediate service on banks and custodians; asset disclosure orders; gagging orders where justified.

Stage 3: Running the case

• Procedural strategy and cadence

• Avoid fragmented filings unless they’re staged to apply pressure (e.g., a targeted Mareva in BVI combined with main proceedings in England).

• Governance and reporting

• Monthly budget call with funders and counsel; quarterly reassessment of quantum and enforcement feasibility. Minutes matter—courts may later examine decision‑making if control is challenged.

• Settlement posture

• Pre‑agree “walk‑away” thresholds and bracket strategies with funders and insurers. Keep escrow agents and draft settlement orders pre‑vetted to avoid last‑second drafting marathons.

• Privilege discipline

• Use limited distribution lists; mark draft memos appropriately; maintain common‑interest agreements when multiple entities and funders are involved.

• Be wary in the EU: communications with in‑house counsel may not be privileged in competition contexts; default to external counsel for sensitive advice.

Stage 4: Enforcement

• Convert paper to money

• For awards: rely on the New York Convention in target jurisdictions. Many courts are receptively pro‑enforcement; resist relitigation of merits.

• For judgments: examine bilateral treaties or local common law routes. In the EU, recognition of UK judgments now requires local law analysis.

• Parallel paths

• Equitable execution over shares; charging orders over distributions; garnishment of receivables; recognition of receivers appointed over offshore holdcos.

• Insolvency levers

• Creditors’ winding‑up petitions can focus minds quickly. “Soft‑touch” provisional liquidation in Cayman/BVI can enable asset recovery and recognition elsewhere.

• Consider UNCITRAL Model Law recognition where available for cross‑border coordination.

• Collections governance

• Escrow waterfall triggers; immediate partial distributions where permitted; reserve for set‑off risk and pending challenges.

Stage 5: Post‑resolution

• Distribute and document

• Execute the waterfall precisely; issue statements to all stakeholders; obtain releases.

• Wind‑down

• Keep the L‑SPV alive for tail liabilities and set‑asides, then liquidate to simplify.

• Lessons learned

• Record what worked—future funders will care about your track record of budgeting and enforcement.

Arbitration vs court: a practical fork in the road

• Arbitration advantages

• Enforceability via New York Convention across 170+ states.

• Confidentiality and specialist tribunals.

• Emergency arbitrator relief in many institutions; supportive courts in seats like Singapore, Hong Kong, London.

• Arbitration watch‑outs

• Limited discovery (which can be a feature or a bug).

• §1782 discovery now largely off the table for private arbitrations.

• Award challenges on public policy can be a wildcard in some jurisdictions.

• Court litigation advantages

• Strong interim remedies (Mareva, Anton Piller/search orders).

• Compulsion of third‑party disclosure.

• Ability to consolidate related claims more easily.

• Court watch‑outs

• Recognition/enforcement can be patchy outside treaty networks.

• Public filings may affect leverage or reputation.

I often split the difference: include an arbitration clause for the core contract but preserve parallel tort/fraud claims for courts that offer better freezing and disclosure tools. Use coordinated stay and anti‑suit strategies to manage the interface.

Tax, substance, and solvency hygiene

• Tax neutrality

• Litigation proceeds are often non‑taxable at source, but treatment varies in the recipient’s jurisdiction. Model for withholding and characterize proceeds properly (damages vs interest vs costs).

• Be mindful of CFC rules: passive income in the L‑SPV may be attributed to shareholders.

• BEPS and anti‑hybrid rules can disrupt interest deductibility for funding stacks—coordinate early with tax counsel.

• Economic substance

• Most offshore jurisdictions now require basic substance for relevant activities. Litigation vehicle activity is typically outside “relevant activities,” but holding companies may be in scope. Keep board meetings and key decisions well‑documented; engage local directors if needed.

• Solvency

• Maintain solvency margins in L‑SPV to avoid wrongful trading allegations if the case turns.

• If insolvency is foreseeable, get restructuring counsel to pre‑wire recognition prospects (e.g., light‑touch PL in Cayman with Hong Kong recognition).

Privilege, data, and confidentiality

• Common interest privilege

• Document common interest with funders and insurers to reduce waiver risk. Use separate counsel for funder if needed.

• In‑house counsel pitfalls

• EU competition cases often deny privilege to in‑house communications. Route sensitive work through external counsel.

