Third Party Funding in International Arbitration BOOK

Introduction – Third party funding: profit
concentration
In response to the development of international markets, business transac-
tions, in general, have become transnational,1 and so have the disputes arising
therefrom.2 International arbitration has become the principal forum for
deciding these disputes. Still, international arbitration can exact considerable
monetary costs that may pose risks to the structural balance of arbitration.
International arbitration may meet the dispute funding practice to alleviate
these risks. Because international arbitration is multifaceted, the intersection
between arbitration and other practices has become challenging to dissect and
resolve. A look through the regular territory of financing legal claims would,
unsurprisingly, reveal nomenclature of different practices that now include the
term “third party funding” – a term that has acquired its own acronym (TPF).
Despite the fundamental role the funding industry plays, in general, within the
civil justice system, it has been brought to litigation with risks, which may not
be eliminated through the traditional markets of investment.
Arbitration has become the principal alternative forum to national courts. It
has become the “coin of the realm, first among equals.”3 The efforts of arbitra-
tion users – aided by long-standing reputable institutions – to make arbitration
a viable alternative to commercial litigation have developed international arbi-
tration as a private consensual justice system with an autonomous legal order.4
Still, arbitration has taken on many of the features traditionally associated
1
Although there might be a distinction between the words “transnational,” “inter-
national,” and “global” from an economic perspective, those terms will be used inter-
changeably in this book, unless otherwise indicated.
2
William S. Fiske, Should Small and Medium-Size American Businesses ‘Going
Global’ Use International Commercial Arbitration?, 18 Transnat’l Law. 455, 465, 470
(2005).
3
Jack J. Coe Jr., Planning for International Disputes (and What Makes Them
Distinctive), 5 Pepp. Disp. Resol. L.J. 385, 387 (2005), https:// digitalcommons
.pepperdine.edu/drlj/vol5/iss2/8.
4
See generally Alec Stone Sweet & Florian Grisel, The Evolution of International
Arbitration: Judicialization, Governance, Legitimacy (2017).
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xvi Third party funding in international arbitration
with litigation. TPF is no exception.5 Similar to its “public cousin,”6 litigation,

international arbitration exacts, particularly in complex disputes, consider-
able monetary costs. These costs may benefit the party with better financial
resources, rather than considering the merits of the dispute.7 Given how expen-
sive the process is,8 many proposals have been introduced to aid in saving time
and costs of arbitration.9 TPF enables the less funded party to survive its war
against the better funded one.10 Simply, TPF introduces an irrelevant party,
with no prior interest in the dispute, who offers financial services to help the
5
Vicki Waye, Conflicts of Interests Between Claimholders, Lawyers and Litigation
Entrepreneurs, 19 Bond L. Rev. 225 (2007); Susan Lorde Martin, Litigation Financing:
Another Subprime Industry that Has a Place in the United States Market, 53 Vill. L.
Rev. 83, 87–88 (2008); Maya Steinitz, Whose Claim Is This Anyway? Third-Party
Litigation Funding, 95 Minn. L. Rev. 1268 (2011); Carolyn B. Lamm & Eckhard
R. Hellbeck, Third-Party Funding in Investor-State Arbitration: Introduction and
Overview, in Dossier X: Third-Party Funding in International Arbitration (B. Cremades
and A. Dimolitsa, eds., 2013); Jennifer A. Trusz, Full Disclosure? Conflicts of Interest
Arising from Third-Party Funding in International Commercial Arbitration, 101 Geo.
L.J. 1649, 1665 (2013); Victoria A. Shannon, Harmonizing Third-Party Litigation
Funding Regulation, 36 Cardozo L. Rev. 861 (2015); Maria Choi, Third-Party Funders
in International Arbitration: A Case for Protecting Communication Made in Order to
Finance Arbitration, 29 Geo. J. Legal Ethics 883 (2016).
6
Jack J. Coe, Jr., Pre-Hearing Techniques to Promote Speed and
Cost-Effectiveness—Some Thoughts Concerning Arbitral Process Design, 2 Pepp.
Disp. Resol. L.J. 53, 55 (2002).
7
A common procedural strategy in arbitration is that the dominant party overbur-
dens the weak party to deplete its money and compel it to settle the dispute, which may
affect the “access to justice.” See infra Chapter 1 (2).
8
The high cost of arbitration has become one of its greatest disadvantages. The
average cost of arbitration in investor–state dispute settlement (ISDS) cases was USD
8 million. See Organisation for Economic Co-operation and Development (OECD),
Report on Government Perspectives on Investor-State Dispute Settlement, 8 (Dec 14,
2012), https://www.oecd.org/daf/inv/investment-policy/ISDSprogressreport.pdf.
9
See, e.g., International Chamber of Commerce, Controlling Time and Costs
in Arbitration (2012); The United Nations Commission on International Trade Law
(UNCITRAL), Notes on Organizing Arbitral Proceedings (2012).
10
Arbitration has become “wars of attrition in which the outcome may depend
more upon which party is better financed than upon the merits of the dispute.” See Coe,
supra note 6, at 55. As highlighted by Michelle Ainsworth, the Hong Kong Law Reform
Commission’s Secretary, “a party with a good case in law should not be deprived of
the financial support it needs to pursue that case by arbitration and associated proceed-
ings under the Arbitration Ordinance, and that these reforms are necessary to enhance
Hong Kong’s competitive position as an international arbitration centre.” Hong Kong
Law Reform Commission (LRC), Report on Third Party Funding for Arbitration (Oct
12, 2016), https://www.hkreform.gov.hk/en/docs/rtpf_pe.pdf.

Introduction xvii
claimant in initiating, continuing, or completing an arbitration proceeding.11 In

return, this irrelevant party receives a portion of the outcome, but also assumes
the risk of receiving nothing if the claim fails.12
Most of the existing literature addresses the implications of the current prac-
tice of TPF rather than its doctrinal premise, i.e., access to justice. This book
looks at TPF differently by addressing its premise rather than its implications.
The customary funding practices may display characteristics that set TPF
apart from the mainstream characteristics of arbitration, e.g., party autonomy,
party’s control, and arbitral justice. The risks that the current funding practice
presents appear in two related characteristics of the modern arbitration practice.
First, a shift from a party’s control to a funder’s control over arbitration. This
shift undermines the premise of TPF as a tool that enhances the funded party’s
access to arbitration as a forum of justice. The risk of a substantive conflict
between the funding parties in the related funded dispute is almost unavoida-
ble. Although there might be some ways to mitigate these potential conflicts,
this is not generally the case, and the risk of claim control by the funder and
their potential conflict has become particularly acute. Animated by a desire to
enable the disputing party to have fulsome control over their claim, and honor
the autonomy of the arbitration agreement, it has become problematic to allow
funders to introduce indeterminacies to the arbitral process. Second, there is an
increasing tolerance toward TPF. Although it is a commendable approach, this
tolerance is insufficient, with the existing structure of TPF, to mitigate these
indeterminacies.
Of the foundational backdrop just considered, this book originated, not to
explain what TPF is, but rather to hopefully solve a set of practical problems
11
The 2015 Queen Mary survey reflected how evolving is the use of TPF. The
survey found that “39% of the respondent group have encountered third party funding
in practice: 12% have used it themselves and 27% have seen it used. This data sug-
gests that its use is relatively widespread compared to, for example, insurance products
for respondents in international arbitration. Only 15% of the respondent group have
encountered such insurance products in practice: 3% have used them and 12% have
seen them used.” See Queen Mary, International Arbitration Survey: Improvements
and Innovations in International Arbitration, 45 (2015), http://www.arbitration.qmul.ac
.uk/media/arbitration/docs/2015_International_Arbitration_Survey.pdf; UNCITRAL
Working Group III, Note: Possible reform of investor-State dispute settlement (ISDS)
Third-party funding, para 7 (37th Session, Paper No. A/CN.9/WG.III/WP.157, 2019),
http://undocs.org/en/A/CN.9/WG.III/WP.157.
12
The scope of funding may cover legal fees and other out-of-pocket costs (e.g.,
expert fees, arbitrator fees, arbitral institution fees, discovery-related fees, etc), or the
costs associated with the enforcement or annulment proceeding. See Trusz, supra note
5.

xviii Third party funding in international arbitration
generated by the risk of claim control by the funder. These practical features
invite a new methodology with an alternative way of structuring TPF.
The book investigates the fundamental inadequacy of TPF that leads to
choosing between two inevitable choices: (a) entirely abort the TPF practice,
or (b) experiment with an alternative methodology that may solve the practical
problems TPF has posed. The book therefore tends to give more convincing
accounts of the fundamental observations, and more persuasive solutions to
some of its enduring conundrums, than do competing conceptions. There is no
simple call in the book to abandon the modern TPF. Rather, what is at issue is
arguably a novel theoretical framework for reconceptualizing TPF in order to
minimize the problem of claim control, and possibly other enduring doctrinal
problems.
The distinction between litigation and arbitration precludes generalized
treatment. Litigation is therefore excluded from the scope of this book because
it responds to different policy considerations than those relevant to interna-
tional arbitration. Such exclusion is however subject to some caveats. First,
while this book covers mainly investor–state and commercial arbitration, it
addresses in part the ties of TPF to the United States to trace the historical
development of TPF from a judicial perspective. Second, other comparable
funding practices may be considered to the extent that their discussion may
help distinguishing TPF. Third, discussion will refer to case law in national
litigation to compensate for the dearth of authorities on TPF in arbitration,
with, of course, such qualifications as are appropriate.
The book deals with the structural premise of TPF and its impact over arbi-
tration as a forum of justice. The scope of the book is limited this way because
the question of TPF implications was extensively addressed without consider-
ing its foundational premise, i.e., access to justice. No one seems to address
the corrosion of arbitration as a forum of justice to be replaced by a forum of
profit. It is an abandoned promise that may cast doubt on the legitimacy of
TPF.
The focus of this book is private investment firms that invest in arbitrated
commercial and investment claims for profit. Private investment firms refer to
those firms operating within the private sector with an “investment for profit”
purpose in legal claims. Hence, this book does not discuss public legal aids.13
Arbitrated claims refer to those claims that are prosecuted or defended through
arbitration. Accordingly, it does not include claims litigated before national
courts. Wherever the word litigation is used in this book, it is assumed to refer
to the process of prosecuting or defending a claim before an adjudicatory body,
13
By their definition, legal aids do not expect any future return from the party in
need of aid.

Introduction xix
including arbitration unless otherwise indicated. Commercial or investment

claims refer to claims that involve commercial or investment relationships based
on any agreement or contract, express or implied, that seek monetary relief
before arbitral tribunals. Hence, this book does not cover consumer-related
claims, personal injury, or divorce cases. TPF in this book does not include
economic entities funding cases against their counter-competitors for polit-
ically motivated reasons. Further, this book addresses the access to justice
theory within the context of international arbitration and refers to it as “arbitral
justice.” Arbitral justice is not just a tool that enables access to arbitration as
a system of adjudication. Rather, it entails justice of the process and justice of
the outcome in order to secure a substantively and procedurally fair process.
Arbitral justice accordingly preserves arbitration as a forum of justice for the
funded party throughout the proceedings and the outcome, unfettered by any
control by a third party. Procedural and substantive justice are therefore foun-
dational to assess the viability of arbitration as a forum of justice. The practice
of arbitration funding will be frequently referred to in this book as third party
arbitration funding (TPAF) or arbitration funding.
This book addresses the situation where an arbitration user seeks a funding
setup to pursue an arbitration claim in which their substantive and procedural
rights may be inconsistently structured. It then determines that current funding
practices do not mitigate these structural inconsistencies. The main body of the
book argues that the arbitration funding regime is fragmentary and complex.
It generates arcane areas of intersection between arbitral justice and funding
practices with no unifying framework. In conclusion, it proposes an arbitration
funding paradigm that unifies the fragmented regime.
The following chapters of this book outline the arguments for why the
individual initiatives of dealing with TPAF arrangements account for narrow
visions of arbitration funding and cannot account for the modern contours and
functions of arbitration funding. This section aims to present a more holistic
argument of what underlies this book. The book is premised on a three-part
argument. Part one tracks the origin and development of the champerty
doctrine in the U.S. by analyzing the American judicial approach to TPF. It
identifies the reasons for relaxing the champerty doctrine on TPF. This relax-
ation was essentially associated with funders’ noncontrol of the funded party
or the proceeding. Otherwise, the champerty doctrine does still apply in the
U.S., so far as there is no clear legislation repealing it. Part one also identifies
the “access to justice” doctrine and settles its foundational premise in relation
to TPAF.
Part two outlines the doctrinal impacts of TPAF by surgically analyzing three
stages of the arbitral process. Stage one is the pre-arbitrators’ decision-making.
It conceptually addresses the adverse impacts of TPAF upon “disclosure” and
“control” concerns. Stage two analyzes the cognitive illusions of TPAF on the

xx Third party funding in international arbitration
arbitrators’ decision-making process. This stage identifies the components of

cognitive illusions that arbitrators may fall prey to in their decision-making.
Stage three focuses on the impacts of TPAF on post-arbitrators’ decision.
Part three focuses on the regulatory argument of TPAF. It settles the com-
peting arguments of banning or permitting TPAF. It then identifies the norma-
tive goals of TPAF that should be preserved throughout the arbitral process. In
addition, it comparatively analyzes the different choices for regulating TPAF
and the propriety of arbitral institutions to assume that role, given the other
imperfect choices.
To back this three-part argument, this book relies on the suggested correla-
tion between modern arbitral tenets, and principles of economic funding, and
the separation of the funding models from the chasm of what is labelled as
“justice.” It establishes a funding paradigm opposing current funding models
and the typical understanding of scholarship to TPAF. The premise of the
new paradigm is that the intrusion of funders into the process, at the expense
of the funded party’s access to justice, ultimately increases inefficiency and
incoherence in the process. In this way, the book tries to reorient scholarship
away from the prototypical intrusion of the funding principles over the justice
principles – politically weakened and practically unsupported – to reflect
instead on the origin, premise, and development of TPAF. In doing so, this
book concludes that the debate of TPAF is ultimately about the proper relation-
ship between the involved parties and the arbitral process, in a forum of justice
rather than a forum of profit. Contemporary arbitration funding scholarship has
failed to address this fundamental premise. It chooses instead to ignore justice
as a dictate of economic logic and funding prudence.
The book ultimately represents the modern TPAF paradigm as a product of
a mode of thought that, with few exceptions, favors justice that ensures the dis-
puting party’s control over the process, while balancing the funders’ interest in
protecting their investment. It also protects arbitrators from falling prey to the
illusions surrounding TPAF in their decision-making process. This new para-
digm allows the funding market to achieve the normative goals of arbitration
funding that deem necessary and beneficial not just to its parties but also to the
system of justice. The general theme of this new paradigm is the involvement
of arbitral institutions as critical players in the arbitration regime. Regional
arbitral institutions have increased dramatically their caseload with the overall
number of cases and continue to increase competition among arbitral insti-
tutions which invite innovation in simulating new procedural mechanisms
to contribute to the development of international arbitration. In addition to
serving specialized trade and regional needs, arbitral institutions could contrib-
ute to serve the funding objectives within the international arbitration regime.
Against this backdrop of the rapid development of international arbitra-
tion, one can imagine this development may extend to arbitration funding.

Introduction xxi
Procedural innovative mechanisms that seemed unreasonable one day can

quickly become reasonable and normal the next day. TPF arrangements in
legal claims seemed unreasonable, until it became reasonable. Relying on
the individual initiatives to maintain and perform TPAF arrangements was
accepted practice, until it proved not to be concern-free. That very notion
sounds developing TPF from abhorrence into general acceptance and, as this
book argues, tends to be dependent on institutionalized mechanisms. In con-
clusion, this book advocates for a voluntary funded adjudicative process, to
whose efficiency arbitral institutions remain purposefully committed, and for
whose functioning, institutions retain a meaningful responsibility by installing
appropriate procedural, and even quasi-substantive, safeguards.

1. Mapping third party funding
Traditionally, any dispute involves two opposing parties with their respective
representatives. Each party is assumed to pursue the dispute from its own
resources. However, commencing a lawsuit is fraught with financial risks. Two
concerns may unfold. First, the financial risks create an access-to-justice chal-
lenge to those who cannot afford the costs of defending their claims. Second,
the cost problem may exacerbate if the claimholder pursues the case from its
own pocket and loses. Dispute funding has therefore become an integral part
of international arbitration.1 The multicultural and multijurisdictional nature
of arbitration has paved the way for an intellectual flexibility of arbitration
funding compared with the traditional court proceedings.2 Given the absence
of international law rules3 that prohibit financing arbitration claims by a third
party,4 TPAF has become more reliable for arbitration users.5 It is becoming
a principal steward of financial resources, a potent force for funding sources,
and a cardinal vehicle for funding development.
1
Alexandra Dosman, Bright Lights, Big Opportunity: Funding International
Commercial Arbitration in New York, 15 (2018), https://www.vannin.com/downloads/
fif7-articles/fif7-bright-lights.pdf.
2
Maxi Scherer, Aren Goldsmith, and Camille Flechet, Third Party Funding in
International Arbitration in Europe: Part 1 – Funders’ Perspectives, Int’l Bus. L. J.
207, 211 (2012), https://ssrn.com/abstract=2348737.
3
Treaty-Based Recourse for Investor-Host Government Disputes, Robert Wray
Pllc (Apr 1, 2005), http://www.robertwraypllc.com/treaty-based-recourse-for-investor
-host-government-disputes/.
4
Aren Goldsmith & Lorenzo Melchionda, Third Party Funding in International
Arbitration: Everything You Ever Wanted to Know (but Were Afraid to Ask) – Part One
& Two, 2012 Int’l Bus. L.J. 221, 230 (2012).
5
However, the funding practice may take different forms than the one analyzed
in this study. See, e.g., S&T Oil Equipment & Machinery Ltd. v. Romania, ICSID Case
No. ARB/07/13 (the investor, S&T Oil Equip. & Mach. Ltd, brought a case against the
funder, Juridica Invests. Ltd., before the Southern District Court of Texas); Waguih
Elie George Siag & Clorinda Vecchi v. The Arab Republic of Egypt, ICSID Case No.
ARB/05/15 (the investor and Ms Vecchi’s heir, Mr Siag, brought a case against King
& Spalding, Mr Siag’s counsel in the ICSID arbitration and de facto funder of the arbi-
tration, before the Southern District Court of Texas); loannis Kardassopoulos v. The
Republic of Georgia, ICSID Case No. ARB/05/18, Award (Mar 3, 2010), https://www
.italaw.com/sites/default/files/case-documents/ita0445.pdf.
1

2 Third party funding in international arbitration
TPAF is frequently referred to as litigation funding, dispute funding, arbitra-

tion financing, third party financing, alternative litigation funding, or litigation
investment.6 TPAF operates among forces that make it globally distinctive and
often exceedingly complex. As such, TPAF has transferred from the proto-
typical funding model – where the funder provides a party with the requisite
funds in a particular case in exchange of a percentage of the outcome – to
different models of funding,7 where funders tend to be active partners rather
than passive financial investors.8 Also, law firms are increasingly funding their
clients and assume a position that far transcends just mere lenders.9 Perhaps the
only significant commonality among the funding practices is that all require
someone other than the disputing party to pay for something in the proceeding.
The choice of TPAF, therefore, dictates the legal regime to which the
funding relationship is deemed, at least ordinarily, to belong. When the parties
choose the method of financing, they are in effect selecting the legal system
that will govern important issues such as the validity of the agreement, the
interaction between the funding parties, and the funder’s level of interference
in the funded dispute. The governing jurisdiction may also influence who may
serve as a third party funder and which disputes may be financed.10 Because
jurisdictions vary widely with respect to TPAF, it may be a dangerous practice
to decide the method of funding based solely on geographic or superficial
grounds. To contemplate on these issues, this chapter considers the compara-
6
This practice was preceded by similar practices, including the law lending indus-
try and consumer litigation funding, that funded personal claims such as personal injury
and workers’ compensation, bankruptcy claims, also referred to as corporate debt, and
sovereign debts, which deal with the market of the International Centre for Settlement
of Investment Disputes (ICSID) awards. Maya Steinitz, Incorporating Legal Claims,
90 Notre Dame L. Rev. 1155, 1164–65 (2015).
7
These models include funding a portfolio of cases through a client or a law firm,
discounted payment for uncollected awards, insurance against unenforced awards, and
financial tools for respondents against worse-than-expected outcomes. Christopher P.
Bogart, Third-party funding of international arbitration (Oct 4, 2016), https://www
.burfordcapital.com/blog/international-arbitration
-funding/
. The transition from the
regular funding method into these developed funding methods is described by some
authors as “first-wave litigation funding” where small operations of lending business
were set up by former contingency fee lawyers to supply the lending services to dispu-
tants. Maya Steinitz, Whose Claim Is This Anyway? Third-Party Litigation Funding,
95 Minn. L. Rev. 1268, 1277 (2011), [hereinafter Steinitz, Whose Claim?].
8
See, e.g., Odell v. Legal Bucks, LLC, 192 N.C. App. 298, 665 S.E.2d 767 (2008).
9
For more details, see Jonathan T. Molot, Litigation Finance: A Market Solution
to A Procedural Problem, 99 Geo. L.J., Geo. Public Law Research Paper No. 11-134
(2010), https://ssrn.com/abstract=1962677.
10
E.g., in the U.S. a third party cannot finance a claim against the federal govern-
ment. 31 USC § 3727(a).

Mapping third party funding 3
ble forms of dispute funding and distinguishes them from TPF (1), and access
to justice as a foundational premise for TPAF (2).
1. THIRD PARTY FUNDING DISTINGUISHED
Traditionally, disputants used to escape litigation costs by turning to law firms

for contingency or conditional fee arrangements,11 banks for loans, insurance
companies for insurance policies,12 and more recently, specialist funders.
These funding sources could be generally referred to as “third party funding.”
Similar-sounding concepts can however hide significant substantive differ-
ences, even within the funding practice. This section prefaces a discussion
of TPAF and places it in a more distinguished context from other similar, yet
overlapping, funding practices, including attorney funding (1.1), insurance
(1.2), loans (1.3), and assignment (1.4).
1.1 Attorney Funding
TPAF is distinguished from attorney funding (or “contingency fees”).13 A third

party is generally someone who is neither a claimant nor a respondent. But
in TPAF, the expression also denotes irrelevancy to the underlying funded
dispute. An attorney may be a third party but is still a relevant party to the
dispute. As such, TPAF and attorney funding involve different actors with dif-
ferent set of rules governing their arrangements. They both make predictions
by assessing a legal claim. Typically, an attorney is involved in a pending
proceeding in order to defend their client’s legal position. By contrast, funders
focus on funding that position and profiting from it.
11
See, e.g., Waguih Elie George Siag and Clorinda Vecchi v. Arab Republic of
Egypt (ICSID Case No. ARB/05/15) (King Spalding law firm financed the costs of
arbitration for claimants).
12
See, e.g., Eskosol S.p.A. in liquidazione v. Italian Republic, ICSID Case No.
ARB/15/50, Procedural Order No. 3, Decision on Provisional Measures (Apr 12, 2017),
https://www.italaw.com/sites/default/files/case-documents/italaw8996.pdf.
13
Unlike contingency fees, conditional fees offer the attorney a possibility of
receiving a fee that is lower than its standard hourly fee if the case is lost. Accordingly,
attorneys’ remuneration is not based on a percentage of the proceeds but they still
receive a fee if the case is lost. Technically “[t]here is no essential difference in princi-
ple between conditional and contingency fees. Indeed, in some ways the latter may be
preferable. Contingency fees create an incentive to achieve the best possible result for
the client, not just a simple win. And they reward a cost-effective approach in a way
that conditional fees, where the lawyers’ remuneration is still based on an hourly bill,
do not.” Stephen E. Kalish, The English Costs War, 2000–2003, and A Moment of
Repose, 83 Neb. L. Rev. 114, 130 (2004).

Regulatorily, funders are not subject to the same professional responsibility

rules that govern attorneys.14 Unlike funders, attorneys are always subject
to external ethical and professional regulations that govern their conduct
throughout the proceedings.15 Functionally, in attorney funding, the funder is
an attorney who is directly involved in the dispute, argues the case, and func-
tions as both funder and attorney. In TPAF, the funder is an irrelevant party
to the dispute who functions only as a funder, does not argue the case, and is
not directly involved in the dispute. On return, while in TPAF the funder takes
a “profit” as an agreed portion of the award, the attorney gets “contingency
fees” upon a successful outcome.16 Attorney fees are often measured by the
time spent on the case. Rather than providing a service in exchange for a fee,
funders invest in the lawsuit.17
The pool of third party funders may be broader than that of attorney
funders.18 In attorney funding, the funder must be an attorney. In TPAF, it can
be any irrelevant third party who invests in legal claims for profit. In attorney
funding, if the attorney declines to pursue the claim, though well merited,
the party may end up with no funding unless it engages another attorney
who is willing to conclude the arrangement. In TPAF, the party may seek
14
Rules of Professional Conduct were promulgated as Joint Rules of the Appellate
Divisions of the Supreme Court, effective April 1, 2009, and amended on several occa-
sions thereafter. They supersede the former part 1200 (Disciplinary Rules of the Code
of Professional Responsibility). Model Rules of Prof’l Conduct (2017), https://www
.nycourts.gov/LegacyPDFS/rules/jointappellate/NY-Rules-Prof-Conduct-1200.pdf.
15
Lawyers are accountable to ethical standards by their bar, which include fiduci-
ary obligations to act in their client’s best interest. E.g., Model Rules of Prof’l Conduct
R. 1.6 (“disclosure is impliedly authorized to advance the best interests of the client and
is either reasonable under the circumstances or customary in the professional commu-
nity”); R. 1.16 (c)(8) (“the lawyer’s inability to work with co-counsel indicates that the
best interest of the client likely will be served by withdrawal”).
16
For funding lawyers, there are some professional responsibility concerns on
sharing fees with nonlawyers. Advisory Committee on Civil Rules, Report of the
Advisory Committee on Civil Rules, at 176, (2018), https://www.uscourts.gov/sites/
default/files/2019-01-standing_agenda_book.pdf. See also New York City Bar Ass’n,
Formal Op. 2018-5 (opining that lawyers may not enter into agreements with funders
that provide payment to the funder and is contingent on the lawyer’s receipt of legal
fees).
17
Contingency fees may partially address the failure to pursue positive
expected-value claims by reducing the entry costs of the clients and dispersing the risks
of litigation. David S. Abrams, Daniel L. Chen, A Market for Justice: A First Empirical
Look at Third Party Litigation Funding, 15 U. Pa. J. Bus. L. 1075, 1078 (2013) [here-
inafter Abrams & Chen, Market for Justice].
18
However, courts draw a distinction between both agreements and their independ-
ent relationship. See, e.g., Devon IT, Inc. v. IBM Corp., No. CIV.A. 10-2899, 2013 WL
7039608, at *16 (E.D. Pa. Dec. 30, 2013).

funding from a third party without affecting the professional relationship with
its attorney. Furthermore, attorneys may limit their claim evaluation to the
legal aspects, as opposed to the economic ones. More particularly, attorney
funding may not function properly in international disputes, especially in other
jurisdictions that do not allow that form of arrangement.19 In contrast, TPAF
corresponds, nationally and internationally, to the requisite dispute flexibility,
especially with the relaxation of the champerty doctrine.20
Therefore, the scope of TPAF is broader than attorney funding on two
fronts. First, it covers a broader category of funders, not only attorneys.
Second, it provides a thorough claim assessment that covers not only legal but
also financial aspects of the claim. Third party funders are in a better position
than attorney funders to objectively assess the claim, detached from interest or
passion. Attorneys might find constraints that hinder their objective assessment
of the claim such as the fees incentive and the duty of loyalty to their clients.
1.2 Insurance
Similar to insurance arrangements, funding agreements are manifestations

of the departure from the prohibition of claim transfer.21 Insurance contracts
may include subrogation clauses that entitle the insurer the right to sue for the
insured’s covered injuries.22 One of the basic features of insurance arrange-
ments is that the insurer is legally obliged to defend the insured against any
claims included in the insurance policy. This may necessitate that the insurer
directly controls the litigation. While the insurer, as a subrogee, is limited to
reimbursement for what it paid to the insured, the funder is entitled to a share
of the outcome or nothing if the claim is unsuccessful.23
TPAF can provide more protection than many conventional legal expenses
policies. Defendants may have contingent defense-side funding and make peri-
odic payments to the funder. In some cases, there will also be a success payment
19
The same may apply to TPF, but the fact that most jurisdictions are more inclined
to allow it is an important factor to increase the liquidity of legal claims in this practice.
20
See infra Chapter 3.
21
Steinitz, Whose Claim?, supra note 7, at 1295.
22
Id.
23
Subrogation is defined as a “substitution of one person in the place of another
with reference to a lawful claim … so that he who is substituted succeeds to the rights
of the other in relation to the … claim, and its rights, remedies, or securities. An action
by a subrogee/insurance company is one of indemnification, and thus the insurance
company as subrogee is limited to reimbursement for what it paid its insured and no
more.” Miller UK Ltd. v. Caterpillar, Inc., 17 F. Supp. 3d 711 (N.D. Ill. 2014).

in case of winning.24 This defense-side funding is called before-the-event

(BTE) or after-the-event (ATE) insurance. BTE agreements are concluded
before the cause of action arises. Conversely, ATE agreements occur after the
event that gives rise to the cause of action. BTE agreements assume that the
insurer is obliged in advance to cover the litigation costs if the counterpart
started the lawsuit. While the insurer invests in a potential litigation, the
insured eliminates the risk of paying the expenses of future litigation.25 Yet,
liability insurance contracts and subrogation are similar to TPAF agreements
in terms of the relationship between the party and the attorney.26 However, lia-
bility insurance may cover two additional insurances: (a) litigation insurance,
where the insurer pays for the insured’s litigation costs, and (b) judgment
insurance, where the insurer pays the insured’s legal liabilities costs.27 Funding
the defendant by a third party, unlike the claimant, may be functionally equiv-
alent to ATE insurance arrangements because it allows the funder to pay the
expected value of the legal claim in addition to a premium to protect it against
a higher-than-expected loss. This insurance benefits the companies by hedging
against the loss involved in an unfavorable award, minimizing litigation
costs.28
Despite the similarities between both forms of funding, they serve different
goals. Insurance arrangements minimize liability costs on the insured. TPF is
designed to maximize expected profit from the lawsuit. Further, most insur-
ance arrangements entitle the insurer to an intervention in the lawsuit. The
insured is supposed to pay the insurer insurance premiums either in advance or
in installments, while the funded party does not pay the funder any advances.
The funder should pay the costs even if the funded party ends up losing the
claim. However, the insurer in general may end up not paying the insured
person, if the event covered by the insurance policy does not occur, except for
life insurance. Upon paying the policyholder, the insurer sues the third party
who caused the damage for recovery. However, third party funders are still
irrelevant parties to the dispute and cannot step into the shoes of the funded
party to pursue their claim. Although both forms of funding involve risk
transfer, the insured tries to avoid the payment of liable actions while funders
24
Victoria A. Shannon, Harmonizing Third-Party Litigation Funding Regulation,
36 Cardozo L. Rev. 861, 894–95 (2015).
25
Marco de Morpurgo, A Comparative Legal and Economic Approach to
Third-Party Litigation Funding, 19 Cardozo J. Int’l & Comp. L. 343, 353 (2011) [here-
inafter Morpurgo, Comparative Approach].
26
Anthony J. Sebok, Should the Law Preserve Party Control? Litigation Investment,
Insurance Law, and Double Standards, 56 Wm. & Mary L. Rev. 833, 854–55 (2015).
27
Id. at 840.
28
See generally Steinitz, Whose Claim?, supra note 7, at 1311.

pay with the possibility of recouping costs. Insurance liability providers run
the risk of losing on liability. However, funders do not run the risk of loss on
liability, because this risk is ultimately held by the funded party.
1.3 Loans
Any financial arrangement, including loans, is necessarily transactional in

nature. They advance money with an expected return plus extra upon the occur-
rence of an event.29 In loan arrangements, the borrower should repay the loan
regardless of the outcome of the case. They may be vulnerable to litigation pro-
ceedings in case of nonrepayment.30 This is a “sure” future repayment.31 Loan
arrangements accrue interest until the borrower returns the principal amount
to the lender. In contrast, in TPAF, the principal amount subject to the funding
agreement increases over time to correspond to the costs of pursuing the legal
claim, and no interest is accrued.32 The funder’s return increases if the recovery
outcome increases, and decreases if the recovery outcome decreases, or gets
nothing if the outcome is unsuccessful. Further, TPAF is “nonrecourse.”33
In other words, if the claim fails, the funder cannot sue the funded party for
expenses or pursue any other assets of the funded party.
Normally, there may be no restrictions on the purpose of the loan and
the way in which it can be spent.34 However, in TPAF, the arrangement is
29
The word “loan” has been used to refer to the practice of private companies pro-
viding litigation loans to the party to cover its necessary expenses – basically medical
and living expenses – pending the outcome of a lawsuit, in return for a share in the pro-
ceeds. See Morpurgo, Comparative Approach, supra note 25, at 356–57. However,
TPAF does not present financial support for the essential needs of the party’s life or
health but instead supports the costs of litigation. Funding personal expenses does not
have any direct impact on the decision to pursue litigation or to settle the dispute.
30
TPAF may generate disputes about nonpayment to the funded party after the
award is issued, and the funded party fails to perform its payment obligation to the
funder. See, e.g., In Lynx Strategies v. Ferreira, 957 N.Y.S.2d 636 (N.Y. Sup. Ct.
2010).
31
Courts draw a distinction between a “sure thing” and a gamble, and find the
first to be a loan and the latter to be an investment with great risk. Echeverria v. Estate
of Lindner, 7 Misc. 3d 1019(A), 801 N.Y.S.2d 233 (Sup. Ct.), judgment entered sub
nom. Echeverria v. Lindner (N.Y. Sup. Ct. 2005).
32
Funders may agree at first to a cap budget. In that case, the principal may not
exceed that cap but may be under depending on the costs of the proceedings.
33
However, the funder may contract for a predetermined payment if the funding
arrangement is concluded with the respondent, not the claimant. Victoria Shannon
Sahani, Reshaping Third-Party Funding, 91 Tul. L. Rev. 405, 416 (2017).
34
In some cases, a loan may be taken for a specific purpose such as a mortgage loan
on property, where the property will serve as a security of that loan. In this case, the

limited to funding a specific dispute. In addition, the loan arrangement is

basically a bilateral relationship between the borrower and the lender. TPAF
arrangements involve more than two parties, which makes the risk calculation
relatively higher than that of the loan arrangement. The involvement of legal
teams and arbitrators, or the subject matter of the dispute itself, may impact the
funders’ decision to finance. Most notably, the involvement of arbitrators who
decide the dispute may increase the amount of risk in the funding transaction.
This high risk is exacerbated by the lack of any guarantee to the financial
arrangement except the claim’s probability of success. In loans, banks nor-
mally request some financial guarantees to secure the possibility of repaying
the loan. Therefore, TPAF is a more precarious, yet profitable, investment than
loan arrangements. More importantly, the distinction between loans and TPAF
may implicate which legal defenses may be raised during the trial. Unlike
the champerty defense that may be raised in TPAF arrangements,35 the usury
defense applies only to loans, not to an ownership interest in the proceeds of
a claim contingent on the actual existence of any proceeds.36
Regulatorily, loan arrangements are subject to the regulatory frameworks
that govern loan providers. Funders may not be subject to the same regula-
tory frameworks because they are not lending institutions. Loans are easily
accessible. TPAF would not ordinarily be available unless the legal claim
has a likelihood of success. In addition, if the funded party loses, it neither
pays the principal nor any other compensation to the funder, whereas in loan
arrangements, the borrower should pay back the principal and the interest to
the lender.37
1.4 Assignment
Assignment is an act of transferring to another all or part of one’s property,

interest, or rights.38 It assumes that the original claimholder sells the claim for
its benefit. One court noted:
[c]ommercial paper was first made assignable to meet the necessities of commerce
and trade. Courts of equity also interfered to protect assignments of various choses
loan has a specific purpose, and the borrower cannot deviate from that purpose. E.g., 12
U.S. Code § 1715v (insurance of mortgages for housing for elderly persons).
35
Hackett v. Hammel,185 Minn. 387, 388, 241 N.W. 68, 69 (1932).
36
Ferreira, 957 N.Y.S.2d 636.
37
Fausone v. U.S. Claims, Inc., 915 So. 2d 626 (Fla. Dist. Ct. App. 2005).
38
If the agreement does not transfer ownership rights, it cannot be argued to be
a sale or assignment. See Wilson v. Frederick R. Ross Inv. Co., 116 Colo. 249, 180
P.2d 226, 230 (1947); accord § 4–2–106(1), C.R.S. (2015) (defining “sale” within
the Uniform Commercial Code as “the passing of title from the seller to the buyer for

in action, and after a while courts of law recognized the validity of such assign-
ments, and protected them by allowing the assignee to use the name of the assignor
for enforcing the claim assigned. And at the present day claims for property and for
torts done to property are generally to be regarded as assignable.39
An assignment of claim involves, accordingly, the sale of the entire claim

to the assignee who replaces the original party.40 A claimholder indeed has
property rights over the claim and its outcome,41 including “possessory rights”
and “transferring rights.” These rights authorize them to transfer the claim
itself or the proceeds of that claim to another person.42 Mere funding of a claim
may seem less offensive than an outright assignment of that claim, because the
claim is still the party’s own.43 Transferring the proceeds of a claim is a form
of investment in the outcome. It does not negate the ownership of the assignor
to the claim itself. TPAF (investment in legal claims) is therefore distinctive
from assignment (sale of legal claims), where the original party sells the entire
claim to the assignee and walks away from the dispute.44
2. ACCESS TO JUSTICE
Access to justice is a norm of international law.45 It commonly refers to “injury

consisting of, or resulting from, denial of access to courts, or denial of pro-
a price”); Oasis Legal Fin. Grp., LLC v. Coffman, 2015 CO 63, 59, 361 P.3d 400, 410
(2015).
39
Rice v. Stone, 83 Mass. 566, 568 (1861).
40
Charlotte-Mecklenburg Hosp. Auth. v. First of Georgia Ins. Co., 340 N.C. 88,
91, 455 S.E.2d 655, 657 (1995). It may include also some insurance arrangements
that involve an insurer who is willing to be a co-party or be impleaded as a third-party
defendant. Fed. R. Civ. Proc. R. 14.
41
This trend is consistent with the breakdown of the artificial line between prac-
tice of law and law-related business services. See Catherine A. Rogers, Ethics in
International Arbitration, para 5.06 (2014).
42
Some funders apply a similar approach when they are viewed as an investment
bank for law, not just mere funders. Burford Annual Report, 6 (2018), https://www
.burfordcapital.com/media/1526/bur-31172-annual-report-2018-web.pdf [hereinafter
Burford 2018 Report].
43
Some jurisdictions still view assignments of proceeds as a form of claim assign-
ment, and make no distinction between both. See, e.g., In re DesignLine Corp., 565
B.R. 341, 342–43 (Bankr. W.D.N.C. 2017).
44
91, 455 S.E.2d 655, 657 (1995).
45
Francesco Francioni, Access to Justice, Denial of Justice and International
Investment Law, 20 Eur. J. Int’l L. 729, 730–31 (2009) (discussing the standards of
justice that emanated first to aliens and their economic interests). Several interna-
tional legal instruments prohibit the denial of access to justice. E.g., Article 13 of the

cedural fairness and due process in relation to judicial proceedings, whether

criminal or civil.”46 Denial of access to justice is a major wrongdoing under
state international law.47 This trend started with the introduction of legal aids
to enable ordinary citizens to have access to courts.48 Access to justice has
become a general theme in any adjudicative system.49 It has now extended to
different forums of adjudication, including arbitration. To the extent that the
arbitration system may be affected by the cost restraints, the prerogative to
finance arbitration claims is generally reinforced by the traditional theory of
access to justice. By introducing TPF to arbitration, as an adjudicative process,
it is imperative to assess the degree to which access to justice is generally
observed in TPAF.
Access to justice is not just a means to enable the funded party to have
access to arbitration, but also it should be a means to maintain a fair proce-
dural process.50 TPF may have implications on the fairness of arbitration, and
so impair the procedural justice of arbitral process. Arbitration is the forum
that the funded party uses to obtain justice. Arguments of access to justice to
Energy Charter Treaty provides for a fair hearing for expropriation. Article 47 of the
EU Charter of Fundamental Rights recognizes the effective remedy and fair trial as
a fundamental human right. The United Nations also recognizes the importance of
access to justice by providing that “all … institutions and entities, public and private …
are accountable to just, fair and equitable laws.” In the Declaration of the High-Level
Meeting of the General Assembly on the Rule of Law at the National and International
Levels, the United Nations General Assembly “commit[s] to taking all necessary steps
to provide fair, transparent, effective, non-discriminatory and accountable services that
promote access to justice for all, including legal aid.” G.A. Res. 67/1, Declaration of the
High-Level Meeting of the General Assembly on the Rule of Law at the National and
International Levels, 2, 8, 14 (Nov 30, 2012).
46
Restatement (Third) of Foreign Relations Law § 711 (1987).
47
Id.
48
Lord Neuberger noted that “[t]he introduction of legal aid by the Legal Aid and
Advice Act 1949 did not only represent the most important piece of legislation to ensure
that ordinary citizens should have access to the courts, but it was also the most impor-
tant statutory breach of the rule against Maintenance.” See Lord Neuberger, Lecture on
Harbour Litigation Funding: From Barretry, Maintenance, and Champerty to Litigation
Funding, para 38 (May 8, 2013), https://www.supremecourt.uk/docs/speech-130508
.pdf.
49
See generally Leonardo V. P. de Oliveira, Chapter 1: To What Degree Should
Access to Justice Be Secured in Arbitration?, in Access to Justice in Arbitration:
Concept, Context and Practice (de Oliveira and Hourani (eds) Nov 2020).
50
Several legal instruments provide for the fair procedural process as a manifesta-
tion of access to justice. For example, Article 6(1) of the 1950 European Convention
on Human Rights, which calls for the right to court, and a fair trial, Article 14(1) of the
1966 International Covenant on Civil and Political Rights. These instruments provide
for access to justice not just through the outcome but also through the process of reach-
ing this outcome.

