Third-party funding is becoming an increasingly common feature of international arbitration. Despite its increasing prevalence in both commercial as well as investorstate arbitration, currently there is no regulatory framework for third-party funding. In fact, many jurisdictions still consider third-party funding as equivalent to the tort of champerty or violative of the state’s public policy. Even though the involvement of a third-party funder can have serious implications for inter alia the prospects of settlement, independence of arbitrators, allocation of costs and security for costs; no national, international or institutional legal instrument requires mandatory disclosure of third-party funding. While some recent efforts have been made to mandate disclosure of third-party funding, these efforts are restricted to disclosure of funding in certain specifi c factual circumstances only. This paper discusses the question of validity of third party funding in leading common law jurisdictions and compares the same to the position in India. Further, the paper highlights the need for mandatory disclosure of third-party funding, focussing on funding’s potential impact on independence of arbitrators. Finally, the paper proposes a disclosure model which preserves independence of arbitrators while safeguarding the interest of all the stakeholders, including the funders.
Asian International Arbitration Journal