• Data transfers

• GDPR and local data privacy regimes may restrict export of personal data and certain corporate information. Use SCCs and data maps. Watch PRC export restrictions and French blocking statute for discovery to U.S. courts.

• Banking secrecy and confidentiality

• Swiss/Monégasque secrecy can complicate evidence gathering. Offshore courts may still grant disclosure orders against intermediaries within their jurisdiction.

Common mistakes—and how to avoid them

• Over‑complex structures

• Courts and counterparties suspect artifice. Use only as many entities as the plan truly needs. If you can’t explain the chart in three minutes, simplify.

• Misaligned control

• Funders, claimants, and counsel pulling in different directions kill momentum. Bake governance into the shareholder agreement and funding documents.

• Ignoring security for costs

• An empty L‑SPV in a costs jurisdiction invites security orders that drain cash. Pre‑arrange ATE or a credible indemnity.

• Failing to plan enforcement

• A merits memo without an enforcement memo is half a strategy. Map assets and legal routes early; secure freezing orders where justified.

• Sloppy privilege practices

• Mixing business and legal advice in emails; casual forwarding to third parties; lack of common‑interest letters. Train the team and set protocols.

• Tax leakage surprises

• Characterization of proceeds and funding returns matters. Get short, focused tax opinions covering both the L‑SPV and the ultimate owner’s jurisdiction.

• Champerty blind spots

• Funding is not universally permitted for court litigation. Calibrate your structure to local rules—e.g., arbitral funding is permitted in Singapore, but general litigation funding remains constrained.

• Inadequate trustee independence

• Purpose trusts with rubber‑stamp trustees invite “sham” allegations. Choose reputable trustees and document their independent decisions.

Two mini case studies

Case A: Tech company vs regional distributor

• Facts: U.S.‑headquartered tech firm faces wrongful termination claim in the Middle East; counterclaim for unpaid royalties; distributor’s assets held through a BVI holdco; banks in Singapore and Dubai.

• Structure:

• L‑SPV in BVI holds counterclaims via assignment; MidCo in Cayman; purpose trust in Cayman holds MidCo shares.

• ICC arbitration seated in Singapore; emergency arbitrator sought for interim preservatory relief.

• WFO obtained in BVI against the distributor’s BVI shares; parallel disclosure orders against registered agent.

• §1782 discovery in the U.S. for bank records relating to royalty flows to a U.S. correspondent bank.

• Funding: Single‑case facility with 2.5x cap; ATE for adverse costs in Singapore and BVI.

• Result: Settlement in month 11 with funds into a Singapore escrow; waterfall paid funder and insurer; L‑SPV wound down after tail liabilities expired.

Key takeaway: Combining a Singapore seat with BVI enforcement and U.S. discovery boxed in the counterparty and accelerated settlement.

Case B: Asset recovery after shareholder fraud

• Facts: Minority investors in a Cayman fund suffer value‑stripping by the GP; assets tunneled to a Hong Kong affiliate and onward to Switzerland.

• Structure:

• Cayman L‑SPV funded via portfolio facility; STAR trust holds shares to insulate from investor‑level insolvencies.

• Proceedings in Cayman for breach and unfair prejudice; HK action for knowing receipt; LCIA arbitration for GP‑level disputes.

• WFOs in Cayman and Hong Kong; appointment of receivers over shares in the HK affiliate.

• Model Law recognition sought in an ancillary jurisdiction to assist with information gathering and asset control.

• Result: Court‑supervised sale of seized assets; distribution per waterfall; residual disputes referred to arbitration.

Key takeaway: Multi‑track proceedings coordinated through a single L‑SPV and trust simplified funding and enforcement across three hubs.

Timelines and cost benchmarks

Every case is different, but these ranges help with budgeting:

• Incorporating L‑SPV and MidCo: 2–7 days, faster with pre‑cleared KYC.

• Purpose trust setup: 1–3 weeks, longer if custom governance or protector committee.

• Emergency relief (WFO/Norwich Pharmacal):

• BVI: 24–72 hours for ex parte applications if evidence is ready.

• England: 48–96 hours with well‑prepared affidavits.

• Singapore/Hong Kong: 2–7 days depending on docket.

• Funding diligence to term sheet: 2–6 weeks with a clean data room.

• ATE binding: 2–4 weeks; longer if multi‑jurisdictional cover.

• Enforcement of arbitral award: 3–12 months depending on jurisdiction and resistance level.

Budget ranges:

• Single‑case funding pricing: 20–40% of net proceeds or 2–4x multiple.