arbitration invite the application of the procedural justice in order to evaluate

to which degree access to justice is observed in arbitration. Simply, in order
to maintain access to justice as a viable foundational theory to TPF, funders
should not interfere with the procedural justice of pursuing the arbitration
claim by the funded party. In other words, procedural, not just substantive,
justice is essential to the application of access to justice to the arbitral process
that is backed by TPF.
The right of access to justice has become an essential part of the rule of
law. Lord Bingham argued that access to a procedure was the sixth principle
of the rule of law because “means must be provided for resolving, without
prohibitive cost or inordinate delay, bona fide civil disputes which the parties
themselves are unable to resolve.”51 Access to justice accordingly entails pro-
cedural guarantees necessary to ensure that justice is delivered absent any dis-
advantages between the disputing parties.52 As such, access to justice exceeds
the mere getting into the court to maintain a procedural balance between the
parties.53 Access to arbitration is part of access to justice that should assume
a procedurally fair process. The consensual nature of arbitration generates
a flexible process that may affect the guarantees of access to justice to the
funded party. That consensual nature cannot in itself be a reason to disregard
access to justice. TPF may complicate that conundrum by creating an imbal-
ance of power between the two parties if the funder assumes a controlling role
in the arbitral process. Leaving it to the individual initiatives, access to justice
can be threatened by the stronger funder at the expense of the funded party’s
unfettered right of pursuing their funded claim. This way, access to justice will
be orchestrated by the funding users and the funding arrangement.
Even in arbitration as a private forum of justice, there should be a minimum
degree of procedural guarantees that feature access to justice, especially with
the existence of TPF.54 Accordingly, access to justice should enable the party
to access arbitration where the party should be treated fairly and equitably.55
51
Oliveira, Access to Justice, supra note 49, at 11–12.
52
Id. at 12–13.
53
Id. at 11–13.
54
Id. at 26–28.
55
It is worth mentioning that the access-to-justice premise may be undermined by
other principles in arbitration. See Duarte Gorjão Henriques, Third-Party Funding:
A Protected Investment?, 2017 Spain Arb. Rev. 30 | Revista del Club Español del
Arbitraje, 124–27 (Wolters Kluwer España 2017) (“In the context of international com-
mercial arbitration, the trend seemingly points to considering that other principles of
the arbitration law override the right of access to justice. It has been reported that the
French Court of Appeals annulled a decision of the President of the Tribunal de Grande
Instance of Paris, acting as jui d’appui, that had considered that the decision of the ICC
withdrawing the claim on account of a lack of payment of the advance on costs follow-

TPF should advance that concept without impairing the funded party’s forum
of justice.56
2.1 “Access to Justice” Determined
Access to justice is an ambiguous concept that can be construed in different

ways.57 Curtailing access to justice through arbitration due to prohibitive costs
is intolerable. Denying parties, especially the financially incapable ones, pro-
tection under the law inevitably leads to unjust outcomes.58 Legal practices and
governing laws should accommodate new needs in the legal field. It is appro-
priate therefore to reassess ongoing needs and respond to those needs by lib-
eralizing the legal regime and increasing access to justice.59 TPAF may allow
for equal opportunity for parties bringing meritorious claims and defenses
in arbitration against well-funded parties.60 Without TPAF, the arbitration
ing a notification to do so amounted to a denial of justice. The Claimant in that ICC arbi-
tration had alleged before the jui d’appui that he had become incapable of paying that
advance on costs and, not without subsequent substantial criticism, the judge ordered
the ICC to proceed with the arbitration notwithstanding that failure to pay the advance
on costs. The Court of Appeals resorted to procedural arguments and did not address the
fundamental issue of one party (or both parties) being incapable of paying the advance
on costs, seemingly rendering the latter principle overridable by procedural considera-
tions. In the same vein, in SARL Lola Fleurs v. Société Monceau Fleurs, the Paris Court
of Appeals considered that the right of access to justice would not suffice to render
inoperable an arbitration clause where one of the parties had become impecunious.”).
56
Henriques, supra note 55, at 127–28 (“Lord Jackson asserts not only that ‘access
to justice is only possible if both parties have adequate funding’, but more importantly
that, it is now recognised that many claimants cannot afford to pursue valid claims
without third-party funding; that it is better for such claimants to forfeit a percentage of
their damages than to recover nothing at all; and that third-party funding has a part to
play in promoting access to justice.”).
57
See generally Christine Parker, Just Lawyers: Regulation and Access to Justice
(1999).
58
It has been held that “[m]anifest injustice in the sense of a lack of due process
leading to an outcome which offends a sense of judicial propriety is enough, even if one
applies the [i]nterpretation according to its terms.” Loewen Group, Inc. and Raymond
L. Loewen v. United States, ICSID (NAFTA) No. ARB (AF)/98/3, Award, para 132
(June 26, 2003).
59
Pac. Gas & Elec. Co. v. Bear Stearns & Co., 50 Cal. 3d 1118, 1136, 791 P.2d
587, 597 (1990) (“If any person who induced another to bring a lawsuit involving
a colorable claim could be liable in tort, free access to the courts could be choked off
with an assiduous search for unnamed parties”).
60
As per the Burford annual report, more than two-thirds of companies (70%)
chose to forgo the pursuit of meaningful, meritorious claims because of the impact of
legal expenses on the bottom line. Burford 2018 Report, supra note 42, at 10.

process may disfavor the financially incapable, powerless, or unprivileged

party, either through the process or the outcome.
2.2 “Access to Arbitral Justice” Rationale
Modern arbitration scholarship frequently relies on access-to-justice principles

to illustrate how TPAF provides a fair and efficient system of justice.61 TPAF
is generally said to respond to the access to justice.62 It also helps large com-
panies that are repeatedly sued to even out the litigation line on their balance
sheets by offering them a fixed payment system for managing their litigation
costs.63
Within the context of civil procedure, the term “civil justice” has been
increasingly used to “describe the entire system of the administration of
justice in civil matters.”64 The imperfection of any legal system may result
in individuals who are unaware of their legal claims.65 The TPAF market
would benefit those who are aware of their claims in addition to those who
are unaware.66 However, any market aims at increasing the overall welfare
by better allocating goods and services. High arbitration costs have prompted
substantial changes in the procedural rules. The ultimate goals are improving
access to justice, removing unnecessary perplexities, and enabling the parties
to effectively use arbitration as a private forum of justice.
TPAF was principally introduced as a necessary tool for financially incapa-
ble parties. However, it is now characterized as a choice rather than a neces-
sity. While parties who may be able to pay the arbitration costs may choose
61
Tara Santosuosso and Randall Scarlett, Third-Party Funding in Investment
Arbitration: Misappropriation of Access to Justice Rhetoric by Global Speculative
Finance, L. & Justice in the Americas (2018), https:// lawdigitalcommons .bc.edu/
ljawps/8. Others who argue against this theory include Frank J. Garcia, The Case
Against Third-Party Funding in Investment Arbitration (July 30, 2018), https://www
.iisd.org/itn/2018/07/30/the-case-against-third-party-funding-in-investment-arbitration
-frank-garcia/. See also Loewen Group, Award, para 153 (discussing the state’s obliga-
tion to provide an efficient and fair system of justice).
62
Within this book, access to justice includes arbitration as a forum of justice.
Accordingly, the author may refer to it as “arbitral justice,” which means enabling the
achievement of justice through the process of arbitration.
63
Neuberger, supra note 48, para 48 (“The argument … appears positively to
support the development of litigation funding, as a means of securing effective access
to justice. Given the retreat from legal aid, that argument may well gain more traction”).
64
Sir Jack I. H. Jacob, The Fabric of English Civil Justice 2 (1987).
65
Abrams & Chen, Market for Justice, supra note 17, at 1078.
66
Id.

not to,67 others may be willing to pay but unable to. Given this procedural
hurdle, TPAF would promote the funded party’s survival in its war against the
better-funded party.68 This procedural hurdle may hamstring the adjudication
of “good cases.”69 Courts have favored that theory by moving away from lim-
iting litigation funding in favor of increasing access to justice.70 Some courts
have even declined some legal defenses in order not to threaten free access to
courts.71 Otherwise, free access to courts will be chocked off with unnecessary
defenses.72
Generally, TPF provides valuable services that “promote global economic
justice in a cost prohibitive system.”73 It has been argued that proponents of
TPF have manipulated the access-to-justice rationale to serve their question-
able ends, especially in investment arbitration claims.74 Even when TPAF
is used by financially capable parties, justice is still at stake. Where TPF is
provided to financially capable parties, access to justice may not be the reason
for the funded party to resort to TPF. The financially capable parties may
prefer to retain their cash flow management and use their financial resources in
67
Funders may be viewed as performing an “arbitral hit-and-run,” which refers
to the fact that funding has become a choice, not a necessity. Some of the world’s
largest companies are regular users of outside financing; Burford created a $45 million
portfolio for a FTSE 20 company. From an accounting perspective, TPF is used to
move risk off corporate balance sheets, which may make it another form of corporate
finance. Bogart, supra note 7.
68
Jack J. Coe, Jr., Pre-Hearing Techniques to Promote Speed and Cost-Effectiveness
– Some Thoughts Concerning Arbitral Process Design, 2 Pepp. Disp. Resol. L.J. 53, 55
(2002).
69
As highlighted by the Hong Kong LRC’s Secretary: “a party with a good case
in law should not be deprived of the financial support it needs to pursue that case by
arbitration and associated proceedings …” Hong Kong LRC, Report on Third Party
Funding for Arbitration (Oct 12, 2016).
70
Eagle Mt. City v. Parsons Kinghorn & Harris, P.C., 2017 UT 31, P26, 408 P.3d
322, 329, 2017 Utah LEXIS 84, *18, 840 Utah Adv. Rep. 27, 2017 WL 2483017.
71
In this case, plaintiff was trying to enjoin defendant from further participation in
the lawsuit, which was essentially seeking to abort the lawsuit by starving the litigant of
funds. Pac. Gas, 791 P.2d 587.
72
Id.
73
Tara Santosuosso & Randall Scarlett, Third-Party Funding in Investment
Arbitration: Misappropriation of Access to Justice Rhetoric by Global Speculative
Finance, 60 B.C.L. Rev. E-Supplement I.-8, I.–10 (2019).
74
Id., at I.-10 (“TPF proponents have manipulated the ATJ rationale to their pur-
poses, distorting its traditional applications to fit questionable ends. Thus, in the context
of third-party funding of investment claims, providing ATJ cannot be equated with pro-
viding financing for parties who lack the resources to litigate. Traditionally, TPF propo-
nents have contended that they provide funding chiefly to impecunious investors who
otherwise would not be able to bring claims against bad-actor states.”).

other business areas rather than the arbitration claim. The financially capable
party may find it preferable to use its financial resources in areas other than the
dispute. The choice to pursue the claim should not be based on the availability
of funding.75 TPAF offers the party not only funding, but the opportunity to
manage financial risks associated with the claim.76 The risks in such a case
are divided between the funder and the party who will be able to achieve
a maximum recovery without undermining its profitability opportunities if the
claim eventually fails. In other words, it frees up the party’s financial resources
for allocation to other investments and brings disputes to an end. This may
bring a new dimension to access to justice that may extend beyond the finan-
cially incapable parties to the financially capable ones. TPF with financially
capable parties contributes to reducing the risk of bringing a claim.77 This risk
may deter claimants from bringing claims in the first place. However, this
may ignore the reality that funders vet the case and tend to fund only claims
with a likelihood of success.78 This open mindset to the doctrine of access to
justice brings a new legitimacy to TPF.79 It is the case that “more complex
arrangements are becoming the norm, with companies using external capital
out of choice, not necessity…”80 Still, access to justice is argued not to support
TPF with financially capable parties. Choosing a claim to fund is done through
an analysis that is unique to this claim and by enabling funding a meritorious
claim, funders are actually promoting arbitral justice.81 Funders may have no
incentive to fund nonmeritorious or frivolous claims.82
75
Courts find that funding in itself does not reflect the financial capabilities of the
party. Benitez v. Lopez, No. 17-CV-3827-SJ-SJB, 2019 WL 1578167, at *1 (E.D.N.Y.
Mar. 14, 2019) (“the financial backing of a litigation funder is as irrelevant to credibil-
ity as the Plaintiff’s personal financial wealth, credit history, or indebtedness”).
76
These parties aim at taking the costs of the claim off balance sheets and turning it
into a source of profit. See Brooke Guven and Lise Johnson, The Policy Implications of
Third-Party Funding in Investor-State Dispute Settlement, CCSI Working Paper 2019,
12 (May 2019) [hereinafter Guven et al., ISDS Policy Report].
77
Santosuosso and Scarlett, Access to Justice, supra note 73, at I.–12.
78
Id. at I.–13 (“This is concerning because empirical evidence points to a correla-
tion between lower per capita income and weaker rule of law in the respondent state and
increased likelihood of the investor-claimant’s success.”).
79
See generally Santosuosso and Scarlett, Access to Justice, supra note 73, at I.–13.
80
Christopher P. Bogart, Third-Party Financing of International Arbitration, Global
Arb. Rev. (Oct 14, 2016), https://globalarbitrationreview.com/insight/the-european
-arbitration-review-2017/1069316/third-party-financing-of-international-arbitration
[https://perma.cc/D2K4-839N].
81
Santosuosso and Scarlett, Access to Justice, supra note 73, at I.–13.
82
Dr. George R. Barker, Third-Party Litigation Funding in Australia and Europe,
8 J.L. Econ. & Pol’y 451, 501 (2012) (“Where, however, the funder is ring-fenced out
of the area of control over the conduct of the proceedings, that risk is removed. True

Despite the demurrers’ views that TPAF for nonimpecunious claimants

is not serving “access to justice,”83 TPAF is still a tool of “access to justice”
because it serves as a critical financial tool for all parties to secure an effective
remedy through arbitration. On the one hand, treating TPAF as an enabling
tool only for those who need funding would undermine other funding options
that may be available to those parties, and overestimate the role of TPAF as the
only available tool for those parties. On the other hand, introducing TPAF as
a necessary tool available only to financially incapable parties may indirectly
underestimate arbitration as a forum of justice that cannot function without
TPAF. There is no denying that the presence of funders shifts the focus from
justice to profit from the funders’ perspective.84 Yet, there are sound methodo-
logical rationales underlying the presence of TPF and correlate to justice from
the funded party’s perspective. That rationale outweighs the demurrers’ view
that TPF to financially capable parties lacks the foundational theory of access
to justice.
3. CONCLUSION
It’s fair to say that TPF is relatively growing to enable more parties to pursue
their meritorious claims, including those who are capable or incapable of
financing the claim. In all cases, in order to maintain arbitration as a forum of
justice, TPF should observe the procedural and substantive guarantees for the
funded party in fully pursuing their arbitration claim. This way, TPF enables
not just accessing arbitration but also maintaining arbitration as a forum of
justice to the funded party. Access to justice should look beyond the funders’
motive to fund a claim to the preservation of TPF of arbitration as a forum of
justice by not interfering with the procedural guarantees to the funded party in
pursuing the funded claim.
enough, the funder’s stake may be considerable, but the objective of safeguarding the
due administration of justice is achieved. The characteristic of the funder’s relationship
to the proceedings which offends public policy has been removed. In those circum-
stances access to the courts re-emerges as an objective of greater weight.”).
83
For more details on this view, see Guven et al., ISDS Policy Report, supra note
76, at 14.
84
On this view, see Santosuosso and Scarlett, Access to Justice, supra note 73, at
I.–15–16.

2. Abandoned promise
This chapter refines the existing funding practices and argues that these prac-
tices are not uncontroversial because they equate justice with economic con-
cepts. This way, TPF has abandoned its promise as a tool of access to justice to
enhance the funder’s profit. Prompted by various factors, TPAF looks beyond
the familiar territory of investment markets, which may change the driving
forces behind its market (1). To cultivate the funding market, TPAF generated
different models in dispute funding. As such, these different funding models
are now prevalent and should be analytically examined (2).
1. THIRD PARTY FUNDING MARKET
With the evolution of property laws,1 TPAF appeared as a transaction over

a form of property in a specific transactional market, i.e., market of legal
claims. International arbitration is an attractive area of investment for funders
due to the high values of the disputes at stake, the speedy proceedings, and
the probability of enforcing the arbitral awards.2 These features increase the
funders’ supply of funding in that field.3 Funders exert effort, time, and capital
1
See generally Anthony J. Sebok, The Inauthentic Claim, 64 Vand. L. Rev. 61,
63–67 (2011) [hereinafter Sebok, Inauthentic Claim].
2
The United Nations Convention on the Recognition and Enforcement of Foreign
Arbitral Awards (1958). A list of the Contracting States is available at http://www
.newyorkconvention.org/countries.
3
One funder stated “[w]e’ve built a massive portfolio, with more than $2.3 billion
committed to litigation finance investments. We can also tap the capital markets
quickly and efficiently, whether through private fund investors or public means, such as
our most recent $225 million bond offering.” Burford Quarterly, A Review of Litigation
and Arbitration Finance (2017), http://www.burfordcapital.com/wp-content/uploads/
2017/07/Burford-Quarterly-Summer-2017.pdf. Funders are also inclined to fund cases
that raise novel issues and involve riskier, and more uncertain, claims. Daniel L. Chen,
Can Markets Stimulate Rights? On the Alienability of Legal Claims, 46 Rand J. Econ.,
23, 24 (2015), https://users.nber.org/~dlchen/papers/Can_Markets_Stimulate_Rights
_RAND.pdf. Conversely, others argue that the availability of external funding does not
necessarily increase the number of arbitration claims. Michael G. Faure, T. Hartlief and
N. J. Philipsen, Funding of Personal Injury Litigation and Claims Culture: Evidence
from the Netherlands, 2 Utrecht L. Rev. 1 (2006).
17

to assess the value of their investment.4 Currently, many funders are institu-
tionalized to attract investors.5 Therefore, the funding industry may affect not
only the funded parties, but also a broad circle of investors who invest in these
institutions. This way, TPAF may have a “direct” impact on funded parties and
an “indirect” impact on those investors.
Observers of arbitration funding may predict that TPAF is growing in
number and sophistication, making changes to the character of TPAF to be
among the more dramatic facets of the arbitration system.6 These develop-
ments have created a competitive market between the key arbitration funding
players.7
The market of legal claims is distinctive, however, from the market of TPAF.
The presumption, in the latter, is that third party funders are nonparties, and
do not have control over the lawsuit. The significant variable that distinguishes
both markets is the degree of control.8 In TPAF, the trade is not in the claim,
but in the proceeds of that claim.9 Some legal claims might involve inseparable
4
See, e.g., Emily Slater, Getting to “yes”: What lawyers need to know
about Burford’s litigation finance diligence process (Dec 06, 2016), https://www
.burfordcapital.com/insights/insights-container/getting-to-yes-what-lawyers-need-to
-know-about-burford-s-litigation-finance-diligence-process/.
5
Major players include Burford Finance (https://www.burfordcapital.com/),
Omni Bridgeway (https://omnibridgeway.com/), and Parabellum Capital (https://www
.parabellumcap.com/).
6
“[F]rom $378 million in 2016 to $1.3 billion in 2017. Even more striking, that
represented 30x growth from 2013, a mere four years earlier. However, many of our
new investments did not immediately require significant capital deployments. We also
did two unusually large portfolio deals, totalling $350 million of commitments. In
short, while 2017 was a great year, we wondered if it could be repeated in 2018, and
we wondered how deployments would shape up.” Burford Annual Report, 7 (2018),
https://www.burfordcapital.com/media/1526/bur-31172-annual-report-2018-web.pdf
[hereinafter Burford 2018 Report].
7
This competition was subject to judicial disputes. See, e.g., Balance Point
Divorce Funding, LLC v. Scrantom, 978 F. Supp. 2d 341, 351 (S.D.N.Y. 2013), as cor-
rected (Oct 31, 2013).
8
Generally, control over legal claims may be alienated to third parties through
assignment, liability contracts, or subrogation. The question of the controlling party in
litigation may remain hidden unless allegations are raised of perjury, concealment of
assets, or any form of tortious interference. See generally Anthony J. Sebok, Should
the Law Preserve Party Control? Litigation Investment, Insurance Law, and Double
Standards, 56 Wm. & Mary L. Rev. 833, 854–55, 858 (2015), [hereinafter Sebok, Party
Control]. E.g., a funder sued the counsel alleging tortious interference with contrac-
tual relations. The District Court however rejected these allegations. Prospect Funding
Holdings, LLC v. Vinson, 256 F. Supp. 3d 318 (S.D.N.Y. 2017).
9
This distinction was very clear in court decisions and was the basis for tolerat-
ing TPF rather than assignment of the cause of action. See, e.g., Mut. of Omaha Bank

Abandoned promise 19
monetary and nonmonetary interests.10 In this case, commodification of legal

claims includes solely the monetary interests, which may create uncertainty for
the funder, who will be funding the entire claim but is expected to get a return
only from the monetary remedies.11
Generally, the basic regulatory pattern for a funding market is two-tiered.
The funding market must respond to the “supply” and “demand” requirements
of this market. While the law of demand governs the services requested by
the funded parties, the law of supply governs the services generated by the
funders. The market of trading in legal claims may be affected by externalities
such as other funding practices, inadequate representation, jurisdictional barri-
ers, or dispute outcome (1.1), and internalities such as the procedural costs and
the frivolity of the funded claim (1.2).
1.1 External Factors
The politics of TPAF may vary depending on whether the disputing party
is unable to finance the claim, or able but chooses not to, or was able when
the claim started but then became unable to continue.12 Funders supply their
financial services to the disputing party upon the latter’s request. They get
a share of the outcome multiplied by the probability of success.13 Generally,
funders may look into the claim type that runs the gamut of commercial arbi-
tration.14 Unlike the disputing parties, funders are generally less risk-averse.15
v. Kassebaum, 283 Neb. 952, 814 N.W.2d 731 (2012) (the assignment of unliquidated
proceeds from personal injury claim was valid and enforceable).
10
The relief sought may affect TPAF. Harper v. Everson, No. 3:15-CV-00575-JHM,
2016 WL 8201785, at *1 (W.D. Ky. June 27, 2016).
11
E.g., in Kentucky, personal injury causes of action are not assignable because
“a claim for personal injuries is peculiarly a personal right that the injured party may
or may not assert as he pleases, and that to permit one’s pain and suffering to become
a matter of speculation is not looked upon with favor by the law.” Incline Energy, LLC
v. Stice, No. 3:09-CV-58-H, 2009 WL 1975038 (W.D. Ky. July 6, 2009).
12
Historically, the demand for external funding was triggered by market forces,
especially with the economic downturn in 2008. Catherine A. Rogers, Ethics in
International Arbitration, para 5.07 (2014) [hereinafter Rogers, Ethics].
13
Third-Party Litigation Funding, 19 Cardozo J. Int’l & Comp. L. 343, 353, 370–71
(2011).
14
Burford 2018 Report, supra note 6, at 24.
15
The risky nature of this investment induces some funders to create a portfolio of
cases, in order to create a variance of payoffs.

There is an inverse correlation between the supply of TPAF and the level of
risk-aversion.16
Because funders want to maximize their profit, they supply their financial
services where the expected return of the claim is greater than its expected
costs.17 Similarly, rational claimholders, putting personal emotions aside,18
normally pursue a lawsuit where the expected outcome exceeds the expected
procedural costs.19 Despite the simplicity of this concept, there exists a measure
of unpredictability. Several factors, however, ameliorate market eccentricities.
1.1.1 Alternative funding

Funding alternatives may contribute to the TPAF market. These alternatives
include attorney funding, transfer of claim ownership (assignment), insurance
policies, loans, or no litigation.20 Normally, funders cover the full costs of the
case if the outcome is negative. In attorney funding, attorneys may not cover
the costs of the proceedings if the outcome is negative, depending on the agree-
ment with the client. This may leave the disputing party with a better choice for
TPAF than attorney funding.
TPAF is a better choice than assignment of claim. The latter assumes that
the disputant gives up the claim to a third party for a payment that is normally
less than its true value. In TPAF, the disputant remains the owner of the claim
and retains control. The risk for the disputant is sharing a percentage of the
future outcome which is expected to be higher than the immediate return for
transferring the claim. Transfer of ownership assumes an immediate payment
with no future return for the disputant. This may leave the disputing party with
a better choice for having a higher future outcome, shared with the third party
through TPAF, rather than having the immediate low return for transferring the
claim ownership.21
16
Christian Hederer, Third-Party Funding in International Investment Arbitration
– Economic Analysis and Regulatory Options, 17 (Dec 2016), https://ssrn.com/abstract
=2952488 [hereinafter Hederer, Economic Analysis].
17
Funders have positive views about developing the arbitration funding practice
which may extend even to funding the liability of defendants. Maxi Scherer, Aren
Goldsmith, and Camille Flechet, Third Party Funding in International Arbitration in
Europe: Part 1 – Funders’ Perspectives, Int’l Bus. L. J. 207, 211 (2012), https://ssrn
.com/abstract=2348737 [hereinafter Scherer et al., Third Party Funding in Europe].
18
Because the outcome of any dispute is uncertain, the possibility of settling the
dispute should always be considered when negotiating the funding arrangement.
19
The parties’ behaviors may contribute to the procedural costs. See infra Chapter
4.
20
See supra Chapter 1 (1).
21
This assumes a disputant is not risk-averse because risk-averse persons prefer
low sure payments over high uncertain payments. However, in this book, the profit is
instrumental for TPAF.

Insurance arrangements are not better options than TPAF. Unlike TPAF,
where the funded party does not pay the funder, insured parties pay insurance
premiums to the insurer. In TPAF, the funded party remains the party to the
claim. But the insured party may be replaced by the insurer who steps into the
shoes of the party. Any recovery that the insurer gets from the lawsuit may be
significantly higher than the agreed-upon recovery paid to the insured party.
The funded party still owns the outcome of the dispute with an agreed-upon
percentage to the funder. This makes TPAF a better choice for the funded party
than insurance.22
TPAF is still a better option than loan arrangements. In most jurisdictions,
funding arrangements are not subject to the same regulatory framework as loan
arrangements. Funded parties are not required to provide any of the collateral
securities that are generally required by borrowers in loan arrangements. The
party should pay back the loan amount with accrued interest, whereas TPAF
is nonrecourse because the party does not pay back the funds if the claim fails.
TPAF is finally a better choice than no litigation. The decision to litigate is
subject to the risk-aversion analysis. The funding parties share two concerns:
costs and time. The disputing party may consider the additional costs and time
of negotiating TPAF. The funder may consider the length of the proceedings
and the expected return. The party may have no option to litigate the case
except through TPAF, whereas the funder would have other investment
options than funding this particular dispute. Therefore, the funder’s evaluation
for the dispute outcome may be superior to that of the party because it is the
funder who is risking the investment.
The absence of other funding forms would increase the demand for TPAF.
Even with other funding forms, rationality favors TPAF. The price of the other
options may also have an impact upon TPAF. Given the assumption that both
arrangements are influenced by the same factors, an increase in the price of
these forms may increase the demand for TPAF and vice versa.23
1.1.2 Jurisdictional barriers

Despite the funders’ sophisticated investment analyses, many variables remain
beyond control. The many jurisdictional approaches to funding practice
form an ominous backdrop to the development of the funders’ marketing
strategies.24 They may transform the increasingly attractive market into a less
22
However, this case considers funding commercial claims, which always involve
sophisticated parties who look to maximize their profit, rather than avoiding risk.
Insurance is arguably better in some other claims, such as personal injury claims.
23
Hederer, Economic Analysis, supra note 16, at 14.
24
This is evident by the use of TPF in jurisdictions that relaxed the champerty doc-
trine. See infra Chapter 3.

attractive one. Some jurisdictions do not permit the transfer of ownership of

legal claims.25 In these jurisdictions, there would be an increasing demand
for TPAF. In contrast, the illegality of TPAF may open the door for other
alternatives.
1.1.3 Dispute outcome

Risk-averse persons prefer a “sure return” rather than an “expected return.”
A transfer of ownership would be more favorable than TPAF. The probability
of a favorable outcome may not justify the party’s choice of TPAF over other
funding alternatives.26 The funding decision includes some objective criteria.
These criteria include expectations of the court’s approach,27 and enforcea-
bility of the funding agreement and the dispute outcome. Dispute outcome
is a critical factor. It includes two variables: the probability of a favorable
outcome and the expected monetary award. Both variables significantly affect
the disputing party’s chances of funding the claim and the funder’s decision to
fund the claim.
1.2 Internal Factors
1.2.1 Procedural costs

The market of TPAF also depends on the expected procedural costs, including
lawyers’ fees, length of the proceedings, and the applicable rule of cost alloca-
tion.28 The growing number of lawyers has created a market of legal services.29
This market creates competition between lawyers that may impact the amount
25
See generally Sebok, Inauthentic Claim, supra note 1, at 62.
26
Hederer, Economic Analysis, supra note 16, at 10.
27
Precedents play a crucial role in litigation more than arbitration. Patrick M.
Norton, The Use of Precedents in Investment Treaty Arbitration Awards, 25 Am. Rev.
Int’l Arb. 167, 168 (2014).
28
The requirement of security for costs from funders may reduce demand of TPAF.
Critically crucial is the time of seeking financial support from a funder. Generally, if
the financial support is sought before commencing the dispute, it will be similar to the
BTE. If it is sought after the cause of action arises, it will be similar to the ATE. In addi-
tion, cultural differences may play an important role in the TPAF market. In addition,
arbitration funding for defendants has become in demand even by sovereigns in ISDS.
See generally Scherer et al., Third Party Funding in Europe, supra note 17, at 211.
29
According to the ABA 2018 survey, there is an overall 15.2% gain in the number
of practicing U.S. lawyers over the last decade (2008–2018) and the top five areas
with the largest number of active attorneys in residence are New York (177,035),
California (170,044), Texas (90,485), Florida (78,244) and Illinois (63,422). New ABA
data reveals rise in number of U.S. lawyers, 15 percent increase since 2008 (May 11,
2018), https://www.americanbar.org/news/abanews/aba-news-archives/2018/05/new
_aba_data_reveals/.

of fees they receive. The more competitive the lawyers are, the more powerful
the parties may be in negotiating fees and method of payment. Having these
fees as an element of the procedural costs may impact the level of demand
of TPAF. Similarly, the increasing number of funders in the market30 creates
competition through which funders may decrease their share in the outcome
to attract more claims.31 Funders anticipate the costs of the process and are
compensated for it in the dispute outcome. For disputants, costs may be the
exclusive element to seek funding. However, costs are not exclusively consid-
ered by the funders. The availability of information may affect the supply of
the funders’ services.32
1.2.2 Claim frivolity

A funder’s proclivity to profit may diminish the quality of the arbitral process
by opening the door for frivolous, specious, or unmerited claims.33 While
funders do not choose claims based only on their merits,34 the parties may also
unconsciously or deliberately make invalid claims to maximize their invest-
ment return.35 However, reality rebuts this view.36 First, funders deliberately
vet the case before making the funding decision.37 Funders, as investors, are
30
This has now become the general view among repeat participants in TPF.
Significant majorities in every segment agree that litigation is a financeable asset. See
Burford Litigation Finance Survey, 13 (2017) [hereinafter Burford 2017 Survey].
31
Burford 2017 survey identified one of the critical business challenges and a cir-
cumstance that leads to use of litigation finance is the “pressure to be more competitive
in bringing in new business.” Burford 2017 Survey, supra note 30, at 16–17.
32
The availability of public records and transparent information in investor–state
arbitration may be systemic factors for increasing the supply of funding in investment
arbitration rather than commercial arbitration. On transparency, see Jack J. Coe, Jr.,
Transparency in the Resolution of Investor-State Disputes – Adoption, Adaptation, and
Nafta Leadership, 54 U. Kan. L. Rev. 1339 (2006).
33
During the 37th Session of the UNCITRAL Working Group III, the distin-
guished delegate of Vietnam State raised that concern by announcing that due to the
increasing use of TPF, the state of Vietnam has been increasingly sued and some inves-
tors use third party funding for suing the state on frivolous claims (the author attended
this meeting).
34
Cf. Mariel Rodak, Comment, It’s About Time: A Systems Thinking Analysis of
the Litigation Finance Industry and Its Effect on Settlement, 155 U. Pa. L. Rev. 503,
518–19 (2006) (providing a rebuttal to assertions that the litigation finance industry
promotes frivolous litigation).
35
Sebok, Party Control, supra note 8, at 845.
36
In reality, most practitioners disagree with this view. In the Burford 2017 survey,
more than 50% of the respondents overwhelmingly disagreed with this view. Burford
2017 Survey, supra note 30, at 30.
37
Michael Abramowicz & Omer Alper, Screening Legal Claims Based on
Third-Party Litigation Finance Agreements and Other Signals of Quality, 66 Vand. L.

unlikely to invest funds in frivolous claims when their only chance of recovery
is contingent on the success of that claim.38 Second, other mechanisms may
practically be employed to combat the claim frivolity.39 Third, funders in fact
are creating more opportunities for claimants to have meritorious claims.40
Liquidating legal claims may enable parties to pursue their unremedied claims
by shifting the costs of litigation. This in turn should incentivize the pursuit of
meritorious, not frivolous, claims.41 Assuming that the funder’s assessment of
the claim is not overestimated, it weighs for claim quality rather than frivolity.
Further, the term “frivolous” may be too difficult to be defined. In investor–
state arbitration, tribunals may apply standards, and their interpretation of
these standards varies significantly. Absent clear application, it may be diffi-
cult to determine the frivolity of the claim. In addition, the lack of precedents
and the wide authority of the arbitrators to freely interpret the applicable laws,
treaties and standards, contribute to the difficulty of determining what is and
what is not frivolous.42 Moreover, the parties can raise the same interpretation
in future proceedings before different tribunals, which are not bound by the
previous tribunal’s determination. Still, frivolity is too difficult to be proven.
Rev. 1641, 1646 (2013) (arguing for a claim-screening device that would reduce plain-
tiff’s incentives to bring and maintain frivolous suits). One court referred to this reality,
saying that it is based on a calculated risk assessment of the probability of a return of
that investment. Anglo-Dutch Petroleum Int’l, Inc. v. Haskell, 193 S.W.3d 87, 104–05
(Tex. App. 2006).
38
Haskell, 193 S.W.3d 87, at 104–05.
39
See, e.g., Saladini v. Righellis, 426 Mass. 231, 687 N.E.2d 1224, 1226–27 (1997)
(identifying other devices that more effectively protect the evils of champerty doctrine
including the fear of frivolous claims).
40
Cf. Rogers, Ethics, supra note 12, para 5.14.
41
Maya Steinitz, Incorporating Legal Claims, 90 Notre Dame L. Rev. 1155,
1197–98 (2015) [hereinafter Steinitz, Incorporating Claims].
42
See Brooke Guven and Lise Johnson, The Policy Implications of Third-Party
Funding in Investor-State Dispute Settlement, CCSI Working Paper 2019, 12 (May
2019).

Although funders are selective,43 they cannot be argued to back up only meri-
torious claims.44 There should be a price for each decision funders may make.45
1.3 Funding Decision
Making a funding decision requires a collaborative reassessment of a func-

tioning relationship in light of the underlying dispute. Once under way, the
negotiation stage allows the funding parties to neutralize their potential dif-
ferences through agreeable funding terms. Practice is not, however, uniform.
Still, common criteria exist for every funder to consider, including (a) the
value of the claim and defenses,46 (b) counsel’s fee arrangement, (c) expected
recovery,47 (d) appointed arbitrators, (e) jurisdictional hurdles,48 and (f) pros-
pects of settlement.
1.3.1 Negotiation parameters

The negotiation parameters may vary as per the stage of the dispute. Every
procedural posture may affect the funding decision. While the issue of control
may be less relevant as the case proceeds, the prospect of settlement may be
more relevant at a later stage. The composition of the tribunal is crucial before
43
Aren Goldsmith & Lorenzo Melchionda, Third Party Funding in International
Arbitration: Everything You Ever Wanted to Know (but Were Afraid to Ask) – Part
Two, 2012 Int’l Bus. L.J. 56 (2012).
44
U.S. Chamber Institute for Legal Reform, Selling Lawsuits, Buying Trouble:
Third-Party Litigation Funding in the United States, 2, 5 (2009) (“[A]lthough pro-
viding non-recourse loans to fund litigation is inherently risky, it does not follow that
litigation-finance companies will only finance claims that are likely to succeed. These
companies – like all sophisticated investors – will base their funding decisions on the
present value of their expected return, of which the likelihood of a lawsuit’s success is
only one component. The other component is the potential amount of recovery.”)
45
As one funder put it “[t]he perception that you need strong merits is wrong–
there’s a price for everything.” Corporate Europe Observatory, Profiting From Injustice,
59 (2012), https://corporateeurope.org/sites/default/files/publications/profiting-from
-injustice.pdf.
46
See, e.g., James E. Krier & Stewart E. Sterk, An Empirical Study of Implicit
Takings, William & Mary L. Rev. 35 (2016) (classifying cases with different types of
takings).
47
Adam R. Pomeroy, Penn Central After 35 Years: A Three-Part Balancing Test or
a One Strike Rule?, 22 Fed. Cir. B.J. 677, 692 (2013) (finding cases decided on merits
had 12% success rate which drops to 4% for cases dismissed on jurisdictional grounds).
48
Susan Choi, Judicial Enforcement of Arbitration Awards Under the Icsid and
New York Conventions, 28 N.Y.U. J. Int’l L. & Pol. 175, 176 (1996). Some funders
may avoid certain defendants, such as Argentina and Russia. Scherer et al., Third Party
Funding in Europe, supra note 17, at 213.

the jurisdictional phase. Some funders require a 95% probability of success to

take the funding decision, others may suffice with only a 50% chance.49
As such, the negotiation phase defines the transactional script within
which the parties may act as the dispute progresses. It is basically designed to
maintain a balance in the funding relationship. However, it may increase the
influence of the funders upon the funded party. Funded parties may adapt to
the financial capabilities of the funders and agree to their terms. The funding
parties come to the negotiation stage with different expectations and input.
While the funder comes with financial resources and expertise, the funded
party comes with strategic, factual and, supposedly, legal expertise. Given the
possibility of reaching an impasse, it is advisable for the parties to anticipate
the deadlock and readjust their positions.
1.3.2 Available information

The negotiation phase may be labelled as an informational stage. Funders often
conduct due diligence to gather information about the case from the potential
client and even the potential opposing party.50 The availability of information
increases the possibility of making an informed funding decision.51 Funders do
not normally require written legal analyses from the client’s counsel to evalu-
ate the chances of success.52 Throughout the proceeding, as more information
becomes available, the bargaining positions may shift, dispelling the trust
between the parties, and increasing the procedural costs. While the funder may
cut off funding if the investment is no longer lucrative, the funded party may
dispute that possibility.
1.3.3 Evidence matters

As discussed above,53 the nature of the facts underlying the dispute, and the
evidence supporting these facts, contribute to the funding decision. Funders
may consider not just the claim type but also the type of evidence that supports
49
David S. Abrams, Daniel L. Chen, A Market for Justice: A First Empirical Look
at Third Party Litigation Funding, 15 U. Pa. J. Bus. L. 1075, 1088 (2013) [hereinafter
Abrams & Chen, Market for Justice].
50
See generally Victoria A. Shannon, Harmonizing Third-Party Litigation Funding
Regulation, 36 Cardozo L. Rev. 861, 899 (2015).
51
The availability of information may lead to uncertainty in the disclosure of the
funding documents if a dispute arises. Absent the ability to communicate with funders
without waiving privilege, potential plaintiffs may be “handcuffed.” In re Int’l Oil
Trading Co., LLC, 548 B.R. 825, 828–29 (Bankr. S.D. Fla. 2016).
52
For some funders, counsels’ legal opinions are welcomed only where they are
protected against disclosure. See Scherer et al., Third Party Funding in Europe, supra
note 17, at 216.
53
See supra Chapter 2 (1.3).

the claim. Some funders may be less enthusiastic about funding a claim that
finds support only in oral evidence. Reliance on oral evidence may be riskier
than reliance on documentary evidence.54
1.3.4 Claim price

TPAF should be understood as a tool to lessen financial pressures on dispu-
tants. This may be achieved by pricing the funded claim.55 On average, one out
of ten cases is approved for funding.56 The price of the claim is the amount of
money that the funded party would pay the funder having won or settled the
case. It may differ depending on the funding parties’ perspectives. The funded
party intends to shift all risks to the funder. However, funders intend to miti-
gate those risks in order to maximize their profit.57
For corporations, the price of legal claims may be difficult to account on the
corporation’s books.58 Merit-based claims affect the accounting of the corpora-
tion because they are an immediate expenditure with a future return contingent
on a successful outcome.59 The expected return may not appear in the corpora-
tion’s accounts because the revenue has not yet been realized.60 Therefore, the
legal claim is arguably not an asset of the corporation. In order to be an asset,
the claim outcome should be more than a mere estimate. This may be achieved
by considering the experience of the enterprise in similar cases, the nature of
the dispute, the legal counsel’s opinion, and the progress of the case.61
54
Abrams & Chen, Market for Justice, supra note 49, at 1088.
55
See Burford 2017 Survey, supra note 30, at 14 (economic pressures have been
one of the strong business challenges. Litigation finance has been considered a rele-
vant tool to address these challenges which in turn would clearly be a key to its ongoing
growth).
56
Rogers, Ethics, supra note 12, para 5.28.
57
Funders mitigate these risks by investing in a diversified portfolio of cases to
consider the aggregate winning rate even with some losing cases. See, 5 minutes on...
Portfolio Finance (Apr 17, 2019), https://www.burfordcapital.com/insights/insights
-container/5-minutes-on-portfolio-finance/.
58
The average claim value varied from $33,500,000 and $28,000,000. See Burford
2017 Survey, supra note 30, at 24.
59
Statement of Financial Accounting Standards No. 5 Accounting For
Contingencies, para 1 (March 1975) [hereinafter SFAS] (a contingency is “an existing
condition, situation, or set of circumstances involving uncertainty as to possible gain
[referred to as a ‘gain contingency’] to an enterprise that will ultimately be resolved
when one or more future events occur or fail to occur.”)
60
In addition, “contingencies that might result in gains usually are not reflected
in the accounts since to do so might be to recognize revenue prior to its realization.”
SFAS, supra note 59, para 17.
61
SFAS, supra note 59, para 36.

