Proposed Guidelines for the Disclosure of Third-Party Funding Arrangements in International Arbitration - ARIA - Vol. 26, No. 2
Author(s):
Elizabeth Chan
Page Count:
42 pages
Media Description:
1 PDF Download
Published:
October, 2015
Description:
Originally from American Review of International Arbitration - ARIA
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I. INTRODUCTION
There is arguably now general consensus that a party to an international
arbitration, who is receiving arbitration funding from a third party, should disclose
the existence of that third-party funding arrangement.1 At the very least, Professor
Catherine Rogers, a leading commentator on third-party arbitration funding,
commented in 2014 that “[w]hatever else may be uncertain about third-party
funding, it seems reasonably clear that a position advocating against any
disclosure obligations regarding the presence of third-party funders . . . will not
carry the day.”2
However, the current debate on disclosure of third-party funding
arrangements has not resolved how such an obligation to disclose should operate
in practice. Specifically, what details about a third-party funding arrangement
should be disclosed, by whom, when and for what purposes? This article proposes
a set of guidelines for the disclosure of third-party funding arrangements in
international arbitration, covering both international commercial arbitration and
investment arbitration.
The first part of this article contains the proposed guidelines for the disclosure
of third-party funding arrangements in international arbitration. The remaining
sections justify each aspect of the proposed framework for disclosure.
II. PROPOSED GUIDELINES FOR THE DISCLOSURE OF THIRD-PARTY
FUNDING ARRANGEMENTS IN INTERNATIONAL ARBITRATION
Preamble
The fundamental purpose of these proposed guidelines for the disclosure of
third-party funding arrangements is to ensure fairness in international arbitral
proceedings. There is currently no mandatory regulation of third-party funders in
international arbitration. Left unregulated, the abusive use of third-party funding
arrangements may compromise the integrity of the arbitral process.
There is currently no obligation in international law for funded parties in an
international arbitration to disclose the existence of a third-party funding
arrangement. The influence (if any) of a third-party funder over the conduct of an
arbitration is therefore invisible to the self-funded party and the arbitral tribunal –
even though the invisible third-party funder may wield substantial control over the
conduct of the arbitral proceedings.
These guidelines propose that, at the outset of an arbitration, the funded party
must disclose the existence and identity of a third-party funder to all the parties in
an arbitration, the arbitral tribunal, and the arbitral institution (if applicable). The
guidelines propose that, in certain circumstances, arbitral tribunals must, or have
the discretion to, order further disclosure of the details of a third-party funding
arrangement.
Funders and funded parties may have legitimate concerns about how
information relating to a third-party funding arrangement may be used against
them. But these concerns can be met by a set of guidelines that restricts the scope
of disclosure only to what is required to ensure the fairness of a proceeding in
specific cases. Further protection against unmeritorious applications for disclosure
can be secured by requiring parties who make unsuccessful and unmeritorious
applications for disclosure to pay costs. The risk of paying costs for making an
unsuccessful application would deter parties from making unmeritorious
applications in order to prolong proceedings unnecessarily or gain some
impermissible tactical advantage.