Third Party Funding in International Investment Arbitration

Third-party Funding in International Investment Arbitration: Why and How Does It Need to Be Regulated?

“…The reasons for this trend are as follows. The first and also the most obvious reason lies with the heavy burden in costs and time for arbitral parties [22]. Lengthy international investment arbitration proceedings often come with high costs, and at the same time, investors who intend to raise a claim against the host state may lack such financial capacity to do so.…”

“…The reasons discussed above are all with for-profit TPF, but the increase of not-for-profit TPF which can by typically found in the situations whereby the funded party is the respondent and should not be ignored [28]. In this case, disinterested third parties, such as a foundation, charity, and international organization, fund the arbitration proceeding without seeking any compensation from a settlement or award.…”

“…The presence of a TPF can potentially extend the proceeding of the settlement of the dispute, such as by influencing the scope of the claim [42]. If the extension of the duration of the settlement is for the purpose of claiming for more reasonable rights, the party's legitimate right can be protected more efficiently and this is also the reflection of the principle of justice and equity.…”

“…In practice, tribunals and committees are likely to refuse to reviewing the existence of a TPF agreement for their decision as the TPF agreement has nothing to do with the investment proceedings. On the other hand, as seen in the case Oxus Gold PLC v. Republic of Uzbekistan [48], the funded party can disclose the TPF agreement voluntarily following the UNCITRAL Arbitrations [49].…”

“…The second reason is related to the award of costs. Most tribunals take loser-pays principle to allocate the costs but as discussed earlier, the existence of TPF may prolong the arbitration proceeding and thus lead to extra costs [53]. It is without doubt, unfair for the respondent to pay extra costs caused by the third party for its own interest.…”