Third Party Funding in International Arbitration: New Challenges and Global Trends
Pursuing Ph.D. in International Investment Law from Indian Institute of Technology Kharagpur, India.
Volume III – Issue I, 2021
International commercial arbitration is a mechanism, rather an alternative method of resolving disputes ascending between private parties under international commercial contracts. Third-party funding (TPF), if not totally novel but relatively innovative phenomenon in international commercial arbitration. The notion of TPF is the fastest growing and highly deliberated contentious issue in the international commercial arbitration. TPF involves in an arbitration when a non-party, namely third-party funder to a dispute provides funding all or a portion of arbitration costs to one of the parties in return for a percentage of the amount recovered as previously agreed. In case the arbitral tribunal renders an adverse award against the funded party, the funder’s investment is lost. The funding generally covers legal fees including but not limited to, such as costs of lawyers, experts, outside counsels’ assistance, and any other expenses that maybe incurred by the claimants relating to the arbitration proceedings. The TPF funding institutions includes insurance companies, investment banks, hedge funds, and client’s attorney or law firms. The present article will examine the notion of TPF in international commercial arbitration and how it influences the arbitration proceedings in international commercial arbitration. After analyzing the basic concept of TPF, it will throw light upon the challenges the TPF such as conflicts of interests and transparency and disclosure requirements. The article identifies transparency and disclosure requirements is one of the most important issues shaping TPF funding arrangement and proceedings in international commercial arbitration. It argues for the mandatory disclosure of existence of TPF agreement.
Keywords: International Commercial Arbitration, Third-party Funding, Arbitral Transparency & Disclosure Requirement.