There is a general consensus that a party to an international arbitration who is receiving funding from a third party should disclosure the existence of a third-party funding arrangement. However, there is no mandatory regulation of third-party funders in international arbitration. This blog post considers some proposed guidelines for disclosure regulation of third party funders in international arbitration.
First, at the beginning of arbitration the funded party should disclosure the existence of a third-party funder to all parties as well as to the arbitral tribunal. Some suggest that also at this time the funded party should have to disclose the identity of the third-party funder. However, if after it is disclosed that there is a third-party funder, if no one raises any possible conflicts of interest with a third party funder than they may not be a reason to disclose the identity.
How much disclosure beyond the fact that there is a third-party funder is still very much debated. But it is important to consider the main aspect that makes arbitration unique from litigation is that the parties set the rules from the beginning. Therefore, if a party would like a detailed funding arrangement if third party funding is being used than that should be made clear at the onset.
The flip side to that is, a party that is considering third party funding may not agree to that rule. Thus, there is a need for a happy medium. I sit necessary to disclose the identity of the funder? Maybe in a particular circumstance. Should the funding agreement have to be produced and given to all parties and the arbitrator? Possibly, but again that may be more unlikely to be agreed upon.
One potential compromise could be that more detailed information regarding a third party funder could be provided to the arbiter only. This could be a good protection for each side because the arbiter has the ability to make rulings and could review the agreement or whatever is provided and then decide if the other party should receive the same information.
In a field that is still continually evolving it will be interesting to see what regulations come in the future and how they are perceived by the international arbitration community.
Topics: litigation finance, alternative litigation finance, third-party funding, arbitration, alternative dispute resolution
Works Cited: Elizabeth Chan, Proposed Guidelines for the Disclosure of Third-Party Funding Arrangements in International Arbitration, American Review of International Arbitration (2015).