General Duties of Counsel - Part I General Report - Chapter 2 - Handbook on Third-Party Funding in International Arbitration

Kabir Duggal is a senior associate in the International Arbitration group of Baker McKenzie's New York office and a Lecturer-in-Law at Columbia Law School. His practice focuses on investor-state arbitration, commercial arbitration, and on public international law issues. He serves as an editor for investment claims.com hosted by Oxford University Press and on ICSID Review's Peer Review Board. He also serves on the Chartered Institute of Arbitrators Young Members Steering Committee. He was awarded the inaugural ABA Diversity Fellowship by the ABA Section of International Law. Mr. Duggal is a graduate of the University of Mumbai (University Medal), University of Oxford (DHL-Times of India Scholar) and NYU School of Law (Hauser Global Scholar). He is admitted to practice law in India, England and Wales (Solicitor) and New York.

Khushboo Shahdadpuri has acted as co-counsel in various international arbitration proceedings under ICC, SIAC, LCIA, LMAA, GAFTA and UNCITRAL Rules. A graduate of Columbia Law School, she received her LL.M. as a Harlan Fiske Stone Scholar and was a recipient of the Parker prize. She represented Columbia University at the LLM. International Commercial Arbitration Moot Competition in 2016 where her team was semi-finalist and won the best oralist title. Prior to that Ms. Shahdadpuri worked under the Prosecutor at the International Criminal Tribunal for the Former Yugoslavia. She is a qualified lawyer in Singapore and is awaiting admission to the New York Bar.

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Originally from Handbook on Third Party Funding in International Arbitration

2.1. Introduction

2.1.1. The Emergence of Third-Party Funding in International Arbitration

The provision of capital by external sources to finance arbitration claims is not a nascent phenomenon. What is rapidly growing in prevalence, however, is an industry specifically catered to providing capital to parties for their costs and expenses of the arbitration. This phenomenon is known as third-party funding.

Third-party funding has traditionally been perceived as being only extended to claimants; however, it is increasingly being made available to respondents facing arbitration claims. While the statistics for commercial arbitration are not as transparent, a clear demand for third-party funding is discernible for respondents in investor-state arbitration. Nonetheless, funding might be analogously utilized for respondents in the context of counter-claims.

Third-party funding raises delicate issues due to the entry of funders in the traditional attorney-client relationship sphere. The present dearth of regulations in the field, juxtaposed by its increasing prevalence as countries relax or abolish their traditional laws of champerty and maintenance results in it falling to the counsel to act as gatekeepers to ensure the legitimacy and integrity of arbitral proceedings is upheld.

2.1.2. Defining Third-Party Funding

While it is acknowledged that the complex and multi-faceted practice of third-party funding makes it difficult to define it in a linear black and white fashion, the definition adopted by the European Union’s proposal for Investment Protection and Resolution of Investment Disputes with the United States (“EU-US TTIP Negotiations”) provides a broad definition that can encompass varying forms of third party funding while specific enough to discern it from other forms of financing.