Challenges Faced Under Third Party Funding In Arbitration
This article deals with the challenges that arise due to third party funding
in the conduct of international commercial arbitration. The use of a third party
is much debated and it is yet hard to define this topic because of the least
legal regulation in this concept. However, it comes up with a number of
procedural and ethical issues. Some of these particular issues include but not
limited to the 'funders' relationship with parties and counsels in managing the
dispute, attorney ethics (attorney-client privilege), allocations of costs and
security for costs, transparency, and disclosure of the funding arrangements,
and finally arbitrators' conflicts of interest.
The Issues Emerging Under Tpf Are As Below:
The nature of international arbitration, and in particular the mechanism for the
appointment of arbitrators, raises several issues surrounding the use of third
party funding. (ashrst, 2020) It can cause various procedural and ethical
issues. The issues which arise in TPF is the conflict that arises between the
relationship of funders and the parties due to allocation and security of cost,
management of disputes, and disclosures of information of the disputes. The
interest of both the funders and parties is different, but funders can have a
financial interest and can claim shares.
The problems faced under TPF are as below:
This method can be said as an expensive method as the successful claimant will
have to pay a large number of his recoveries for damages to the funder as the
remuneration for the funds provided by him for litigation.
Although funder is not given any power or influence in the arbitration
proceedings, the funded party may lose some autonomy, especially in matters
relating to settlement as the funder reserves the right to make decisions
regarding settlement issues.
A huge amount of costs can be incurred when packaging the case for presentation
to a funder. This type of investment will be in vain if the funding of the
application becomes unsuccessful. On the other hand, if they manage to get the
funding, the funder will not be responsible for any cost incurred on packaging
the case. The packaging of the claim will include the providing of the key
documents to the funder so that proper case analysis can be done by in house
experts or counsel. Important information also includes information about the
respondent's financial viability of the respondent, the location of any assets,
and their attitude towards arbitration. (ashrst, 2020)
The funder can feel speculative while funding for a particular party in the
arbitration process as the funders and parties are very much unsure about the
result. It is very unpredictable at the same time. In addition to it, there are
very few laws and regulations regarding TPF, which makes it difficult to
regulate. (Chattopadhyay, Third-Party Funding in International Arbitration,
Lack Of Legislative Reforms:
Many countries are doubtful of the impact and consequences, and therefore no
laws are implemented in favor of TPF, for instance, India. Recently, Singapore
and Hong Kong have come up with the new laws on TPF. While most of the countries
are not accepting this concept, the attitude of Asian countries is changing.
Conflicts Of Interest:
There is two conflicting situation that can arise in TPF. The first one of which
is when the funders and arbitrators remain the same in two different disputes.
There exist a chance of biased opinions by the arbitrators. The second issue of
conflict that can arise is when there is a relationship between the funder and
the arbitrator, and the decisions are deemed to be prejudiced. (ashrst, 2020)
Disclosure Of The Funding Agreement:
It becomes essential for the parties to disclose the facts relating to the
funding arrangement etc. These days the demand for greater transparency is
growing, and it sometimes becomes difficult to maintain the balance between
disclosure and of the facts and to keep them in confidence.
There exits a number of more challenges in the implementation of Third Party
Funding, But at the same time there is a need to find an effective way to
maintain the balance between the challenges and the advantages brought due to
its implementation and growth.
There are also various different situations that
can arise when a party is funded by a third party such as there can be an issue
regarding the seat of arbitration and the seat decided on the basis of the
agreement based on the agreement made with the third party then it is said to be
violative of a country's public policy but at the same time we also need to
consider that TPF is gaining much importance and popularity at the international
level and many parties, organizations and companies are adopting the same.
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