EMURGENCE OF THIRD PARTY

FUNDING IN ARBITRATION

RESEARCH PAPER

2018-2019

Submitted by: Submitted to:

Kashif Zafar Dr. Mohd. Saleem
Ist Semester Asst. Professor
LLM Executive Faculty of Law
S. No. 11 Jamia Millia Islamia
Student ID 20184113 New Delhi
 Litigation funding is a practice where a third party unrelated to the lawsuit provides
capital to a petitioner involved in litigation in return for a portion of any financial
recovery from the lawsuit. Funding for litigation or arbitration cases in return for a share
of the proceedings has become a new business. Several countries have invoked claims
under bilateral investment treaties ('BITs') concluded with India.
Third Party Funding (TPF) is commonly associated with non-recourse outcome based
financing—where funder’s fees are repaid only upon success. Historically, TPF was
introduced to facilitate access to justice for an impecunious party (usually the claimant).
As arbitrations are rising in India, so are the arbitration claims and their quantum. There
is a consequent rise in arbitration costs, be it legal fees, arbitrators’ fees, security on costs,
and/or costs payable by the unsuccessful party. Arbitral costs can be exorbitant, and
sometimes even prohibitive –even for a party with a legitimate and meritorious claim. As
India matures as an arbitral market, access to funds is not only be desired, but also
required.
Recently, we have seen that the Supreme Court has, very softly, in paragraph 35 out of 46
in its judgment1 that allowed foreign lawyers limited rights to fly-into India, opened the
door to third-party litigation funding.
The question or the problem which arises is that whether the arbitrations also comes
within the purview of the said judgement, and to what extent, has the Supreme Court
overruled its previous judgements, in the light of the Advocates Act, 1961, the Arbitration
and Conciliation Act, 1966 and the Code of Civil Procedure, 1908.

1
Bar Council of India v. A.K. Balaji and Ors., 2018 5SCC 379