Different theories govern pricing legal claims. First, the traditional or neo-
classical law and economics school considers the legal dispute a monetizable
asset, i.e., commodity as opposed to relationship.62 “[L]itigants will compare
the financial value of a settlement offer to the expected financial value of trial
and, of the two, select the course of action with the greater expected value.”63
If the expected value of the lawsuit is readily calculable, settlement is a more
favorable choice than trial. Second, the financial theory considers litigation
an option rather than an asset.64 Filing a lawsuit is a “purchase of an option”
because it entitles the claimholder to various options, in light of the new infor-
mation through motions, discovery, or any other strategic decision.65 Legal
probability, from a mathematician’s perspective, is not measurable and cannot
be applied by statistical probability.66 Third, the behavioral theory concerns
actual human behaviors and psychology to the law based on the assumption
that rationality, willpower, and self-interest are bounded.67 All the involved
parties, including litigants, lawyers, funders, and judges, may make systemic
errors in their judgments due to the cognitive illusions that may lead to biased
judgments.68
Pricing legal claims is therefore important to funders as potential investors.
First, the expected value of the claim is significant because the claim is the
asset which the funder purchases. Second, the value of the option to settle may
differ from the claim value. Third, the value of the transaction costs in effectu-
ating the payment of a claim or an option is significant.69 Funding practice may
involve a combination of these three theories for valuing the legal claim. Under
a neoclassical law and economics theory, funding parties consider the expected
recovery after subtracting the anticipated costs of the dispute, the probability
of success, and the time between an immediate payment and a later damage
award. These variables may intertwine with the availability of asymmetric
information as suggested by the financial theory. The financial theory may add
a new component to include the role of precedents. However, this component
may have less impact in arbitration than litigation. New information may lead
to more divergence than convergence in the disputants’ assessment of the likely
62
George L. Priest & Benjamin Klein, The Selection of Disputes for Litigation, 13
J. Legal Stud. 1 (1984).
63
Maya Steinitz, How Much Is That Lawsuit in the Window? Pricing Legal Claims,
66 Vand. L. Rev. 1889, 1904 (2013) [hereinafter Steinitz, Pricing Claims].
64
Id. at 1907.
65
Id. at 1907–08.
66
Id. at 1910.
67
Id.
68
Id. at 1911.
69
Id. at 1903.

outcome because they egocentrically interpret the information.70 Therefore,

accurate predictions of future prices, as per the financial theory, may not be
possible. From a behavioral theory perspective, the parties’ ultimate goal of
litigation is not always money. They may be driven by nonmonetary goals
such as vindication, creating new precedents, or just exercising leverage over
the other party. These nonmonetary goals may impact the ongoing proceeding
and the option to settle.71
As such, there has been a need for new ways of funding litigation as well
as managing legal risks and uncertainties.72 Among these challenges is the
need to monetize legal receivables more quickly, the ongoing legal expenses
that depress financial results, the pressure of shareholders or other investors to
contain costs, the increased pressure on legal budgets, staffing and spending,
managing legal risks, and the difficulty of enforcing awards.73 These critical
business challenges have led to the development of new funding models.
2. THIRD PARTY FUNDING MODELS
2.1 Internal Partnership
One model is for funders to become, rather than separate or external entities,
internal partners to either a client or a law firm.74 In this model, funders as
internal partners would create a joint venture that represents the funding
arrangement in the dispute.75 This joint venture may be structured in two ways.
First, the funder creates a joint venture entity with the disputing party (joint
funder–client entity) where they both act as partners. The disputing party
assigns the entire claim to the joint venture entity where the attorney does not
deal with the original party but with the joint venture entity.76 Second, a funder
partners with the attorney to create a “joint funder–attorney” entity, which then
signs a retainer agreement with the disputing party for both legal and financial
70
Id. at 1914–15.
71
Other factors may contribute to distorting the rational assessment of the liti-
gants as to the likelihood of success and hence reduce the possibility of settlement.
These include subjective psychological costs, litigation fatigue, reactive devaluation
(the desire not to appear capitulated to the opposing party) and status quo bias. Steinitz,
Pricing Claims, supra note 63, at 1914–15.
72
Burford 2017 Survey, supra note 30, at 15.
73
Id. (chart of identifiable critical business challenges).
74
Victoria Shannon Sahani, Reshaping Third-Party Funding, 91 Tul. L. Rev. 405,
435 (2017) [hereinafter Sahani, Reshaping].
75
Id.
76
Id. at 433–34.

services.77 Critically, this model originates in three fallacies, namely doctrinal,

ethical, and market fallacies.
2.1.1 Doctrinal fallacy

The partnership between the funder and the party in a joint venture entity is
inconsistent with the disputants’ fulsome autonomy over the claim.78 This
model assumes that the disputant has to share claim ownership with the funder
and assign this claim to a joint venture entity. In other words, the real owner
loses control over the claim in favor of the joint entity. From a doctrinal
perspective, courts distinguish claim assignment from assignment of claim
proceeds. Some courts are skeptical of the validity of the first, but they are
inclined to permit the latter.79 Accordingly, this model would undermine the
parties’ autonomy over their claims without any legislative basis. It transforms
the commoditization of legal claims from one legal system, TPF, into another,
claim assignment, both of which are subject to different rules and policy
considerations.
The model may create uncertainty as to the relationship between the parties
and the legal claim. Direct contact between the funder and the attorney may
impliedly create a form of agency between the funder and the attorney. This
arrangement may simulate lawyers to agents or intermediaries that connect
parties who seek funding and entities that provide funding. This characteriza-
tion is not far from reality. The United States District Court for the Southern
District of New York found a breach of contractual terms by an agent who
acted as an intermediary to bring clients to the funder.80 In this case, the inter-
mediary was found to have misrepresented cases to the funder with the intent
to deceive.81 Similar disputes may easily arise, especially because the funder is
not involved in contacting the potential plaintiffs.
77
Id. Funding a law firm by a third party funder is different from the contingency
fee arrangement, which is subject to the attorney–party financing arrangement. See
supra Chapter 1 (1.1).
78
J. Maria Glover, A Regulatory Theory of Legal Claims, 70 Vand. L. Rev. 221,
230–31 (2017) (“an individual has almost complete dominion over her claim, almost as
a natural right. At the other end of the spectrum is the view that the party’s control over
her claim is at the grace of someone else–a judge, a class attorney, or a rulemaker.”)
79
See, e.g., In re DesignLine Corp., 565 B.R. 341, at 342–43.
80
Cadet Funding, LLC v. Hooser, No. 11 CIV. 1140 JPO FM, 2012 WL 3642827,
at *1 (S.D.N.Y. July 2, 2012), report and recommendation adopted, No. 11 CIV. 1140
JPO, 2012 WL 3642407 (S.D.N.Y. Aug. 24, 2012) (identifying the role of the inter-
mediary by contacting, screening potential plaintiffs, negotiating with them, conclud-
ing funding agreements on the funder’s behalf, and reporting key developments of each
case in return for a share in the profit).
81
Id.

2.1.2 Ethical fallacy

The ethical fallacy of this model originates in the attorney–client relationship.
This relationship is premised primarily on the fact that the client has the right
to choose their counsel.82 Even in cases where representation is legally solic-
ited by an attorney, the decision is still the client’s.83 This model changes the
landscape of legal representation. A client would not choose their attorney,
rather, the attorney would choose the client. Due to the presence of external
funding, attorneys may be inclined to choose only lucrative claims. Funders
primarily fund law firms for profit. This model would undermine access to
justice. Further, the attorney–client relationship would not be based on provid-
ing legal services, but on providing an investment to the funder and the client.84
2.1.2.1 Terminating representation

Ethically, if the attorney, who has the main responsibility of handling the
client’s case, leaves the law firm, the client should have the unfettered right to
choose to be represented by the law firm, to be represented by the departing
attorney, or to hire new counsel.85 The funding arrangement between the
funder and the law firm should not impact the funded party’s right to freely
choose their counsel.86 This model may affect the client’s representation.
If, for any reason, the funding agreement has terminated, it may necessarily
terminate the counsel’s representation. Accordingly, counsel representation
may be terminated for funding-related reasons. Counsel may terminate legal
82
Unified Sewerage Agency of Washington Cty., Or. v. Jelco Inc., 646 F.2d 1339,
1350 (9th Cir. 1981).
83
Model Rules of Prof’l Conduct R. 7.3 (2017) “(a) A lawyer shall not by
in-person, live telephone or real-time electronic contact solicit professional employ-
ment when a significant motive for the lawyer’s doing so is the lawyer’s pecuniary
gain … ” The New York City Bar formed a working group to prepare a report on litiga-
tion funding which recommended revising Rule 5.4 of the Model Rules by suggesting
two proposals, including funders financing lawyers or law firms, but the Rule has not
been revised yet. See New York City Bar Ass’n, Working Group Report on Litigation
Funding (Feb 28, 2020), http://documents.nycbar.org/files/Report_to_the_President
_by_Litigation_Funding_Working_Group.pdf.
84
For discussions on the threats on the legal profession, see Carl T. Bogus, The
Death of an Honorable Profession, 71 Ind. L.J. 911 (1996); Norman Bowie, The Law:
From a Profession to a Business, 41 Vand. L. Rev. 741 (1988).
85
LaFond v. Sweeney, 2012 COA 27, 345 P.3d 932, aff’d, 2015 CO 3, 343 P.3d
939 (A client represented by a particular lawyer or law firm will have to choose counsel
again if the firm breaks up or the responsible lawyer departs from the firm during the
course of the representation).
86
Similarly, a dispute between attorneys in a law firm over a fee that is due or may
come due should not impact the client’s right to freely choose counsel. Sweeney, 2015
CO 3, 343 P.3d 939.

representation under regular fee arrangements if the client has defaulted on

payment.87 However, the situation here is different because the client is not
expected to pay any costs in TPF. This model would undermine the client’s
unfettered right of choosing their attorney.88
2.1.2.2 Zealous representation

This model may pose risks to the attorneys’ role in zealously representing their
clients.89 Attorneys should consider only the client’s interests. However, this
model would put the client’s interests and the funder’s interests in competition,
if not in conflict. Attorneys are supposed to be loyal to their clients.90 However,
the attorney’s loyalty in this model may be questioned. More specifically, this
model argues that funders should be considered attorneys or agents to attor-
neys when applying the attorney–client privilege and work product doctrine.91
However, in partnering with law firms, funding entities may employ attor-
neys,92 but they cannot be considered attorneys because they are not licensed,
or they are licensed but do not perform authorized legal practice in this role.93
As a joint venture, funders and law firms are equal partners in the legal claim.
So, funders cannot be considered agents of the attorneys as they both have
a direct stake in the dispute.
2.1.3 Market fallacy

Funding law firms may impact the market of law firms. In choosing which
law firm to finance, funders make decisions based primarily on profit. Funders
would choose only law firms with a high reputation of success in order to
secure their return.94 This may create discrepancies between different law
87
Team Obsolete Ltd. v. A.H.R.M.A. Ltd., 464 F. Supp. 2d 164 (E.D.N.Y. 2006).
88
The chilling impact of TPF on the funded party’s right to choose or change
counsel was a concern as to the validity of TPF by many courts. See infra Chapter 3.
89
Model Rules of Prof’l Conduct (Preamble & Scope) (2017) (“when an opposing
party is well represented, a lawyer can be a zealous advocate on behalf of a client and
at the same time assume that justice is being done”).
90
Model Rules of Prof’l Conduct R. 5.8(a) (2017) (“clients of lawyers practicing
in New York State are guaranteed independent professional judgment and undivided
loyalty uncompromised by conflicts of interest”).
91
Sahani, Reshaping, supra note 74, at 451.
92
93
Model Rules of Prof’l Conduct R. 5.8. b(1)(ii) (2017) (“the profession is com-
posed of individuals who … (ii) are licensed to practice the profession …”).
94
Burford, How we work with law firms, https://www.burfordcapital.com/how-we
-work/with-law-firms/. For instance, “litigation funder Bentham IMF announced that it
has assembled a portfolio of investments with a group of law firms around the country
that could signal a new model for financial risk-sharing.” Omni Bridgeway, Bentham
IMF unveils new portfolio model for litigation funding, https://omnibridgeway.com/

firms depending on whether they are funded, and between law firms and
individual attorneys. In addition, clients would often target funded law firms,
which in turn would make hiring decisions based on purely financial criteria,
rather than adequate legal representation.95 This funding model may change
the governance, organization, and finance of law firms. Large firms may
monopolize the field of litigation finance, which would divide the legal market
into consortia of firms that provide lawyering services and others that provide
lawyering and financing services.96
2.1.4 Unanswered concerns

Assuming an active role by funders as partners, this model raises questions
when the funder and the attorney disagree on the conduct of the case, to the
detriment of the disputing party. Given the ethical and legal restraints on
legal representation, attorneys may have the final word.97 However, funders
might allege otherwise. In addition, any misconduct resulting from the part-
nership between the funder and the law firm should be subject to discipline.
However, there exists no regulatory framework for disciplining the players in
this model. Disciplining the funders under the Rules of Professional Conduct
would be problematic because these rules apply only to licensed attorneys who
conduct legal services.98 The funder–law firm partnership may affirm fears of
transforming lawyers from members of a noble profession, to mere “business-
people.”99 Thus, this model falls short in securing an efficient funding model.
2.2 Staged Funding
The need for an alternative paradigm within which litigation finance could
operate based upon not only ethical but also economic and legal considera-
tions triggered the introduction of “incorporating legal claims.” Incorporating
a claim denotes a separation between the claim and the claimholder that
insights/ p ress - releases/ a ll - press - releases/ 2 015/ 1 1/ 1 6/ b entham - imf - unveils - new
-portfolio-model-for-litigation-funding.
95
See generally Thomas D. Morgan, The Evolving Concept of Professional
Responsibility, 90 Harv. L. Rev. 702, 737 (1977).
96
See generally Maya Steinitz, Follow the Money? A Proposed Approach for
Disclosure of Litigation Finance Agreements, UC Davis L. Rev. 10–11 (2019), https://
ssrn.com/abstract=3360672.
97
Lawyers may withdraw in case of fundamental disagreement with the client.
Model Rules of Prof’l Conduct R. 1.16 (c)(4) (2017).
98
Model Rules of Prof’l Conduct R. 5.8 (2017).
99
Bogus, supra note 84.

qualifies the claim to be a traded asset.100 The philosophy behind claim incor-
poration is that commercial funders are emboldened to control the litigation
to enhance the value of their investment.101 Incorporating legal claims is
said to reduce the cost of litigation finance of large commercial claims. This
encourages corporations to pursue unprosecuted claims, and create accounting
benefits for corporations.102 Based on that paradigm, a “staged funding” model
was proposed in a manner similar to funding start-ups by venture capitalists.103
It is argued to accommodate the uncertainties of legal claims and maximize the
efficiency and fairness of the process for both funding parties.104
Staged funding is “an iterative process used to provide the portfolio
company with capital in return for ownership (shares) in the company.”105
It allows the funders to minimize their risk and, in the meantime, allows the
company to move from one stage to the next in its development.106 Contractual
terms cannot specify the terms of future funding because those are determined
based upon the bargaining costs at each stage.107 At each funding stage, differ-
ent investment rounds are valued anew, and shares are issued in exchange for
additional funding.108 These stages may be classified into procedural rounds.
Every round comes with new information that produces new uncertainties. The
staged evaluation may prompt funders to purchase additional shares or sell
shares they purchased at the beginning of the round.109 However, venture capi-
talists have control over the start-up and the ability to shut down the enterprise
if it seems to be losing viability.110
2.2.1 Staged funding determined

From an economic perspective, there might be an analogy between venture
capital and litigation funding. The analogy may unfold as follows: litigation
funders are akin to venture capitalists, claimants to entrepreneurs, counsels
100
Claim incorporation has two structures. First, “loose” incorporation, in which
the value of the litigation is embodied in a security that derives value solely from the
expected value of litigation. Second, “strict” incorporation in which the claim is embod-
ied in special purpose vehicles (SPVs) that may issue securities. Steinitz, Incorporating
Claims, supra note 41, at 1162.
101
Id. at 1165–66.
102
Id. at 1159.
103
Steinitz, Pricing Claims, supra note 63, at 1893.
104
Id. at 1894–95.
105
Id. at 1895.
106
Id. at 1895–96.
107
Id.
108
Id. at 1897.
109
Id.
110
Id. at 1898.

to managers, and litigation to portfolio companies. Both financial models

share the extreme uncertainty, information asymmetry, agency problems, and
effort provisions.111 Generally, funding a commercial claim through a joint
venture, where the funding parties become co-venturers, may lead to a con-
flict between them as co-owners of the claim. While the funder may push for
early settlement to maximize its profit at the expense of the funded party and
eventually invest in other litigations, the funded party, at the expense of the
funder, may take advantage of the joint venture by spending excessive funds
in prosecuting the claim.112 However, staged funding is argued to help align
the interests of the funder and the party through the entrepreneur by tying the
continued funding to the performance and achievements of the investment.113
It allows the funder to reassess its contribution on a staged basis in light of new
information.114 Funders can contractually increase or decrease expenditures as
“necessary.” From a financial perspective, this model claims to have the ability
to accelerate and supplement the investment with a downside protection for the
investor and a minimum recovery for the disputing party.
In addition, staged funding reduces the uncertainty of the influence of the
party’s actions over the value of the venture because staging increases incen-
tives for the parties to enhance the value of the investment and reduces agency
problems.115 Further, funders would have a role in the day-to-day management
of litigation, including raising additional funds, formulating legal strategies,
and structuring settlement agreements, in the same manner that venture
capitalists structure key dealings for the portfolio companies.116 In doing so,
funders appear functionally equivalent to the venture capitalists represented on
the board of directors of the portfolio company. The control of litigation may
be allocated to the funder to monitor the investment. Litigation funders should
similarly pay for the privilege of additional control.117 This control might be
found in the contractual covenants that require the approval, or at minimum
the consultation, of the funder before making strategic decisions like forum
selection, key motions filing, and settlement decisions.118
111
Id. at 1919–20.
112
Steinitz, Incorporating Claims, supra note 41, at 1204–05.
113
This does not take into consideration that the achievement is not subject to the
funded party’s control but instead is something beyond their control: a decision by the
arbitrator.
114
115
Maya Steinitz, The Litigation Finance Contract, 54 Wm. & Mary L. Rev. 455,
505 (2012) [hereinafter Steinitz, Finance Contract].
116
Id. at 508.
117
Id. at 508–09.
118
Id. at 509–10.

The basic difference between litigation and start-up companies is the mono-
tonic nature of investment. While the value of litigation is discontinuous and
nonmonotonic, the value of the start-up company is generally monotonic.119
The context of both investment markets may differ. In arbitration, the players
in the market are limited to arbitrators or judges, opposing parties, party
representatives, arbitral institutions, and national courts. Given the limited
number of players in the arbitration market, it would be difficult to have
an effect over this market. Conversely, the market of start-up companies is
broader, and its value may be expanded. In arbitration, two variables comprise
that investment: facts and laws. The nucleus of operative facts may change
over time because of newly disclosed information, the parties’ grasp of the
facts, or the decision-makers’ different views of the facts. The applicable law
which governs the legal arguments might be less uncertain than the facts.120
Therefore, the extent of the transaction is determined pursuant to the given
facts and the applicable laws in arbitration, which may make it unlikely to
change value.
Significantly, venture capital is driven by the reputational force. This creates
an equilibrium between the structure of venture capitals and the small pool of
venture capitalists. The reputational force is affected by a number of factors,
including whether the party in question is a repeat player, the normative views
of the participants in the market, and the behavior of the players.121 This
reputational force plays a crucial role in raising funds for the venture capital.
Similarly, the reputational force in litigation finance is strongly considered
by the participants,122 especially with the existence of repeat players in the
funding industry.123
2.2.2 Staged funding questioned

Despite the benefits the staged funding model offers, it also raises concerns. It
basically allows the disputing party to take advantage of the financial expertise
of the funder without any procedural or ethical barriers. The disputing party
would be aware of the financial aspects of the arbitration process. Because the
funder creates a joint venture with the party, the attorney should be dealing
with the joint venture entity rather than the funder. Normally, third party

119
However, investor–state arbitration is generally governed by standards, espe-

120
cially with the absence of binding precedents. Norton, supra note 27, at 168.
121
Steinitz, Finance Contract, supra note 115, at 511.
122
Id. at 513–14.
123
Doe v. Soc’y of Missionaries of Sacred Heart, No. 11-CV-02518, 2014 WL
1715376, at *1 (N.D. Ill. May 1, 2014).

funders proceed in a competitive open market with other funders.124 Funders

would likely try to reduce risks and maximize returns. Accordingly, the greater
the involvement of funders in the joint venture entity, the greater the expected
return will be.
This model is premised on the revelation of new information in a later stage
that may justify reassessing the claim. Given that discovery is the primary way
of revealing new information – and in some instances, may result in no new
information – this model might be questionable. There is no clear guidance
on whether reassessment of the case should be periodical, regardless of the
revealed information, or conditioned upon revealing new information. In some
instances, the source of information would be the opposing party. Should the
funder reassess the claim or would it be considered the strategic progress of
the case?
2.2.2.1 Control concerns

This model raises concerns on the conduct of the joint venture. There may be
uncertainties about the relationship between the retained attorney and the new
entity. Creating this new entity assumes that it will conduct all claim-related
issues with a uniform approach in pursuing that claim. Otherwise, the issues
related to the claim would be bifurcated between the entity, the claimholder,
and the funder. However, acting as a co-owner of the arbitration claim would
qualify the funder to exercise control over the arbitration proceedings. The
objectives of the funder and the disputing party would be aligned. But their
means to achieve these objectives may differ. Additionally, this model seems
to adopt the view that the legal claim may be subject to control by collective
parties, not just the owner of the claim.125 However, courts often uphold the
party’s fulsome control over the claim.126 Staged funding may undermine the
party’s fulsome control, even partially, over the claim.
A similar structure to this model has been scrutinized by some courts. One
case involved quarterly funding throughout the action by requesting funding
from the funder, who should approve any request to increase the litigation
budget.127 These regular requests to increase the budget or to approve the quar-
terly funding requests and some strategic decisions, such as substituting coun-
sels, entitle the funder to weigh whether its involvement is still profitable.128
124
125
Glover, supra note 78, at 230–31.
126
Mohamed Sweify, Third Party Funding in the United States: A Systematic
Judicial Analysis, 32 Am. Rev. Int’l Arb. 165 (2021). See generally infra Chapter 4.
127
In re DesignLine Corp., 565 B.R. 341, at 342–43.
128
Id. at 348.

The funder in that case can decline additional advances of funding.129 The fact
that the funding was not up front deprives the funded party of sole discretion
on using the funds.130 Through these quarterly requests, the funder has repeated
opportunities to cut off funding if the litigation begins to diverge from its
initial expectations, or if it simply elects to abandon the venture, and thus “kill
the litigation.”131 The funded party’s requests for the funder’s permission to
increase the litigation budget, and to consult with the funder about replacing
counsel, combined with the power attendant to the funding relationship, vests
the funder with significant control over the action and invalidates the funding
arrangement.132 It appears, therefore, that even if courts recognize joint prose-
cution of the case by the funding parties, the funded party should retain control
over litigation.133
2.2.2.2 Practical concerns

Some concerns may undermine the practicability of this model. First, it entitles
the funders broad discretion to exercise the valuation power “as necessary.”
It may open the door for the funders’ subjective views. If a dispute arises
as to what constitutes “necessary,” there is no guidance on whose opinion
shall prevail or how this dispute may be decided. Second, some contractual
provisions may paradigmatically serve the same goals as the joint venture.
This model is premised on the evaluation of the newly revealed information,
which may enable the funder to continue a further stage or terminate the agree-
ment, depending on the case progress and other factors. In the meantime, the
termination provision authorizes both parties, not just the funder, to reassess
the agreement in light of the new information. On one hand, the funded party,
according to the terms of the agreement, has an ongoing obligation to disclose
any necessary information that would help the funder in assessing the case.134
Breaching this obligation would justify the funder’s termination of the agree-
ment with no consequential liability. On the other hand, absent the funded
Id. at 345.
129
Id. at 349.
130
131
Id.
132
Id. at 348–49.
133
In a bankruptcy proceeding, the United States Court of Appeals, Second Circuit,
found that the agreement between the trustee (funded party) and one secured creditor
(funder of litigation) to jointly prosecute the case in return for a share in the outcome
created standing for the creditor to bring fraudulent conveyance claims if it was in the
best interest of the estate and the creditor was not replacing the trustee as a plaintiff but
simply assisting him with the litigation while retaining the right to control litigation to
the plaintiff. Glinka v. Housecraft Indus. USA, Inc. (In re Housecraft Indus. USA, Inc.),
310 F.3d 64, 70–72 (2d Cir.2002).
134
Cf. Int’l Oil Trading Co., 548 B.R. 825, at 828–29.

party’s fault, the funder has an ongoing obligation to provide financial support
to the disputing party throughout the proceedings.135 Failing to do so would
entitle the funded party to sue the funder for damages. However, the staged
funding model views the revealed information only from the funder’s side.
Privileging one party, the funder, over the other, the funded party, violates the
legitimate mutual balance between both parties.
Third, staged reassessment raises due process concerns. Disclosure of TPF
may create expectations to both parties as to how the proceedings will be
conducted. It also puts the arbitral tribunal, especially with the costs issue,
in a position to evaluate the proceedings with the existence of a funder.136
A sudden removal of this factor from the equation based upon the new infor-
mation may materially violate the expectations of the involved parties.
Fourth, this model ignores the risk variable of the funding industry. This risk
extends to the course of the proceeding. Having a staged funding to reassess
the proceedings would disregard the parties’ risk assessments at the time of
concluding the agreement. Furthermore, given the fact that funders often are
not risk-averse, they can continue in funding a later stage. Normally, if the
funder withdraws, there would be only one outcome: no profit and immediate
loss of the expenditures. If the funder continues, there would be two outcomes:
either making a profit or continuing the loss. Given the fact that funders are
risk-conscious investors, they would be more inclined to the second choice.
Staged funding allows the funder to “exit” or “continue” the investment at
milestones either on the same terms or new ones. However, this model neither
aligns with the nature of any investment as “risky,” nor provides a stable con-
tractual environment through which the funding relationships should function.
Further, it triggers the problem of what criterion should be used to evaluate the
new information. Moreover, there is no clear guidance on the funded party’s
role while the funder decides whether to continue funding or quit. This solution
neither promotes efficiency nor enhances the justice of the process.
3. CONCLUSION
None of the funding models are uncontroversial. By its very nature, the
current TPAF practice is arguably improper. If efficiency is the linchpin of the
promise of arbitral justice, these current funding practices fail that promise.
Considerations of efficiency and certainty are maintained by justice. Equating
justice with economic value is simplistic, but arbitrary. It is often difficult to
tell by which, if any, objectives fairness is measured. The most that could be
135
Id.
136

hoped for is to come closer to accomplishing the objectives of arbitration with

the funding system. Acknowledging all this does not by itself justify denying
the economic values posed by the current funding practices.
Current funding practices are premised on borrowing some corporate
doctrines from business law into the arbitration regime. Despite the many
advantages that this new trend may bring, the reality in practice has revealed
the erosion of the basic features of arbitration as a forum of justice. Any
funding model that is based upon any of these corporate doctrines, that results
in eroding the intrinsic feature of arbitration as a forum of justice, should be
discarded.
Instead of banning TPAF, this book argues that the funding practice needs to
be disciplined so as to avoid any concerns it may raise. Three arguments con-
ceptualize this view. First, a historical argument that traces the development
of champerty in its application to TPF from a judicial perspective (Chapter 3).
Second, a doctrinal argument that illustrates the process of integrating new
financial tools into a system of justice (Chapter 4). Third, a regulatory argu-
ment that advocates for a regulatory framework for TPAF (Chapter 5). Taken
together, these three arguments should line up to lead to a proposed funding
paradigm that responds to the concerns that the current funding practice raises
(Chapter 6).

3. A historical framework
TPF is not a recent invention in the legal landscape. Its roots in national litiga-
tion are tied to certain feudal practices in ancient Rome, Greece, and medieval
England.1 Due to the anxiety over claim assignments, trading in litigation was
prohibited for centuries. Litigation traffic was used as a tool of corruption in
the judicial process by intermeddling third parties.2 Purchasing a lawsuit was
seen as helping extortioners – or at best speculators or gamblers – to escape –
a practice that was against public policy.3 In the Middle Ages, a corrupt black
market existed to serve the nobles who, “deprived of the power of taxing and
judging vassals, and of demanding their assistance in private wars,” turned
to “corruption, intimidation or other perversion of courts of law.”4 Feudal
lords used this market as a form of “private war” to initiate suits against their
enemies and financially weaken their opponents,5 or to support plaintiff’s suits
on a disputed parcel of land and get a share of the land as a repayment for their
support.6
As a relic of the ancient ages, maintenance was an evil because it enabled
rich and powerful men to oppress the poor and weak, and corrupt the court of
justice.7 As a result, men were generally held liable for helping litigants find
a lawyer; giving friendly advice to a neighbor on their legal rights; lending
money to a friend to vindicate their known legal rights; offering voluntarily
1
Jason Lyon, Revolution in Progress: Third-Party Funding of American
Litigation, 58 UCLA L. Rev. 571, 580 (2010) (discussing the role of the “sycophant”
in ancient Greece (an individual or parade of individuals, often paid, who would appear
at proceedings to argue on behalf of parties) and “calumniator” in ancient Rome (one
“who without authorization brings actions in the name of another with which [he has]
no concern or otherwise brings false, vexatious litigation”)).
2
Max Radin, Maintenance by Champerty, 24 Cali. L. Rev. 1, 48, 54 (Nov 1935)
(discussing the development of maintenance throughout the ancient centuries).
3
Id. at 54.
4
A.H. Dennis, The Law of Maintenance and Champerty, 6 Law Q. Rev. 169, 173
(1890).
5
Radin, supra note 2, at 64.
6
Id.
7
All were thought to lead to a corruption of justice because of their tendency to
encourage unwanted and unmeritorious litigation, inflated damages, suppressed evi-
dence, and suborned perjury. See generally Gilman v. Jones, 87 Ala. 691, 698–702, 5
So. 785, 787–89 (1889).
41

to testify in a pending suit; and other like offices of charity and friendship.8
Three concerns were found to impact the integrity of the judicial process. First,
third parties were effectively controlling litigation. Second, third parties could
share confidential information with attorneys that could raise ethical and prac-
tical concerns over their potential disagreements. Third, the use of frivolous
claims.9 The doctrines of maintenance and champerty were created to prevent
powerful intermeddlers from subverting the legal process by acquiring an
interest in a litigation to which they did not have any pretense of right,10 and to
prevent litigating doubtful claims.11 Relatedly, barratry refers to “the frequent
stirring up of disputes between the Kings’ subjects.”12
Centuries ago, the English philosopher Jeremy Bentham observed that:
[a] mischief, in those times it seems but too common, though a mischief not to be
cured by such laws, that a man would buy a weak claim, in hopes that power might
convert it into a strong one, and that the sword of a Baron, stalking into court with
a rabble of retainers at his heels, might strike terror into the eyes of a judge upon
the bench.13
The history of champerty was best illuminated in the House of Lords’ decision
in England as follows:
the crimes of Maintenance and Champerty are so old that their origins can no longer
be traced, but their importance in medieval times is quite clear. The mechanisms
of justice lacked the internal strength to resist the oppression of private individuals
through suits fomented and sustained by unscrupulous men of power. Champerty
was particularly vicious, since the purchase of a share in litigation presented an
obvious temptation to the suborning of justices and witnesses and the exploitation
of worthless claims which the defendant lacked the resources and influence to with-
stand. The fact that such conduct was treated as both criminal and tortious provided
an invaluable external discipline to which, as the records show, resort was often
required. As the centuries passed, the courts became stronger, their mechanisms
more consistent and … their participants more self-reliant. Abuses could be more
easily detected and forestalled, and litigation more easily determined in accordance
8
Id.
9
Radin, supra note 2, at 48, 54.
10
Gilman, 87 Ala. 691, at 698–702.
11
Odell v. Legal Bucks, LLC, 192 N.C. App. 298, 665 S.E.2d 767 (2008).
12
Dr. George R. Barker, Third-Party Litigation Funding in Australia and Europe,
8 J.L. Econ. & Pol’y 451, 459 (2012). See generally Wellin v. Wellin, 135 F. Supp. 3d
502, 526 (D.S.C. 2015).
13
Jeremy Bentham, Defence of Usury; Shewing the Impolicy of the Present Legal
Restraints on the Terms of Pecuniary Bargains; in Letters to a Friend (4), 122–23 (4th
ed. 1818).

A historical framework 43
with the demands of justice, without recourse to separate proceedings against those
who trafficked in litigation.14
It added:
[i]n the most recent decades of the present century Maintenance and Champerty
have become almost invisible in both their criminal and tortious manifestation. In
practice, they have maintained a living presence in only two respects. First, as the
source of the rule, now in the course of attenuation, which forbids a solicitor from
accepting payment for professional services on behalf of the plaintiff calculated as
a proportion of the sum recovered from the defendant. Secondly, as the ground for
denying recognition to the assignment of a ‘bare right of action’. The former sur-
vives nowadays, so far as it survives at all, largely as a rule of professional conduct,
and the latter is in my opinion best treated as having achieved an independent life
of its own.15
Similarly, the doctrine of usury was established to prohibit funders from

seeking a high rate of return for successful claims. Because funders get nothing
if the claim fails, they double their expected return.16 However, unlike cham-
perty, usury was used only as a defense to loan arrangements rather than TPF.17
Throughout the premodern societies, a general anxiety existed over com-
mercializing legal claims. With judicial development and new fluidity of claim
transfer,18 this anxiety has become an archaic remnant in commercial dis-
putes.19 Over time, the concerns surrounding claim transfer have trumped the
14
Giles v. Thompson & Devlin v. Baslington, UKHL 2, 1 AC 142, 3 All ER
321 (1993), https://harbourlitigationfunding.com/wp-content/uploads/2015/07/giles_v
_thompson_ukhl_2_26_may_1993.pdf.
15
Id.
16
Catherine A. Rogers, Ethics in International Arbitration, para 5.41 (2014) [here-
inafter Rogers, Ethics].
17
18
Resisting the Champerty doctrine was common in other areas of law that are
analogous to litigation funding. In bankruptcy proceedings, if a debtor fails to pay,
creditors may sell the debt to a third party who may choose to seek a judgment in court.
See Richard M. Hynes, Broke but Not Bankrupt: Consumer Debt Collection in State
Courts, 60 Fla. L. Rev. 1, 8 (2008).
19
E.g., England and Wales conducted a series of regulatory reforms to allow
the financing practice, such as damage-based agreement (DBA) and conditional fee
arrangement (CFA). Under this form, a lawyer accepts a lower fee based on the nature
of the outcome; it increases or decreases based upon the degree of success of the claim.
See Aren Goldsmith & Lorenzo Melchionda, Third Party Funding in International
Arbitration: Everything You Ever Wanted to Know (but Were Afraid to Ask) – Part
Two, 2012 Int’l Bus. L.J. 53, 63 (2012).

champerty concerns.20 The funding practice first emerged in Australia and then
extended to other jurisdictions.21 Consequently, other jurisdictions began to
reconsider the historical prohibitions of TPF due to the champerty doctrine,22
with an expectation of a continued growth of TPF.23
1. MAINTENANCE AND CHAMPERTY
Maintenance is officious intermeddling in a suit by maintaining or assisting

a disputant with money, or otherwise prosecuting or defending the action
without any prior connection to the intermeddler.24 As a specialized form of
maintenance, champerty involves an element of compensation for such inter-
ference by bargaining with a party for a portion of the matter involved at the
champertor’s expense.25 These offenses were historically considered malum
20
E.g., Kraft v. Mason, 668 So. 2d 679, 683–84 (Fla. Dist. Ct. App. 1996) (reject-
ing the plaintiff’s usury defense of the litigation funding agreement to repay the liti-
gation finance advance it made to fund an antitrust lawsuit after it failed); Rancman v.
Interim Settlement Funding Corp., 789 N.E.2d 217, 217–21 (Ohio 2003) (deciding that
contract making the repayment of funds advanced to a party to a pending case contin-
gent upon the outcome of that case is usurious and unconscionable and therefore void
as champertous); Haskell, 193 S.W.3d 87 (rejecting arguments that funding agree-
ments were usurious loans, unregistered securities, and against public policy); Odell,
665 S.E.2d 767 (deciding that funding agreements are not illegal gaming contracts nor
champertous).
21
See, e.g., Vanessa O’Connell, Funds Spring Up to Invest in High Stakes
Litigation, Wall St. J., Oct 3, 2011 (highlighting spending about US$15.5 billion during
2011 on US commercial litigation alone).
22
Jennifer A. Trusz, Full Disclosure? Conflicts of Interest Arising from Third-Party
Funding in International Commercial Arbitration, 101 Geo. L.J. 1649, 1662 (2013).
23
Id. (TPF “in civil law countries will likely grow due to expected economic
growth, Germany’s favorable experience, the benefits of such funding, and high costs
of litigation in some civil law nations”).
24
Brush v. City of Carbondale, 229 Ill. 144, 152–53, 82 N.E. 252, 254–55 (1907).
25
Galinski v. Kessler, 134 Ill. App. 3d 602, 604, 480 N.E.2d 1176, 1178 (1st Dist.
4th Div. 1985). Black’s Law Dictionary defines champerty as “[a] bargain by a stranger
with a party to a suit, by which such third person undertakes to carry on the litigation
at his own cost and risk, in consideration of receiving, if successful, a part of the pro-
ceeds or subject sought to be recovered” and defines maintenance as “maintaining,
supporting, or promoting the litigation of another.” Black’s Law Dictionary 231 (6th
ed. 1990) (champertous is a derivative of the term “champerty,” which is defined as
“a bargain between a stranger and a party to a lawsuit by which the stranger pursues the
party’s claim in consideration of receiving part of any judgment proceeds”). See also
Cassandra Burke Robertson, The Impact of Third-Party Financing on Transnational
Litigation, 44 Case W. Res. J. Int’l L. 159, 164 (2011) (“feudal lords often took an
interest in the real property at issue in the litigation, using their funding agreements to
expand their holdings and ultimately to consolidate land wealth in fewer hands”).

in se and against the public welfare.26 The focus of much scholarly attention,
maintenance and champerty have in fact been relaxed. However, that relaxa-
tion comes with strings attached.
Given the rapid advancement of the legal practice, many exceptions have
emerged to repress practices that oppress possessors of lawsuits.27 “[P]ublic
policy rationale regarding Maintenance and Champerty has turned full circle.
Originally their prohibition was justifiable as a means to help secure the devel-
opment of an inclusive, pluralist society governed by the rule of law. Now,
it might be said, the exact reverse of the prohibition is justified for the same
reason.”28 Accordingly, the prohibition of litigation traffic by champerty was
intended to curb corruption, enhance the integrity of the judicial process, limit
frivolous legal claims, and integrate the attorneys’ interests with the clients’
interests. If maintenance and champerty are flexible doctrines, TPF is too.
However, TPF is impervious to which role the funder may have throughout the
proceedings, alongside the funded party. TPF started to spread over common
law jurisdictions, such as Australia and the United Kingdom, and some civil
law jurisdictions such as Germany, Switzerland, and Austria.29 In the U.S., the
doctrine of champerty has declined over time.30
1.1 Champerty in Australia
The practice of TPF first emerged in Australia.31 Australian courts prohibited

TPF for a long time32 due to the original statutory prohibition by the Australian
Courts Act.33 In 1960, the Australian High Court observed that “it may be
necessary someday to consider whether maintenance as a crime at common
26
Galinski, 134 Ill. App. 3d 602, at 604. Another doctrine is referred to as “barra-
try,” which is defined as adjudicative cheerleading, which is an offense of frequently
exciting or stirring up suits and quarrels between others. Id.
27
Wilhoit’s Adm’x v. Richardson, 236 S.W. 1025 (Ky. 1921). See also Barker, supra
note 12, at 461 (explaining the gradual emergence of the exceptions to applying the
champerty doctrine and their connection to public policy).
28
See Lord Neuberger, Lecture on Harbour Litigation Funding: From Barretry,
Maintenance, and Champerty to Litigation Funding, para 48 (May 8, 2013), https://
www.supremecourt.uk/docs/speech-130508.pdf.
29
Third-Party Litigation Funding, 19 Cardozo J. Int’l & Comp. L. 343, 360 (2011) [here-
inafter Morpurgo, Comparative Approach].
30
See generally Lyon, supra note 1.
31
See generally Barker, supra note 12.
32
Maya Steinitz, Whose Claim Is This Anyway? Third-Party Litigation Funding,
95 Minn. L. Rev. 1268, 1279 (2011) [hereinafter Steinitz, Whose Claim?].
33
Which was re-enacted throughout history until its repeal in the U.K. by the 1967
Criminal Law Act, 1967, c. 58, § 10, sch. 3. Barker, supra note 12, at 458.

law ought to be regarded as ‘obsolete.’”34 In 1967, the New South Wales

(NSW) Law Reform Commission recommended to abolish the laws of cham-
perty.35 Accordingly, section 6 of the Maintenance, Champerty and Barratry
Abolition Act of 1993 provides that “[t]his Act does not affect any rule of law
as to the cases in which a contract is to be treated as contrary to public policy
or as otherwise illegal, whether the contract was made before, or is made after,
the commencement of this Act.”36 Even with the limited application of cham-
perty, it still affected the TPF market.37
TPF emerged in the context of insolvency and bankruptcy as a statutory
exception to the common law prohibition of maintenance and champerty.38 It
then extended to other areas of commercial litigation,39 and spread generally
to civil litigation.40 In response to the growing demand of legal claim funding,
in 2006, the Australian High Court, in Fostif,41 allowed the use of TPF in legal
claims.42 However, funders were allowed to exercise a large degree of control
over litigation.43 In 2009, the Australian High Court interpreted the Fostif deci-
sion to ban any rule prohibiting the use of TPF for return.44 Further, the Federal
Court of Australia, in 2011, issued Practice Note CM 17, which mandated the
disclosure of TPF relationships by the parties.45
Australian courts have favorably endorsed the use of nonrecourse lending
practices, which opened the door for TPF success.46 Soon after, several funders
have emerged in the professional business of TPF, including IMF (Australia)
34
Clyne v. NSW Bar Assoc. (1960) 104 CLR 186 (Austl.).
35
Barker, supra note 12, at 459 (citing NSW Law Reform Commission, L.r.c.4,
Application Of Imperial Acts).
36
Barker, supra note 12, at 463.
37
Id. at 462–63.
38
Litigation Funding in Australia, Discussion Paper, Standing Committee of
Attorneys General (May 2006), http://www.lawlink.nsw.gov.au/lawlink/legislation
_policy/ll_lpd.nsf/vwFiles/LitigationFundingDiscussionpapMay06.pd/ $file/
LitigationFundingDiscussionpaperMay06.pd.
39
Morpurgo, Comparative Approach, supra note 29, at 360.
40
Trusz, supra note 22, at 1659.
41
Campbells Cash & Carry Party, Ltd. v. Fostif Party, Ltd., (2006) 229 ALR 58
(Austl.).
42
Fostif, (2006) 229 CLR 386 (Austl.) (recovery in the tobacco industry); Mobil
Oil Australia Pty Ltd. v. Trendlen Pty. Ltd., (2006) 229 ALR 51 (recovery in the petro-
leum license fee).
43
Fostif, (2006) 229 ALR 58, paras 91–93.
44
Steinitz, Whose Claim?, supra note 32, at 1280 (citing Jeffery & Katauskas Pty.
Ltd. v. SST Consulting Pty. Ltd. (2009) 239 CLR 75, 92 (Austl.) (addressing the issue
of indemnity for costs by litigation funders).
45
Fed. Court Of Austl., Practice Note Cm 17, para 3.6, http://www.fedcourt.gov
.au/law-and-practice/practice-documents/practice-notes/cm17.
46

Ltd.,47 Litigation Lending Services Ltd.,48 and LCM Litigation Fund Pty.
Ltd.49 TPF was limited to large claims of commercial litigation50 that exceed
$500,000 or $2 million with an exception to class actions.51 Further, Australian
funders are not limited to funding claims within Australia but they actively
invest extraterritorially.52
1.2 Champerty in the United Kingdom
Originally, champerty was prohibited in English laws to curb the feudal lords
using investments in others’ lawsuits to expand their land holdings.53 However,
the United Kingdom, through the Criminal Law Act of 1967, “abolished
criminal and civil liability for champerty.”54 The TPF practice in the United
Kingdom covered areas of personal injury and family disputes.55 The develop-
ment of TPF was tied basically to the public policy trend that reduced legal aid
as a publicly funded tool of access to justice. In the 1980s, the United Kingdom
adopted the policy of encouraging privately funded access to justice through
conditional fees arrangements and ATE insurance agreements without refer-
ring expressly to TPF.56 This policy was expected to shift away the funding of
noncommercial injury claims (claims involving physical or mental injuries)
from the public legal aid sphere to the private funding sector.57 Thereafter,
TPF was endorsed by the judiciary to support access to justice.58 Then, TPF
47
IMF is the first to be listed on the Australian Stock Exchange. IMF decided to
rebrand as one global entity under the name of Omni Bridgeway. See IMF, http://www
.imf.com.au.
48
See Litigation Lending Services, http://www.litigationlending.com.au.
49
See LCM Litigation Fund, http://www.lcmlitigation.com.au.
50
51
Id.
52
“Some Australian based companies also invest funding claims in foreign jurisdic-
tions. Among them, Litigation Lending Services Ltd., based in Sydney…” Morpurgo,
Comparative Approach, supra note 29, at 362.
53
Trusz, supra note 22, at 1659.
54
55
56
Id. at 364.
57
Id.
58
Id. at 363.

extended to commercial claims59 and so expanded the access to justice to other

claims.60
In 2005, the English Court of Appeal, in Arkin v. Borchard Lines
Ltd,61 allowed TPF as a desirable method for increasing access to justice so
long as “[s]uch funding [leaves] the claimant as the party primarily interested
in the result of the litigation and the party in control of the conduct of the
litigation.”62 Thereafter, TPF has become a theme of the funding practice in
the U.K., especially after the 2008 financial crisis, which triggered a flood of
litigation that prompted the establishment of new companies that finance law-
suits.63 Allianz Litigation Funding64 has become the first mainstream funding
institution in the U.K.65 Still, champerty may invite public policy to apply
to TPF depending on the funder’s interference and the rate of return of the
claim.66 Thus, in the U.K., public policy has no longer been a challenge to TPF
in itself but the rationale has become whether the nonparty funder can “avoid
the risk of interference in the due administration of justice [or it] displaces the
public policy objective of such access.”67
59
Id. at 364 (citing Norglen Ltd. (in liq) v. Reeds Rains Prudential Ltd. [1999] 2
A.C. 1 (Eng.); Ramsey v. Hartley [1977] 1 W.L.R. 686 (Eng.); Guy v. Churchill [1888]
40 Ch. 481 (Eng.); In re Park Gate Waggon Works Co. [1881] 17 Ch. 234 (Eng.); Seear
v. Lawson [1880] 15 Ch. 729 (Eng.)).
60
61
Arkin v. Borchard Lines Ltd, 2005 EWCA (Civ) 655 (Eng.), Arkin v Borchard
Lines Ltd & Ors | [2005] 2 Lloyd’s Rep 187 | England and Wales Court of Appeal (Civil
Division) | Judgment | Law | CaseMine.
62
Arkin, 2005 EWCA, para 40. See also Hamilton v. Al-Fayed (No 2) [2002]
EWCA (Civ) 665, [2003] Q.B. 1175; R (Factortame) v. Secretary of State for
Transport, Local Govt and the Regions (No 8) Factortame, [2002] EWCA (Civ) 932,
[2003] Q.B. 381.
63
Nicholas Dietsch, Note, Litigation Financing in the U.S., the U.K., and Australia:
How the Industry Has Evolved in Three Countries, 38 N. Ky. L. Rev. 687, 699 (2011).
64
See Allianz Litigation Funding, http://www.allianz-litigationfunding.co.uk.
65
66
Trusz, supra note 22, at 1660 (citing Queen ex rel. Factortame v. Sec’y of
State for Transp., [2002] EWCA (Civ) 932 [31], [2003] Q.B. 381 [399] (Eng.)).
Barker, supra note 12, at 502 (citing 1 Lord Justice Jackson, Review Of Civil Litigation
Costs: Preliminary Report 163 n. 38 (Vol. I. 2009) (The Review of Civil Litigation
Costs led by Lord Justice Jackson in 2009 considered whether section 14(2) of the
Criminal Law Act 1967 should be repealed).
67
Arkin [2003] EWHC 2844 (Comm) para 70. See also Barker, supra note 12, at
500.

