Originally from the Leading Arbitrators' Guide to International Arbitration - Fourth Edition

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I. INTRODUCTION

An earlier version of this chapter, published a decade ago, described the third party funding of international arbitrations as a “nascent but growing business.” This is no longer the case. Third party funding of international arbitrations is now commonplace; indeed, for cases in which third party funding is both “economically and legally suitable,” it now “frequently poses the only alternative” to parties funding disputes themselves.  Third party funders are becoming well-recognised names and brands, and the business of funding disputes has proved so profitable for certain funders that they now trade as publicly listed companies.  Funders have also grown more sophisticated and conduct extensive due diligence before deciding to fund cases. This has resulted in funders exercising greater discretion—the mere fact of a case being funded no longer justifies presumptions of any kind about the strength of the case, beyond that the funder considers it of sufficient merit to invest in. Market feedback indicates that between only two and 10 per cent of cases that are pitched to funders are accepted.  

The cultural acceptance of third party funding in international arbitrations has grown in tandem with structural changes, both in the United Kingdom and abroad, that serve to strengthen the framework in which third party funding operates. Many jurisdictions have passed legislation that codifies the acceptance of third party funding,  and arbitral institutions have accounted for third party funding in their Rules (as well as imposing additional disclosure obligations on funded parties). In the United Kingdom, while third party funding is still a self-regulated industry, reforms to voluntary codes of conduct have served at least to clarify that funders’ associated entities are bound by such codes.