Abstract
Third-party funding has been commonly used in International Investment Arbitration. Third-party funders increasingly usually finance the claimant who either (i) does not have sufficient funding to start legal proceedings, or (ii) adequately capitalized, but seek funding in order to minimize cash flow disruption and share risk during their arbitration proceedings. However, the notion of third-party funding gives rise to several issues; first, should funded parties be required to disclose their funding arrangements? Following the first research question, when does the funded party need to disclose the existence of a third-party funder? Then what legal measures can be taken to tackle the concern of transparency and disclosure in cases involving third-party funding? This research concentrates on the transparency and disclosure requirements, which is the central issue that influences further development and use of third-party funding arrangements in international arbitration. Analysis of relevant treaties, laws, guidelines, and case laws drives us to the conclusion that there exist measures and several drains the current international arbitration system that will serve a transparency system to control third-party funding. Hence, it would be appropriate for arbitration institute or investment treaties to take these tools into account in order to provide legal certainty for the disputing parties, arbitral tribunal, and ultimately, for the legal framework of third-party funding in investment arbitration..
Highlights
International investment has become an integral part of states as it brings revenues and specific benefits to their economic system, which contributes to their Gross Domestic Product (‘GDP’)
The notion of third-party funding gives rise to several issues; first, should funded parties be required to disclose their funding arrangements? Following the first research question, when does the funded party need to disclose the existence of a third-party funder? what legal measures can be taken to tackle the concern of transparency and disclosure in cases involving third-party funding? This research concentrates on the transparency and disclosure requirements, which is the central issue that influences further development and use of third-party funding arrangements in international arbitration
There are several disadvantages of third-party funding (TPF) in arbitral proceedings (i) a successful claimant will generally have to pay a significant percentage of their retrievals to the funder, following the agreement concluded between them (ii) Even though funders are generally prohibited from taking excessive control or impact in an arbitration proceeding, there may be some loss of autonomy on the part of the funded party as funders may reserve the right of approval of the settlement.; (iii) Substantial costs can be incurred when packaging the case for presentation to a funder
Summary
International investment has become an integral part of states as it brings revenues and specific benefits to their economic system, which contributes to their Gross Domestic Product (‘GDP’). A state uses its sovereign rights to regulate and oversee all foreign investment activities conducted within its jurisdiction. In the event where the BIT contains a clause of investment arbitration, investors will automatically have the right to initiate an arbitral proceeding against a state under the substantive law of the host state, which seeks redress for violation of the BIT conducted by that state.[4] In foreign investment cases, the parties seek to choose an arbitration forum,[5] and the arbitral tribunal is empowered to determine the applicable relevant regulation of the BIT as well as the contract between the parties in dispute.[6] At the same time, international investment arbitration includes elevated expenses in the procedures for both the investor and the states. The notion of TPF gives rise to several legal issues; first, whether the funded party is required to disclose their TPF arrangements? Following the first research question, when does the funded party need to disclose the existence of TPF? lastly, what are legal measures that can be taken to tackle the concern of transparency and disclosure in cases involving TPF?
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