1.3 American Judicial Approach
In the United States, the champerty doctrine was first prohibited and restricted,
then served as a check on frivolous litigation to encourage dispute settlement,
and eventually was no longer used to protect speculation in lawsuits or the
financial overreaching by a party of stronger bargaining powers.68 Rather than
prohibiting the champerty doctrine, courts were driven by the “fair and rea-
sonable” analysis of the funding agreement, including the parties’ bargaining
position.69 According to the ABA Commission on Ethics 20/20, 29 out of 51
jurisdictions have permitted some form of champerty in situations of TPF.70
It highlighted the American courts’ inclination to allow the practice of TPF.71
TPF in the U.S. is governed “by a patchwork of relatively weak laws, cases,
rules, and regulations—and they are only in force in a handful of states.”72
Since 1824, the Court for the Correction of Errors of New York73 has con-
demned the champertous nature of TPF. It has held that the laws against cham-
perty were never intended to operate, but instead to prevent the interference of
strangers, having no pretense of right in the subject of the suit, and standing in
no relation of duty to the suitor.74 They were also intended to prevent traffic in
doubtful claims.75 The court noted that:
[w]here the person promoting the suit of another, has any interest whatever in the
thing demanded, distinct from that which he may acquire by an agreement with the
suitor, he is in effect, also a suitor, according to the nature and extent of his interest.
To deny to such a person the benefit which he might receive from a suit conducted
mainly or partly, for the benefit of another, would be to close the temple of justice
68
See Saladini, 426 Mass. 231, at 237 (describing the evolution of Champerty in
the U.S. courts).
69
Id.
70
ABA Comm. on Ethics & Alternative Litigation Finance, Formal Op. 12/2012,
10–13 (2011).
71
Id. at 10. Almost all states have clear exceptions as to the doctrines of main-
tenance and champerty, by allowing some forms of TPF such as contingency fees.
Douglas R. Richmond, Other People’s Money: The Ethics of Litigation Funding, 56
Mercer L. Rev. 649, 655 (2004–2005).
72
John Beisner, Jessica Miller & Gary Rubin, Selling Lawsuits, Buying Trouble:
Third-Party Litigation Funding in the United States, U.S. Chamber Institute for Legal
Reform 4 (Oct 2009), https://instituteforlegalreform.com/wp-content/uploads/media/
thirdpartylitigationfinancing.pdf.
73
“The Court of Errors was abolished under the Constitution of 1846 and replaced
by the New York Court of Appeals.” See Historical Society of the New York Courts,
http://courts.state.ny.us/history/legal-history-new-york/legal-history-eras-04/history
-era-04-court-trial-impeachments.html.
74
Thallhimer v. Brinckerhoff, 1824 WL 2274 (N.Y. 1824).
75
Id.

against all persons not parties to the suit, and yet having interests in the subject of
litigation, which may be affected by the determination of the cause. It is accordingly
a principle, that any interest whatever in the subject of the suit, is sufficient to
exempt him who gives aid to the suitor, from the charge of illegal Maintenance.76
The voice of nature, and the language of the law equally declare, that such assis-
tance is not unlawful Maintenance.77
Since that decision, TPF has undergone a dramatic development in litigation.78

Tracing the application of champerty to TPF in the American courts reveals
an understanding of the historical framework for permitting TPF in the U.S.79
Worth noting is the courts’ adjustment to the advanced funding practices of
modern times.
1.3.1 Courts’ findings

Since the early 1800s, few decisions in the American courts disallowed TPF
agreements because they constituted either maintenance, champerty, or usury,
or all of them, and violated public policy.80 Most decisions reveal a liberal
approach that permits TPF for not being violative of public policy.81 For
instance, New York,82 Alabama,83 Virginia,84 and California85 courts have
considered champerty an inactive area where the funder does not control the
litigation. Otherwise, courts would apply the champerty defense and nullify
the funding agreement.86 When it comes to the exercise of control by a third
76
Id.
77
Id.
78
Funders do not owe the same ethical duties as attorneys, and so they play more
shadowy roles than attorneys. They do not appear before the judge, so the judge may
subject them to sanctions for contempt of court or abuse of the process with less speed
and facility than for attorneys. E.g., one funder was held in contempt for failure to
comply with the court’s prior order for discovery. Frederick on behalf of LF v. Panda
No. 1, LLC, No. 17-CV-0420-WJM-KMT, 2018 WL 4627105, at *2 (D. Colo. Sept. 26,
2018).
79
This survey identified 34 cases addressing the doctrine of champerty in cases
involving disputes funded by a third party. See Mohamed Sweify, Third Party Funding
in the United States: A Systematic Judicial Analysis, 32 Am. Rev. Int’l Arb. 165 (2021).
80
The survey revealed that more than 70 percent of the decisions allowed funding
arrangements. Id.
81
See, e.g., Saladini, 426 Mass. 231; Osprey, Inc., 340 S.C. 367.
82
These doctrines were intended to prevent interference by strangers who have no
relation to the suitor or the subject and prevent traffic in doubtful claims. Thallhimer,
1824 WL 2274.
83
McCall’s Adm’r v. Capehart, 20 Ala. 521, 526 (1852).
84
Lewis v. Broun, 36 W. Va. 1, 14 S.E. 444, 445–46 (1892).
85
In re Hall, 2011 WL 4485774, at *1 (B.A.P. 9th Cir. Aug. 22, 2011).
86
Richardson, 193 Ky. 559.

party who has a financial interest in the claim (or the proceeds of the claim)
and the autonomy of the party over the claim, courts favor the latter.87
Even in the same jurisdiction, there may be inconsistencies. Connecticut
state courts have demonstrated inconsistency toward the funding agreements.88
However, federal courts seated in Connecticut apply a more advanced
approach where the funding agreement is necessary for a fair and efficient res-
olution system and not violative of public policy because the funder does not
exercise any control over the proceeding.89 In contrast, Wisconsin state courts
do not consider funding agreements champertous if they were concluded prior
to any dispute or litigation.90 Moreover, Wisconsin courts consider the “time
of dispute” as an element of champertous agreements.91 Ohio state courts con-
sider TPF champertous.92 Utah courts seem to favor access to justice over the
prohibition of champerty and allow TPF.93
Illinois courts recently relaxed these doctrines to TPF as long as the funder
does not control the litigation.94 It can be said that Illinois courts have a general
tendency to narrowly read and apply the champerty doctrine by eliminating its
scope to a specific set of instances.95 Nonetheless, there has been inconsistency
on the application of these exceptions to specific types of claim, such as claims
for pain and suffering.96 One court might have made a similar distinction as
the Wisconsin court (time of dispute as an element for champerty), when it
referred to “instigate, not just participate in other’s proceedings.”97 However,
87
Boling v. Prospect Funding Holdings, LLC, No. 114CV00081GNSHBB, 2017
WL 1193064, at *1 (W.D. Ky. Mar. 30, 2017), aff’d, 771 F. App’x 562, 563–64 (6th
Cir. 2019).
88
Rice v. Farrell, 129 Conn. 362, 366, 28 A.2d 7, 9 (Conn. 1942).
89
In re Complete Retreats, LLC, 2011 WL 1434579, at *1 (Bankr. D. Conn. Apr.
14, 2011). In order to determine the validity of the agreement, the court questioned
whether the funder instigated the litigation, was required to consent to settlement of lit-
igation, and had control to direct litigation. Id.
90
Felker, 28 Wis. 594, at 596–97; Matter of Estate of Katze-Miller, 158 Wis. 2d
559, 463 N.W.2d 853, 860 (Wis. Ct. App. 1990).
91
Matter of Estate of Katze-Miller, 158 Wis. 2d 559.
92
Finders Diversified, Inc. v. Baugh, 1984 WL 7841, at *3 (Ohio Ct. App. Apr. 20,
1984).
93
Eagle Mt. City v. Parsons Kinghorn & Harris, P.C., 2017 UT 31, P26, 408 P.3d
322, 329, 2017 Utah LEXIS 84, *18, 840 Utah Adv. Rep. 27, 2017 WL 2483017.
94
Brush, 229 Ill. 144, at 152–53.
95
N. Chicago St. R. Co. v. Ackley (State Report Title: N. Chicago St. R.R. Co. v.
Ackley), 171 Ill. 100, 106, 49 N.E. 222, 224 (1897).
96
Courts refused to create an exception to pain and suffering claims because there
were no counterbalancing reasons in favor of changing the law in respect of those
claims. Ackley, 171 Ill. 100, at 106.
97
Medallion Prod., Inc. v. H.C.T.V., Inc., No. 06 C 2597, 2007 WL 1022010, at *4
(N.D. Ill. Mar. 29, 2007).

the modern trend of Illinois courts is that champerty is rarely pled. There is
room for more exceptions to these doctrines as long as the funder does not
“wickedly and willfully” try to stir up the suit, foment “useless” litigation
for the sake of harassment, malicious prosecution, or to promote meritless
litigation.98
Massachusetts courts have relied on other devices to escape the application
of traditional prohibitions to TPF.99 While Minnesota state courts find that
funder’s control over the settlement renders TPF champertous,100 federal courts
seated in Minnesota found that Minnesota laws are unclear on the issue, and
without clear laws voiding funding agreements, it is difficult to establish an
intent to defraud by executing these agreements.101 However, more recently,
the Supreme Court of Minnesota expressly allowed TPF as long as the funder
does not officiously meddle in the proceedings.102
1.3.2 Champerty relaxed

Within the context of the TPF paradigm analyzed in this book, it can be said
that there is a tendency in the American courts to allow TPF. Over the years,
most American courts have tried, under a variety of circumstances, to elimi-
nate the application of the doctrine of champerty to TPF.103 That said, almost
all courts that refused to apply champerty to TPF required a passive role of the
funder in litigation. Where courts find no substantial control over litigation,
they enforce the funding agreements to the extent that they were concluded to
help the funded party enforce its legal rights. However, the mere fear of control
of the litigation by an irrelevant third party is a compelling rationale behind
champerty that is still being strongly considered. The progressive movement
for abandoning the champerty defense finds support in other vehicles that may
alleviate the potential evils associated with the champertous agreements.104
They include causes of action for malicious prosecution, abuse of process,
and sanctions for instituting or maintaining frivolous actions.105 Further, some
courts have assumed a supervisory role to “scrutinize an agreement to finance
98
Miller, 17 F. Supp. 3d 711.
99
Saladini, 1996 WL 1186799.
100
Huber v. Johnson, 68 Minn. 74, 74, 70 N.W. 806, 806 (1897).
101
Pickford v. Kemp & Assocs., Inc., 2019 WL 3537219, at *1 (D. Minn. Aug. 2,
2019).
102
Johnson, 68 Minn. 74; Maslowski, 944 N.W.2d 235.
103
E.g., Schomp v. Schenck, 40 N.J.L. 195, 206 (Sup. Ct. 1878); Weller v. Jersey
City, H. & P. St. Ry. Co., 66 N.J. Eq. 11, 17, 57 A. 730, 732 (Ch. 1904), aff’d, 68 N.J.
Eq. 659, 61 A. 459 (1905).
104
Saladini, 426 Mass. 231.
105
Id.

a lawsuit with care” in order to appropriately safeguard the undertaking of

courts to prevent any potential mischief caused by the funders.106
Therefore, it seems that champerty has not been completely eliminated
from the American courts but has been redefined to cope with the modern
view of litigation practice. American courts moved away from the original
strict formulations of this doctrine because the reasons justifying such strict
application no longer exist. Useful, however, does not mean strings-free. The
modern interpretation assumes no “officious intermeddling” or “substantial
control” by the funder. Where those factors are present, the prohibitions are
still at work.107 American courts still uphold the litigant’s fulsome control over
its claim even for a third party who assumes a financial stake in the outcome.
Serious though these fears may be, they are nothing compared with the risks
where the funder controls litigation and interferes with the funded party’s right
to have its day in court. The issue now is not whether rich or powerful men
can exploit weak parties and intermeddle in the lawsuit, rather it has become
whether litigants can contract to allow third parties to intermeddle in their
lawsuits. It appears that the doctrine of champerty was created not just for the
parties’ own interests but also to protect the justice system itself. There are
interests that courts were not willing to sacrifice even for the interests of the
funding parties. In arbitration, the situation may certainly differ. Arbitration
is premised primarily on party autonomy where the parties are the masters of
their claims. Therefore, claim control may be controversial. Once again, it is
worth repeating that there is little arbitration-specific authority on the surgical
development of champerty and arbitration. That analysis therefore has to rely
on suitably qualified analogies derived from the case law in national courts.
2. CHAMPERTY AND ARBITRATION

The application of champerty in arbitration comes with strings attached.
Champerty doctrine raises a range of due process concerns, mostly due to
the possibility of controlling arbitration. It may be more versatile for reasons
mainly related to the party autonomy principle where the parties’ agreement
controls. In principle, the parties are the masters of the arbitration agreement,
provided that they do nothing to prejudice either party. Still, if one accepts
certain basic assumptions about funding arbitration claims, the risks that TPF
poses on the parties’ arbitration agreement may be obvious.
The relaxation of the ethical prohibition disallowing fee-sharing between
lawyers and nonlawyers propelled the invasion of TPF into international
106
Id. at 1227.
107
Boling, 771 F. App’x 562.

arbitration, where its practice was otherwise not possible erstwhile.108 These
prohibitions have receded since states have vied for international arbitration
business and attempted to avoid idiosyncrasy within a homogenous arbitra-
tion system. The transnational nature of most arbitration disputes has been
considered as well by national courts to relax the application of champerty to
international arbitration.109 One court noted that:
in the light of the history of Champerty it is not appropriate to extend the doctrine.
If it were to apply in the present case, it would be extending Champerty from the
public justice system to the private consensual system which is arbitration. The
trend in recent years has all been the other way. The role of the courts in relation
to arbitration has been substantially diminished since 1979 in England when provi-
sions requiring leave to appeal an arbitral award were introduced. In Hong Kong,
similar provisions were introduced in 1982 and by 1990 Hong Kong had in force
the UNCITRAL Model Law which gives supremacy to the doctrine of full part[y]
autonomy and substantially curtails the powers of the court in relation to arbitration
proceedings. The Model Law has not been introduced in England but it has in
Scotland. It seems … unwise to make any extension to the law of Champerty given
that the reasons for its introduction have long since passed.110
The least problematic scenario involves the agreement of the parties to arbi-
tration on the existence of TPF to the dispute subject to arbitration. Here,
there is practically no risk of violating the arbitration agreement. Somewhat
more complicated is the scenario where the opposing party is not aware of
TPF and objects to the hidden driving forces of the funder on the dispute. The
concern is asymmetry of information between the parties, and hence a risk of
disproportionate influence over the procedural and substantive due process of
the proceedings.
On its face, the issue is not so simple. The effects of champerty may still
extend to the arbitral proceedings or the produced award. Commercial arbitra-
tion is conducted in arbitral seats whose national laws may provide a basis for
108
Hong Kong LRC, Report on Third Party Funding for Arbitration (Oct 12, 2016)
(recommending not to apply the Champerty common law principle to arbitration);
Jern-Fei Ng, The Role of the Doctrines of Maintenance and Champerty in Arbitration
(July 12, 2010), http://www.mondaq.com/x/103272/Arbitration+Dispute+Resolution/
The+Role+of+the+Doctrines+of+Champerty+and+Maintenance+in+Arbitration.
109
The homogenous nature of international arbitration was indirectly referred to in
the House of Lords’ decision by stating that “[a]nother factor to be taken into account
is that in Hong Kong many arbitrations have an international flavour and this has
been even more so since the definition of ‘international’ contained in the Model Law
has been in force.” Cannonway Consultants Ltd v. Kenworth Engineering Ltd [1995]
1 H.K.C. 186, 190, http://neil-kaplan.com/wp-content/uploads/2013/08/Cannonway
-Consultants-Limited-v-Kenworth-Engineering-Limited-HCCT5-of-1994.pdf.
110
Id.

annulling the award if they consider TPF agreements champertous.111 Some

advocate for no impact of champerty upon annulling the arbitral award.112
Chief among the justifications of this view is that champerty is a substantive
doctrine that was developed to protect the courts from vexatious litigation.
These concerns may not apply to claims pursued through arbitration and
should escape the application of the mandatory procedural law of the arbi-
tral seat.113 Accordingly, the champerty doctrine is argued not to affect the
procedural aspects of the underlying dispute to which the funding agreement
relates.114 However, despite its substantive nature, champerty may inevitably
extend to arbitration. It is the funder’s level of control which concerned the
courts. Courts uphold the champerty defense where the funder substantially
controls litigation.115 Conferring on that argument, the funder’s control may
be equally exercised in arbitration as litigation. In fact, it is more apparent in
arbitration than litigation because of its consensual nature. Accordingly, the
argument that champerty is substantive and so should not apply to arbitration
is inaccurate. Even in investor–state arbitration, some decisions refer to the
champerty concerns.116
111
Campbells Cash & Carry Pty Ltd. v Fostif Pty Ltd., (2006) 229 CLR 386, paras
88–89 (Aust.) (explaining that TPF may be condemned as against public policy in
a jurisdiction prohibiting champerty).
112
113
Id. paras 5.45, 5.48. One court found a nonparty funder, who funded an unsuc-
cessful challenge to a patent, could not file a subsequent lawsuit challenging the patent
because it was privy to the party for having a direct interest in the subject matter or had
the right to make defense, control the proceedings, examine and cross-examine wit-
nesses, and appeal from the judgment. Theller v. Hershey, 89 F. 575, 576–77 (C.C.N.D.
Cal. 1898); Visoly v. Sec. Pac. Credit Corp., 768 So. 2d 482, 489 (Fla. Dist. Ct.
App. 2000).
114
115
Echeverria, 801 N.Y.S.2d 233; Huber, 68 Minn. 74. Cf. Miller, 17 F. Supp. 3d
711 (finding funding agreement not champertous because funder did not intermeddle or
control the litigation). See also supra Chapter 3 (1.1).
116
One arbitrator found that “[t]he practice of third party funding investment arbi-
tration continues to be criticized by academics and professionals. The Funder’s role
in this case may well be characterized as ‘champerty’, which has long been consid-
ered under English common law as being against public policy as it encourages vex-
atious litigation. A contract may be void for champerty, though it may not strictly
amount to criminal offence. The purchase of a lawsuit by an attorney is champerty in
its most odious form as has been held in a judgment of the English Chancery Division:
So odious in the eyes of the law are these contracts, that they confer no rights on the
parties making them, and if one pay out money under them he cannot recover it.”
Teinver S.A., Transportes de Cercanías S.A. and Autobuses Urbanos del Sur S.A. v.
The Argentine Republic, ICSID Case No. ARB/09/1, para 73 (July 13, 2017) (Kamal
Hossain, dissenting).

However, this does not necessarily invite applying champerty in arbitration

without qualification, as has been found by some decisions. Lord Denning long
ago found that the doctrine of champerty extends to “any contentious proceed-
ings where property is in dispute which becomes the subject of an agreement
to share the proceeds.”117 In contrast, one English court acknowledged that
the doctrine of champerty does not extend to the arbitral proceedings.118 In
the U.S., courts may apply champerty to arbitration.119 The inconsistency
exhibited by these decisions may negatively impact the competition between
different jurisdictions to attract more arbitration business, which should
necessarily invite more funding business. A wise approach would not blindly
apply these doctrines to arbitration. It is facile to go on about intricate webs
between champerty and arbitration. Similar to litigation, it may apply to arbi-
tration when the circumstances that invite the champerty application are met,
including the exercise of control over litigation. There is no compelling reason
for differentiating the application of champerty to arbitration from that in liti-
gation.120 Even considering that party autonomy gives the parties more leeway
in arbitration to orchestrate their proceedings, this does not necessarily denote
that the disputing party should lose control over the claim. Losing control to
the funder may constitute a de facto assignment of the claim.121 In that sense,
the legal framework of that practice will be assignments of claim, not TPAF.
Their frameworks are distinctive, given the different set of rules that govern
each of them.
There is a hidden connection between the funding agreement and the
arbitration agreement. In a way, the funding agreement exists because of the
arbitration agreement. The structural impact of the arbitral process on the
funding agreement invites, to a certain extent, questioning the validity of the
117
In re Tripeca Mines Ltd., 3 All ER 351, 355 (UK 1962).
118
Giles, 3 All ER 321, 331–32 (UK). Courts in Hong Kong have similarly con-
cluded that champerty does not apply to claims brought in arbitration. Cannonway
Consultants, supra note 109, at 179–81 (holding that champerty applied in Hong Kong
but that it did not apply to arbitration proceedings).
119
Huber, 68 Minn. 74; McCullar v. Credit Bureau Sys. Inc., 832 S.W.2d 886, 887
(Ky. 1992); Hall v. State, 655 A.2d 827, 829–30 (Del. Super. 1994); Johnson v. Wright,
682 N.W.2d 671, 678 (Minn. Ct. App. 2004); Echeverria, 801 N.Y.S.2d 233. Cf.
Miller, 17 F. Supp. 3d 711 (finding funding agreement not champertous because funder
did not intermeddle or control the litigation).
120
A Singaporean court decision adopted a similar view, holding that it would be
artificial to differentiate between litigation and arbitration proceedings and say that
champerty applies to one because it is conducted in a public forum and not the other
because it is conducted in private. Otech Pakistan Pvt. Ltd. v. Clough Eng’g Ltd.,
SGCA 46, para 38 (Sing. 2006).
121

underlying funding agreement. Otherwise, this structural relationship would

have no basis. Champerty lends itself particularly well to certain situations that
involve arbitration agreements and the arbitral process. For instance, question-
ing the arbitrator’s disclosure of a possible connection with the funder would
not happen without the existence of the funding agreement. If the validity of
that funding agreement is irrelevant, so too should be the consequences of that
agreement.
2.1 Champerty: Substantive v. Procedural
The procedural law of the arbitral seat has more significant importance in com-
mercial arbitration than in investor–state arbitration.122 Often, the substantive
law of the arbitral seat may affect the enforcement of the arbitral award on
a public policy basis.123 Although the champerty doctrine is argued to be sub-
stantive, it is also argued to be unrelated to the substantive law underlying the
arbitration dispute, because it affects the individuals or the funding agreements
themselves.124 The irrelevancy of champerty to the underlying funded dispute
should be consistent with the policy of not interfering with the finality of arbi-
tral awards.125 However, this view is questioned. First, the distinction between
the procedural and substantive issues is debatable in arbitration.126 Second,
even if champerty is considered substantive, it still may affect the procedural
aspects of the dispute. More importantly, the issue is fiercely contested in cases
where the funding terms entitle the funder to directly enforce the produced
award.127
More often, funding agreements are governed by laws other than the
substantive laws of the arbitral seat of the underlying dispute. Also, they are
often governed by a choice of forum clause that designates a jurisdiction that
permits TPF.128 Working around this, courts in the arbitral seat may extraterri-
122
Nigel Blackaby, Constantine Partasides et al., Redfern and Hunter on International
Arbitration, 171 (6th Ed. 2015) [hereinafter Blackaby et al., Redfern & Hunter].
123
Id. at 196.
124
125
Id.
126
See generally Eric Ordway, The Importance of the Seat of Arbitration, 25 The
Advoc. (2003).
127
See, e.g., Wirth v. Wade, 2013 WL 5797365, at *1 (D. Me. Oct. 28, 2013).
128
Application of Whitehaven S.F., LLC v. Spangler, 45 F. Supp. 3d 333 (S.D.N.Y.
2014), aff’d sub nom. Whitehaven S.F., LLC v. Spangler, 633 F. App’x 544 (2d Cir.
2015) (discussing the unconscionability of the arbitration clause incorporated in the
funding agreement).

torially overreach to apply their own substantive laws to invalidate the funding
agreement.129
Although some argue that invalidating funding agreements based on local
prohibitions against the champerty doctrine should not extend beyond its
current meaning and effect,130 this argument may not be effective where the
funding agreement intertwines with the procedural fairness of the process. The
funding agreement of itself cannot be claimed to be a reason for challenging
the award in the funded dispute. Otherwise, this would be applying local pro-
hibitions to international arbitration, which is vehemently detested. However,
some decisions question, for instance, the real party in interest or the discovery
issues. These issues are basically procedural because they deal with the parties
to the dispute, and who have the capacity to litigate. If discovery was denied,
it may raise a due process issue, and may create challenges in the enforcement
jurisdiction. It thus seems that local prohibitions may extend to the arbitral
process where this arrangement extends to affect the arbitration proceedings.
2.2 Champerty and Public Policy
Although the standards for setting aside arbitral awards for violating local
public policy are high,131 champerty may likely be invoked to refuse enforce-
ment of the award.132 Nevertheless, the basis would not be just an external
funding of a case, because this justification alone cannot find any support to
annul or refuse to enforce an award.133 Scholars are split on the impact of TPF
on the enforcement of the award.134 However, their starting point is the mere
existence of TPF in the funded dispute. Once again, in this case, TPF cannot
affect the enforcement of the award. However, the starting point should not be
the mere existence of TPF, but the level of control that the funder may exercise
over the proceeding. These impacts intertwine with the funding agreement.135
If the funding agreement affects the ongoing proceeding, and is found of itself

129
Id. para 5.50.

130
131
Blackaby et al., Redfern & Hunter, supra note 122, at 615. Cases affirming
application of champerty prohibitions extraterritorially and in international arbitration
have addressed only the enforceability of the funding agreement or punishment for the
funder. These decisions do not address the annulment or confirmation of a resulting
judgment or an award seated there. Rogers, Ethics, supra note 16, para 5.51.
132
Cf. Rogers, Ethics, supra note 16, para 5.51.
133
Cf. Rogers, Ethics, supra note 16, para 5.52 (adopting the opposite view by
relying on the general trend of limiting local public policies to reach the enforcement of
international arbitral awards based on the fact of financing the agreement in itself).
134
Professor Rogers is of the view that it should not impact the produced award. Id.
135
Cf. Id. para 5.54.

to be invalid, its impacts should be invalid as well. These issues may feasibly
find basis in the law of the arbitral seat to annul the award.
However, it has been argued that challenging the produced award of the
funded dispute would be too indirect to be an appropriate remedy136 – for
example, an award sought to be annulled as against public policy for violating
the antitrust or competition laws of the arbitral seat.137 An award resulting
from a dispute between a seller and an end user would not be annulled because
the seller’s original purchase agreement was violating antitrust laws.138 In this
case, public policy may challenge the original sale agreement, not the subse-
quent related transactions between the seller and the end users.139 However, this
example lacks the accurate analogy to TPAF and raises a range of due-process
concerns, mostly in relation to the parties involved and the scope of perfor-
mance. In principle, in the antitrust example, the sequences of the agreements
are entirely separable and distinctive. The conclusion and performance of one
agreement does not necessarily overlap or even impact the other, except that
one may have led to the other. Still, if one accepts certain assumptions about
potential overlap between the sequential agreements, the risks associated with
these agreements are little. In TPAF, the situation is different. The performance
of the funding agreement may intertwine with the underlying funded dispute
and its procedures. Antitrust and competition laws have a public dimension.
First, the separation between the original sale agreement and the transactional
agreement between the seller and the end users is justified by the market
considerations. The subsequent sale agreements may involve tons of end users
who purchased the goods that were subject to the original sale agreements. It
is arbitrary to rescind all these contracts. Second, those end users may not be
aware of the original tainted sale agreement that violated the antitrust laws. It
is unfair to hold them accountable for something they did not execute. In con-
trast, TPAF involves information travelling between the funding parties that
may allow a disproportionate influence on their relationship and the outcome.
Somewhat complicated is the intertwining of the funding agreement with the
underlying arbitration. There is a risk of influence by the funder over the pro-
ceeding. As such, the invalidity of the funding agreement may necessarily have
impacts on the produced award.
136
Id. para 5.50.
137
Id.
138
Id.
139
Id.

2.3 Champerty and Practical Concerns
The practice shows that TPAF may have an impact on the enforcement pro-
ceedings. The first issue that comes to mind is whether a funder can directly
enforce an award to which it was not a party. A similar question was raised in
a dispute that was decided through arbitration. That dispute involved a plaintiff
who assigned its arbitration proceeds to its creditors.140 The question arose as
to whether that assignment deprived it of standing to seek confirmation of the
arbitral award, and whether the assignee of the proceeds must have been joined
as a necessary and indispensable party under Fed. R. Civ. P. 19.141 However,
the assignee reserved the right to directly enforce their assigned portions of the
proceeds following a notice to the assignor.142 In that sense, having an invalid
funding agreement may cast doubt on the direct possibility of enforcing the
award by funders, even with the fact that the funding agreement did not affect
the arbitral proceedings.
To sum up, the champerty doctrine may be inseparable from international
arbitration. TPAF enables the disputant to pursue the arbitration claim in the
arbitration sphere, without which opportunity the disputant would not be able
to bring the claim. Having an illegitimate or illegal basis for enabling the
disputant to pursue the claim would undermine the mechanism through which
this right is pursued. If these jurisdictions stand for champerty, they might
invalidate any process premised on this doctrine.
3. CONCLUSION
The efficiency of the justice system is of considerable public interest.

Arbitration is still viewed as part of the civil justice system, and therefore it
should be viewed as promoting the traditional goals of that system. A proper
use of TPAF can pave the way for effective application of access to justice and
140
Compagnie Noga D’Importation et D’Exportation, S.A. v. Russian Fed’n, 361
F.3d 676 (2d Cir. 2004).
141
Upon a dispute that has arisen out of a supply contract relationship between Noga
and Russian Federation, eight years of arbitration ensued. On March 13, 2001, arbi-
trators issued an award finding that Noga was entitled to $25.3 million in consequen-
tial damages plus interest. In 1993 and1994, Noga assigned portions of the expected
proceeds from arbitration awards to four Swiss banks (“assignee banks”) which had
financed Noga’s performance of the contract. These assignments served as guarantees
of Noga’s debts to the banks with different percentage assignments to different assignee
banks. Id. at 680–81.
142
The Second Circuit remanded the case to the District Court for more factual
records and determination. Id.

level the playing field.143 It would preserve arbitration as a forum of justice for
all parties.144 Otherwise, arbitration may turn into an inefficient process that
undermines the ultimate purpose of this system, i.e., access to justice.
143
However, it may bring to investment arbitration a structural imbalance if the
respondent states generally did not have access to it. UNCITRAL Working Group III,
Note: Possible reform of investor-State dispute settlement (ISDS) Third-party funding,
para 36 (37th Session, Paper No. A/CN.9/WG.III/WP.157, 2019), http://undocs.org/en/
A/CN.9/WG.III/WP.157.
144

4. Asymmetric imbalances
The Alemanni ICSID tribunal confirmed what arbitration users knew to be the
position of TPAF. It clearly provided that:
[i]ndividual views may differ as to whether third party funding is or is not desirable
or beneficial, either at the national or at the international level, but the practice is by
now so well established both within many national jurisdictions and within interna-
tional investment arbitration that it offers no grounds in itself for objection to the
admissibility of a request to arbitrate.1
As one specialist funder pointed out, “[c]apital is here, clients want it and it’s
time to get on with figuring out how best to use it.”2 Despite being useful,
TPAF is not risk-free. It raises a range of asymmetric imbalances between
the parties and the arbitrators’ decision-making that extend to pre-, during,
and post-arbitrators’ decision-making. The current status of TPAF does not
help in leveling these imbalances.3 Rather, it exacerbates them.4 This chapter
considers doctrinally the uses, misuses, and pitfalls of TPAF. Once again,
there is little arbitration-related authority articulating these imbalances, and the
analysis therefore has to rely in part on proper analogies from court decisions.
1
Giovanni Alemanni and others v. Argentine Republic, ICSID Case No. ARB/07/8,
Decision on Jurisdiction and Admissibility, para 278 (Nov 17, 2014), http://www.italaw
.com/sites/default/files/case-documents/italaw4061.pdf. TPF has gained attention after
the unsuccessful disqualification of an arbitrator in an ICSID tribunal where an investor
moved to disqualify the arbitrator based on his recent comments on funding arbitration
claims. RSM v. St. Lucia, ICSID Case No. ARB/12/10, Decision on Disqualification
of Dr. Griffith, para 84 (Oct 23, 2014), https://www.italaw.com/sites/default/files/case
-documents/italaw4062.pdf.
2
Christopher Bogart, Arbitration academics are living in the dark ages (Oct
16, 2017), https://www.burfordcapital.com/insights/insights-container/arbitration
-academics-are-living-in-the-dark-ages/ (criticizing the Queen Mary’s Task Force
Report on TPF that failed to fix its problems).
3
UNCITRAL Working Group III, Note: Possible reform of investor-State dispute
settlement (ISDS) Third-party funding (37th Session, Paper No. A/CN.9/WG.III/WP
.157, 2019), http://undocs.org/en/A/CN.9/WG.III/WP.157 (describing TPF as a “sig-
nificant concern [that] created a systemic imbalance and did not ensure a level playing
field”).
4
UNCITRAL Working Group III, supra note 3, at 10.
62

Asymmetric imbalances 63
The arbitration system carries risks, which may transfer to TPAF once
it embraces that system. These risks are associated with the process itself,
including inefficient procedures, inadequate rules, and uncertainty about the
outcome. Other risks are associated with the players, including disputants,
counsels, arbitrators, national courts, and funders. These players are human
beings whose behaviors vary in the degree of error or deception. There is
a practical risk of information travelling between parties, and a risk of informa-
tion asymmetries between arbitrators that may open the door for disproportion-
ate influence on the outcome. The degree of error or deception may impact the
financial arrangement, especially the costs the funder is going to pay.5
Fueled by the increasing use of TPF in general6 and the rapid growth of spe-
cialized funders,7 TPAF has become a dominant feature of international arbi-
tration. It has become widely accepted by prominent arbitral institutions and
arbitration-friendly jurisdictions.8 Introducing TPAF into a dispute may shift
the bargaining power to the funded party, at the expense of the opposing party
who may be more willing to settle for a less favorable outcome, rather than
a subsequent adjudication with exorbitant costs and unpredictable outcomes.9
Moreover, TPAF may reshape the arbitral structure and the arbitrators’ calcu-
lus, either during the funding decision, during the arbitral proceedings, or after
issuing the award. Disputants must fear that risks in one stage might prejudice
5
TPAF may raise concerns in cases of non-disclosure, including criminal threats.
For instance, the Federal Wire Fraud Statute was used to convict a lawyer who allegedly
deprived his clients of an honest service because of the undisclosed financial arrange-
ment. In other words, considering TPAF a breach of an ethical rule may constitute
a felony for lawyers to use this method of financing litigation. See Geoffrey McGovern
et al., Third-Party Litigation Funding and Claim Transfer: Trends and Implications
for the Civil Justice System, RAND UCLA Law 20 (2010); Eric Blinderman,
INSIGHT: How Litigation Funders Determine Which Legal Matters to Fund (Mar 27,
2019), https://news.bloomberglaw.com/us-law-week/insight-how-litigation-funders
-determine-which-legal-matters-to-fund (the indictment alleged that the attorney fab-
ricated a settlement agreement in a lawsuit and the plaintiff sought a bridge loan from
a litigation funder based on that fabricated agreement. One funder was persuaded by
that meticulously drafted fraudulent agreement which had a forged signature, and wired
$30,000 to the plaintiff). This pitfall to which a funder was a victim was attributed to the
breakdown of the funder’s due diligence systems. Id.
6
Vannin Capital, 60 Seconds Q&A with Louise Bell (2018), https://www.vannin
.com/downloads/fif7-articles/fif7-60-seconds.pdf.
7
Burford Annual Report, 12 (2018), https://www.burfordcapital.com/media/1526/
bur-31172-annual-report-2018-web.pdf [hereinafter Burford 2018 Report].
8
E.g., Arbitration and Mediation Legislation (Third Party Funding) Ordinance
No. 6/17, § 1(1) (H.K.). https://www.gld.gov.hk/egazette/pdf/20172125/es1201721256
.pdf.
9
See supra Chapter 2.

other stages. To contend with these fears, this chapter considers three stages
of a dispute: pre- (1), during (2), and post- (3) arbitrators’ decision-making.
1. PRE-ARBITRATORS’ DECISION-MAKING
The international arbitration community is relatively small, and so are users

whose expertise extends to TPAF. Arbitration practitioners may change roles
from one arbitration to another by serving as an arbitrator in the first, while
serving as counsel or expert in the other. As a preliminary matter, arbitrators,
absent parties’ agreement, should decide their own jurisdiction,10 even with the
existence of TPAF.11 Accordingly, the pre-arbitrators’ decision-making stage
may extend to disclosure of TPAF and the arbitrators’ jurisdiction. Conflict of
interests has been the focus of much scholarly attention. However, this section
considers the TPAF information travelling between the parties that prompts its
disclosure.
1.1 Disclosure Asymmetries
Generally, nothing in the arbitration regime governs the disclosure of TPAF.

