Originally from Handbook on Third-Party Funding in International Arbitration

6.1.   Introductory Note

This analysis is based on the current rules of professional responsibility and legal obligations of attorneys as revealed by court decisions in the United States without regard to whether the attorney’s legal services occur in an arbitration or non-arbitration context. Given that the Model Rules of Professional Conduct (“MRPC” or “Rules”) explicitly distinguishes the obligations of attorneys in arbitration from other adjudicative and non-adjudicative legal practice very rarely,  and in contexts not relevant to Third-Party Funding, there is no basis for assuming that the obligations of attorneys in arbitration will vary from attorney’s obligations in general in the context of this discussion.

6.2.   Relevant Ethics Rules

Before discussing the duties, if any, that an attorney may owe third parties, it is important to establish the range of possibilities available to the attorney. Therefore, it is necessary to establish the circumstances under which it is unethical for an attorney to assume duties to third parties. The following rules are relevant to this issue.

6.2.1. Rule 1.8(f): “Attorney lawyer shall not accept compensation for representing a client from one other than the client unless [exceptions not listed]”.

Litigation funders do not compensate attorneys. Litigation funders advance money to clients who may, if they choose, use some or all of those funds to compensate attorneys. Even where a funder and a client agree that the funder will establish an escrow account out of which the attorney may draw funds that does not mean that the funder is compensating attorney. Therefore, although Rule 1.8(f) permits an attorney to establish duties to a third party by accepting compensation from them, it is, as a matter fact, not relevant to the practice of litigation funding.