Third-Party Funding in Arbitration - India's Readiness in a Global Context

Abstract

TDM Editorial (2018):

"Anish Wadia and Shivani Rawat have demonstrated the permissibility and enforceability of third-party funding in India since 1876 by engaging in an exhaustive analysis of relevant judicial authorities. This is followed by a comprehensive dialogue on all major aspects of third-party funding in international commercial and investment arbitration, including disclosure norms and FEMA. The authors have proposed a viable regulatory framework for India inspired by best practices from other jurisdictions."

The Times of India (Sunday, 24 February 2019):

“Advocates Anish Wadia and Shivani Rawat, in a 201[8] paper, traced permissibility of TPF to an 1876 judgement. Wadia said “amendments to [the] Civil Procedure Code for Maharashtra by the Bombay [High Court] in 1983 acknowledged the permissibility of TPF by including measures for security for costs awarded against the funded claimant. Few other states had followed suit to ensure securing costs from TP funders. TPF holds significant potential and its success would pave way for traditional modes like litigation.””

Authors' Executive Summary:

With increasing cross-border transactions, resort to international commercial and investment arbitrations is on the rise. While these forms of dispute resolution ensure speedier results as opposed to claims languishing in domestic litigation systems for years (and often, for decades in India), the high operational costs of arbitration cannot be denied. In this context, third-party funding in international commercial and investment arbitrations is proving to be a boon for litigants. Dispute financing is allowing parties increased flexibility in pursuing their claims, access to better resources and mitigation of cost risks. The concept does not play favourites - dispute financing equally benefits financially weaker and well-funded parties.

With third-party funding gaining increasing global significance in providing parties access to justice, the time has come for India to formally open its doors to dispute financing in international commercial and investment arbitrations, and eventually even for domestic litigation. Compared to other common law jurisdictions, India is faced with relatively fewer hurdles. Judicial precedent since 1876 has held the common law doctrines of champerty and maintenance as not being applicable to India and the concept of litigation funding has not been held, per se, illegal and hence, enforceable in most situations. This progressive outlook, therefore, provides fertile ground for the development of third-party funding in India.

Through this paper, the authors have sought to initiate a meaningful discourse on third-party funding in India, the benefits for the parties involved, the issues that would need to be tackled, the requirement for a regulated regime, and what India could learn from other common law jurisdictions where the practice of third-party funding is bourgeoning. The paper concludes with the authors' suggestions.

Keywords: India, third-party funding, regulation, international arbitration, investment arbitration, dispute financing, access to justice, champerty, maintenance, funding agreements, stricto sensu, lato sensu, contingency fees, Bilateral Investment Treaty, security, costs of arbitration, disclosure, conflict