The practical travelling of information between the funding parties may raise
due process concerns. There is a risk of asymmetrical information that may
prompt the disclosure of TPAF arrangements in the underlying dispute. The
distinction between the judges’ appointment and the arbitrators’ appointment
generates debate on the issue of disclosure. It may govern the arbitrator’s
disclosure for potential challenges based on conflict of interests, and also
the disclosure of the funding materials based on discovery demands by the
opposing party.12
Disclosure is one form of discovery whereby the parties produce documents
that are relevant and necessary to the underlying disputed issues.13 Courts do
10
Jack J. Coe, Jr., International Commercial Arbitration: American Principles and
Practice in a Global Text, 57–59, 140–46, 168 (1997).
11
See generally Frank J. Garcia, The Case Against Third-Party Funding in
Investment Arbitration (July 30, 2018), https://www.iisd.org/itn/2018/07/30/the-case
-against-third-party-funding-in-investment-arbitration-frank-garcia/.
12
Arbitrators are appointed through an ad hoc process with no life tenure. Even in
institutional arbitration, the role of arbitral institutions is supporting the parties’ choice
and facilitating the process of appointment. Am. Arb. Ass’n, Commercial Arbitration
and Mediation Procedures, R.14(A) (2013).
13
TPF-related materials may be subject to disclosure if the funder has engaged in
undesirable behavior other than merely financing litigation. See generally Susan Lorde
Martin, Financing Plaintiffs’ Lawsuits: An Increasingly Popular (and Legal) Business,
33 U. Mich. J.L. Reform 57, 63 (2000).

not require disclosure of the funding agreements if the funder does not affect
the ongoing litigation.14 However, disclosure may be sought where the stand-
ing of the funded party is questioned.15
Even when disclosure is sought in international arbitration, issues of privi-
lege and relevancy often arise. Despite the absence of fully formed best prac-
tices in TPAF, disclosure of TPAF has become widely recognized.16 Absent
disclosure, arbitrators are, in reality, powerless against the impact of TPAF
upon the proceedings, especially the funders’ behavioral conduct.17 This may
make it relevant and necessary to disclose the TPAF materials.18 However,
disclosure should not be allowed at a face value.19 This section prefaces the
rationale, scope, and effects of disclosing TPAF documents.
1.1.1 Disclosure rationale

Disclosing TPAF may be proper where there is an alleged relationship between
the arbitrator and the funder20 that may disqualify the arbitrator,21 or for rele-
14
Some courts have shown a strong tendency to uphold assertions of privilege pro-
tections for funding documents even before they contain information about litigation.
Circle Grp., L.L.C. v. Se. Carpenters Reg’l Council, No. 1:09-CV-3039-WSD, 2011
WL 13214349 (N.D. Ga. Apr. 22, 2011).
15
Cobra Int’l, Inc. v. BCNY Int’l, Inc., No. 05-61225-CIV, 2013 WL 11311345, at
*2–3 (S.D. Fla. Nov. 4, 2013).
16
Advisory Committee on Civil Rules, Draft Minutes of the November 1,
2018 Meeting 213 (2018), https://www.uscourts.gov/sites/default/files/2019-01
-standing_agenda_book.pdf [hereinafter Advisory Committee Draft Minutes].
17
That concern is a reason for rules against fee-sharing by lawyers. Advisory
Committee on Civil Rules, Report of the Advisory Committee on Civil Rules, 178
(2018), https://www.uscourts.gov/sites/default/files/2019-01-standing_agenda_book
.pdf. [hereinafter Advisory Committee Report].
18
Stan Lee Media, Inc. v. Walt Disney Co., 2015 WL 5210655, at *1 (D. Colo.
Sept. 8, 2015).
19
Advisory Committee Report, supra note 17, at 178.
20
Muhammet Çap & Sehil In aat Endustri ve Ticaret Ltd. Sti. v. Turkmenistan,
ICSID Case No. ARB/12/6, https://www.italaw.com/cases/2036.
21
Int’l Ctr. for Settlement of Investment Disputes (“ICSID”) art. 57. ICSID was
established in 1966 by the Convention on the Settlement of Investment Disputes
between States and Nationals of Other States, Mar 18, 1965, 17 U.S.T. 1270, 575
U.N.T.S. 159 (1965) (ICSID Convention). ICSID Convention is “a multilateral treaty
formulated by the Executive Directors of the World Bank to further the Bank’s objec-
tive of promoting international investment.” It applies to investment disputes between
foreign investors and the host state, had both the investor’s state and host state ratified
the Convention and both parties consented. See https://icsid.worldbank.org/.

vant jurisdictional issues.22 Driven by the issue of recusing judges,23 some U.S.
courts have created their own local rules24 requiring disclosure of investors’
financial interests in the outcome of pending cases.25 One opinion calls for in
camera disclosure that may avoid the discovery battle and would allow the
court to apprise the driving forces behind litigation, settlement, and recusal.26
However, this opinion opens the door for ex parte communications.27
Some funders associate disclosure to the arbitration stage. They require the
funder’s consent for disclosure if arbitration has not commenced, and give
arbitrators the power to disclose after commencing the claim.28 Similarly, some
suggest a “staged disclosure,”29 taking into account timing and context, with an
analysis that can be repeated at different stages of the dispute.30 At each stage,
the applicable factors may be different, and so too the form and scope of dis-
closure.31 Likewise, the purpose of disclosure may lead to a different analysis.
For conflict of interest issues, the existence of TPAF and the identity of the
funders may be sufficient. For the process, the terms of TPAF may be relevant
to deciding the fee-shifting rule under the “loser pays” principle.32 Additional
disclosure calibration tools may be proper for disclosure as a process, not just
a solitary event that decision-makers are faced with.33 Equally important is the
nature of the dispute. Funding a commercial claim may not necessarily require
22
ICSID Convention art. 41(1&2). Andrea Marco Steingruber, Security for Costs
and Third-Party Funding – An Analysis of Eskosol S.p.A. in liquidazione v. Italian
Republic, Procedural Order No. 3 (Decision on Respondent’s Request for Provisional
Measures), Transnat’l Disp. Mgmt., 23 (2018).
23
Judges are unlikely to invest in big funding firms for recusal issues. But the rapid
expansion of TPF and the emergence of new forms of lenders may generate recusal
concerns. Advisory Committee Draft Minutes, supra note 16, at 213–14.
24
See, e.g., United States v. Homeward Residential, Inc., No. 4:12-CV-461, 2016
WL 1031154, at *1 (E.D. Tex. Mar. 15, 2016); United States v. Ocwen Loan Servicing,
LLC, No. 4:12-CV-543, 2016 WL 1031157, at *5 (E.D. Tex. Mar. 15, 2016).
25
Litigation Funding Transparency Act of 2018, § 2815 was introduced to, among
other purposes, increase transparency and oversight of TPF in certain actions.
26
Advisory Committee Report, supra note 17, at 178.
27
Id. at 179.
28
Maxi Scherer, Aren Goldsmith, and Camille Flechet, Third Party Funding in
International Arbitration in Europe: Part 1 – Funders’ Perspectives, Int’l Bus. L. J.
207, 217 (2012), https://ssrn.com/abstract=2348737 [hereinafter Scherer et al., Third
Party Funding in Europe].
29
See generally Maya Steinitz, Follow the Money? A Proposed Approach for
Disclosure of Litigation Finance Agreements, UC Davis L. Rev. 10–11 (2019), https://
ssrn.com/abstract=3360672 [hereinafter Steinitz, Follow the Money?].
30
Id. at 30–31.
31
Id.
32
Id.
33
Id.

the same disclosure analysis as funding a boundary dispute or exploration

rights, which require more transparent disclosure rules because it involves
public interests.34 This view may trigger a comparable analysis between com-
mercial and investor–state arbitration, where the public interest is at stake. It
serves no one to have different disclosure rules for commercial and investor–
state arbitration funding. Given that arbitration practitioners may rotate roles
in commercial and investor–state arbitration, it would be odd to apply different
disclosure rules based on the nature of the arbitration claim.
Some call for applying disclosure statements in corporate relationships to
TPF,35 where one funder finances both parties to the dispute to strike a balance
between the court’s interests in identifying the critical financial information
and the funded parties’ interests in maintaining their litigation strategy.36
However, the trend of borrowing corporate concepts into dispute resolution37
should not apply without limitation. The purpose of disclosure in corporate
governance38 may differ from that of disclosure in arbitration. This may cast
doubt on the methods employed in both systems to achieve different goals.
Corporate disclosure aims to communicate the firm’s performance to outside
investors, in order to analyze the investments and the social and environmental
policies.39 The goals of corporate disclosure make their rules distinctive, and
do not necessarily invite their application to TPAF disclosure. A “built-in
supervisory” role, similar to that of class actions, has been suggested to serve
as a remedial measure of TPAF’s ethical problems.40 The court can potentially
act as a workable monitor, like in a class certification process.41 However, this
view creates a broad scope of application requiring unnecessary disclosure of
detailed terms of the TPAF arrangement.42 Nevertheless, this view gains credi-
bility similar to the approval of class action funding agreements.43
34
Id. at 14–15.
35
Victoria Shannon Sahani, Judging Third-Party Funding, 63 UCLA L. Rev. 388,
423 (2016) [hereinafter Shannon, Judging].
36
Id. at 426–27.
37
Id. at 423–25. See also Advisory Committee Report, supra note 17, at 192.
38
Étienne Farvaque et al., Corporate disclosure: a review of its (direct and indi-
rect) benefits and costs, CEPII research center, issue 128, 5–31 (2011), https://ideas
.repec.org/a/cii/cepiie/2011-q4-128-1.html.
39
Id.
40
Jasminka Kalajdzic et al., Justice for Profit: A Comparative Analysis of
Australian, Canadian and U.S. Third Party Litigation Funding, 61 Am. J. Comp. L. 93,
137–38 (2013) [hereinafter Kalajdzic et al., Justice for Profit].
41
Id.
42
In Australia, disclosure is often voluntary, which is argued to create fewer prob-
lems. Id.
43
Id.

1.1.2 Disclosure scope

Reasonable minds may differ on the extent of disclosing TPAF.44 The variables
that determine disclosing the existence of TPAF may differ from those sur-
rounding the disclosure of the identity of the funder or the scope of the funding
agreement.45 For instance, courts may disclose funding documents if they are
relevant to potential bias of a witness in the funded case.46 The scope of dis-
closure may also differ according to the stage of the proceedings. The funding
arrangement may involve a conflict check analysis at the commencement of
the proceedings; a question of control or security for costs order during the
proceedings; and a security for costs awards or other meritorious decisions at
the end of the proceedings.
Some factors may be considered to decide the disclosure question. One
tribunal determined these factors at the preliminary stage of the proceedings
to include (a) avoiding any potential conflict of interest between the arbitra-
tor and the funder, (b) ensuring a transparent process by identifying the real
party in interest, (c) fairly allocating costs at the end of the dispute, and (d)
ensuring that confidential information that may come out during the process
is not disclosed to the parties with ulterior motives.47 The same tribunal added
other factors in a later stage to include (a) enhancing transparency by ensuring
the integrity of the proceedings and their impact upon the arbitrators, (b) the
security for costs order may be based upon the existence of the third party
funder, (c) claimants’ nondenial of the existence of third party funders, and (d)
reference to other cases where the order for costs in favor of respondent was
not paid although the claimant had funded the annulment proceedings.48
44
Scherer et al., Third Party Funding in Europe, supra note 28, at 217.
45
The disclosure of TPF documents may arise in applying § 1782(a). Defendants
sought a subpoena request on a funder for producing the funding documents to deter-
mine the party controlling the action. The court granted the subpoena request for
meeting the statutory requirements of the discretionary discovery of § 1782(a) applica-
tion. Grupo Mexico Sab De CV, No. CV314MC00073GBH, 2014 WL 12691097 (N.D.
Tex. Oct. 17, 2014).
46
Berger v. Seyfarth Shaw LLP, No. C07-05279JSWMEJ, 2008 WL 4681834, at
*1 (N.D. Cal. Oct. 22, 2008).
47
Muhammet v. Turkmenistan, Decision on Respondent’s Objection to Jurisdiction
under Article VII(2) of the Turkey–Turkmenistan Bilateral Investment Treaty, para 10
(Feb 13, 2015), https://www.italaw.com/sites/default/files/case-documents/italaw4163
.pdf. The tribunal was not persuaded that there was any reason to make an order requir-
ing claimants to disclose how they were funding this arbitration. Id. para 13.
48
Muhammet v. Turkmenistan, Procedural Order No. 3, paras 8–12 (June 12,
2015), https://www.italaw.com/sites/default/files/case-documents/italaw4350.pdf.

1.1.3 Disclosure limitations

Disclosure of TPF is not off-limits. Disclosure may be limited by the relevancy
requirement. Courts require compelling records to justify the relevancy of the
funding information to the underlying dispute.49 If the funding documents are
relevant to the adequacy and fairness of the process, or the claims and defenses
of the dispute, they may be discoverable.50 However, the mere existence of
TPF should not be relevant to the credibility of the party’s personal financial
wealth, credit history, or indebtedness.51
Disclosure may also be limited by an existing privilege. A privilege is
a defensive right, held by a party, to withhold certain information from a third
party:
The rationale for … litigation privilege rests, in modern terms, on the principles
of access to justice, the proper administration of justice, a fair trial and equality
of arms. Those who engage in litigation or are contemplating doing so may well
require professional legal advice to pursue the adversarial litigation effectively.
To obtain the legal advice and to pursue the adversarial litigation efficiently, the
communications between a lawyer and his client and a lawyer and a third party and
any communication brought into existence for the dominant purpose of being used
in litigation must be kept confidential, without fear that what is said or written might
be disclosed. Therefore, those classes of communication are covered by ‘litigation
privilege.’52
A hidden and disquieting force, the funder’s interest in the dispute outcome
may affect the operation of privileges.53 In TPAF, two types of communica-
tions may unfold: (a) the funder’s internal communications about the funded
claim, and (b) the disputant’s communication with the funder or the attorney.
A dispute often arises when these communications are not privileged, and
therefore disclosable. In international arbitration, privileges are not well devel-
oped compared with national litigation.54 The parties have the flexibility to
49
Kaplan v. S.A.C. Capital Advisors, L.P., No. 12-CV-9350 VM, 2015 WL
5547263, at *1 (S.D.N.Y. Sept. 15, 2015), decision reaff’d, motion to amend denied,
141 F. Supp. 3d 246 (S.D.N.Y. 2015).
50
Id.
51
Lopez, 2019 WL 1578167.
52
Winterthur Swiss Insurance Co & Or v. AG (Manchester) Ltd (in Liquidation) &
Ors, EWHC 839 (Comm Ct) (2006).
53
Typically, funders directly contract with the party. Accordingly, the lawyer is
not a party to that arrangement. Model Rules of Prof’l Conduct R. 5.4 (2017) (forbid-
ding a lawyer from sharing legal fees with a nonlawyer). See New York City Bar Ass’n,
Formal Op. 2018-5 (2018); New York City Bar Ass’n, Formal Op. 2011-2 (2011).
54
Mohamed Sweify, Third Party Funding in the United States: A Systematic
Judicial Analysis, 32 Am. Rev. Int’l Arb. 165 (2021) [hereinafter Sweify, TPF
Systematic Analysis] (discussing the application of privileges to TPF).

agree on evidentiary matters in light of the applicable laws. Within the limits
of lex arbitri and lex fori, arbitrators may have the power to determine the
admissibility of the evidence as well.55
1.1.3.1 Arbitrators and privileges

Historically, there was no clear guidance on treating privileges in interna-
tional arbitration. Most national laws are silent on the issue.56 However, some
institutional rules have recognized the privilege as a basis for objecting to the
requests for disclosure.57 Still, the subject of privilege in international arbitra-
tion remains relatively unsettled.
The funder’s financial interest in the dispute may raise privileges-related
issues. The funding agreement may constitute in some jurisdictions a work
product because it is entered with the intent to facilitate litigation.58 The
funding documents or information may be substantially needed if they are
central to the argument adopted by the party and if they include relevant
information that can be interpreted as a “fact work product” which is subject
to lesser protection than “opinion work product.”59 Finding “substantial need”
may also depend on the relief sought in the case.60 In addition, disclosure may
be warranted for nonprivileged documents if they were relevant to the statute
of limitations defense.61
In commercial arbitration, the evidentiary privilege rules in the arbitral seat
are relevant to communications that occur in that jurisdiction. For instance,
Article 22(1)(e) of the London Court of International Arbitration (LCIA) Rules
provides tribunals with specific powers to order the disclosure of documents,
including “to order any party to produce to the Arbitral Tribunal, and to the
other parties, for inspection, and to supply copies of, any documents or classes
55
Nitya Jain, Can an Arbitral Tribunal Admit Evidence Obtained through
a Cyber-Attack?, Kluwer Arb. Blog (Jan 27, 2019).
56
Gary B. Born, International Commercial Arbitration 2376 (2014).
57
For instance, the International Centre for Dispute Resolution (ICDR) Rules
(2014) recognize privilege as a basis for objecting to disclosure requests. Arts. 20(6), 22
(tribunal shall “take into account applicable principles of legal privilege, such as those
involving the confidentiality of communications between a lawyer and client”).
58
Int’l Oil Trading, 548 B.R. 825, at 828–29.
59
In this case, it is not subject to the extraordinary protection of the opinion work
product and is hence discoverable. Id.
60
Some courts distinguish between monetary and injunctive relief. Plaintiff’s
standing is not affected by the existence of a funder if the relief sought is injunctive
relief because plaintiff does always meet the injury-in-fact standing for injunctive relief
purposes. Harper v. Everson, No. 3:15-CV-00575-JHM, 2016 WL 8201785 (W.D. Ky.
June 27, 2016).
61
Doe v. Soc’y of Missionaries of Sacred Heart, No. 11-CV-02518, 2014 WL
1715376 (N.D. Ill. May 1, 2014).

of documents in their possession, custody or power which the Arbitral Tribunal

determines to be relevant.” Arguably, arbitrators may order the funded party
to disclose the preliminary evaluation of the funder to the claim for inspec-
tion. That evaluation may be included within the scope of “documents … in
their possession, custody or power.” If the arbitrators consider that document
related to the subject matter of the arbitration, they can order the party to make
it available for inspection.
More important is the disputant’s expectation in communicating with the
funder. Arbitrators may give credence to the disputant’s expectations if the
disputant expects these communications to be confidential and protected.62
This issue may create a problem of parallel proceedings with national courts.
Under 28 U.S.C. § 1782,63 federal courts have the authority to decide discovery
demands for information used in international arbitration.64 In international
arbitration, there is a limited guidance on the application of privileges.65 The
New York Convention is silent on the issue. As such, the issue of privileges in
international arbitration is determined generally by the applicable rules of priv-
ileges under national laws that entitle the parties to withhold documents from
disclosure in the proceedings. However, there exist significant differences on
62
Odyssey Wireless, Inc. v. Samsung Elecs. Co., Ltd, No. 315CV01735HRBB,
2016 WL 7665898, at *1 (S.D. Cal. Sept. 20, 2016); Homeward Residential, Inc.,
2016 WL 1031154, at 6; Soc’y of Missionaries of Sacred Heart, 2014 WL 1715376, at
*3; Mondis Tech., Ltd. v. LG Elecs., Inc., 2011 WL 1714304, at *3 (E.D. Tex. May 4,
2011).
63
28 U.S.C. § 1782(a) authorizes federal district courts to order discovery “for
use in a proceeding in a foreign or international tribunal” upon application by “any
interested person.” The Sixth Circuit held that a privately constituted arbitral tribu-
nal is a “foreign or international tribunal” under Section 1782. In re Application to
Obtain Discovery for Use in Foreign Proceedings, 939 F.3d 710 (6th Cir. 2019). Cf.
National Broadcasting Co., Inc. v. Bear Stearns & Co., Inc., 165 F.3d 184 (2d Cir.
1999); Republic of Kazakhstan v. Biedermann Int’l, 168 F.3d 880 (5th Cir. 1999). The
Southern District of New York held that the investment treaty arbitration was taking
place before a “foreign or international tribunal” within the meaning of § 1782. The
court added that the investor–state tribunal “does not possess [] the functional attributes
most commonly associated with private arbitration” because investment arbitration in
general is “a tool of international relations, … the Tribunal derives its jurisdiction from
the Treaty, and … the Arbitration is a means by which [the Fund is] bringing claims
against the Republic of Lithuania in its capacity as a state.” In re Application of Fund
for Prot. of Inv’r Rights in Foreign States pursuant to 28 U.S.C. § 1782 for an Order
Granting Leave to Obtain Discovery for Use in a Foreign Proceeding, No. 19 MISC.
401 (AT), 2020 WL 5026586, at *1 (S.D.N.Y. Aug. 25, 2020).
64
See supra text accompanying note 63.
65
IBA Rules on Taking Evidence, art. 9(3). See also Born, supra note 56, at 2387
(discussing the factors that arbitrators should consider in addressing the privilege
issue).

the nature and scope of privileges under national laws,66 which extend to the
content and application of the privilege rules to determine what information is
privileged.67
In investor–state arbitration, foreign tribunals deal with domestic legal
frameworks with different expectations from different parties involved in
the process. Privileges are no different. ICSID tribunals frequently refer to
Article 34 of the ICSID Arbitration Rules in considering the privileges of the
information or documents.68 Article 42(1) of the ICSID Convention mandates
the tribunal to apply the parties’ agreed upon rules,69 absent which the tribunal
shall apply the law of the contracting state party to the dispute, including its
choice of law rules. Article 43 of the ICSID Convention authorizes the tribunal
to require the parties to produce documents. Based on their inherent powers to
decide provisional measures under Rule 39(1) of the ICSID Arbitration Rules70
and Article 47 of the ICSID Convention,71 respectively, tribunals are argued to
settle any dispute on the applicable privilege in the arbitration proceeding.72 In
this context, the privileges issue may arise in disclosing the TPF information,
especially with the security for costs applications where the existence of TPF
may be argued to be an element in deciding these applications.73
66
Born, supra note 56, at 2377.
67
Id. at 2377–78.
68
ICSID Rules of Procedure for Arbitration Proceedings [hereinafter ICSID
Arbitration Rules] R. 34 (“The Tribunal may, if it deems it necessary at any stage of
the proceeding: (a) call upon the parties to produce documents, witnesses and experts;
…”), https://icsid.worldbank.org/sites/default/files/documents/ICSID%20Convention
%20English.pdf.
69
ICSID Convention, art. 42(1). See Georges R. Delaume, ICSID Arbitration
And the Courts, 77 Am. J. Int’l L. 784 (1983); Christoph H. Schreuer, The ICSID
Convention: A Commentary (2001).
70
ICSID Arbitration Rules art. 39(1) (“…a party may request that provisional
measures for the preservation of its rights be recommended by the Tribunal…”).
71
ICSID Convention art. 47 (“Except as the parties otherwise agree, the Tribunal
may, if it considers that the circumstances so require, recommend any provisional
measures which should be taken to preserve the respective rights of either party”).
72
See generally Teinver v. Argentine, Award, para 237 (July 21, 2017). See also
Meriam N Alrashid, Jane Wessel, John Laird, Impact of Third Party Funding on
Privilege in Litigation and International Arbitration, 6 Disp. Resol. Int’l 101, 126
(2012) [hereinafter Alrashid et al., Privilege in Arbitration] (arguing that “while the
internal dynamics of an ICSID arbitration will remain protected, where parties to such
proceedings clash on the level of confidentiality and privilege to be maintained, their
dispute may be settled by the tribunal’s inherent powers to make orders and provi-
sional measures under Rule 39(1) of the ICSID Arbitration Rules, and Article 47 of the
Washington Convention respectively”).
73
See infra Chapter 4 (2.2).

Tribunals recognize the parties’ rights to rely on evidentiary privileges in

international arbitral proceedings as per the applicable law.74 Even national
courts find privileges unaffected when arbitral tribunals order disclosure.75
As mentioned earlier, although tribunals have the power to recommend pro-
visional measures, provisional measures are too extraordinary to be granted
except in exceptional circumstances. Generally, in order to issue a provisional
measure, the tribunal must decide that (i) it has prima facie jurisdiction, (ii)
the measure is urgent and intends to preserve and protect a right, and (iii) the
measure is necessary to preserve the status quo or avoid the occurrence of
irreparable harm.76 For TPAF, what is at issue is the nature of the measure
and its consequences. “When the integrity of the proceedings is threatened,
some tribunals have found the need for provisional measures to be ‘inherently
urgent’.”77 Absent clear guidance, some tribunals provide for a reasonable
test,78 others require the harm not to be adequately reparable by a damage
award.79 Yet, there should exist a necessity for preserving the status quo or
where the actions of a party may cause or threaten irreparable prejudice to the
rights invoked or tribunals would “weigh the interests of both parties and order
74
75
Id.
76
EuroGas Inc and Belmont Resources Inc v. Slovak Republic, ICSID Case
No ARB/14/14, Decision on Provisional Measures, paras 69, 75, 76, 78, 85 &
122–23 (June 23, 2015), https://www.italaw.com/sites/default/files/case-documents/
italaw6272_0.pdf; South American Silver Limited (Bermuda) v. Plurinational State of
Bolivia, PCA Case No. 2013-15, para 61 (Jan 11, 2016) (Perm. Ct. Arb. 2016), https://
www.italaw.com/sites/default/files/case-documents/italaw7176.pdf.
77
Anthony C. Sinclair and Odysseas G. Repousis, Note: An Overview of Provisional
Measures in ICSID Proceedings, ICSID Review, Vol. 32, No. 2, 437–438 (May 2017).
See also Teinver SA, Transportes de Cercanıas SA and Autobuses Urbanos del Sur SA
v. Argentine Republic, ICSID Case No ARB/09/1, Decision on Provisional Measures
with Dissenting Opinion, para 235 (April 8, 2016); Quiborax S.A., Non Metallic
Minerals S.A. and Allan Fosk Kaplún v. Plurinational State of Bolivia, ICSID Case No.
ARB/06/2, Decision on Provisional Measures, para 153 (Feb 26, 2010), https://www
78
Railroad Development Corporation v. Republic of Guatemala, ICSID Case No.
ARB/07/23, Decision on Provisional Measures, para 34 (Oct 15, 2008), https://www
79
Burlington Resources Inc. v. Republic of Ecuador, ICSID Case No. ARB/08/5
(formerly Burlington Resources Inc. and others v. Republic of Ecuador and Empresa
Estatal Petróleos del Ecuador (PetroEcuador)), Procedural Order No. 1 on Burlington
Oriente’s Request for Provisional Measures, para 82 (June 29, 2009), https://www

the measure only if the harm spared the petitioner exceeds greatly the damage
caused to the party affected by it.”80
Tribunals practically adopt a “most-favored nation” approach to afford
the parties no less protection than they might have expected in their domes-
tic regimes.81 The IBA Rules on the Taking of Evidence in International
Arbitration (the IBA Rules on Evidence) provide factors to be considered in
the application of a privilege, including whether the communication concerns
legal advice, settlement negotiations, possibility of waivers, dovetailed expec-
tations of the parties, and the need for equality and fairness between parties.82
For example, in a disclosure request, one respondent sought discovery of all the
funding documents.83 The claimant retorted that the request lacked necessity or
relevancy, and noted the absence of any impact of the funding on the jurisdic-
tion of the tribunal.84 As a result, the tribunal declined the respondent’s request
for insufficiency.85 Discovery demands may be limited by the attorney–client
privilege or the work product doctrine. Both doctrines are qualified by the
commonly known exception of “common interest.”
1.1.3.2 Attorney–client privilege

The attorney–client privilege applies to any communication between the
attorney and client that involves providing legal assistance.86 The terms “attor-
ney” and “client” are broadly interpreted to include their agents or technical
advisors such as accountants and economists.87 Accordingly, any disclosure of
these communications to these third parties should not affect the privilege.88
TPAF may not expressly create an attorney–client relationship at a structural
80
Burimi SRL and Eagle Games SH.A v. Republic of Albania, ICSID Case No.
ARB/11/18, Procedural Order No. 2 on Provisional Measures Concerning Security
for Costs, para 35, (May 3, 2012), https://www.italaw.com/sites/default/files/case
81
Alrashid et al., Privilege in Arbitration, supra note 72, at 112.
82
Int’l Bar Ass’n, Rules on the Taking of Evidence in International Arbitration art.
9(2).
83
Teinver S.A., Transportes de Cercanías S.A. and Autobuses Urbanos del Sur
S.A. v. The Argentine Republic, ICSID Case No. ARB/09/1, Decision on Jurisdiction,
para 24 (Dec 21, 2012), https://www.italaw.com/sites/default/files/case-documents/
italaw1090.pdf.
84
Id. para 25.
85
Id. para 26.
86
Am. Bar Ass’n Comm. on Ethics 20/20, Draft White Paper on Alternative
Litigation Finance, 34 (2011), https://americanlegalfin.com/wp-content/uploads/2015/
11/20111019_draft_alf_white_paper_posting.authcheckdam.pdf [hereinafter ABA
Commission on ALF Ethics].
87
See, e.g., U.S. v. Kovel, 296 F.2d 918 (2d Cir. 1961).
88
ABA Commission on ALF Ethics, supra note 86, at 35.

level. However, it may create a de facto attorney–client relationship.89 TPAF

is arguably not a simple bipolar relationship because it involves a symbiotic
relationship with the funded parties’ attorney.90 The practice now involves
attorneys, or law firms in general, who encourage and facilitate funding
arrangements to guarantee their own fees or reduce the risk of losing if they
pursue the case on a contingency fees basis.91 This practice may create an
informal relationship between funders and funded parties’ lawyers.92 Premier
litigation funders are founded and staffed by lawyers who engage in exacting
analysis of the funded cases. If an attorney is providing substantive legal
advice about critical strategy issues to a party, and the party is expressly acting
on that advice, it may be strained to say no legal services are being provided
simply because of a repeated incantation to that effect.93
1.1.3.3 Work product doctrine

Originated in the common law,94 the work product doctrine protects the
thoughts, mental impressions, and strategies of attorneys from being disclosed
to opposing parties in litigation.95 The rationale of this doctrine is that “discov-
ery was hardly intended to enable a learned profession to perform its functions
on wits borrowed from the adversary.”96 The work product doctrine operates
in the adversarial litigation system and protects the party’s privacy against the
adverse party. It covers documents and tangible things prepared “in anticipa-
tion” of litigation.97 It is therefore narrower in scope than the attorney–client
privilege. While the attorney–client privilege is waived if the communication
89
This may justify the promulgation of new rules obliging funders to ensure that
the funded party seeks independent legal advice on the funding arrangement. Abu
Dhabi Global Market Litigation Funding Rules (2019) R. 6, https://www.adgm.com/
documents/courts/legislation-and-procedures/legislation/rules/litigation-funding-rules
-2019.pdf (“The Funder must take reasonable steps to ensure that the Funded Party has
received independent legal advice in relation to the Litigation Funding Agreement and
its terms prior to its execution”).
90
A triangular relationship may exist between funder, client, and attorney.
Universitas Educ., LLC v. Nova Grp., Inc., No. 11 CIV. 1590 LTS HBP, 2014 WL
113702, at *2 (S.D.N.Y. Jan. 13, 2014).
91
Aviva Will, Building contingency practices: Key takeaways from a conversa-
tion with Peter Zeughauser and Aviva Will (Nov 05, 2020), https://www.burfordcapital
.com/insights/insights-container/building-contingency-practices/.
92
Id.
93
Catherine A. Rogers, Ethics in International Arbitration, para 5.33 (2014) [here-
inafter Rogers, Ethics].
94
Hickman v. Taylor, 329 U.S. 495 (1947).
95
See, e.g., Fed. R. Civ. P. 26(b)(3).
96
Hickman, 329 U.S. at 516 (Jackson, J., concurring).
97
ABA Commission on ALF Ethics, supra note 86, at 37.

is disclosed to any third party, the work product protection is waived only if the
disclosure substantially increases the likelihood that the adversary possesses
the disclosed documents.98 Still, the work product materials may be disclosed
to the adversary if there is a substantial need, and no other means exist to
obtain these materials.99
TPAF information is often protected by the work product doctrine.100 This
protection may not be waived by disclosing the information to possible or
actual funders. Funders have an interest in maintaining the confidentiality
of potential clients, who likewise expect to keep the disclosed information
confidential.101 Nondisclosure agreements support the nonwaiver of the work
product protection because they substantially reduce the likelihood of the
opposing party possessing the materials.102 Further, where the funding commu-
nications are in anticipation of litigation, they are most likely protected by the
work product doctrine, and would not be disclosed.103
1.1.3.4 Common interest exception

The parties may have a common interest to survive the waiver of the privilege,
if the materials have been disclosed to a third party.104 Generally, the common
interest doctrine is narrowly construed.105 The common interest exception may
find application to the funding relationship. The communications with funders
may arguably fall within either the agency or the common interest exceptions
to the privileges.106 In determining what is a common interest, some courts do
not require a complete unity of legal interests to apply the common interest
exception. Rather, they consider communications for the purpose of preparing
a joint legal strategy or litigation in applying the common interest doctrine.107
Some courts have declined to identify the funding parties’ interests as common
98
Id. at 37–38. See also Mondis, 2011 WL 1714304.
99
Fed. R. Civ. P. 26(b)(3). See also ABA Commission on ALF Ethics, supra note
86, at 37.
100
Homeward Residential, Inc., 2016 WL 1031154, at *1.
101
Id.
102
Id.
103
Lambeth Magnetic Structures, LLC v. Seagate Tech. (US) Holdings, Inc., No.
CV 16-538, 2018 WL 466045, at *1 (W.D. Pa. Jan. 18, 2018).
104
United States v. American Tel. & Tel. Co., 642 F.2d 1285, 1298–1300 (D.C.Cir.
1980).
105
Gulf Islands Leasing, Inc. v. Bombardier Capital, Inc., 215 F.R.D. 466, 471
(S.D.N.Y. 2003).
106
107
Berger v. Seyfarth Shaw LLP, No. C07-05279JSWMEJ, 2008 WL 4681834
(N.D. Cal. Oct. 22, 2008).

interests108 because they share commercial, not legal, interests.109 Others find
that the situation falls under the common interest exception.110 For instance,
one court considered the “shared common interest in litigation strategy” a suf-
ficient ground to apply the privileged information exception. Both funding
parties had a common interest in the successful outcome of the litigation,
which the plaintiff otherwise would not have been able to pursue without the
financial assistance of the funder.111
Funders may be included within the scope of the agency exception because
funders must assess the potential litigation, both at the outset and on an
ongoing basis, using information provided by the client and its counsel. One
court has enabled the funder to advise the client on the costs of pursuing the
litigation, risks involved, and the best strategies to pursue litigation.112 More
often, courts find funding documents relevant to the issue of bias and tend
to disclose them upon request.113 Still, courts may employ some methods to
preserve the privileged information such as redaction or in camera review.114
The timing of the communication also may be important because if it predates
filing any litigation, it might be presumed to be communications for obtaining
a loan, not classic TPF.115 Some courts favor disclosure of funding agreements
and the imposition of the strict requirements for the application of privileges
may reflect this tendency.116
Although some argue for including funders within the exceptions of waiving
the evidentiary privileges,117 some cases distinguish between the “identical”
108
Leader Techs. v. Facebook, Inc., 719 F. Supp. 2d 373, 376–77 (D. Del. 2010)
(finding that information exchanged between plaintiff and potential funder not pro-
tected under the attorney–client privilege or the common interest doctrine because the
funding agreement was not eventually concluded).
109
Berger, 2008 WL 4681834.
110
See, e.g., Marciano v. Atlantic Medical Specialties, Inc., No. 08-CV-305-JTC,
2011 WL 294487 (W.D.N.Y. 27 Jan. 2011) (waiving work product protection because
the common interest doctrine did not encompass a “joint business strategy”) (quoting
Bank Brussels Lambert v. Credit Lyonnais (Suisse) S.A., 160 F.R.D 437, 447 (S.D.N.Y.
1995)).
111
Devon, 2012 WL 4748160, at *1.
112
113
Berger, 2008 WL 4681834.
114
In re Superior Nat. Ins. GR, No. 1:00-BK-14099-GM, 2014 WL 51128 (Bankr.
C.D. Cal. Jan. 7, 2014).
115
Acceleration Bay LLC v. Activision Blizzard, Inc., No. CV 16-453-RGA, 2018
WL 798731 (D. Del. Feb. 9, 2018).
116
Id.
117
Shannon, Judging, supra note 35, at 445. Similarly, some view funders as real
parties in interest who are akin to co-clients, similar to insurers, of the party’s litigation
counsel and therefore should be entitled to the privilege. See Maya Steinitz & Abigail

legal interest and the “substantially similar” legal interest.118 While the “identi-
cal” legal interest requires more than an interest in the same outcome to create
a common legal interest,119 a “substantially similar” common interest qualifies
the exception, even where the communication occurs between adverse par-
ties.120 Adopting the identical common interest approach makes it difficult to
apply the waiver exception to any given case. American courts are not likely to
find the common interest to be a waiver of the work product doctrine between
the funding parties, compared with the case of attorney–client privilege.121
1.1.3.5 Nondisclosure agreements

In the negotiation phase, evidentiary documents might be called in the dis-
covery process. In response, funders may include nondisclosure provisions
to avoid disclosing the information exchanged with the funded party. Due
to the consensual nature of arbitration, the common practice of including
nondisclosure provisions in the funding agreement is argued to prevail.122
The scope of nondisclosure might be broad enough to cover the funder’s
proprietary methods and financial terms.123 Further, courts may find no waiver
for disclosing the funding information to possible or actual funders who have
an interest in maintaining confidentiality with potential clients.124 However,
funders should anticipate the possibility of disclosure even with the existence
of nondisclosure agreements.125
1.1.4 Disclosure argued

Arbitrators’ duty of disclosure was created at a time when the arbitration land-
scape was quite simple, compared with the complex system that arbitration has
C. Field, A Model Litigation Finance Contract, 99 Iowa L. Rev. 711, 732–33 (2014)
[hereinafter Steinitz & Field, Finance Contract].
118
GUS Consulting GmbH v. Chadbourne & Parke LLP, 858 N.Y.S.2d 591, 593
(Sup. Ct. 2008).
119
A mere concern shared by the parties is not sufficient to create a common legal
interest. Gulf Islands Leasing, Inc., 215 F.R.D., at 472–73.
120
GUS Consulting GmbH, 858 N.Y.S.2d, at 593.
121
Alrashid et al., Privilege in Arbitration, supra note 72, at 112. “Similar to U.S.
federal courts, in international arbitration, the parties’ legitimate expectation[] is meas-
ured by the ‘closest connection,’ which apply the ‘touch base’ doctrine which applies
the federal privileges to any communication touching base with the U.S.” Id. at 121.
122
Some funders consider arbitral institutions proper entities to deal with the disclo-
sure requests. Scherer et al., Third Party Funding in Europe, supra note 28, at 217.
123
Courts refused to disclose the funding documents, especially with the existence
of the nondisclosure agreements. Odyssey, 2016 WL 7665898, at *1.
124
Homeward Residential, Inc., 2016 WL 1031154; Morley v. Square, Inc., No.
4:10CV2243 SNLJ, 2015 WL 7273318, at *2 (E.D. Mo. Nov. 18, 2015).
125

hitherto become. As a matter of fact, disclosure rules should strike a balance

between the competing interests of a transparent arbitration process, while
preserving the confidential nature of the funding practice. Disclosure should
be crafted in a way that reduces informational asymmetries, and allows an
effective decision-making process. With an objective rather than subjective
standard, disclosure should be warranted only with reasonable grounds such as
challenging an arbitrator. In challenges based on conflict of interest, disclosure
of the funder’s identity may be justified. In deciding the jurisdictional chal-
lenges as to who the real party in interest is, adopting mechanisms that enable
disclosure of relevant provisions may be convenient.126 The nature of the
relief sought is instrumental in deciding the question of disclosing the funding
documents. Courts may decline to disclose the funding documents where the
status of the funded party may not be affected by the source of funding, espe-
cially where the relief sought is an injunctive, rather than a monetary, relief.127
For injunctive relief, the plaintiff always meets the injury-in-fact standing
requirement.128
Disclosure may raise costs and cause delays.129 Arbitrators, similar to
courts,130 may suffice with in camera disclosure without disclosing the identity
of the funder. Other situations may justify disclosing certain provisions while
redacting others, or filing a short “check the box” closing statement.131 As
such, some courts may order discovery but redact the amount and strategy,
while keeping all other terms unredacted.132 However, tribunals may deny the
disclosure request if it has become moot. In an investment dispute, a respond-
ent sought disclosure of the TPAF documents from claimant who admitted
later that it was funded by a third party who was committed to executing a cost
126
Federal courts generally create their own rules on disclosing TPF. Steinitz,
Follow the Money?, supra note 29, at 6.
127
One court denied a discovery request for the funder’s possible involvement in the
lawsuit because plaintiffs were real parties in interest in injunctive reliefs, unlike mon-
etary relief, and their status should not be affected by the source of funding and there-
fore meet the injury-in-fact standing. Everson, 2016 WL 8201785.
128
Id.
129
Some rules mandate the disclosure of both the identity and the terms. E.g., Milan
Chamber of Arbitration (“CAM”), Arbitration Rules art. 43 (“The party that is funded
by a third party in relation to the proceedings and its outcome shall disclose the exist-
ence of the funding and the identity of the funder”), https://www.camera-arbitrale.it/
upload/documenti/arbitrato/ARBITRATION%20RULES%202020.pdf.
130
E.g., Mondis, 2011 WL 1714304.
131
Other mechanisms include “attorney’s eyes only” designation, sealed agreement
or certification by attorneys for the content of the undisclosed agreement. See Steinitz,
Follow the Money?, supra note 29, at 30–31.
132
In re Superior Nat. Ins. Gr, No. 1:00-BK-14099-GM, 2014 WL 51128 (Bankr.
C.D. Cal. Jan. 7, 2014).

