Disclosure and Security for Costs or How to Address Imbalances Created by Third-Party Funding

Abstract

The growth of third-party funding (TPF) in international arbitrations seems to have intensified recently, as suggested by the rise in the number of publicly-known cases involving funders.TPF is here to stay and it can play an important and commendable role in the arbitral process when it provides an impecunious party with access to justice. However, the flipside is that the addition of funders to the arbitral e quation also creates imbalances where there were none before. This article provides an innovative perspective into the issue of TPF, by analysing how funders have impacted the arbitral process. The arbitral community should be aware of these imbalances and seriously consider effective remedies to redress them, thereby safeguarding the integrity and efficiency of the arbitral process. Currently, there is virtually no regulation of TPF conduct in international arbitration, and funders have been left to define their own rules of conduct. In the absence of appropriate and consistent regulation, two remedies can already be implemented to address the imbalances created by TPF. First, a funded party should communicate upfront and transparently about TPF. Second, arbitral tribunals should be more amenable to granting security for costs, especially when an impecunious claimant is being funded and the respondent is faced with a serious risk of a hit-and-run arbitration.