First Paragraph
Third party funding is still a relatively new phenomenon in international arbitration. As none of the leading arbitral institutions currently have rules governing the practice of third party funding it raises both procedural and ethical issues.l While the prevalence and impact of third party funding in international arbitration continues to increase, scholars weigh the benefits of the participation of third party funders such as access to justice, risk management, and financial support against the risks of potential conflicts of interests possible confidentiality and privilege issues, and the inability to finance adverse costs. The international Bar Association ("IBA") has recognized the role that third party funding is beginning to make in arbitration, and has incorporated guidelines for third party funding into its revised version of the Guidelines on Conflicts of Interest in International Arbitration. In addition, arbitral tribunals are beginning to respond to the increasing role that third-party funders are playing are playing in international arbitration. For example, in a recent International Centre for Settlement of Investment Disputes (hereinafter "ICSID") decision. RSM Production Corporation v. Saint Lucia, the tribunal ordered the first ICSID order for security for costs and recognized the funding of the claimant by a third party in its reasoning. Third-party funding is becoming increasingly popular in international arbitration and jurisdictions and tribunals must decide on and create the proper procedures to regulate arbitral proceedings that involve third-party funders. The new IBA Guidelines for disclosure of third-party funding should be incorporated into leading arbitral institutions' existing rules because it is the best way to prevent potential conflicts of interest and ensure the independence of the arbitrator. Incorporating the disclosure requirement of the IBA Guidelines would also grant tribunals the capacity to take the existence of third party funders into account when determining security for costs. While such disclosures should not automatically trigger an order of security for costs, it should be a factor in determining whether such an order would be appropriate in an arbitral proceeding.
Recommended Citation
Kelsie Massini, Risk Versus Reward: The Increasing Use of Third Funders in International Arbitration and the Awarding Security for Costs, 7 Y.B. Arb. & Mediation 323 (2015).