award if adopted by the tribunal against the claimant. The tribunal denied the
respondent’s request to disclose the funding documents without redactions to
confirm the funder’s commitment to cover the costs of the proceedings.133
Generally, arbitrators should be empowered with the discretion to inquire
into funding arrangements, and decide how to weigh the different consider-
ations. Courts do not apply the attorney–client privilege or common interest
doctrine to funders who share only a financial interest in the dispute.134 Still, the
work product doctrine may extend to funders whose lawyers provide mental
impressions, theories, and strategies of the claim to the prospective funder in
preparation of, and only “because of,” the litigation.135 Further, in determining
the real party in interest, courts may tend to consider relevant the funding
documents.136 In these cases, arbitrators should not be left without guidance
on weighing these considerations. Arbitrators should be detail-oriented when
deciding the scope of disclosure. That said, the applicable rule should allow
for discretion to help arbitrators investigating the disclosure inquiry rather
than dictating a specific outcome. The mere fact that a party seeks to depose
a funder may justify the substantial need for the subpoena request or for
subpoenaing the funding documents. Nevertheless, courts’ unclear definition
of “substantial need” creates vagueness and uncertainty in the application of
these rules.
As a transparent process, commercial arbitration involves known parties,
including arbitrators, parties (including their parent companies or affiliates),
counsel, institutions, and national courts. That transparency should extend
to third party funders, as additional players. Through which, there should be
a level playing field. The goal of disclosure is maintaining a consistent and
efficient process to ultimately avoid any unwanted impacts on the arbitral
award. Disclosure exists in arbitration so that arbitrators can check when there
is “a specific, articulated reason to suspect bias or conflicts of interest.”137
Courts tend to decline to disclose funding agreements when they can question
the potential witnesses in camera for their relationships with the third party
funders.138 Similarly, one court has produced, redacting the privileged infor-
133
Eskosol v. Italian Republic, ICSID Case No. ARB/15/50, Decision on Provisional
Measures, paras 44, 45 (April 12, 2017).
134
Grochocinski v. Mayer Brown Rowe & Maw LLP, 251 F.R.D. 316, 327 (N.D. Ill.
2008); Miller, 17 F. Supp. 3d 711, at 732.
135
Miller, 17 F. Supp. 3d 711, at 734.
136
Id.
137
MLC Intellectual Prop., LLC v. Micron Tech., Inc., No. 14-CV-03657-SI, 2019
WL 118595, at *1–2 (N.D. Cal. Jan. 7, 2019). However, in this case, the court was con-
sidering questioning “jurors.” Id.
138
Id.

mation, the fee agreement, because it was relevant to the plaintiff’s damages
and potential bias. There was suspicion that one of its market competitors was
funding the plaintiff’s litigation.139 Ultimately, disclosure should reduce the
margin of risk in attacking the final award.
In investor–state arbitration, the public interest demands more transparent
rules. The fear of nondisclosure casts more doubts than fear of disclosing.140
The ICSID Rules have responded to these concerns by adopting an approach
of a mandatory disclosure of the existence and the identity of the funders,
with discretion to the arbitrators on the extent of TPAF disclosure based on
necessity and relevancy.141 These requirements are similar to the disclosure
requirements of the U.S. federal courts.142 This approach provides arbitrators
with discretion in deciding the scope of disclosure on a case-by-case basis,
without leaving them with no guidance.
1.2 Control Asymmetries
As a disquieting hidden force, funders’ financial interest in the dispute

outcome may suggest funders to be real parties in interest. That may in various
avenues affect the arbitrators’ jurisdiction or the admissibility of the claim.
Just like any other type of property, a legal claim is subject to legal and ben-
eficial ownership. Beneficial ownership implicates the “standing of a person
who does not have legal title to property, but who has other rights in it that are
the normal incident of ownership.”143 Generally, the real and equitable owner,
not the nominal or record owner, of the claim is the proper party for adjudica-
tion.144 In other words, the beneficial, not the nominal, owner of property is the
real party in interest for adjudication purposes.145
139
Nelson v. Millennium Labs, No. 2:12-cv-01301-SLG, 2013 WL 11687684, at
*5–6 (D. Ariz. May 17, 2013).
140
See generally Coe, supra note 10.
141
Int’l Ctr. for Settlement of Investment Disputes, Working Paper #4, Proposals
For Amendment of the ICSID Rules, 278 (ICSID, Working Paper No. 4, 2020)
R.23 [hereinafter ICSID Amendment Proposals, Working Paper No. 4], https://icsid
.worldbank.org/sites/default/files/WP_4_Vol_1_En.pdf.
142
Sweify, TPF Systematic Analysis, supra note 54 (surveying U.S. court decisions
on TPF disclosure).
143
David J. Bederman, Beneficial Ownership of International Claims, 38 Int’l
Comp. L. Quarterly 935, 935 (1989).
144
Id. at 936.
145
Id. The assignment of the investment claim arising out of the IPT may trigger
the treaty shopping problem. Treaty shopping involves the “creation of artificial con-
ditions to access the international adjudication mechanism provided by an IPT.” Aren
Goldsmith & Lorenzo Melchionda, Third Party Funding in International Arbitration:
Everything You Ever Wanted to Know (but Were Afraid to Ask) – Part One & Two,

1.2.1 TPAF and assignment

Assignment of claims has become widely recognized.146 As a threshold matter,
a distinction should be drawn between assignment of claims which gives the
assignee control over the claim and assignment of claim proceeds which does
not grant any control.147 Nothing, of course, is simpler than letting the funding
parties characterize their agreement however they see fit. But reality is more
complex than this. With TPAF, funding agreements do not often refer explic-
itly to assignment, but the question of assignment may arise through the per-
formance of the agreement. The funder’s proclivity to control the proceeding
may constitute a de facto assignment of the claim rather than its proceeds.148
In “assessing whether litigation funding arrangements effectively amount to
an assignment, the court should have regard to the funding arrangements as
a whole, including the level of control able to be exercised by the funder and
the profit share of the funder.”149
Despite the common similarities between commercial and investor–state
arbitration, they exhibit distinguishable differences. Commercial arbitration is
2012 Int’l Bus. L.J. 221, 231 (2012) [hereinafter Goldsmith & Melchionda, Third Party
Funding Everything]. Treaty shopping seeks to create investment treaty jurisdiction
over persons otherwise not to be eligible investors for the protection of the IPT. It has
been considered an abuse of the process and arbitral tribunals find it a valid reason for
denying the protection of the IPT. Société Générale In respect of DR Energy Holdings
Limited and Empresa Distribuidora de Electricidad del Este, S.A. v. The Dominican
Republic, LCIA Case No. UN 7927, Award on Preliminary Objections to Jurisdiction
(Sep 19, 2008), https://www.italaw.com/sites/default/files/case-documents/ita0798
.pdf; African Holding Company of America, Inc. and Societe Africaine de Construction
au Congo S.A.R.L. v. Democratic Republic of the Congo, ICSID Case No. ARB/05/21,
Sentence sur les déclinatoires de competence et la recevabilite (July 29, 2008), https://
www.italaw.com/sites/default/files/case-documents/ita0016.pdf.
146
Stephen Jagusch & Anthony Sinclair, The Impact of Third Parties on International
Arbitration – Issues of Assignment, in Pervasive Problems in International Arbitration
291, 295–98 (Loukas A. Mistelis & Julian D.M. Lew eds., 2006) (discussing the assign-
ment of claims).
147
91, 455 S.E.2d 655, 657 (1995). However, this decision was in the context of insurance
and imposing a lien on the proceeds not in the context of TPF. Mut. of Omaha Bank
v. Kassebaum, 283 Neb. 952, 814 N.W.2d 731 (2012) (the assignment of unliquidated
proceeds from personal injury claim was valid and enforceable).
148
See infra Chapter 4 (1.2.5).
149
Waterhouse v. Contractors Bonding Ltd, (2013) NZSC 89, para 57, https://www
.courtsofnz.govt.nz/assets/cases/2013/sc-66-2012-waterhouse-v-contractors-bonding
.pdf. Certain funders may mitigate the effects of the restrictions on the scope of control
by subjecting the funding agreement to a choice of law that is more favorable for the
funder. Goldsmith & Melchionda, Third Party Funding Everything, supra note 145, at
58.

a private setting where the jurisdiction of the arbitrator is generally originated

in the arbitration agreement; investor–state arbitration is typically founded
based on a mutual assent between the aggrieved investor and the host state
after the dispute arises. By concluding an investment treaty, a state is deemed
to make a standing offer to arbitrate to aggrieved investors of other states. By
initiating arbitration against the host state, the aggrieved investor accepts the
treaty-based standing offer150 to arbitrate a class of claims with a defined class
of claimants.151 The right to arbitrate is arguably considered by some tribunals
to be an investment of its own and may affect the jurisdictional basis of the
bilateral investment treaty (BIT).152 The language of the BIT generally deter-
mines the possibility of assigning an investment claim.153 First, some treaties
define “investment” as any kind of asset “invested by the investor in the ter-
ritory of the other contracting party.”154 This may be interpreted as requiring
a territorial link,155 by making an investment through contributing assets in the
territory of the host state.156 This territorial link between the investment and
the host state may restrict the transferability of the claim from the investor to
the funder and hence, the funder would not be able to avail itself of the treaty
protection. Second, an investment may be defined as any kind of asset “owned
150
Chevron Corp. v. Ecuador, 795 F.3d 200, 206 (D.C. Cir. 2015) (“The BIT
includes a standing offer to all potential U.S. investors to arbitrate investment disputes,
which Chevron accepted in the manner required by the treaty”). See generally Rudolf
Dolzer & Margrete Stevens, Bilateral Investment Treaties, 131–32 (1995).
151
Jan Klabbers, Some Problems Regarding the Object and Purpose of Treaties, 8
Finnish Y.B. Int’l L. 138 (1997).
152
ATA Construction, Industrial and Trading Company v. The Hashemite Kingdom
of Jordan, ICSID Case No. ARB/08/2, Award, para 117 (May 18, 2010), https://www
.italaw.com/sites/default/files/case-documents/ita0043.pdf (“the right to arbitration is
a distinct ‘investment’ within the meaning of the BIT because Article I(2)(a)(ii) defines
an investment inter alia as ‘claims to […] any other rights to legitimate performance
having financial value related to an investment’. The right to arbitration could hardly
be considered as something other than a ‘right […] to legitimate performance having
financial value related to an investment’”).
153
95 Minn. L. Rev. 1268, 1297–98 (2011).
154
E.g., Agreement between the Government of the Republic of Korea and
the Government of the United Arab Emirates for the Promotion and Protection of
Investments, Korea–UAE, art. 1(1), June 9, 2002. Other treaties refer to any kind of
assets “owned or controlled by” the investor. E.g., US Model BIT, art. l, 2004.
155
Mytilineos Holdings SA v. The State Union of Serbia & Montenegro and Republic
of Serbia, UNCITRAL Arbitration, Partial Award on Jurisdiction, paras 126–136 (Sep
8, 2006), https://www.italaw.com/sites/default/files/case-documents/ita0549.pdf.
156
Goldsmith & Melchionda, Third Party Funding Everything, supra note 145, at
231.

or controlled” by the investor without the territorial qualification.157 As such,

the issue of transferability to the funder is less likely. If the funder’s and the
investor’s nationalities overlap, the assignment may be consistent with the
treaty’s language.
1.2.2 Arbitrators’ jurisdiction

The literature discussing the jurisdictional issues in arbitration is vast.
However, the application of that literature to the jurisdictional issues over
funders may reveal misgivings that are, to a large extent, mere reactions to
the established doctrines of nonsignatory parties.158 Many doctrines that apply
to third parties in general may not properly apply to TPAF. The nonsignatory
theories assume a pre-existing relationship or a role in the performance of the
underlying contract.159 This is unlike how, in TPAF, a funder may interfere
in the performance of the agreement to arbitrate, not the performance of the
underlying contract between the disputing parties. TPAF is “no more tied to
performance of obligations within the scope ratione materiae of the agreement
to arbitrate, than counsel or the arbitral tribunal, who become equally engaged
in the implementation of the agreement to arbitrate.”160 However, the financial
interest in the dispute may arguably extend the arbitration agreement to the
funder, as a nonsignatory party on different grounds.161
From an economic perspective, funders resemble claimants because they
both receive part of the final award issued by the tribunal. This may raise the
question of who the real party in interest is, as clearly was asked by the CSOB
157
See the 2004 US Model BIT. See also CME Czech Republic B.V. v. Czech
Republic, UNCITRAL Arbitration, Partial Award, paras 396, 397 (Sep 13, 2001),
https://www.italaw.com/sites/default/files/case-documents/ita0178.pdf. One case
endorsed the transferability of the right to arbitrate under the ICSID Convention.
See Amco Asia Corporation and others v. Republic of Indonesia, ICSID Case No.
ARB/81/1, Decision on Jurisdiction (Sep 25, 1983), 23 ILM 351 (1984).
158
See generally Alison Ross & Richard Woolley, Queen Mary Professor
Challenges Thinking on Consent, Global Arb. Rev. (May 5, 2015).
159
See generally Born, supra note 56, at 1142–1205.
160
228.
161
See generally Born, supra note 56, at 1142–1205 (discussing the theories of
extension, including agency relationships; apparent or ostensible authority; implied
consent; alter ego and veil-piercing; the “group of companies” doctrine; third-party
beneficiaries; estoppel and related doctrines; ratification; extension to corporate
officers and directors; extension based upon shareholder derivative rights; exten-
sion to state nonsignatories; and extension based on joint-venture relationships or
conspiracies).

tribunal.162 In that case, the Czech Republic was assumed to be assigned the
proceeds of the award, and was argued to be the real party in interest which,
as respondent argued, qualified the dispute as a state–state dispute and hence
should not be subject to the ICSID jurisdiction.163 The tribunal stated that:
absence of beneficial ownership by a claimant in a claim or the transfer of the

economic risk in the outcome of a dispute should not and has not been deemed to
affect the standing of a claimant in an ICSID proceeding, regardless whether or not
the beneficial owner is a State Party or a private party.164
The question of the real party in interest was also raised in Alemanni where
the respondent raised a due process objection in response to the lack of any
mechanism to verify the identity of the individual claimants.165 The claimant
argued that the funder had no control over the claims or the counsel.166 In this
case, the tribunal did not question the funder’s control but rather the claimants’
full control over the counsel.167 The tribunal found no claimant involvement in
the process168 and stated that:
individual claimants, in giving their mandate to [the funder], at the same time
not only sign away their right to obtain more than a percentage of the pro rata
outcome of an eventual Award in their favour, but in addition abandon any right
of control over the conduct of the arbitration (including the potential settlement of
their claims); and that they give their Power of Attorney to represent them for these
purposes to a named individual who has never appeared before the Tribunal on
their behalf nor played any part in the proceedings after the Request for Arbitration.
Instead, their representation as Claimants has been arranged for them through …
co-counsel … attendance at all hearings and meetings … has similarly been by the
co-counsel …169
162
Ceskoslovenska Obchodni Banka, A.S. v. The Slovak Republic, ICSID Case No.
ARB/97/4, Decision on Jurisdiction, paras 28–32 (May 24, 1999), https://www.italaw
.com/sites/default/files/case-documents/ita0144.pdf.
163
Id. para 32.
164
Id.
165
Alemanni v. Argentine, Decision on Jurisdiction and Admissibility, para 48 (Nov
17, 2014).
166
Id. para 81.
167
Id. para 143.
168
Id. para 279. However, this proceeding was discontinued because of the parties’
failure to pay the costs of arbitration. Alemanni v. Argentine, Order Discontinuing the
Proceeding, para 26 (Dec 14, 2015), https://www.italaw.com/sites/default/files/case
-documents/ITA%20LAW%207009.pdf.
169
Alemanni v. Argentine, Decision on Jurisdiction and Admissibility, para 278
(Nov 17, 2014).

Funders may indeed exercise direct and indirect control over the claim.170 The
funding agreement often governs the degree of funder’s interference in the
proceeding, either through the consensual funding provisions or as a moder-
ating body of principles that coordinate with the governing law of the funding
agreement. Indirect control may appear through the de facto role the funder
plays in pursuing the claim,171 especially when the funding parties disagree
on the strategic decisions of the claim’s management. Moreover, tribunals
may find it necessary to first identify the degree of the funder’s interference
in the proceedings by conducting an analysis of the funding agreement under
its applicable law.172 Some suggest incorporating provisions in the arbitration
agreement that address the potential participation of funders.173 However, this
may disturb the bipolar nature of the arbitration agreement, to which the funder
is not a party.174 The result would also be anomalous. Funders may decline
funding to avoid any jurisdiction by the tribunal that may systemically hold
funders liable for some procedural aspects, like the security for costs orders.
Dragging funders into the proceedings may become emblematical.175
Arbitrators may indirectly exercise jurisdiction over the funder by issuing
a security for costs order against the funded party, which the funder would
pay.176 Nonetheless, the mere involvement of the funder in the proceeding does
not necessarily justify the extension of the proceeding over the funder.177
170
Funders’ interference may include vetoing some decisions, controlling the strat-
egy management or creating a timeline to comply with the case budget. David S.
Abrams, Daniel L. Chen, A Market for Justice: A First Empirical Look at Third Party
Litigation Funding, 15 U. Pa. J. Bus. L. 1075, 1089 (2013) [hereinafter Abrams &
Chen, Market for Justice].
171
Ian Brownlie, Principles of Public International Law, 480 (2008).
172
Philippe Pinsolle, Comment on Third-Party Funding and Nationality Issues in
Investment Arbitration, Transnat’l Disp. Mgmt. 4, 646 (2013).
173
174
Nathalie Voser, Multi-party Disputes and Joinder of Third Parties, 343, in 50
Years of the New York Convention: ICCA International Arbitration Conference, ICCA
Congress Series, Kluwer L. Int’l (Albert Jan van den Berg ed. 2009).
175
In the U.S., doctrines of “personal jurisdiction” or “long arm statutes” may be
invoked to establish “minimum contacts,” and exercise jurisdiction over the funders
in the underlying funded dispute. EcoDisc Tech. AG v. DVD Format/Logo Licensing
Corp., 711 F. Supp. 2d 1074, 1086 (C.D. Cal. 2010).
176
177
Including the funder under the broad concept of “party” would depend primarily
upon the agreement of the parties, applicable laws, or the tribunal adopting the doctrine
of third party to the dispute. E.g., English Arbitration Act (1996) art. 58(1) (defining a
“party” to include “persons claiming through or under them”). Arguably, such defini-
tion may include third party funders.

Despite being a nonparty, some tribunals addressed the funder’s role in

the proceedings.178 One respondent questioned the role of the funder, who
was alleged to be the driving force behind the arbitration. The funder had full
control because of the impermissible barrier between claimants and their attor-
neys which qualified the funder to be the real party in interest.179 However, the
tribunal disagreed and found that:
while [the funder] has, without doubt, played a crucial role not only in financing the
present proceedings on the Claimants’ side, but also in bringing them together and
coordinating them to conduct the proceedings against the Respondent, this does not
amount to putting [the funder] in a position to ‘control’ the present proceedings. The
lawyers acting in this case are bound by the Power of Attorney which legally links
them to the Claimants, and to the Claimants only. At the same time, these lawyers
are not bound by the [funding arrangement] which is a contract between the [funder]
and the Claimants. Counsel for the Claimants specifically pointed out in the Hearing
on Jurisdiction that he represents the Claimants rather than [the funder] and takes no
instructions from the latter.180
[The tribunal] could not conclude that [the funder] is more than a third party which
has a special relationship to Claimants. It is not a party to the present proceedings.
The [funding arrangement] does not interfere with the ability of the Claimants to
conduct the present proceedings in their best interest and to instruct their counsel
accordingly. In sum, in the Tribunal’s opinion, there are no substantiated indications
that there would be an external control of the present proceedings by an external
actor or a conflict of interests which would undermine the proper exercise of juris-
diction by the Tribunal.181
Accordingly, the tribunal concluded that:
Claimants [were] definitely not pursuing claims on behalf of a third party. The fact
that a third party may have an interest in the outcome of the proceedings does not of
itself make it a party to the proceedings. Hence, no lack of standing [could] follow
from the limited degree of involvement of [the funder] in the present case.182
The critical concern for the tribunal was apparently the level of the funder’s
control over the proceedings, the claimants, and their counsel. Nonetheless, if
178
Ambiente Ufficio S.p.A. and others v. Argentine Republic, ICSID Case No.
ARB/08/9, Decision on Jurisdiction and Admissibility, para 273 (Feb 08, 2013), https://
www.italaw.com/sites/default/files/case-documents/italaw1276.pdf. This case was dis-
continued. Ambiente v. Argentine, Order Discontinuing Proceedings (May 28, 2015),
https://www.italaw.com/sites/default/files/case-documents/italaw4289.pdf.
179
Ambiente v. Argentine, Decision on Jurisdiction and Admissibility, para 276 (Feb
08, 2013).
180
Id. para 277.
181
Id. para 278.
182
Id. para 296.

the tribunal found that the funder had exercised that amount of control over the
proceedings, the outcome might have been different if they had extended juris-
diction over the funder as a real party in interest as argued by the respondent.
1.2.3 Standing and claim admissibility

Standing may differ in litigation from that in commercial and investor–state
arbitration. Any BIT or multilateral investment treaty (MIT) targets a desig-
nated class of investors to protect. Only qualified investors are entitled to the
protection of these treaties183 by embracing a specific nationality that defines
the scope of the treaty, i.e., ratione personae.184 The ICSID Convention also
has a nationality requirement for investors to qualify for its jurisdiction.185
Funders’ control over the proceedings may affect the admissibility of the
claim.186 In Occidental v. Ecuador, the ad hoc Committee found that “legal
standing pertains to beneficial owners and not necessarily to nominees, and
that unprotected parties cannot receive compensation, even if claimed on
their behalf by protected investors.”187 It decided that “tribunals exceed their
jurisdiction if they grant compensation to third parties whose investments are
not entitled to protection under the relevant instrument.”188 However, applying
this standard to TPAF may be problematic. Although funders may be benefi-
cial owners because they share part of the future proceeds, claimants are still
beneficial owners in terms of the rest of the proceeds. In that sense, claimants
cannot be purely nominal parties, but instead are both nominal and beneficial
parties. The issue is whether being a partially beneficial owner entitles the
183
Bernardo M. Cremades, Third-Party Funding in International Arbitration 6–7
(2011), https://www.cremades.com/pics/contenido/File634523783352588756.pdf.
184
230.
185
ICSID Convention art. 25.
186
Jagusch et al., supra note 146, at 319 (discussing the choice of law that governs
the assignment of claims). See also Dolzer & Stevens, supra note 150, at 131–32. Lanco
International, Inc. v. Argentine Republic, ICSID Case No. ARB/97/6, Preliminary
Decision on Jurisdiction (Dec 8, 1998). Nevertheless, if the host state’s domestic law
requires express consent for the assignment of rights associated with an investment,
absent that consent would raise issues that the tribunal may consider under admissibil-
ity of the claim as a substantive issue, not a jurisdictional one. For example, the ille-
gality of the investment or the breach of contract. On similar problems, see Aguas del
Tunari S.A. v. Republic of Bolivia, ICSID Case No. ARB/02/3, Decision on Jurisdiction
(Oct 21, 2005).
187
Occidental Petroleum Corporation and Occidental Exploration and Production
Company v. Republic of Ecuador, ICSID Case No. ARB/06/11, Decision on Annulment
of the Award, para 273 (Nov 2, 2015), https://www.italaw.com/sites/default/files/case
188
Id. para 262.

funder to any interference privileges in conducting the case.189 TPAF may

affect the form of consent in investment arbitration. One arbitrator dissented
to the majority decision because the form of expressing claimants’ consent to
institute the arbitration proceedings was found in the funding arrangement, and
an instruction letter to claimants to sign the power of attorney.190 The dissenter
added that neither of those requirements were satisfied and the claimants’
request for arbitration was inadmissible.191
1.2.3.1 Nationality
Each BIT and MIT defines national investors differently in order to benefit
from the treaty. While some definitions are based on the place of incorpora-
tion,192 others adopt a control-based approach that requires claimants to be con-
trolled by nationals of a given state.193 A third approach requires investors to
be incorporated and carry out certain business activities in the host country.194
Generally, the date of the injury (the dies a quo), which is usually the date of
the host state’s breach, is the critical date for evaluating whether a claimant sat-
189
The ad hoc Committee partially annulled an investment arbitration award for
finding the tribunal “illicitly expanded the scope of its jurisdiction by compensating the
claimant for 100 per cent of the investment, even though a third party was the benefi-
cial owner of 40 per cent of the investment.” Id. paras 266, 268.
190
The funder’s letter stated “[y]ou will subsequently have to sign the request for
arbitration when so requested by attorney Parodi at his office.” Ambiente Ufficio v.
Argentine, ICSID Case No. ARB/08/9, para 498 (May 02, 2013) (Santiago Torres
Bernárdez, dissenting), https://www.italaw.com/sites/default/files/case-documents/
italaw1487.pdf.
191
Id. para 499. The dissenter found that “the Claimants’ Request for Arbitration is
also inadmissible on a second account, namely by the vice of internal incongruities on
the essential question of the manifestation of the Claimants’ consent to arbitration.” Id.
para 501.
192
The International Energy Charter Consolidated Energy Charter Treaty (2016) art.
1(7), https://www.energycharter.org/fileadmin/DocumentsMedia/Legal/ECTC-en.pdf
(“a natural person having the citizenship or nationality of or who is permanently resid-
ing in that Contracting Party in accordance with its applicable law; (ii) a company or
other organization organized in accordance with the law applicable in that Contracting
Party”).
193
Agreement on encouragement and reciprocal protection of investments between
the Kingdom of the Netherlands and the Argentine Republic, Netherlands–Argentina,
Oct 20, 1992, art. 1(b) (1992) (“legal persons, wherever located, controlled, directly or
indirectly, by nationals of that Contracting Party”).
194
E.g., the 2004 U.S. Model BIT (defining enterprise as “an enterprise constituted
or organized under the law of a Party, and a branch located in the territory of a Party and
carrying out business activities there”). The absence of clear reference to funded dis-
putes when considering the nationality of the investor prompts some scholars to analo-
gize the requirement of the “origin of funds” for the investment itself, as distinct from
the arbitration funding. Pinsolle, supra note 172, at 643–44.

isfies the treaty requirements. Otherwise, an investor cannot avail themselves

of the treaty’s protection, even if it acquires the status of the protected investor
thereafter.195 However, the ICSID rules have adopted a different approach by
considering the date of consent to arbitration.196 This may affect the standing
issue if the funding agreement was concluded before consenting to arbitration.
One respondent argued that the funder, Burford, was the real party in inter-
est because it was the only party to potentially benefit from a hypothetical
award against the respondent.197 As such, the funder was argued not to meet the
basic jurisdictional requirements under the ICSID Convention because it was
not an investor that could invoke the treaty protection.198 In that way, Burford’s
benefit from the treaty was contrary to its purpose and impermissibly bypassed
the limits of Argentina’s and Spain’s consent to arbitral jurisdiction.199
However, the tribunal determined the jurisdiction on the date of instituting
the proceedings which, once established, could not be later defeated.200 It
found that the alleged transfer of the claimants’ interest to a funder that did
195
See Societe Generale v. Dominican Republic, UNCITRAL, LCIA Case No. UN
7927, Award on Jurisdiction, paras 106–107 (Sep 19, 2008), https://www.italaw.com/
sites/default/files/case-documents/ita0798.pdf; PhoenixAction Ltd v. Czech Republic,
ICSID Case No. ARB/06/5, Award, paras 67–68 (Apr 15, 2009), https://www.italaw
.com/sites/default/files/case-documents/ita0668.pdf; Mobil Corp., Venezuela Holdings,
B.V., Mobil Cerro Negro Holding, Ltd., Mobil Venezolana de Petróleos Holdings,
Inc., Mobil Cerro Negro, Ltd., and Mobil Venezolana de Petróleos, Inc. v. Bolivarian
Republic of Venezuela, ICSID Case No. ARB/07/27, Decision on Jurisdiction (June 10,
2010). Therefore, assigning an investment claim from an investor who lacked the req-
uisite nationality at the date of injury would not cure the lack of nationality require-
ment even if the assignee – the funder – is of the same requisite nationality because the
funder at the time of the injury – though satisfies the nationality requirement – did not
hold the investment. Mihaly International Corporation v. Sri Lanka, ICSID Case No.
ARB/00/2, Award, para 24 (Mar 15, 2002), https://www.italaw.com/sites/default/files/
case-documents/ita0532.pdf.
196
The ICISD Convention art. 25(2)(b). See National Grid plc v. The Argentine
Republic, UNCITRAL Arbitration, Decision on Jurisdiction, para 117 (June 20, 2006),
https://www.italaw.com/sites/default/files/case-documents/ita0553.pdf.
197
Teinver S.A., Transportes de Cercanías S.A. and Autobuses Urbanos del Sur S.A.
v. Argentine Republic, ICSID Case No. ARB/09/1, Decision on Jurisdiction, para 245
(Dec 21, 2012), https://www.italaw.com/sites/default/files/case-documents/italaw1090
.pdf.
198
This case involved criminal allegations against the funders. The funding agree-
ment provided for a power of attorney to King & Spalding for claimants as a con-
dition and any variation or termination of such power of attorney would entitle the
funder to terminate the funding agreement. Teinver v. Argentine, Award, para 225 (July
21, 2017), https://www.italaw.com/sites/default/files/case-documents/italaw9235.pdf.
However, the tribunal found the power of attorney valid. Id. para 230.
199
Teinver v. Argentine, Decision on Jurisdiction, para 245 (Dec 21, 2012).
200
Id. para 255.

not meet the nationality requirements could not affect its jurisdiction because
it occurred after the case was initiated, and hence, after the parties consented
to submit their dispute to ICSID.201 The result might have been different if
the funder had gotten interest in the claim before initiating the arbitration
proceedings.202 Respondent further argued that the agreement involved an
assignment of contentious claims, not just the rights to the proceeds of any
potential award,203 and the assignee should have appeared in the proceeding.
Respondent, as a potential debtor, should have been given prior notice of the
assignment.204 In the final award, the tribunal found that the claimants did
not assign their claims, and that the agreement could have no impact on their
standing.205
1.2.3.2 Financial interest

Aggrieved investors have concrete interests in the dispute. Placing the burdens
of instituting the investment claim in the hands of the investors relieves the
respondent states from having to distinguish the truly aggrieved claimants,
who have a direct standing in the proceedings, from others who lack such
standing. Accordingly, the host states would have legitimate expectations of
who the other party in the proceeding is. Considering funders relevant parties
to the proceedings may, therefore, disrupt the host state’s expectations, and
affect the treaty arbitration system in general.
It can be argued that states may resist any attempt to broaden the scope
of consent or the investors because third party funders in such cases would
benefit from the rights that were only intended for specific investors.206 In
addition, investors should have an economic interest to have a valid claim.
201
Id. para 256.
202
See, e.g., Pinsolle, supra note 172, at 647 (noting that if the assignment has taken
place after the initiation of the arbitration, and absent any other circumstances such as
fraud, there is in principle no issue of nationality, and no objection can be raised by the
respondent on that basis. However, if the assignment has taken place before the initia-
tion of the arbitration, there may be an issue of nationality depending on the nationality
of the third party).
203
Teinver v. Argentine, Award, para 237 (July 21, 2017).
204
Id.
205
Id. para 242.
206
Occidental v. Ecuador, paras 138–40 (Sep 20, 2012) (Stern, dissenting), https://
www.italaw.com/sites/default/files/case-documents/italaw1096.pdf. Ceskoslovenska v.
Slovak, Decision on Jurisdiction, para 32 (May 24, 1999). See generally David N.
Cinotti, How Informed Is Sovereign Consent to Investor-State Arbitration?, 30 Md. J.
Int’l L. 105 (2015).

However, they may not keep their economic interest in the investment after
commencing arbitration.207 One tribunal decided that:
absence of beneficial ownership by a claimant in a claim or the transfer of the eco-

nomic risk in the outcome of a dispute should not and has not been deemed to affect
the standing of a claimant in an ICSID proceeding, regardless of whether or not the
beneficial owner is a state party or a private party.208
TPAF may, therefore, generate concerns about the state’s consent to invest-
ment claims.209 Still, some arbitrators may consider funders for the form of
consent. In his dissenting opinion,210 one arbitrator found that the funder,
which was not an “investor” under the BIT, was intended to be the principal
beneficiary, along with the nominated lawyers, of the proceeds of any award.
The award proceeds were to be immediately paid to the nominated lawyers
for payment to the funder, and any outstanding invoices to the claimants.211
Although the funder was not an investor under the BIT and its funds were not
protected investments, the dissenting arbitrator found that the proceedings had
continued because the funder was assured of receiving significant amounts of
the potential award. The dissenter found that the funder, as a third party, was
abusing the ICSID system by bringing forward a claim contrary to the goals
of the Convention to make astronomical profits.212 Despite the funder’s invest-
ment in arbitration, it was not a protected investment under the BIT. Investors
do not invest in the territory of the host state to enable the payment of awards
to third party funders. The funders’ sole purpose is to speculate on the outcome
of the pending arbitration.213
207
See, e.g., GEA Group Aktiengesellschaft v. Ukraine, ICSID Case No. ARB/08/16,
Award, para 124 (Mar 31, 2011), https://www.italaw.com/sites/default/files/case
-documents/ita0356.pdf; Mondev International Ltd. v. United States of America, ICSID
Case No. ARB(AF)/99/2, Award (Oct 11, 2002), https://www.italaw.com/sites/default/
files/case-documents/ita1076.pdf; Jan de Nul N.V. and Dredging International N.V. v.
Arab Republic of Egypt, ICSID Case No. ARB/04/13, Decision on Jurisdiction (June
16, 2006), https://www.italaw.com/sites/default/files/case-documents/ita0439.pdf.
208
Ceskoslovenska v. Slovak, Decision on Jurisdiction, para 32 (May 24, 1999). See
also Gemplus, S.A., SLP, S.A. and Gemplus Industrial, S.A. de C.V. v. United Mexican
States, ICSID Case No. ARB(AF)/04/3 & ARB(AF)/04/4, Award, para 5–33 (June 16,
2010), https://www.italaw.com/sites/default/files/case-documents/ita0357.pdf.
209
Angelynn Meya, Third-Party Funding in International Investment Arbitration
The Elephant in the Room, in Third-Party Funding in International Arbitration 122, 123
(Bernardo M Cremades Román and Antonias Dimolitsa eds., 2013).
210
Teinver v. Argentine, (July 13, 2017) (Hossain, dissenting), https://www.italaw
.com/sites/default/files/case-documents/italaw9234.pdf.
211
Id. para 69.
212
Id. para 70.
213
Id. paras 72–74, 77.

1.2.4 Unconscionability
TPAF may be used to restore the balance of bargaining power between the
parties and avoid any unconscionability allegations between the disputing
parties. However, it may be abused to financially empower the funded
party, and create an unconscionability issue between the disputing parties.
The parties’ bargaining positions may be at issue in negotiating the funding
agreement or throughout the underlying process. The flow of new information
may warrant reconsidering the parties’ bargaining positions.214 This powerful
bargaining chip may, on one hand, entitle the funder to withdraw or cut off
funding if the investment is no longer lucrative. The funded party, on the other
hand, may not perform the terms of the funding agreement.
The real challenge is to strike a balance between the freedom to contract and
the justiciability of the funding terms. Some courts uphold the validity of the
funding agreement because it is not one with a tendency to corrupt, mislead,
or improperly influence the judgment of a public official in the performance
of their duties.215 Other courts consider the excessiveness of the fees charged
or the funder’s overreaching, which prevents recovery by the prevailing
party.216 To analyze what is fair and reasonable under the circumstances, courts
consider:
(1) whether the respective bargaining position of the parties at the time the agree-
ment was made was relatively equal, (2) whether both parties were aware of the
terms and consequences of the agreement, (3) whether the borrowing party may
have been unable to pursue the lawsuit at all without the financier‘s help, (4)
whether the financier would retain a disproportionate share of the recovery, and (5)
whether the financier engaged in officious intermeddling.217
Courts have generally become driven by the “fair and reasonable” analysis
of the agreement to finance a lawsuit, including the bargaining position of
the parties at the time of the agreement.218 The Second Circuit, for instance,
refused to consider a funding agreement a contract of adhesion because there
was no disparity in bargaining powers and the arbitral clause was not unrea-
214
215
Brush, 229 Ill. 144, at 152–53.
216
Osprey, Inc. v. Cabana Ltd. P’ship, 532 S.E.2d 269, 278 (S.C. 2000).
217
Id.
218
See, e.g., Saladini, 426 Mass. 231, at 237.

sonable.219 The defendant conscionably entered into the funding agreement and
had the right to cancel it, which he elected not to do.220
Additionally, funders may create unconscionable conditions not just
between the funding parties but also between the disputing parties.221 Funders
may enable the funded party to financially force the proceedings a specific
way. For instance, funders may advance all the costs of arbitration and arbitra-
tors’ fees in exchange for arbitrators deciding that they have jurisdiction over
the dispute. Funders are using their powerful financial position to tactically
direct the proceedings toward a specific outcome. This positional imbalance
may affect the conscionability of the arbitration agreements and in turn the
arbitration proceedings.222
1.2.5 Control argued

The use of TPAF may be impaired by economic factors.223 In arbitration, law
is generally enforced by private parties through a private framework, which
may raise fears about a deluge of nonmeritorious claims. This fear is exacer-
219
The dispute involved the validity of the arbitration clause in a litigation funding
agreement. Upon settling the dispute, defendant sued the funder alleging unconsciona-
bility of the funding agreement to extinguish the liens and void the funding agreement.
The funder then filed a petition seeking preliminary injunction and temporary restrain-
ing order. Spangler, 45 F. Supp. 3d 333, 633 F. App’x 544.
220
Id.
221
Uber Technologies Inc. v. Heller, 2020 SCC 16, para 133 (Can L II) (2020),
http://canlii.ca/t/j8dvf, (Brown J.’s reasons) (“What matters is Mr. Heller’s contrac-
tual relationship with Uber. Nor, with respect, is the availability of third‑party funding
a relevant consideration. A litigant does not need to canvass options for third‑party
financing – likely compromising the quantum of their claim in the process – to benefit
from the principle that contracting parties cannot preclude access to dispute resolution
according to law”). However, Justice Côté disagreed and found that “while Brown J.
maintains that the ICC Fees bar Mr. Heller from bringing a claim of any size against
Uber, there is no evidence before this Court regarding the actual size of Mr. Heller’s
claim against Uber or the possible availability of third party funding for the pursuit of
his claim. Neither is there any evidence of his income at the time of the formation of the
contract. There is, therefore, an insufficient evidentiary basis for Brown J.’s conclusion
given the testimonial evidence in the record. The analysis requires an understanding of
the parties’ ability to finance the pursuit of arbitration proceedings, and of the compara-
tive availability of litigation funding … Therefore, I cannot conclude, as Brown J. does,
that the ICC Fees act as an insurmountable precondition that prevent Mr. Heller from
commencing a claim.” Id. para 319 (Côté J.’s reasons).
222
E.g., Allen & Overy Litigation and Dispute Resolution Review, Costs of
third-party funding awarded in arbitration (Oct 19, 2016). See also Robert Blackett,
The Gift Of Gold – Recovery Of The Costs Of Third Party Funding In Arbitration (Jan
24, 2017).
223
Burford Litigation Finance Survey, 28 (2017) [hereinafter Burford 2017 Survey].

bated by the presence of a nonparty whose sole purpose is profiting from the
proceedings.224 Accordingly, TPAF, just like any new phenomenon, comes at
a price.225 Whether the price is worth paying is obviously a question of compet-
ing interests and policies. Each participant should expect new risks, liabilities,
and even benefits in an already complex arbitration system. One of those risks
is the possibility of extending a tribunal’s jurisdiction over funders. While
funders may call for more accountability and enhancement of the funding
industry by keeping funders beyond the reach of the tribunals, disputants may
call for more certainty. Some rules have responded to these divergent calls.226
These responses are wise enough not to adopt extreme approaches that may
denature the arbitration regime from its own intrinsic features.
Generally, control asymmetries may be conceptualized through the attorney–
client relationship, the disputing parties’ relationship, and the interaction with
arbitrators. The funder’s level of interference in these three contexts may
create conflicts, protract the proceedings, and generate more costs.227 Although
some institutions incorporate the funding arrangements into their arbitration
rules,228 funding agreements remain discrete from these rules. As a result of
this dualism, the funder’s degree of interference may differ as per these bodies
of law. The funder’s power over the claim may, in a given circumstance, be
greater than those available under the governing law or the institutional rules.
Funders may justifiably interfere in the case not only as to the portion of the
recovery they might get, but also to avoid any potential liability for damages or
costs against the funded party. The risk of the win–lose bargain would trigger
224
The U.S. Chamber of Commerce described these fears within the national liti-
gation context by stating that “[i]n a typical case [,] a hedge fund, acting on behalf of
already wealthy investors, will seek to accumulate yet more money – not by investing
in business enterprise or wealth creation – but by gambling on the outcome of a legal
action for damages. They have no interest in the justice or otherwise of [sic] the case –
only in the chances of success – as they will demand a share of the damages awarded
in return for putting up the stake money.” John Beisner, Jessica Miller & Gary Rubin,
Selling Lawsuits, Buying Trouble: Third-Party Litigation Funding in the United States,
U.S. Chamber Institute for Legal Reform, 3 (Oct 2009), https://instituteforlegalreform
.com/wp-content/uploads/media/thirdpartylitigationfinancing.pdf.
225
The ethical restraints over the scope of control are less encumbered in civil law
jurisdictions than common law jurisdictions. In Germany, for example, funders can
exercise significant control over the claim. Aren Goldsmith, Third-Party Funding in
International Dispute Resolution, 25 NYSBA Int’l L. Practicum 2, 114, 149 (2012).
226
ICSID Amendment Proposals, Working Paper No. 4, supra note 141.
227
Cf. Rogers, Ethics, supra note 93, para 5.27 (arguing that funders may sometimes
provide legal advice and so a de facto attorney–client relationship may exist).
228
Int’l Bar Ass’n, Guidelines on Conflicts of Interest in International Arbitration,
n. 6(b) (Oct 23, 2014), https://www.ibanet.org/Publications/publications_IBA_guides
_and_free_materials.aspx [hereinafter Conflicts of Interest].

the substantial economic interest of the funder in the dispute. The anticipated
benefits and the scope of control, coupled with the associated risks over the
funded claim, may arguably hold the funder to be the real party to the dispute.
Funders often contribute to the dispute through their disinterested and
dispassionate evaluation of the claim, which distinguishes them from both the
funded party and its representative.229 Funders therefore produce independent
and often neutral evaluation of the funded claim. This evaluation involves
assumptions and potential legal positions in light of the potential arbitrators
or expert witnesses. Given this, funders may actively interfere if the ongoing
procedure is at odds with their initial evaluation. This suggests that funders
may interfere to force their presumptive analysis. That said, the funders’ active
role may generate concerns not only on claim control but also on providing
legal advice, based on that preliminary evaluation by nonlawyers which may
constitute an illegal practice.
1.2.5.1 Control distinguished

Control can be conflated with other terms, such as monitor, influence, or inter-
fere. Drawing a line between these terms is not concern-free. Monitoring the
case assumes that funders follow up on the case to ensure consistency between
the case’s progress and their initial assessment to ensure that the costs of the
case do not exceed the allocated budgetary limits. Simply, funders should be
aware of any progress that relates to the funding arrangement, but not nec-
essarily the ongoing proceedings of the case. While some funders adopt the
“passive investors” approach,230 others tend to be more active.231 Most funders
may disintermediate the client dynamic and potentially make the process more
efficient and predictable, because clients on occasion may make litigation
decisions for reasons other than risk and economic return.232
While the parties may permit attorneys to exercise authority over day-to-day
decisions,233 they still retain control over the key decisions, including settle-

