Third-Party Funding: Security for Costs and Other Key Issues
2 The Investment Treaty Arbitration Review 103 (Barton Legum ed., Law Business Research), 2017
23 Pages Posted: 10 Oct 2017
Date Written: May 1, 2017
Third-party funding, referring to the financing of lawsuits in exchange for a portion of the proceeds in the event of success, is a relatively recent phenomenon in investment arbitration. Professional funders appear to have realised the potential of a field where multimillion and multibillion-dollar cases are the norm rather than the exception. They may also be attracted by the lack of regulation of third-party funding. While some domestic laws limit or even prohibit third-party funding, investment arbitration was until recently a ‘legal no man’s land’ in that respect. But that situation is rapidly changing. As third-party funding is becoming more common, a growing body of arbitral decisions and commentary has highlighted serious concerns.
This chapter discusses some of the key issues, including:
(1) potential conflicts of interest arising out of the involvement of a third-party funder in an arbitration;
(2) whether a party’s reliance on third-party funding constitutes grounds for ordering security for costs;
(3) whether the involvement of a third-party funder has implications for the jurisdiction of investment treaty tribunals; and
(4) whether and to what extent a party relying on third-party funding should disclose that arrangement.
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