Originally from Handbook on Third-Party Funding in International Arbitration, Second Edition

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I. Introduction

In the past years, many major international arbitration institutions have adapted their commercial and investment arbitration rules to the rising use of Third-Party Funding (“TPF”). At the forefront of this development is the complex question of disclosure of TPF, which is increasingly required in various forms. This chapter will examine the current state of regulation and the distinct approaches chosen as to what and when TPF shall be disclosed in arbitration proceedings.

At the outset, it should be noted, however, that the adoption of disclosure obligations is far from universal: Out of the 23 commercial arbitration rules examined for this chapter, nine of them, or 39%, have yet to address TPF.  In contrast to commercial arbitration rules, all six examined investment arbitration rules explicitly address the disclosure of TPF. This chapter will also discuss the general differences between the disclosure regimes in commercial and investment arbitration as well as some of the underlying reasons.IIActors' Perspectives

II. Actors' Perspectives

Any attempt to address the disclosure obligations of funded parties necessarily requires a delicate balance of the competing interests of the various stakeholders involved (i.e., funded party, funder, opposing party and arbitrators).

This chapter provides a short introduction of the different interests and considerations surrounding the disclosure of TPF in arbitration proceedings.

A. Parties

The parties to an arbitration may have conflicting interests when it comes to the disclosure of TPF (and the respective funding terms) in arbitration proceedings. On the one hand, funded parties are typically interested in keeping information relating to their funding arrangement confidential as far as possible for a variety of reasons, including the desire to maintain the privacy of financial information or case strategy and to reduce the risk of delays for the proceedings or applications for security for costs. On the other hand, the presence of TPF may raise concerns in the opposing party regarding the funded party’s ability to pay adverse cost awards (possibly indicated by its reliance on TPF to finance the dispute). Consequently, opposing parties may have an interest in the disclosure of the presence of TPF and (some of) its terms to potentially apply for security for costs.  This is mainly based on (i) the (perceived) risk of non-compliance of the funded party with cost awards due to (potential) impecuniosity, and (ii) the fact that a funder generally has no obligation to cover any adverse costs if the funded case is unsuccessful (since the funder is not a party to the arbitration).