229
Odell, 192 N.C. App. 298, 665 S.E.2d 767 (finding that upon advancing the
230
funds, the funder stood passively and had no influence over the action).
231
Radek Goral, Justice Dealers: The Ecosystem of American Litigation Finance,
21 Stan. J.L. Bus. & Fin. 98, 113 (2015) (referring to ‘‘hands-off” and “hands-on” types
of funders). Some funders do not find anything wrong with exercising control over the
claim because they have an intimate understanding of the claim and how to pursue it.
Other funders suffice with monitoring the case, not necessarily influencing it, but may
have an interest in adding litigation support. Scherer et al., Third Party Funding in
Europe, supra note 28.
232
233
Model Rules of Prof’l Conduct R. 1.4 (1–2) cmt. (2017) (partially authorizing an
attorney to “take such action on behalf of the client as is impliedly authorized to carry
out the representation”).

ment decisions.234 Control is the primary element that may transfer TPAF into
claim assignment.235 It is measured by the funder’s level of influence over the
proceeding, settlement decision, and replacement of counsels. Repeat-funders
may have indirect control over arbitration when it is conducted by the same
counsel, because the funder in these cases could influence the conduct of the
case.236 Funders seem unlikely to remain passive if odd strategies are adopted
by the party’s counsel.237 This view supports the premise that even if funders
allege that they do not exercise any control over the proceedings, they still
may be prone to do so. At minimum, the funders’ profit-oriented realities may
necessitate indirect control over the case.
1.2.5.2 Control levelled

Control may vary depending on the level of interference and the stage at which
the interference is sought. Control may be exercised in negotiating the funding
arrangement by setting forth certain conditions to enter into the agreement. It
may also extend to the ongoing proceeding. A mere monitoring of the case
may be a first step toward an actual control if the funder finds that the case is
not being directed in the manner agreed upon.238 Control over arbitration may
also be manifested by the funder’s frequent communication with the attorneys
before the hearings, and by paying their legal fees.239
The issue of funder’s noncontrol is, therefore, questionable. This chilling
effect was observed by some courts where the funded party had to regularly
make funding requests to the funder throughout the litigation and seek input
and approval of strategic decisions.240 Funders have an opportunity at each
234
ABA Commission on ALF Ethics, supra note 86, at 26–27 (observing that lawyers
should not allow alternative litigation funders to influence their professional judgment
when it comes to litigation strategy).
235
Odell, 192 N.C. App. 298, 665 S.E.2d 767.
236
However, some funders distinguish themselves as only funding the client, who
has the ultimate decision-making authority in the litigation, unlike principal investing,
where the funder acquires the decision-making authority. See Burford 2018 Report,
supra note 7, at 28.
237
238
E.g, Campbells Cash, 229 CLR 386, para 63 (the Australian High Court tolerated
the funder’s nonexcessive control); Arkin v. Borchard Lines Ltd & Ors, EWCA Civ
655 (May 26, 2005), http://www.bailii.org/ew/cases/EWCA/Civ/2005/655.html (the
English court decided that TPF is desirable to increase access to justice, but fell short of
sanctioning the transfer of control to funders).
239
A party need not be represented by a fiduciary or agent in the proceeding to be
found a party’s privy, if it exercised some degree of actual control over the presentation
of a party’s case at the previous proceeding. Universitas Educ., 2014 WL 113702, at *2.
240
In re DesignLine Corp., 565 B.R. 341, at 342–43.

instance to decline the additional funding requests241 and are therefore empow-
ered to “kill the litigation.”242 These opportunities constitute an indirect control
over litigation.243 Funders may also exercise indirect control over the proceed-
ings by threatening to terminate the funding relationship. Termination provi-
sions244 entitle the funder to terminate the funding relationship if it “reasonably
ceases to be satisfied about the merits of the dispute,” “reasonably believes
that the dispute is no longer commercially viable,” or “reasonably believes that
there has been a material breach” of the contract.245 In that case, the problem
may exceed a mere termination of TPAF and require repayment of the money
exerted by the funded party. The nonrecourse arrangement applies only where
the funded party loses the case with no fault.
1.2.5.3 Control and rule of law

Coupled with the increasing need for disclosing the identity of the funder,
claim control may raise doubts about the identity of the real party in interest246
and so violate the “rule of law.”247 Pointed out by some scholars, corporations
may decide, for the best interests of the company, to cede control over a claim
in exchange for funding.248 In that case, the decisions involved in the claim will
no longer be subject to the ordinary corporate governance rules, but instead to
the funder who can exercise a degree of control over the corporate decisions on
the funded claim.249 The purpose of funding may be instrumental as well. The
actual use of the disbursed funds in litigation is material to the funders in order
to benefit from their bargains.250 Otherwise, funders would be deprived of the
Id. at 345.
241
Id. at 349.
242
243
Id. at 348–49.
244
Ass’n of Lit. Funders, Code of Conduct for Litigation Funders 4 (2016), http://
associationoflitigationfunders.com/wp-content/uploads/2014/02/Code-of-conduct
-Nov2016-Final-PDF-1.pdf.
245
Id.
246
Control of litigation is recognized by 36% of the respondents to the Burford
survey as a basic challenge to the use of litigation funding. See Burford 2017 Survey,
supra note 223, at 29.
247
In contrast, it is argued that concealing the identity of the real party in inter-
est cannot violate the rule of law because courts have enforced some contracts even
with the explicit concealment of the identity of the true party in interest. Anthony J.
Sebok, Should the Law Preserve Party Control? Litigation Investment, Insurance Law,
and Double Standards, 56 Wm. & Mary L. Rev. 833, 858–59 (2015). See also Arkin,
EWCA Civ 655.
248
249
Id.
250
Funding may be subject to wire fraud allegations. See, e.g., United States v.
Detling, No. 1:18-CR-309-LMM-LTW, 2019 WL 2284726, at *1 (N.D. Ga. May 29,
2019). See also Blinderman, supra note 5.

benefit of the bargain if the funding was obtained through an unauthorized

manner, or the funding was misused for an improper purpose.251 The funding
parties should be limited to the funding goals and should not abuse the courts’
tendency to allow the funding practice in a way that supports fraud and cor-
ruption. The funding parties, by doing so, undermine the philosophical, ethical
and practical grounds for allowing TPAF. Further, attorneys are supposed to
zealously and loyally252 represent their clients and exercise independent judg-
ment.253 Funders’ control may affect the independent judgment of the attorney
and the zealous representation of their clients.
Control challenges Claim control is the basic challenge to the rule of

law of the funding arrangement. Funders may not participate in conducting
the case either through developing arguments, drafting pleadings, participating
in the day-to-day case work, or making any strategic decisions in the case.
Failure to abide by the control limits would later risk the enforceability of the
arbitral award.254 Further, exceeding the limits of permissible interference is
a violation in some jurisdictions. For instance, where a funder’s share exceeds
50 percent of the value of the underlying claim, some jurisdictions invalidate
the funding agreement and challenge the enforceability of the arbitral award.255
In these jurisdictions, the funder’s entitlement may be construed as a de facto
assignment of the claim and in return triggers the identity of the real party in
interest. Once again, it may create a reasonable justification for a relevancy
requirement of the funding agreement to the underlying dispute, to identify
the funder’s level of control over the claim, and hence decide the disclosure
issue.256 It may also pose concerns about the expectations of the funding parties
in terms of the confidential nature of their arrangement.257
251
Detling, 2019 WL 2284726, at *1 (N.D. Ga. May 29, 2019).
252
Model Rules of Prof’l Conduct R. 1.3 cmt. 1 (2017). Further, as per the
California State Bar Opinion on litigation funding, a lawyer’s duty of loyalty is to the
client first and foremost, and that a funder cannot interfere with that duty. Andrew
Cohen, California State Bar opinion on litigation funding could have sway (Oct 26,
2020), https://www.burfordcapital.com/insights/insights-container/california-state-bar
-gives-opinion-on-legal-finance/.
253
Model Rules of Prof’l Conduct R. 5.4 (2017).
254
United Nations Comm’n on Int’l Trade Law, New York Convention on the
Recognition and Enforcement of Foreign Arbitral Awards art. V (1958).
255
56. Some decisions considered the fees in that case excessive and one element that man-
ifests funder’s control. E.g., Osprey, 532 S.E.2d 269.
256
Soc’y of Missionaries, 2014 WL 1715376. Cf. Miller, 17 F. Supp. 3d 711.
257
One court recognized the parties’ expectation of the confidential nature of their
funding correspondences. Berger, 2008 WL 4681834, at *1.

As such, the mere existence of the funding agreement should not necessarily
involve any prejudice to either party in the underlying dispute. However, if
the funding arrangement expressly or impliedly entitles funders to control the
conduct of the arbitration to serve their own interests,258 this may pose chal-
lenges to the rule of law that TPAF is supposed to support.
Advanced funding The idea of “advanced funding” avoids not only the
uncertainties of control but also the perils of the staged funding agreements,
i.e., funding litigation, not all at once, but on a quarterly basis. Staged funding
empowers the funder to weigh whether its involvement is still profitable and
is in the funder’s, rather than funded party’s, best interests.259 Otherwise, the
funder could decline to make additional advances. These repeated opportuni-
ties for the funder to cut off funding may be a result of a mere divergence of
the litigation from the funder’s initial expectations or just a simple election
to abandon the funding. In other words, it is a power to kill the litigation. For
example, an International Chamber of Commerce (ICC) tribunal ordered secu-
rity for costs on the ground that the disclosed agreement between the claimant
and the funder provided that the funder had no obligation to pay an eventual
costs award and that the funder could “walk away at any time.”260 The tribunal
in this case applied a broad fairness test since the claimant was unlikely to be
able to pay adverse costs and the funding agreement did not cover them. More
importantly, the tribunal found that the funder was discretionally empowered
to terminate the funding agreement at any time.261 In that sense, the funder was
indirectly controlling the litigation.
258
See generally Arkin, EWCA Civ 655.
259
Staged funding is in reality codifying the funder’s power to control through
a legal framework. Through this model, funders can terminate the funding arrangement
by legally exerting control over the decision to advance the funding or cut it in a later
stage. Rather, this model codifies the funder’s control through different stages that
entitle the funder to control the funding arrangement and legally terminate it. See supra
Chapter 2 (2.2).
260
X v. Y and Z, ICC Case, Procedural Order, para 40 (Aug 3, 2012), repro-
duced in Philippe Pinsolle, Third Party Funding and Security for Costs, 2 Cahiers de
L’Arbitrage 399 (2013) (TPF “makes it possible for the Funder to secure a comforta-
ble share of the proceeds for itself in case the litigation is successful while (i) taking no
risk whatsoever with regard to the costs that may have to be paid to the other party as
a consequence of an unsuccessful litigation and (ii) retaining the possibility to walk out
at any time by simply [‘]pulling the plug’ on [the Claimant] should it appear […] that
the case is going less well for the Claimant than had been anticipated.”).
261
Id. Another ICC tribunal ordered security for costs on the ground that “[i]f a party
has become manifestly insolvent and therefore is likely relying on funds from third
parties in order to finance its own costs of the arbitration, the right to have access to
arbitral justice can only be granted under the condition that those third parties are also

Forum selection clauses Funding arrangements may be subject to a forum

selection clause analysis. The United States Court of Appeals, Tenth Circuit,
addressed this scenario. It had been argued that litigation in Russia would, for
all practical purposes, be the “death knell” of the case because its litigation
funders would be unwilling to fund a lawsuit in Russia. While a party’s finan-
cial resources may be a relevant consideration, the court was less convinced
that the possible actions of present or future investors were relevant consider-
ations, especially considering the fact that the lawsuit was potentially worth
multiple billions of dollars.262 The court also found this argument speculative
because of the possible future actions with no specified third parties.263
Price paid The price a funded party pays may raise concerns. Normally,
the price is calculated as a share of the monetary outcome of the dispute, if
the claim is successful. However, the funded party may pay a “nonmonetary”
price. The nonmonetary price is measured by the degree of control that is
diminished from the funded party to the funder. This nonmonetary price may
affect the funding arrangement because the price is paid during the ongoing
dispute, not upon deciding or settling the dispute. Furthermore, the nonmone-
tary price is a sure price because it is paid by the funded party no matter what
the outcome of the dispute. So, this nonmonetary price is not subject to the
same risk calculation as the monetary price.
This practice of diminished control over the claim is tolerated in the attorney
funding practice, where the attorney seeks out potential plaintiffs to enforce
the law with a pecuniary interest in the claim outcome. Similarly, in TPAF,
a certain degree of control may be relinquished from the funded party to the
funder as a nonmonetary price for the funding arrangement.264 However,
ready and willing to secure the other party’s reasonable costs to be incurred.” X SARL,
Lebanon v. Y AG, ICC, Procedural Order No. 3, para 21 (July 4, 2008), 28
(1) ASA Bulletin 37 (2010).
262
Archangel Diamond Corp. Liquidating Tr. v. Lukoil, 812 F.3d 799, 804 (10th
Cir. 2016).
263
Id.
264
Some argue that the absence of complete control of the funders over the pro-
ceeding tempts funders to peddle sub-prime claims as high-return investments without
investors having a meaningful ability to assess the risk of the bundled claims. This
is a risk that may lead to a financial crisis, like what happened in 2008. Cf. Susan
Lorde Martin, Litigation Financing: Another Subprime Industry that Has a Place in
the United States Market, 53 Vill. L. Rev. 83, 87–88 (2008); Susan Lorde Martin,
The Litigation Financing Industry: The Wild West of Finance should be Tamed Not
Outlawed, 10 Fordham J. Corp. & Fin. L. 55 (2004) [hereinafter Martin, Litigation
Financing Wild West] (discussing abusive cases, including one of a funding arrange-
ment with an interest rate of 280%). Yet, this view ignores the true nature of TPAF that
is used to support the justice system.

this situation may create some conflicts within the proceeding. Although the
funder would have some degree of control over the claim, attorneys as well
exert certain levels of control, directly or indirectly, in conducting the case.
Presumptively, a funder and an attorney share the same goals, i.e., winning the
case. However, they may use different means to reach that goal. On another
note, attorneys do have an interest in maximizing their fees, especially hourly
fees, while funders may try to minimize the attorneys’ fees because they will
be offset from the case outcome. These divergent interests may prompt the
funder, for example, to understate the proceedings and settle the case, or the
attorney, for example, to overstate the proceedings and reach a decision. Given
that, attorneys are repeat players who work not only for monetary profit but
also to build up a reputation. Funders are more institutionalized repeat players
and care about their reputation.265 The funded parties’ interests are at uncertain
odds between these two concerns.
Party representation The ambiguity surrounding the funder’s right to

control the conduct of the claim creates a corollary problem with the party’s
representative. Although the party representative may not act as a represent-
ative of the funder, it is argued that the attorney in some instances is deemed
to be an agent of the funder.266 Unlike the fact that funding agreements do not
often provide for any attorney–client relationship at a structural level between
the funding parties, a de facto attorney–client relationship may exist due in
part to the funders’ teams, which often consist of attorneys. In many respects,
their claim evaluations are considered legal analysis or advice, particularly if it
involves substantive legal strategies, and the funded party or its counsel acted
265
The number 1 factor in selecting a legal finance partner is reputation. “I would
be willing to pay a premium to work with a trusted funder. I would need to have a lot of
confidence in the company providing the financing.” See Burford, 2020 Legal Finance
Report (Oct 19, 2020), https://www.burfordcapital.com/insights/insights-container/
2020-legal-finance-report/ [hereinafter Burford 2020 Report].
266

on that basis.267 A legal service may have actually been provided.268 However,
courts may have a strong reason for not creating an attorney–client privilege
between a funder and a funded party based solely on the funder’s financial
interest in the dispute outcome.269 Accordingly, the concerns of the attorney–
client privilege may arise only in the context of the funder’s interference
to force its legal views on the ongoing proceeding. Moreover, the funder’s
control over the claim throughout the proceeding may trigger the doctrines
of res judicata or collateral estoppel when enforcing the arbitral awards. For
instance, a defense may have been raised by a respondent during arbitration
to which the court found that the funder’s interests were represented through
the respondent.270 That said, the defenses that may be raised during the arbitral
proceedings over which the funder exercised control271 could not be raised
when enforcing the award by the funder because of res judicata or collateral
estoppel, which bars funders from raising these defenses.
1.2.5.4 Tolerable control

Generally, courts do not prohibit the forms of funding that facilitate a disputant
pursuing its claim, as long as the funder does not interfere with a “tendency
to pervert the course of justice” or “to pervert the remedial process of the law
into an engine of oppression.”272 It can be said that courts abhor the concept of
turning the justice system into a profit system through oppressing disputants
267
New York City Bar Ass’n, Formal Op. 2011-2, supra note 53. Restatement
(Third) of Law Governing Lawyers § 51 cmt. e (2000) provides: “[w]hen a lawyer or
that lawyer’s client invites a nonclient to rely on the lawyer’s opinion or other legal ser-
vices, and the nonclient reasonably does so, the lawyer owes a duty to the nonclient
to use care…” Susan R. Martyn et al., The Law Governing Lawyers National Rules,
Standards, Statutes, and State Lawyer Codes, 193 –94 (2011–2012). As pointed out
by some scholars, where the attorney independently contracts with a funder while
representing a client who seeks funds from that same funder, the funder may seek
damages from the attorney for the breach of duty of care owed to a funder as a non-
client. Anthony Sebok, Chapter 6: Sources of Attorney’s Duties to Third Parties in
the Litigation Funding Context, in Handbook on Third Party Funding In International
Arbitration, 83–84 (2018).
268
269
Grochocinski v. Mayer Brown Rowe & Maw LLP, 251 F.R.D. 316, 327 (N.D.Ill.
2008).
270
The doctrine of res judicata bars a party to a prior litigation from raising a claim
or defense in a later suit that was or should have been litigated in that prior proceeding.
Collateral estoppel or issue preclusion operates to bar adjudication of issues that have
been previously determined. Universitas Educ., 2014 W L 113702, at *2.
271
Id.
272
Gilman, 87 Ala. 691, at 698–702.

by any disguising form of funding.273 Therefore, a balance should be struck

between the funder’s interference and the party’s control. This balance may
be maintained by the terms of the agreement.274 The funding parties’ disagree-
ments may be resolved by referring to binding arbitration, which may preserve
the legitimacy of the funding arrangement.275
Procedurally, in the treaty arbitration, the situation is different. Article 37(2)
of the ICSID Rules provides for nondisputing parties’ submissions.276 Amici
plays a crucial role in investment arbitration. If not the standard, many tribu-
nals have permitted forays into amicus submissions.277 This may arguably open
the door for permitting funders to submit their views on the dispute in case they
disagree with the funded party, rather than interfering with the funded party’s
conduct over the claim. In that case, both parties may offer their views on the
conduct of the proceedings and the associated substantive arguments. This
may promote a transparent and efficient process in the treaty arbitration.
As such, the funder’s interference in the underlying proceedings is not per
se an exercise of control.278 Interference should not be equivalent to control
where the claimant retains the sole legal right to initiate the proceedings.279 In
addition, the interference in settling the funded dispute is not per se control of
the settlement decision where the funder has a limited role in the settlement.
For instance, where the plaintiff can settle the dispute with the consent of
the funder, and in case of disagreement they refer the settlement decision
to a third party expert. In this case, courts do not consider such interference
a form of control because the funder does not have the final authority to decide
the settlement if the plaintiff disagrees.280 Where the funder is found to have
the final authority to settle, it is a manifestation of control that may generate
adverse consequences. For instance, the funder may be elevated to a party to
the dispute.281 The same analysis applies to the final authority to approve coun-
273
Even in class actions, courts tend to certify the class which is funded by a third
party as long as the funder does not control the litigation. Trull v. Dayco Prod., LLC,
214 F.R.D. 394, 404 (W.D.N.C. 2003).
274
SecurityPoint Holdings, Inc. v. United States, No. 11-268C, 2019 WL 1751194,
at *5 (Fed. Cl. Apr. 16, 2019).
275
Id.
276
ICSID Convention art. 37(2).
277
Dinah Shelton, The Participation of Nongovernmental Organizations in
International Judicial Proceedings, 88 Am. J. Int’l L. 611 (1994).
278
WAG Acquisition, LLC v. Multi Media, LLC, No. CV142340ESMAH, 2019 WL
3804135, at *1 (D.N.J. Aug. 13, 2019).
279
Id.
280
Id.
281
Abu-Ghazaleh, 36 So. 3d 691.

sels for plaintiffs or to vote for filing the litigation.282 Further, when the funder
substantially controls the litigation, courts invalidate that arrangement.283
Clearly put, the level of control over the claim is key.284 The funder’s financial
interest does not of itself support any claim that a funder is likely to interfere
with the settlement.285 Absent any actual exercise of control by the funder over
the lawsuit, the funding arrangement should be valid.286
The ability to continue the litigation may blur the thin line between inter-
ference and control. One court found that the fact the funder had voting rights
to continue litigation did not create control because these voting rights did
not confer exclusionary rights to the funder. The discontinuance of litigation
would not result from a meaningful exercise of the funder’s control but instead
would be a product of circumstance.287 Interestingly, the court characterized
the funding voting rights as “future contingencies” similar to potential future
interests that did not constitute a significant transfer of the plaintiff’s rights.288
These interference rights may “reflect an intention to allow to protect [the
funder’s] investment” in litigation, which is fundamentally different from
conferring substantial rights in the underlying dispute itself.289 These sensitive
issues may call for more educational duties for TPAF users and the boundaries
that they should observe.290
2. ARBITRATORS’ DECISION-MAKING
Despite its efficacy, TPAF is not risk-free. Disputes driven by TPAF may
raise a host of decision-making concerns, mostly in relation to the arbitrators’
approaches to deciding funded disputes. In principle, the quality of the arbitra-
282
Id.
283
Having a strange funder in the litigation does not necessarily mean that it was an
officious intermeddler, unless the funder offers unwanted advice or otherwise attempts
to control the litigation for the purpose of stirring up strife or continuing a frivo-
lous lawsuit. See In re Hall, No. BAP NV-10-1407-JUHJO, 2011 WL 4485774, at *1
(B.A.P. 9th Cir. Aug. 22, 2011).
284
Id.
285
Id.
286
Id. See also Fast Trak Inv. Co., LLC v. Sax, No. 4:17-CV-00257-KAW, 2018 WL
2183237, at *6 (N.D. Cal. May 11, 2018).
287
WAG Acquisition, 2019 WL 3804135.
288
Id.
289
Id.
290
A California State Bar Opinion reminded lawyers that “they must provide com-
petent advice and encourages them to seek education on legal finance and how it may
impact litigation. This education can be sought from legal finance providers them-
selves, as many (including Burford) offer educational materials and continuing legal
education to lawyers.” Cohen, supra note 252.

tion regime depends on the quality of the decisions that arbitrators, as human
beings,291 make.292 Understanding the arbitrators’ decision-making process is
crucial to understanding the outcome of a particular case with the existence of
TPAF.293 By becoming “guardians of the international commercial order,”294
it is inevitable to determine how arbitrators decide the funded disputes and,
more specifically, whether they can be fair from legal and nonlegal perspec-
tives. Arbitrators’ decision-making cannot be influenced by something they
do not know. The least problematic scenario is where arbitrators freely decide
a dispute with nondisclosed TPAF. Here, an arbitrator does nothing to pre-
judge the funded claim or the opposing party’s position. Practice now dictates
disclosure of at least the existence of TPAF. Still, arbitrators may commence
the proceedings neutrally, and upon disclosing TPAF, hope to remain unaf-
fected by the existence of TPAF. But they will inevitably be involved in one
way or another with the funders. Arbitrators then may change their views from
pre-disclosure of TPAF to post-TPAF disclosure.
Although arbitrators enjoy broad discretion in conducting the proceedings,
they have an obligation to be impartial.295 Arbitrators may less likely be fully
impartial in the case of conflicts with third party funders.296 In analysis, the
potential conflict of interests should not be based merely upon the existence of
291
Robert M. Cover, Nomos and Narrative, 97 Harv. L. Rev. 4, 67 (1983) (“Judges
are like the rest of us. They interpret and they make law. They do so in a niche, and
they have expectations about their own behavior in the future and about the behavior of
others”). Richard A. Posner, The Jurisprudence of Skepticism, 86 Mich. L. Rev. 827,
858–59 (1988) (noting that “legal reasoning is not a branch of exact inquiry in an inter-
esting sense … It is for the most part a branch of practical reason, and the methods of
practical reason that it uses are the same rough tools that we use in coping with every-
day life. There is no distinctive methodology of legal reasoning”).
292
See generally Chris Guthrie et al., Inside the Judicial Mind, 86 Cornell L. Rev.
777, 784 (2001).
293
As Jerome Frank clearly stated about judges’ decision-making process: if judi-
cial decisions are “based on judge’s hunches, then the way in which the judge gets
his hunches is the key to the judicial process. Whatever produces the judge’s hunches
makes the law.” Jerome Frank, Law and the Modern Mind 104 (1930).
294
Julian D. M. Lew, Applicable Law in International Commercial Arbitration:
A Study in Commercial Arbitration Awards, 540 (1978).
295
Nigel Blackaby, Constantine Partasides et al., Redfern and Hunter on International
Arbitration, 254 (6th Ed. 2015) [hereinafter Blackaby et al., Redfern & Hunter].
296
In disclosing the arbitrator’s equity ownership with the funders, it has been
suggested that the concentrated effect of funding on a claim suggests that TPAF in
the aggregate creates a higher risk of bias than equity investments at the same level.

TPAF, but rather by using an objective standard through which an arbitrator

may reasonably be influenced by the existence of this external funding.297
Commonly, the existence of TPAF may be disclosed without raising any
issues.298 Somewhat more complicated is the scope and extent of disclosing
TPAF. Here, there is a risk of informational asymmetries between the parties
and the arbitrators. No doubt arbitrators presumptively make their own deci-
sions after a wary canvass of the detailed and complicated records that reflect
a high level of accuracy in their decision-making.299 However, arbitrators, no
matter how experienced and well trained, occasionally make mistakes.300 These
mistakes may be systematic errors that the public would expect arbitrators to
avoid.301 To appreciate some of these mistakes, assume a situation in which an
297
See Int’l Court of Arbitration, Note to Parties and Arbitral Tribunals on the
Conduct of the Arbitration under the ICC Rules of Arbitration (2017), https://iccwbo
.org/publication/note-parties-arbitral-tribunals-conduct-arbitration.
298
Infinito Gold Ltd. v. Republic of Costa Rica, ICSID Case No. ARB/14/5, Decision
on Jurisdiction, paras 30–31 (Dec 4, 2017), https:// www .italaw
.com/
sites/
default/
files/case-documents/italaw9384.pdf. See also Oxus Gold v. Republic of Uzbekistan,
UNCITRAL, Award, para 127 (Dec 17, 2015), https://www.italaw.com/sites/default/
files/case-documents/italaw7238_2.pdf.
299
This is manifested by the requirement of reasoned awards in arbitration rules.
E.g., ICC Arbitration Rules art. 32(2) (“The award shall state the reasons upon which it
is based”). The ICSID Convention art. 48(3) (“[t]he award shall deal with every ques-
tion submitted to the Tribunal, and shall state the reasons upon which it is based”). The
ICSID Convention art. 47(1) (“[t]he award shall be in writing and shall contain: (i) the
decision of the Tribunal on every question submitted to it, together with the reasons
upon which the decision is based…”).
300
In general, few studies have been conducted on the decision-making process.
Donald C. Nugent, Judicial Bias, 42 Clev. St. L. Rev. 1, 3 (1994). Arbitrators as judges
of facts and law may be compared with trial court judges. Most of the empirical studies
that have been conducted on judicial decision-making have focused on the appel-
late judges, not trial court fact-finding. See John J. Brunetti, Searching for Methods of
Trial Court Fact-Finding and Decision-Making, 49 Hastings L.J. 1491 (1998) (observ-
ing little literature on the trial court fact-finding). Theodore Eisenberg, Differing
Perceptions of Attorney Fees in Bankruptcy Cases, 72 Wash. U. L.Q. 979, 982 (1994)
(studying the egocentric bias on bankruptcy judges and lawyers). Roselle L. Wissler et
al., Decisionmaking About General Damages: A Comparison of Jurors, Judges, and
Lawyers, 98 Mich. L. Rev. 751, 776 (1999) (analyzing the factors that contribute to
assessing the damages and the severity of injuries by judges).
301
Louis Kaplow, The Value of Accuracy in Adjudication: An Economic Analysis,
23 J. Legal Stud. 307 (1994) (“Even if precise quantification of various benefits of
accuracy is impossible, decision-making will be enhanced by understanding why accu-
racy may be desirable”). Normally, the appeal is the regular response to the systemic
errors. Steven Shavell, The Appeals Process As A Means of Error Correction, 24 J.
Legal Stud. 379 (1995). However, in arbitration, there is no appellate mechanism that
helps in correcting arbitrators’ factual errors.

arbitrator considers TPAF an element in deciding an application for reliefs by

either party. In practice, however, arbitrators and funders evaluate claims that
involve similar points of facts or law. Arbitrators are asked to evaluate and
decide a claim that was evaluated before by a third party, i.e., the funder. What
is a sitting arbitrator in this situation to do? It is facile to go on about intricate
webs of legal issues and TPAF considerations that arbitrators supposedly must
disentangle. Like any process, TPAF may create a cognitive illusion that lends
itself particularly well to certain situations, well enough to some arbitrators,
and not at all to many others.
Cognitive illusions identify the predictable errors that arbitrators may
commit in processing the information in their minds.302 The systematic errors
in arbitrators’ decisions may result primarily from these cognitive illusions.303
Of course, cognitive illusions are not the only factors that may influence arbi-
trators’ decision-making. However, the influence of cognitive illusions may,
with other factors, adversely impact the decision-making process – an impact
that would be too challenging to be negligible. Therefore, it is equally impor-
tant to understand how arbitrators think, both rationally and irrationally, and
whether they may change their minds predictably or unpredictably concerning
the existence of TPAF in the dispute they are asked to decide.304 There are no
guarantees, however, against the impacts of cognitive illusions. Arbitrators
may depart from their duty of neutrality if they fall prey to the cognitive short-
cuts that TPAF may create. As such, TPAF disclosure may affect the arbitra-
tor’s evaluation of the final decision if it reveals information that alters either
the arbitrator’s evaluation of the parties’ arguments, the chances of prevailing
by one party over another, or even the damages amount an arbitrator was most
likely going to rule for a party. Reality is more complex. Despite the absence
of empirical evidence, arbitrators often make decisions under conditions of
302
Amos Tversky & Daniel Kahneman, Judgment Under Uncertainty: Heuristics
and Biases, 185 Science 1124, 1124–31 (1974) [hereinafter Tversky & Kahneman,
Heuristics and Biases] (heuristics are patterns of thinking where the brain constructs
mental shortcuts to process information in an efficient manner).
303
Guthrie et al., supra note 292, at 778 (finding people frequently “fall prey to cog-
nitive illusions that produce systematic errors in judgment”).
304
Id. at 821 (analyzing some decisions that manifest the impact of the cognitive
illusions including the res ipsa loquitur doctrine that appears to be a product of overreli-
ance on the representativeness heuristic and the prudent investor rule on cases of trustee
liability which was a product of the hindsight bias and concluding that the “motivation,
detail, and resources that judges have available in deciding cases do not necessarily
enable them to avoid the effects of cognitive illusion”).

uncertainty and time constraints305 that may push them to rely upon the cogni-
tive or mental shortcuts.306
Although arbitrators may have various schools of thought in deciding
cases,307 this section identifies the existence of a funder as an element of cog-
nitive bias that may generate consistent and predictable mistakes on the part
of the arbitrator just due to the existence of an external funder.308 It is difficult
to design a framework that effectively reconciles the desire of issuing awards
unfettered by TPAF, with the competing desire to use TPAF while preserving
the fundamental principles of arbitration, i.e., justice and efficiency. Add these
concerns together, a faith in TPAF begins to seem somewhat misplaced. Still,
if certain basic assumptions about human reality are considered, the risks that
TPAF may pose on the arbitrators’ decision-making should become obvious.
These risks will now be considered.
2.1 TPAF Cognitive Illusion
Human minds are “intricate evolved machine[s],” and their evolution may
guide behavior.309 The art of persuasion “requires empathy as well as
a deep understanding of human psychology and the complex emotional
and intellectual processes that result in perception and attitude change.”310
With the advancement of sociological jurisprudence311 and the behavioral
decision theory,312 the discussion of the psychological impact of TPAF over
the decision-maker, which often escapes the attention of arbitration users,
305
The average duration of an LCIA arbitration is 16 months. LCIA Releases Costs
and Duration Data (Nov 3, 2015), https://www.lcia.org/News/lcia-releases-costs-and
-duration-data.aspx.
306
Yet, with no empirical evidence, an assertion that cognitive illusions affect arbi-
trators remains mere conjecture.
307
Richard A. Posner, What Do Judges and Justices Maximize? (The Same Thing
Everybody Else Does), 3 Sup. Ct. Econ. Rev. 1 (1993) (discussing the behavior of
judges using a “model in which judicial utility is a function mainly of income, leisure,
and judicial voting”). See also Edward L. Rubin, The New Legal Process, the Synthesis
of Discourse, and the Microanalysis of Institutions, 109 Harv. L. Rev. 1393 (1996).
308
Hal R. Arkes et al., Eliminating the Hindsight Bias, 73 J. Applied Psychol. 305,
306 (1988).
309
Bret Rappaport, A Lawyer’s Hidden Persuader: Genre Bias and How It Shapes
Legal Texts by Constraining Writers’ Choices and Influencing Readers’ Perceptions,
22 J.L. & Pol’y 197, 217–18 (2013).
310
Kathryn M. Stanchi, The Science of Persuasion: An Initial Exploration, 2006
Mich. St. L. Rev. 411, 412 (2006).
311
Jerome Frank, Law And The Modern Mind (2009).
312
Donald C. Langevoort, Behavioral Theories of Judgment and Decision-making
in Legal Scholarship: A Literature Review, 51 Vand. L. Rev. 1499, 1500 (1998).

has become indispensable.313 Arbitrators’ approaches toward the underlying

dispute are consciously oriented by different ideologies. Some arbitrators
may be textualists, others may be contextualists, and some others may adopt
a mix of both approaches.314 Moreover, arbitrators may vary in interpreting the
existence of TPAF.
Humans generally have a “heuristics and biases” approach to informa-
tion processing.315 Heuristic cases involve essential elements of information
processing and may lead to biases.316 While an arbitrator’s independence
is assessed by an objective standard,317 an arbitrator’s impartiality may be
governed by a subjective one to assess bias. Hence, arbitrators may be poorly
equipped to measure the impact of the existence of TPAF on their own assess-
ment of the case.
Funders apparently have a baseline preference for not disclosing TPAF due
to a suspicion that disclosure would adversely influence the arbitrators,318 and
may lead to “frivolous defences,” which may in turn increase the costs of the
proceedings. Arbitrators may have sufficient knowledge of irrelevant facts and
circumstances so as to increase the likelihood that they would be influenced
by factors other than the underlying merits of the dispute.319 Although the
comparative financial powers of the parties should not generally be considered
in deciding the dispute,320 this may not be the case when it comes to TPAF.321
For instance, TPAF may prompt arbitrators to overstep the jurisdictional
313
Russell B. Korobkin & Thomas S. Ulen, Law and Behavioral Science: Removing
the Rationality Assumption from Law and Economics, 88 Calif. L. Rev. 1051 (2000)
(arguing to better understand the human behavior through behavioral and sociocultural
theories than the rational choice theory).
314
Textualists focus primarily on the plain meaning of the language, contextu-
alists consider a wider array of information outside the text in order to comply with
the parties’ intended purpose. Shahar Lifshitz & Elad Finkelstein, A Hermeneutic
Perspective on the Interpretation of Contracts, 54 Am. Bus. L.J. 519, 519–20 (2017).
315
Tversky & Kahneman, Heuristics and Biases, supra note 302, at 1124–31 (heu-
ristics are patterns of thinking where the brain constructs mental shortcuts to process
information in an efficient manner).
316
Id. at 1124–26, 1128, 1131.
317
United Nations Comm’n on Int’l Trade Law, UNCITRAL Rules on Transparency
in Treaty-based Investor-State Arbitration (2013) art. 11, https://www.uncitral.org/pdf/
english/texts/arbitration/arb-rules-2013/UNCITRAL-Arbitration-Rules-2013-e.pdf
[hereinafter UNCITRAL Arbitration Rules] (“an arbitrator … shall disclose any cir-
cumstances likely to give rise to justifiable doubts as to his or her impartiality or
independence”).
318
319
Conflicts of Interest, supra note 228, n. (2)(a).
320
Cherry v. Champion Int’l Corp., 186 F.3d 442, 448 (4th Cir. 1999).
321

phase without fully considering the jurisdictional objections, based on the fact
that the funder has objectively vetted the case. Normally, judges utilize some
assessment mechanisms before reaching the merits of the underlying dispute,
such as dismissing a case based on plaintiff’s failure to state a claim, or grant-
ing a summary judgment motion.322 In these cases, judges ask whether the
plaintiff would prevail if the facts claimed were true. Analogically, arbitrators
may ask whether a claimant would prevail due to the existence of a funder who
assessed the facts and concluded that the plaintiff would prevail with these
facts. In summary judgments, judges may grant a motion where the evidence
is extremely one-sided.323 Similarly, the existence of funders may imply to
arbitrators that the case is extremely one-sided. This section proceeds with
analyzing arbitrators’ approaches (2.1.1), and their cognitive biases (2.1.2).
2.1.1 Arbitrators’ approaches

The decision-making process may be subject to external and internal factors.
While external factors refer to influences such as cultural and social factors,
internal factors refer to personal intuition of what is a fair and proper out-
come,324 and the players’ behavior. Arbitrators should decide the dispute with
a complete regard to the legal conventions, despite the potential influence of
their subconscious personal views. Nevertheless, the system of legal rules
is constructed in a way that allows for nonlegal factors to contribute to the
dispute decision-making.325 Even if the decisions of the arbitrators turn out
to be identical, delving more deeply into the reasoning behind their decisions
may reveal a divergence in their legal reasoning given their distinguished
orientations.
2.1.1.1 Arbitrators: conventional v. liberal

Given the fact that identical outcomes do not necessarily reflect equivalent
reasoning, an analysis of the arbitrator’s impartiality considering the existence
322
Fed. R. Civ. Proc. R. 12 (Motion to Dismiss) & R. 56 (Summary Judgment).
323
Payne v. Orton, No. 1:14-CV-00144, 2016 WL 5404635, at *5 (M.D. Tenn. Sept.
27, 2016).
324
Cf. Joseph A. Reinert, Esq., The Myth of Judicial Activism, Vt. B.J. 35, 36 (2004).
325
Brian Z. Tamanaha, A Socio-Legal Methodology for the Internal/external
Distinction: Jurisprudential Implications, 75 Fordham L. Rev. 1255, 1258 (2006) (“in
a subset of cases the legal rules are so completely open that a decision requires that
a judgment be made based upon nonlegal factors. Note the realism of these conditions,
which deny a mechanistic view of judicial decision-making”).

of TPAF is always required.326 This analysis is significant for two reasons.327

First, with the prerogative of dissenting or assenting,328 arbitrators in the same
tribunal may pursue different approaches to the existence of TPAF.329 This
factor may impact the process and the outcome of the dispute, or even the
continuity of the funding arrangement. In RSM v. Saint Lucia, it was noted
that the claimant’s funding was terminated because the party-appointed arbi-
trator, who was blatantly against TPAF, remained on the tribunal, after his
challenging request was denied.330 It was alleged that this was the reason why
the claimant did not provide security for costs.331 Second, tribunals’ decisions
have recently become seminal references for future tribunals, which creates
a hidden force of implied precedents.332 For instance, the tribunal in RSM v.
Grenada declared insufficient lack of assets to order security for costs by
relying on the Lihananco and Casado decisions.333 Therefore, the rationale of
one tribunal on TPAF may impact other tribunals.334 The parties’ behaviors
326
See, e.g., Eskosol v. Italian Republic, ICSID Case No. ARB/15/50, Decision on
Provisional Measures (Apr 12, 2017) (comparing the facts and circumstances of the
dispute with the ones in RSM v. Saint Lucia).
327
Some investor–state tribunals have addressed the scenario that involves funding
to a project underlying the dispute; however, this is different from the arbitration
funding model discussed in this book. See, e.g., Crystallex Int’l Corp. v. Bolivarian
Republic of Venezuela, ICSID Case No. ARB(AF)/11/2, Award (Apr 4, 2016), https://
www.italaw.com/sites/default/files/case-documents/italaw7194.pdf; Rusoro Mining
Ltd. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/12/5, Award (Aug
22, 2016), https://www.italaw.com/sites/default/files/case-documents/italaw7507.pdf.
328
RSM Production Corp. v. Saint Lucia, ICSID Case No. ARB/12/10 (Aug 12,
2014) (Griffith, assenting), https://www.italaw.com/sites/default/files/case-documents/
italaw3318.pdf.
329
RSM v. St. Lucia, ICSID Case No. ARB/12/10, Decision on Annulment,
para 114 (Apr 29, 2019), https://www.italaw.com/sites/default/files/case-documents/
italaw10600.pdf.
330
Id.
331
Id.
332
Similarly, Eskosol v. Italian Republic, ICSID Case No. ARB/15/50, Decision
on Provisional Measures (Apr 12, 2017). See also Tai-Heng Cheng, Precedent and
Control in Investment Treaty Arbitration, 30 Fordham Int’l L.J. 1014, 1016 (2007)
(“although arbitrators in investment treaty arbitration are not formally bound by prec-
edent in the same manner as common-law judges, there is an informal, but powerful,
system of precedent that constrains arbitrators to account for prior published awards
and to stabilize international investment law”).
333
Rachel S. Grynberg, Stephen M. Grynberg, Miriam Z. Grynberg & RSM
Production Corporation v. Grenada, ICSID Case No. ARB/10/6, Decision on Security
for Costs, para 5.19 (Oct 14, 2010), https://www.italaw.com/sites/default/files/case
-documents/ita0725.pdf.
334
See, e.g., Eskosol v. Italian Republic, ICSID Case No. ARB/15/50, Decision on
Provisional Measures (Apr 12, 2017).

