If They Finance Your Claim, Will They Pay Me If I Win: Implications of Third Party Funding on Adverse Costs Awards in International Arbitration (original) (raw)
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The article considers the treatment of third-party funding in the current draft of ICSID’s proposed amendments to the ICSID Arbitration Rules. Analysing arbitral tribunal decisions in investment treaty cases that have dealt with third-party funding, the authors conclude that there is little need to revise the ICSID Arbitration Rules to specifically address funding. Yet, in light of pressure from some stakeholders to do so, the ICSID Secretariat has proposed to require parties to disclose the name of any funder and to explicitly authorize arbitral tribunals to require disclosure of further information regarding the funding agreement. Requiring disclosure of the identity of funders to identify potential conflicts of interest is not controversial. However, requiring disclosure of the terms of a funding arrangement is unnecessary, unfair, and would implicate serious privilege issues. The ICSID Secretariat also proposes to add a new rule addressing requests that a party provide security to ensure payment of an eventual adverse cost award. The new rule, appropriately, would prohibit arbitral tribunals from ordering a party to provide security for costs merely because the party is receiving third-party funding. Such funding may be critical to provide access to justice for claimholders who do not have the means to pursue their case without funding, and it is fundamentally unfair to burden them with the additional costs that would be associated with providing security for costs in addition to the other costs of pursuing their claim. In the case of parties that are not impecunious, which for example have sought out third-party funding to manage their balance sheet or risk exposure, the existence of third-party funding has no relevance to the parties’ ability or willingness to pay an eventual adverse costs award.
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