The third party funding of international arbitrations is a nascent but growing business. Recent years have witnessed a marked increase in the demand for third party funding by parties to arbitration proceedings, regardless of whether or not they are in financial distress. To meet this demand, existing and new funders are developing specialist arbitration funds and fund managers to target parties to suitable cases. It is perhaps no surprise therefore that a more supportive and flexible approach to the third party funding industry is emerging in many countries. Yet, owing to its recent emergence in the mainstream, the legal and ethical implications of third party funding are frequently unfamiliar to parties with arbitration claims, their counsel and their arbitrators.
This chapter provides a practical and practice-oriented insight into the non-recourse financing of arbitrations by third parties.1 Part I introduces the concept and mechanics of third party funding in international arbitration. Parts II and III consider, respectively, the benefits and risks of third party funding from a systemic perspective, and provide guidance on how to manage those risks. Part IV discusses the current limited framework which governs third party funding and suggests areas where reform may be required. Part V addresses the role of arbitral tribunals in promoting best practice from funded parties and their funders, with particular reference to the disclosure of third party funding arrangements and the allocation of costs and security for costs. Part VI contains some concluding remarks.