• ATE premium: 15–35% of limit, often staged or contingent.

• Offshore injunction campaign: Low six figures to start; mid six figures if contested.

Governance that survives scrutiny

• Board composition: Two directors for L‑SPV (one independent). Reserve matters for settlement thresholds, counsel changes, and budget variance.

• Funder oversight: Observer rights and information covenants, not day‑to‑day control. Courts look skeptically at funders directing litigation strategy.

• Conflicts: If counsel holds a success fee, disclose and manage via engagement letter; ensure client consent is informed and documented.

• Audit trail: Keep a clean record of decisions, alternatives considered, and reasons for settlement choices. It’s your shield against later challenges.

Documentation pack you’ll actually use

• Corporate

• L‑SPV constitution, shareholder agreement with reserve matters

• Trust deed (if applicable), protector committee terms

• Litigation

• Counsel engagement letters, budgets, and success fee terms

• Common‑interest and confidentiality agreements

• Funding and insurance

• Funding agreement with schedule of milestones

• Intercreditor deed and security documents

• ATE policy with endorsements acceptable to target courts for security for costs

• Enforcement

• Draft forms of freezing orders and disclosure requests

• Template escrow agreement and distribution waterfall

• Recognition playbook for target jurisdictions

I keep these in a versioned data room with red‑flag trackers so nothing drifts.

Using insolvency tools as a strategy, not a threat

• Strategic petitions: Filing or threatening winding‑up petitions can catalyze settlement, especially when counterparties rely on regulated licenses or financing covenants sensitive to insolvency.

• Provisional liquidators: In Cayman/BVI, soft‑touch PLs help manage assets while negotiations proceed and can obtain recognition elsewhere.

• Director duty transitions: If the claimant group nears insolvency, adjust governance to reflect duties to creditors. This is where an L‑SPV outside the operating group helps preserve optionality.

Discovery and information leverage

• U.S. §1782: Still powerful for foreign court proceedings and certain treaty‑based tribunals; not for private commercial arbitration. Target banks with U.S. branches, cloud providers, and correspondents.

• Offshore disclosure: Norwich Pharmacal and Bankers Trust orders can unmask recipients of misappropriated funds. Ensure the L‑SPV has standing through assignment or agency language.

• Corporate registries and share charges: Many offshore jurisdictions allow enforcement against shares of asset‑holding entities. A well‑timed share charge can be as valuable as a judgment lien.

Risk management and optics

• Reputational narrative: Offshore doesn’t have to read as evasive. Your message: the structure ring‑fences a claim, protects counterparties through escrow, and ensures orderly distribution.

• Regulatory notifications: If you’re a listed company or regulated entity, pre‑clear disclosure obligations. ATE coverage and funding terms can be price‑sensitive information.

• Sanctions and AML: Screen counterparties and asset paths. Funders will require it, and courts can scrutinize transfers if sanctions risk appears.

Quick checklist to get moving

• Objectives

• Define win number and minimum acceptable settlement.

• Identify top three enforcement jurisdictions.

• Structure

• Decide on L‑SPV jurisdiction and whether to use a trust/foundation.

• Draft governance with funder/insurer input.

• Funding

• Prepare merits and enforcement memos; open data room.

• Shortlist funders; align on term sheet anchors (cap, multiple, control).

• Procedural

• Choose seat/forum, institution, and rules.

• Prepare first‑wave injunction and disclosure applications.

• Compliance

• KYC/AML and economic substance plan.

• Privilege protocols and data transfer map.

• Enforcement

• Asset heat map with bank touchpoints and share registers.

• Draft escrow, waterfall, and intercreditor docs.

A few seasoned tips

• Put enforcement counsel at the table on day one. They often change how you draft the claim itself.

• Don’t hide the funding. Courts increasingly accept it; transparency, within reason, reduces suspicion and avoids discovery fights.

• Stage your pressure. A fast ex parte WFO followed by targeted disclosure and a credible settlement bracket will often yield a better—and quicker—result than a maximalist pleading war.

• Keep the story simple for the judge. Complex structures are fine behind the scenes, but your pleadings and evidence should read as a straight line from wrongdoing to remedy to enforcement.

Structured well, an offshore litigation platform turns a chaotic cross‑border fight into a bankable, sequenced project. The right entities, the right forums, and the right funding terms don’t just support the case—they create leverage that moves counterparties to sensible outcomes and gets money in the door.