may also contribute to deciding the issues. For instance, in deciding a secu-
rity for costs application, one tribunal took into consideration the claimants’
behaviors by finding that claimants were not found by any evidence to avoid
any previous cost awards or similar obligations.335 Further, the behavior of one
claimant more than a decade ago, in unrelated proceedings, could not support
that claimants would use every available means to avoid enforcement of any
potential costs award in the future.336
As such, the funders’ involvement in the arbitral process crafts two types of
arbitrators. First, there are conventional arbitrators, who decide the merits of
the case using internal factors, including the framework of legal rules, to come
up with an outcome. They give no regard to any external factor, such as TPAF.
A representative example of conventional arbitrators in the TPAF context is
the decision in Ioannis Kardassopoulos and Ron Fuchs v. Georgia, where the
tribunal found that it knows of “no principle why any … third party financing
arrangement should be taken into consideration in determining the amount
of recovery by [parties] of their costs incurred in arbitration proceedings.”337
Second, there are liberal arbitrators, who decide the case using not just a legal
framework but also a conscious ideology to achieve a preferred outcome.
Some argue that arbitrators are required to take into account the manifold
capital structures, financial processes, and third party funders.338 The liberal
arbitrator approach was implicitly referred to in RSM v. Saint Lucia, where
the claimant argued that the arbitrator was partial and biased against TPAF
by referring to the arbitrator’s approach of stepping outside his role as an
impartial and open-minded arbitrator.339 Operating on the premise that liberal
arbitrators may not be restricted by the legal framework, liberal arbitrators may
employ the existence of TPAF as an external factor, which can be the civil
analogue of expert opinions,340 to achieve a more desirable outcome. Further,
liberal arbitrators may not abide by the fact that funders are irrelevant parties
to the underlying dispute and may consider them parties to the dispute, even
for costs purposes only.341 Once disclosed, even the mere existence of TPAF
can empanel the members of the tribunal to issue a particular decision. The
335
RSM v. Grenada, ICSID Case No. ARB/10/6, Decision on Security for Costs,
para 5.24 (Oct 14, 2010).
336
Id.
337
Kardassopoulos v. Georgia, ICSID Case No. ARB/05/18, Award, para 691 (Mar
3, 2010).
338
Jonas Von Goeler, Third-Party Funding in International Arbitration and Its
Impact on Procedure, 5 (2016).
339
RSM v. St. Lucia, ICSID Case No. ARB/12/10, Decision on Disqualification of
Dr. Griffith, para 44 (Oct 23, 2014).
340
Mohamed Sweify, Against Disclosure, 31 S Cal. Interdisc. L.J. 509 (2021–2022).
341

funder’s evaluation of the dispute may be unconsciously struck by arbitrators

in their decision-making process. In this sense, justice may not be done given
the effects TPAF disclosure has on the arbitrators’ decision-making process.
Despite some sound potential criticism, these scenarios are not uncommon.
An example of this situation is the Assenting Opinion of Dr. Gavan Griffith
in RSM v. Saint Lucia, which led the party to challenge him for partiality
against the funded claimants.342 This analysis shows cases with a significant
cognitive impact on some arbitrators once TPAF is present, with the possibility
of considering the irrelevant funders parties to the dispute even for costs only.
This may categorize cases that are funded and cases that are not, as though all
cases should not be unequal simply because arbitrators happen to find TPAF in
some cases and not in the others. Such category should create inconsistencies
and deviate arbitrators from their main task of deciding the underlying dispute
unfettered by any other factors.
2.1.1.2 Funding experts

As was just considered, liberal arbitrators may subconsciously consider TPAF
in weighing both parties’ arguments. A funder’s assessment of the claim may
be substantively compared with expert opinions.343 Generally, institutional
rules allow the parties to rely on their own chosen experts.344 Given the fact that
342
RSM Production Corp. v. Saint Lucia, ICSID Case No. ARB/12/10, para 18 (Aug
12, 2014) (Griffith, assenting). See also RSM v. St. Lucia, ICSID Case No. ARB/12/10,
Decision on Disqualification of Dr. Griffith, para 44 (Oct 23, 2014).
343
A funder’s evaluations can be compared with expert determination mechanisms.
Cf. Brian C. Willis, Resolving Disputes by Expert Determination: What Happens
When Parties Select Appraisers, Accountants, or Other Technical Experts to Decide
Disputes, Fla. B.J., 34 (2017) (“Expert determination is a form of dispute resolution in
which the parties use a subject-matter expert, rather than a judge, mediator, or arbitra-
tor with legal training, to decide the dispute. It may be the least known form of alter-
native dispute resolution. In fact, it’s been called the ‘secret alternative to arbitration.’
While the term ‘expert’ may call to mind the concept of an expert witness, expert deter-
mination actually has its roots in the English common law of ‘valuation’ or ‘appraise-
ment’”). Matthew W. Swinehart, Reliability of Expert Evidence in International
Disputes, 38 Mich. J. Int’l L. 287, 288 (2017) (“reliance on experts has increased dra-
matically in the last forty years. Human activity itself has become more complex – more
scientific, more specialized, more reliant on experts – and so too have disputes that arise
out of that activity”).
344
IBA Taking of Evidence art. 5(2)(c); UNCITRAL Arbitration Rules art. 27(2).
See also Chartered Institute of Arbitrators, Protocol for the Use of Party-Appointed
Expert Witnesses in International Arbitration (2007). A number of investment arbitra-
tion decisions have relied on amicus curiae submissions presenting scientific and other
technical evidence. See, e.g., Philip Morris Brands Sarl v. Uruguay, ICSID Case No.
ARB/10/7, Award, paras 394, 396 (2015) (relying on a World Health Organization
submission).

arbitrators sometimes solicit expert nominations from the disputing parties,

based on the identities and credentials of the potential experts,345 arbitrators
may be subconsciously inclined to view the funder’s evaluation of the claim
as a neutral expert opinion even if they were not procedurally appointed to
provide expert opinions. In addition, some may treat the party-appointed
experts as co-counsels.346 This view may juxtapose with the view that consid-
ers funders to be co-counsels who help the funded party not just from a finan-
cial perspective but also from a legal one.
Generally, experts in arbitration include legal, technical, and quantum
experts.347 Technical experts are less likely to be compared with third party
funders due to the funder’s lack of scientific expertise. Funders, by definition,
are financial experts, and more recently legal experts. Due to the high stakes
of the cases funders often finance, they can be compared with the quantum
or valuation experts. They provide divergent damage estimates that help in
reaching the final determination.348 Compared with quantum experts, who are
described as “hired guns,”349 funders may regularly finance specific types of
cases or claimants. This may make them “hired guns” to the opposing party
and the decision-makers due to the expertise they develop in financing those
particular types of claims. Their expertise may subconsciously signal to the
decision-maker that the funders’ evaluation should be given the same weight
as expert opinions.
Quantum experts are generally necessary in investor–state disputes.350
Arbitrators in investor–state disputes are notorious for their lack of sufficient
explanations for valuing the damages awards.351 To escape that reality, arbitra-
tors may rely on the succinct evaluation of the damages, and the methodologies
of synthesizing the amount of compensation, based on potential liability, pre-
pared by the funder. The funder’s comprehensive claim evaluation may have
subconscious effects on arbitrators. That effect is more than an expert opinion,
arbitrators may subconsciously follow that succinct damage determination to
avoid any potential inconsistencies from various damage determinations. By
345
346
For more details on this view, see Nigel Blackaby & Alex Wilbraham, Practical
Issues Relating to the Use of Expert Evidence in Investment Treaty Arbitration, 31
ICSID Review 655 (2016).
347
Mélida Hodgson & Melissa Stewart, Experts in Investor-State Arbitration: The
Tribunal as Gatekeeper, 9 J. Int’l Disp. Settlement 453, 454 (2018).
348
Cf. Joshua B Simmons, Valuation in Investor-State Arbitration: Toward a More
Exact Science, 30 Berkeley J. Int’l L. 196 (2012) (discussing the role of quantum
experts).
349
Hodgson et al., supra note 347, at 455.
350
Blackaby et al., supra note 346, at 655–663.
351
Simmons, supra note 348.

doing so, arbitrators would strengthen the weaknesses in their reasoning, for
which they are criticized, in the final awards.
In principle, parties should be permitted to comment on the expert opinions
that arbitrators rely upon.352 Having subconsciously relied upon the funders’
assessment without providing the opposing party an opportunity to challenge
that assessment, may pose a challenge to the produced award. An arbitrator
might have previously acted as a counsel in a case funded by a funder. This
funder may fund a new case before that arbitrator who acted previously
as a counsel. This may create uncertainties. Similarly, one arbitrator was
challenged because the quantum expert who appeared before that arbitrator
presented the same quantum valuation in a previous case where that arbitrator
was a counsel.353 In that case, it was argued that the arbitrator had a personal
interest in promoting the use of the same methodology due to his previous
work as a counsel.354 That arbitrator eventually resigned from the case after the
two co-arbitrators were split on the challenge.355 Similar scenarios may arise
to funders.
To sum up, arbitrators may consult the funding documents once they are
disclosed, and they may be affected by the funders’ claim evaluation. In that
sense, the decision-making process would favor the party who has a more
robust financial backup, which may open the door for corrupt practices.
2.1.2 Arbitrators’ cognitive bias

Cognitive bias refers to a decision-making process that deviates systemically
from the rational choice356 through its constituent components.357 Because
arbitrators are humans, they may be, as decision-makers, subject to systemic
judgment errors through cognitive biases and mental illusions.358 Given the
352
Hodgson et al., supra note 347, at 457.
353
Tethyan Copper Company v. Islamic Republic of Pakistan, ICSID Case No.
ARB/12/1, https://www.italaw.com/cases/1631.
354
See, e.g., Tom Jones, Alexandrov survives Pakistan’s challenge over “rare”
damages model, Global Arb. Rev. (2017).
355
Id.
356
See generally Korobkin et al., supra note 313, at 1053, 1102 (human behavior is
better understood through behavioral and sociocultural theories than the rational choice
theory).
357
See generally Chris Guthrie et al., supra note 292. See also Amos Tversky &
Daniel Kahneman, The Framing of Decisions and the Psychology of Choice, 211 Sci.
453 (1981); Chris Guthrie, Framing Frivolous Litigation: A Psychological Theory, 67
U. Chi. L. Rev. 163, 166–67 (2000). See also Allen v. Chance Mfg. Co., 873 F.2d 465,
470 (1st Cir. 1989) (using framing theory to analyze the jury’s finding of the proximate
cause).
358
See generally Daniel Kahneman, Thinking, Fast and Slow (2011).

fact that actual bias is too difficult to measure or prove,359 the analysis of
cognitive bias is normative. It reflects a heightened possibility of bias, not
necessarily actual bias. Although the parties’ economic positions are irrelevant
to the underlying merits,360 the presence of a funder may adversely impact, for
instance, the security for costs applications.361
Seizing on a vivid TPAF arrangement and using it to quickly categorize
a party’s position may not be optimal for deciding the dispute. This was simi-
larly argued by the claimant in RSM v. Saint Lucia, where the party-appointed
arbitrator, Dr. Griffith, was challenged because of his bias against third party
funders and the funded claimants. Dr. Griffith described third party funders as
“mercantile adventurers” and associated them with “gambling” and the “gam-
bler’s Nirvana: Heads I win and Tails I do not lose.”362 The claimant contended
that Dr. Griffith had a preconceived, radical, and general apprehension of
TPAF and funded claimants because he reached his decision by a considera-
tion of funding in general363 and showed a clear preference for respondent.364
However, while the tribunal found Griffith’s expressions “strong,” “figurative
metaphors,” and “extreme in tone,”365 they purposefully clarified that his point
on TPAF contained no underlying bias against third party funders in general
or claimant in particular.366 Dr. Griffith had not actually stepped over the line
between “radical” and “extreme” language, and clearly inappropriate and unac-
ceptable expressions.367 These views were not sufficient to establish his parti-
ality.368 Despite this conclusion, the impact of the cognitive illusions because
359
Morelite Const. Corp. v. New York City Dist. Council Carpenters Ben. Funds,
748 F.2d 79, 84 (2d Cir. 1984) (referring to actual bias as an “insurmountable”
standard).
360
The Fourth Circuit has found that “the district court’s reliance on its third ground,
the parties’ comparative economic power, to be error. Such a factor would almost
always favor an individual plaintiff … over her employer defendant … To do so would
not only undermine the presumption that Rule 54(d)(1) creates in prevailing parties’
favor, but it would also undermine the foundation of the legal system that justice is
administered to all equally, regardless of wealth or status.” Cherry, 186 F.3d 442, at
448.
361
RSM v. St. Lucia, ICSID Case No. ARB/12/10, Decision on Provisional
Measures, paras 71–74 (Dec 12, 2013), https://www.italaw.com/sites/default/files/case
-documents/italaw8005.PDF.
362
363
Id. para 43.
364
Id. para 50.
365
Id. paras 84, 86.
366
Id. paras 84, 86.
367
Id. para 86.
368
Id. para 90.

of the existence of TPAF is apparent in hindering, rather than facilitating, the

prosecution of the case in terms of time and costs. The repeated exposure of
arbitrators to the concerns raised by TPAF would develop a habit of analyzing
these problems from both legal and economic perspectives.369 Arbitration
users subjectively view the procedural fairness of the process.370 Arbitrators
are often called upon from relevant industries because they bring the benefit
of expertise.371 The same applies to TPAF. Having an arbitrator with a funding
background would reflect their awareness of the complex process and the
diligence exerted by the funder in making the funding decision.372
Five components constitute cognitive bias: anchoring, framing, hind-
sight bias, representative heuristics, and egocentric bias.373 While anchoring
involves making a final estimate based on irrelevant starting points, framing
involves the different economic treatment of gains and losses.374 Hindsight bias
is the human tendency to perceive past events to have been more predictable
than they actually were.375 Representative heuristics involves ignorance of
statistical information, particularly the frequency of a category of events.376
Egocentric bias tests the human tendency to overestimate one’s own abilities.
These elements will now be considered.
2.1.2.1 Framing
The decision to fund a case reflects the funder’s belief that further litigation
will produce a future gain.377 This decision may detrimentally create framing
369
Repeat players often have strong incentives to figure out and account for their
biases. See generally John Conlisk, Why Bounded Rationality?, 34 J. Econ. Literature
671 (1996).
370
AKC Koo, The role of the English courts in alternative dispute resolution, 38
Legal Stud. 666–683 (2018).
371
See Commonwealth Coatings v. Cont’l Cas. Co., 393 U.S. 145, 150, 89 S.Ct.
337 (1968) (White, J., concurring) (recognizing that arbitrators are often “of the
marketplace”).
372
See supra Chapter 4 (1.2.3).
373
See generally Guthrie et al., supra note 292, at 784.
374
See generally Tversky et al., supra note 357. See, also, Allen v. Chance Mfg.
Co., 873 F.2d 465, 470 (1st Cir. 1989) (using framing theory to analyze jury’s finding
of proximate cause by discussing the framing effects on the decision makers and the
choices on human judgment and citing to literature on cognitive psychology by noting
that “[p]eople’s assessments of the causes of events are inevitably influenced by the
array of possible causes that are made salient to them”).
375
Id.
376
Id.
377
Otherwise, the funder would not have chosen to “gamble” the case. See AVM
Techs., LLC v. Intel Corp., No. CV 15-33-RGA, 2017 WL 1787562, at *3 (D. Del. May
1, 2017).

to the arbitrator that the claimant has potential gains while respondent expects
losses.378 However, arbitrators may also favor the unfunded party as opposed
to the financially strong party.379 Arbitrators should carefully employ an objec-
tive analysis of the dispute by consciously comparing the parties’ contesting
points to reach a decision, with the existence of TPAF.380 However, they may
believe that the case should proceed in a particular way that it would not have
proceeded had TPAF not been present. Basing the outcome, even partially,
on the existence of TPAF undermines the neutrality of the decision-making
process.381
2.1.2.2 Hindsight bias

Arbitrators may be psychologically vulnerable to hindsight bias.382 Hindsight
bias is a person’s tendency to overestimate the predictability of past events.383
It occurs by replacing or updating information about an event or situation
378
Normally, when a court is in doubt as to the ownership of a commodity in
dispute, it favors the one with possession, even if the possession is arbitrary. In TPAF,
the asymmetry between the disputing parties is not just financial but also procedural.
Similar to the courts’ inclination in deciding the ownership of a commodity in case of
doubt, an arbitrator may be inclined to find that the party with funding backup should
be favored over the opposing party because it brings more credibility. Guthrie et al.,
supra note 292, at 798. See also David Cohen & Jack L. Knetsch, Judicial Choice and
Disparities Between Measures of Economic Values, 30 Osgoode Hall L.J. 737, 749–69
(1992) (discussing the areas of law that create similarly arbitrary distinctions between
gains and losses).
379
12, 2014) (Griffith, assenting).
380
Tenielle Fordyce-Ruff, Research Across the Curriculum: Using Cognitive
Science to Answer the Call for Better Legal Research Instruction, 125 Dick. L. Rev.
1 (2020) (demanding that “law schools do better when teaching legal research”). Paul
Brest & Linda Krieger, On Teaching Professional Judgment, 69 Wash. L. Rev. 527,
553–54 (1994) (urging law schools to teach about the psychology of decision-making).
381
In fact, one arbitrator considered third party funders and funded claimants under-
mining the integrity of investor–state arbitration. RSM v. St. Lucia, ICSID Case No.
ARB/12/10, Decision on Annulment, para 163 (Apr 29, 2019), https://www.italaw
.com/sites/default/files/case-documents/italaw10600.pdf.
382
Some judicial decisions rely on the likelihood of occurrence of some events
that they are aware of to justify their decision. One court noted that “[i]t was common
knowledge, not only amongst bankers and trust companies, but the general public
as well, that the stock market condition at the time of [the] testator’s death was an
unhealthy one, that values were very much inflated and that a crash was almost sure to
occur.” In re Chamberlain’s Estate, 156 A. 42, 43 (N.J. Prerog. Ct. 1931).
383
Baruch Fischhoff, Hindsight is not equal to foresight: The effect of outcome
knowledge on judgment under uncertainty, 1 J. Experimental Psychol. Hum. Perception
& Performance, 288–299 (1975), https://doi.org/10.1037/0096-1523.1.3.288 (empiri-
cally discussing the effects of hindsight on judgment).

with more current information.384 Funding arrangements could be seen as past

events of evaluating the dispute, compared with evaluating the dispute in the
award as a future event.385 Arbitrators are expected to be neither completely
rational nor entirely irrational. They may make rational use of the funding
information386 to update their belief about the case.387
Arbitrators’ previous experiences are crucial in evaluating the hindsight
bias. An arbitrator’s decision to evaluate a case, especially in investor–state
arbitration, may be informed by other cases that he or she has arbitrated
before, or cases decided by other tribunals, some of which may have involved
TPAF.388 Relatedly, arbitrators’ predictions about the likely outcome of the
disputes are reflections of their underlying assumptions of arbitrating these
types of disputes. Some arbitrators may be familiar with the funding practices
and may place great reliance on the role funders tend to play. The overesti-
mation of TPAF may constitute a hindsight bias that may cause arbitrators
to give undue weight to TPAF and undervalue the arguments underlying the
main dispute. For instance, although the words used by Dr. Griffith on TPAF
did not result in his challenge, the tribunal itself held that it was very tough and
expressed strong and unnecessary views on TPF.389
As such, arbitrators must use care when they compare a given dispute with
other ones.390 Arbitrators’ past exposure to TPAF may contribute to making
a useful judgment in a given dispute by way of comparison. If an arbitrator has
encountered improper behaviors by funders in prior cases, a moderate outcome
in the current case is not promising. If an arbitrator has encountered moderate
384
Ian Weinstein, Don’t Believe Everything You Think: Cognitive Bias in Legal
Decision-making, 9 Clinical L. Rev. 783, 800 (2003).
385
Guthrie et al., supra note 292, at 800 (pointing out that courts are vulnerable to
hindsight bias because they evaluate events after the fact, which is a threat to accurate
determinations in many areas of law).
386
As argued by some scholars, new information may reflect not illusion of judg-
ment but a rational use of the new knowledge. See Mark Kelman et al., Decomposing
Hindsight Bias, 16 J. Risk & Uncertainty 251, 253–54 (1998).
387
Hindsight bias supposes using known outcomes to evaluate the predictability of
something that should happen. In one study, judges were experimented with known
outcome that changed their beliefs. Judges relied on this new information to re-predict
the past outcome. See Guthrie et al., supra note 292, at 803–04.
388
389
Dr. Griffith, paras 84, 86 (Oct 23, 2014).
390
Daniel Kahneman et al., Judgment Under Uncertainty: Heuristics and Biases
(1982).

behaviors by funders in previous cases, then a moderate outcome in the current

case seems more likely.391
2.1.2.3 Anchoring
Individuals make final estimates based on initial anchors,392 which may impede
rational decision-making.393 A funder’s initial evaluation of a claim may
contribute to “anchoring” the final estimation.394 Arbitrators, no matter how
experienced or well trained, may not be able to muffle themselves from the
funder’s calculation of the claim’s success and their estimation of damages.
Even if the anchors provide no useful information, exposure to them might
unconsciously lead to adjusting estimates around these anchors.395 Arbitrators
may thus conclude that these anchors are correct regardless of their actual
value.396 Conversely, arbitrators may doubt the viability of the opposing
party’s case compared with the strength of the funded party’s claim. There is
a thin line between positively assessing the case in favor of the funded party
and negatively doubting the case of the opposing party due to the presence of
TPAF.397 The funder’s thorough claim screening398 may create an assumption
of strength for the funded party’s case. This may constitute a general anchoring
for arbitrators to begin the case with and may cast doubts on their neutrality.
391
Certainly, specific particularities among cases should make it difficult to identify
typical comparative cases. Guthrie et al., supra note 292.
392
See generally Tversky & Kahneman, Heuristics and Biases, supra note 302, at
1128–30.
393
Id. at 1128–30. Weinstein, supra note 384, at 787 (pointing out that the move-
ment to cognitive bias studies gained momentum after World War II, which had roots
in logicians and mathematicians of the early twentieth century).
394
See generally Tversky & Kahneman, Heuristics and Biases, supra note 302, at
1128–30.
395
Even ridiculously high anchors may result in the estimate anchors being
higher than they should have been. Scott Plous, The Psychology of Judgment and
Decision-making, 146 (1993).
396
Similarly, in settlement, the opening offer may affect the adversary’s acceptance
of an offer to settle. See generally Fritz Strack & Thomas Mussweiler, Explaining the
Enigmatic Anchoring Effect: Mechanisms of Selective Accessibility, 73 J. Personality &
Soc. Psychol. 437, 437–39 (1997).
397
The existence of a funder presumes that the claim has been diligently screened
by the funder. See, e.g., Michael Abramowicz & Omer Alper, Screening Legal
Claims Based on Third-Party Litigation Finance Agreements and Other Signals
of Quality, 66 Vand. L. Rev. 1641 (2013). British Inst. of Int’l & Comparative
Law, 21st Investment Treaty Forum Public Meeting The Economic and Financial
Aspects of Investor-State Arbitration (2013), http://www.biicl.org/files/6603_21st_itf
_ programme_-_final-_24_october_2013.pdf (arbitrators may potentially be swayed by
knowledge that one side of the arbitration case has the support of a third party funder).
398
See, e.g., Abramowicz & Alper, supra note 397.

It can be argued, however, that the parties’ reliefs may also constitute an
anchoring to the arbitrators. But anchoring effects are more realistic when the
estimates are conducted by funders. Parties often overestimate the success and
the potential recovery of their claim. However, the funder’s decision is based
on economic and legal calculations that objectively identify the probability of
the claim’s success in light of the potential counter arguments of the opposing
party. Arbitrators may be more inclined to pay more attention to the funders’
calculation than the disputants’ and so unconsciously produce biased decisions.
2.1.2.4 Representative heuristics

Psychologists refer to mental shortcuts in making complex decisions as “heu-
ristics.”399 Generally, people make categorical judgments based on the extent
to which the introduced evidence is representative of this category.400 Although
these heuristics may facilitate decision-making, they may also deliver erro-
neous decisions.401 Certain fact patterns can mislead a decision-maker.402 In
arbitration,403 the fact that a party is financially backed by a third party may
look like a categorical judgment on the strength of the funded claim,404 which
may generate errors in the decision-making.405 One claimant argued that it was
forced to fund the entire arbitration as part of the respondent’s overall strategy
to make arbitration expensive and frustrate claimant’s access to justice.406
The tribunal found that the claimants had no history of nonpayment of costs
399
Plous, supra note 395, at 109–30, 145–52.
400
Tversky & Kahneman, Heuristics and Biases, supra note 302, at 1124–28.
See also Daniel Kahneman & Amos Tversky, Subjective Probability: A Judgment
of Representativeness, 3 Cognitive Psychol. 430 (1972). Tversky & Kahneman,
Extensional Versus Intuitive Reasoning: The Conjunction Fallacy in Probability
Judgment, 90 Psychol. Rev. 293 (1983) (defining the “conjunction fallacy,” as a type of
the representativeness heuristic).
401
Tversky & Kahneman, Heuristics and Biases, supra note 302, at 1124.
402
Id.
403
Cf. Guthrie et al., supra note 292, at 805 (discussing the representative heuristics
effect on judges’ minds).
404
See supra text accompanying note 304 (discussing the impact of representative
heuristics on doctrine of res ipsa loquitur).
405
Leda Cosmides & John Tooby, Are Humans Good Intuitive Statisticians After
All? Rethinking Some Conclusions from the Literature on Judgment Under Uncertainty,
58 Cognition 1, 3–4 (1996).
406
Transglobal Green Energy, LLC and Transglobal Green Energy de Panama, S.A.
v. The Republic of Panama, ICSID Case No. ARB/13/28, Decision on Shifting Costs,
para 17 (Mar 4, 2015), https://www.italaw.com/sites/default/files/case-documents/
italaw7329.pdf.

awards407 but declined to decide the question of the financial conditions of the
parties at that premature stage of the dispute.408
Arbitrators may see the opposing party’s case as categorically weak, or at
minimum, not as strong as the funded party’s case.409 Conversely, represent-
ative heuristics may create an “inverse fallacy” for arbitrators by favorably
treating the nonfunded party to counter the categorical judgment of the funded
party.410
2.1.2.5 Egocentric bias

Egocentric bias is one’s egocentric estimation to be above average.411
Arbitrators may interpret some information in egocentric ways, and hence
overestimate their decision-making powers.412 The risk of overestimation
is supported by the fact that arbitrators’ decisions are not reviewed on the
merits.413 Therefore, if an arbitrator considered the funder’s assessment of the
claim, that issue may not be reviewed by the court.414 Egocentric biases may
affect arbitrators’ awareness of their limitations, which may harm the disputing
parties. Egocentric bias may make it difficult for an arbitrator to fully and
neutrally decide the case which involves TPAF.415 The unfunded party may be
under pressure to convince the arbitrator that the claim is not strong enough to
be supported by a funder, and the funder’s analysis may be inaccurate.
407
Id. para 43.
408
Id. paras 44 & 47.
409
See Jonathan J. Koehler, Why DNA Likelihood Ratios Should Account for Error
(Even When a National Research Council Report Says They Should Not), 37 Jurimetrics
J. 425, 432 (1997) (discussing the inverse fallacy).
410
Guthrie et al., supra note 292, at 811.
411
Id. at 812.
412
Linda Babcock & George Loewenstein, Explaining Bargaining Impasse: The
Role of Self-Serving Biases, J. Econ. Persp. 109, 110–11 (1997).
413
Blackaby et al., Redfern & Hunter, supra note 295, at 570.
414
Unless it can be construed as extrinsic evidence in jurisdictions which do not
permit that type of evidence, and hence the decision may be reviewed. However, it may
be too difficult to prove the unconscious impact of the funding assessment on arbitra-
tors or establish a rapport between both.
415
Guthrie et al., supra note 292, at 815–16.

2.2 Security for Costs
TPAF may have an impact on security for costs and recoverable costs.416 The
determination of “costs” is subject to the tribunals’ discretion.417 Despite their
various approaches,418 the tribunals’ power to issue an order for security for
costs against the parties is not questionable.419 Absent an agreement between
the parties, tribunals have the power under procedural law to make costs
decisions.420 Funding agreements may provide for the funder’s liability to pay
the adverse costs.421 Generally, two approaches govern the arbitrators’ power
on cost-allocation: (a) each party pays its own costs, and (b) costs follow the
event where the losing party pays the costs. Funders’ potential liability for
costs often arises in the second approach.422 The funder’s existing, future, or
conditional right in the claim may justify the tribunal’s order for security for
costs against it.423
Generally, the lack of assets, nonavailability of economic resources, or
the financial difficulties of a party are not per se justifications for warranting
a security for costs order.424 There is “no principle why any … third party
financing arrangement should be taken into consideration in determining the
amount of recovery by [parties] of their costs incurred in arbitration proceed-
ings.”425 In the abstract, it may seem difficult to “formulate a rule of general
416
However, the causality between the increasing costs of arbitration and the pres-
ence of TPF remains unknown. UNCITRAL Working Group III, supra note 3, para 27.
417
ICSID Secretariat, Proposals for Amendment of the ICSID Rules, (Aug 02,
2018), https://icsid.worldbank.org/en/Documents/Synopsis_English.pdf.
418
Supplier v. First distributor, Second distributor, ICC Case No. 7006, Award
(1992) (deciding that the legal costs of a respondent that had been paid by a third party
“insurer” would have been recoverable had the respondent succeeded).
419
E.g., English Arbitration Act § 61 (1996); ICSID Convention art. 61(2). See also
Essar Oilfields Services Ltd v. Norscot Management Pvt Ltd., EWHC 2361 (Comm)
(2016), https://www.casemine.com/judgement/uk/5a8ff75760d03e7f57eab7c1.
420
Blackaby et al., Redfern & Hunter, supra note 295, at 308.
421
See, e.g., Int’l Ctr. for Dispute Resolution (ICDR), International Dispute
Resolution Procedures art. 20(7) (2014); ICC Rules art. 37(3).
422
Vyapak Desai & Kshama Loya Modani, Third-Party Funding: Liability of
Third-Party Funders to Pay Costs in Arbitration; Entitlement of Successful Claimants
to Costs of Third-Party Funding, 87 IPBA J. 18 (2017), http:// www .nishithdesai
.com/fileadmin/user_upload/pdfs/NDA%20In%20The%20Media/News%20Articles/
170926_A_IPBA_Sep17.pdf.
423
para 5.24 (Oct 14, 2010).
424
South American Silver Limited v. Bolivia, PCA Case No. 2013–15, para 63,
(Perm. Ct. Arb. Jan. 11, 2016) https://pcacases.com/web/sendAttach/1562.
425
3, 2010).

application against which to measure whether the making of an order for

security for costs might be reasonable.”426 However, some consider the funded
party’s inability to comply with the security for costs order sufficient reason to
issue that order.427 Arguably “once it appears that there is third party funding
of an investor’s claims, the onus [may] cast on the claimant to … make a case
why security for costs orders should not be made.”428 While the requesting
party should still show additional evidence of impecuniosity, the funded party
may provide evidence of its ability or willingness to comply with the order.429
Despite its relevancy, TPAF alone cannot lead to issuing the measure.430
Otherwise, it would increase meritless security for costs requests and risk
blocking meritorious claims. As such, there is no specific set of principles that
governs security for costs requests given the existence of TPAF.431
2.2.1 Costs calculus

Theoretically, absent financial capabilities of the funded party, respondent may
seek a security for costs order against the funder itself. Rule 39 of the ICSID
Rules entitles the parties to seek provisional measures from the tribunals
to preserve rights.432 However, funders are not parties to the dispute.433 The
party’s interest in securing compliance with the potential costs award may be
426
para 5.20 (Oct 14, 2010).
427
428
429
This view finds its support in the Proposed Amendments prepared by the ICSID
Secretariat on the Reform of the ICSID Rules. ICSID Secretariat, supra note 417, paras
267, 530. These amendments were approved and came into effect on July 1, 2022.
See ICSID Administrative Council Approves Amendment of ICSID Rules, News
Releases (Mar 21, 2022), https://icsid.worldbank.org/news-and-events/communiques/
icsid-administrative-council-approves-amendment-icsid-rules.
430
South American Silver Limited v. Bolivia, PCA Case No. 2013–15, paras 75–77
(“The fact of having funding alone does not imply risk of non-payment … If the exist-
ence of these third-parties alone, without considering other factors, becomes determina-
tive on granting or rejecting a request for security for costs, respondents could request
and obtain the security on a systematic basis, increasing the risk of blocking potentially
legitimate claims”).
431
Ron Fuchs v. The Republic of Georgia, ICSID Case No. ARB/07/15, Award,
para 691 (Mar 3, 2010), https://www.italaw.com/sites/default/files/case-documents/
ita0347.pdf.
432
ICSID Arbitration Rules art. 39(1).
433
Some consider this possibility a risk that TPF may create in relation to inter-
national arbitration proceedings such that claimants will be incentivized to gener-
ate and externalize excessive costs. Goldsmith & Melchionda, Third Party Funding
Everything, supra note 145, at 223.

argued to be a “right to be preserved” under Rule 39 of the ICSID Arbitration

Rules. However, TPAF does not by itself constitute exceptional circumstances
to justify the security for costs order.434 Nonetheless, an agreement that funders
would not cover an adverse costs order may constitute extraordinary circum-
stances that justify an order for security for costs against claimants.435
Parties may have legitimate reasons for seeking a security for costs order.
Funders themselves may at one point lack the adequate capital or may termi-
nate the funding agreement at any time, leaving the funded party in peril and
the opposing party at risk of futile enforcement of the potential award.436 In
that sense, the request for security for costs may serve as an equitable relief to
protect the requesting party. However, the parties should demonstrate that their
need for the measure is not outweighed by the hardships the opposing party
would experience if the measure was granted.437 Otherwise, the measure would
impede access to justice and should not be granted.438 In these cases, a request
for procuring an undertaking from the funder to pay the costs order against the
claimant may be denied as well.439
TPAF may also reflect the claimant’s uncertainty to honor any security for
costs award. In RSM v. St Lucia,440 the tribunal acknowledged that, among
other relevant factors,441 the existence of TPAF supported the claimant’s
434
EuroGas Inc and Belmont Resources Inc v. Slovak Republic, ICSID Case No
ARB/14/14, Decision on Provisional Measures, paras 122–23 (June 23, 2015), https://
www.italaw.com/sites/default/files/case-documents/italaw6272_0.pdf. See also South
American Silver Limited (Bermuda) v. Plurinational State of Bolivia, PCA Case No.
2013–15, para 61 (Jan 11, 2016) (Perm. Ct. Arb. 2016).
435
Manuel García Armas and others v. Bolivarian Republic of Venezuela, PCA
Case No. 2016-08 (June 20, 2018) (Perm. Ct. Arb. 2018), https://www.italaw.com/
sites/default/files/case-documents/italaw9849_2.pdf (in Spanish).
436
See generally supra Chapter 4 (1.2.5).
437
Eskosol v. Italian Republic, ICSID Case No. ARB/15/50, Decision on Provisional
Measures, para 38 (Apr 12, 2017).
438
Id.
439
Id. para 39.
440
RSM v. St. Lucia, ICSID Case No. ARB/12/10, Decision on Security for Costs,
para 83 (Aug 13, 2014), https://www.italaw.com/sites/default/files/case-documents/
italaw3318 .pdf (the admitted third party funding further supported the tribunal’s
concern that “Claimant will not comply with a costs award rendered against it, since,
in the absence of security or guarantees being offered, it is doubtful whether the third
party will assume responsibility for honoring such an award.” Therefore, the tribunal
decided that it was “unjustified to burden Respondent with the risk emanating from the
uncertainty as to whether or not the unknown third party will be willing to comply with
a potential costs award in Respondent’s favor”).
441
Id. para 85 (the tribunal added the relevant urgency factor by stating that it “con-
siders it necessary to order Claimant to provide security for costs before proceeding
further with this arbitration. In light of the fact that in the above referenced prior pro-

uncertainty to honor the security for costs award. Further, one arbitrator found
that funders “should remain at the same real risk level for costs as the nominal
claimant,”442 and that the integrity of the BIT regime mandates real exposure
of third party funders to “costs orders which may go one way to it on success
should flow the other direction on failure.”443 Accordingly, a number of factors
may be considered in issuing a security for costs order. First, the degree of the
claimant’s compliance with the proceedings’ costs and expenses, including
other proceedings or previous damage awards. Second, the claimant’s bad
faith in avoiding the costs award by disposing of assets. Third, the justifiable
belief that the adverse award would not be enforced. Fourth, the frivolity of the
claim.444 However, regardless of the proper application of the law to the facts,
as long as the claimant had a bona fide claim and did not act with wanton disre-
gard, the claim could not be considered frivolous.445 In certain cases, the coun-
sels’ behavior throughout the proceedings may be considered an additional
element for the costs order. One tribunal found that “neither of the [p]arties has
presented its case in a way justifying the shifting of arbitral costs against it. To
the contrary, counsel for both [p]arties worked professionally and efficiently
in pursuing their clients’ interests.”446 The tribunal divided the arbitration costs
equally between the parties while each party bore its own fees for pursuing the
claim.447 Another tribunal found no differential treatment between TPAF and
insurance contracts for the purpose of awarding claimants full recovery.448 It
found it fair and appropriate to award claimants their entire arbitration costs,
which were reasonably assessed by them.449
In contrast, the unfunded party’s conduct may be considered for allocating
costs. One arbitrator found that the respondent had financially crippled the
claimants to push them to seek funding.450 The arbitrator issued a cost award to
ceedings costs accrued on the part of the opposing party (and the Centre) have not been
reimbursed, the Tribunal further finds it inappropriate to wait for the final award before
dealing with Respondent’s legal costs”).
442
443
Id.
444
Corona Materials, LLC v. Dominican Republic, ICSID Case No. ARB(AF)/14/3,
Award on Preliminary Objections, para 277 (May 31, 2016), https://www.italaw.com/
sites/default/files/case-documents/italaw7314.pdf.
445
Id.
446
Id. para 278.
447
Id. para 279.
448
3, 2010).
449
Id. para 692.
450
Allen & Overy, Costs, supra note 222 (citing Essar Oilfields Services Ltd v.
Norscot Management Pvt Ltd [2016] EWHC 2361 (Comm)). See also Blackett, supra
note 222.

the funded party including the return owed to the funder because the funding
agreement had standard commercial funding terms.451 Respondent challenged
that award for causing substantial injustice, but the challenge was rejected.452
This decision exacerbates the complexity of costs claims, especially with the
allegation of duress in concluding TPAF agreements. Further, the tribunal in
RSM v. St Lucia found that claimant’s conduct throughout the proceedings
of not advancing expenses and fees of ICSID, or payment of expenses to the
opposing party, gave rise to a reasonable inference of their inability or unwill-
ingness to pay.453 Nonetheless, the tribunal found that TPAF exacerbated the
concerns inherent in claimant’s conduct, which “place[d] an unfunded [claim-
ant] and the third party funder(s) in the inequitable position of benefitting from
any award in their favor yet avoiding responsibility for a contrary award.”454
As a result, in the tribunal’s view, due to the existence of TPAF, the fees and
expenses would never be paid.455 The tribunal found that “these circumstances
constitute[d] a showing of ‘good cause’ to alter the presumptive allocation
of advance payments,” and claimant was ordered to pay all interim advances
subject to the final award.456 The ad hoc Committee in this case found no basis
for overturning the challenged award.457
The RSM decision has become a seminal reference. The claimants in
Transglobal Green v. Panama distinguished themselves from the circum-
stances of the RSM tribunal, including the history of the unpaid adverse costs
awards, lack of financial capacity, and the existence of TPAF.458 Claimants
did not have TPAF,459 and the tribunal in this case denied the security for
costs application due to the absence of any exceptional circumstances.460 In
Lao Holdings v. Lao People, the respondent relied upon the claimant’s TPAF,
which was provided by one of the company’s owners as opposed to an outside
funder, to support its application for security for costs and analogized the
451
See supra note 450.
452
Id.
453
RSM v. St. Lucia, ICSID Case No. ARB/12/10, Decision on Provisional
Measures, paras 71–74 (Dec 12, 2013).
454
Id.
455
Id.
456
Id.
457
RSM Production Corporation v. Saint Lucia, ICSID Case No. ARB/12/10,
Decision on Annulment, para 165 (Apr 29, 2019).
458
Transglobal Green Energy v. Panama, ICSID Case No. ARB/13/28, Decision on
Security for Costs, para 19 (Jan 21, 2016), https://www.italaw.com/sites/default/files/
case-documents/italaw7333.pdf.
459
Id. para 22.
460
Id. paras 34, 36, 37.

situation to RSM.461 The tribunal, however, denied the application for security
for costs and found that this case did not include the exceptional factors that
led the tribunal in RSM to grant the order.462 It added that a “party that seeks
to avail itself of discretionary relief under the ICSID framework should not, at
the same time, insist on the other party funding in the entirety the very arbitral
procedures necessary to consider its application.”463
Finally, it is worth noting that the new ICSID Amendments provide for
a moderate approach. In considering TPAF as a form of evidence that is not by
itself sufficient to order security for costs, it should be considered with other
evidence presented by the parties.464 They grant the tribunals discretion with no
unnecessary restrictions.465
2.2.2 Funders’ liability

Funders may be held directly liable for costs. One court decided that “[w]here
… the nonparty not merely funds the proceedings but substantially also con-
trols or at any rate is to benefit from them, justice will ordinarily require that,
if the proceedings fail, he will pay the successful party’s costs.”466 Similarly,
a “litigant may find himself liable to pay indemnity costs on account of the
conduct of those whom he has chosen to engage—e.g. lawyers, or experts
[who] may themselves have been chosen by the lawyers, or witnesses … The
position of the funder is directly analogous.”467 Also, a funder who controls the
proceedings may become liable for the defendant’s attorneys’ fees and costs.468
Similarly, even though the court’s authority to sanction does not expressly
461
Lao Holdings N.V. and Sanum Investments Limited v. Lao People’s Democratic
Republic, ICSID Case No. ARB(AF)/16/2 ICSID Case No. ADHOC/17/1, Decision on
Security for Costs, para 16 (June 29, 2018), https://www.italaw.com/sites/default/files/
case-documents/italaw9858.pdf.
462
Id. para 41.
463
Id. para 43.
464
ICSID Amendment Proposals, Working Paper No. 4, supra note 141, at 325. See
also supra note 429.
465
Id. at 324.
466
Arkin, EWCA Civ 655 introduced a principle known as the “Arkin cap,” where
the Court of Appeals held that the funder was liable for costs up to the amount of its
own contribution, but that to impose liability over this limit would represent too great
risk for litigation funders. The court considered that access to justice would not be
achieved if funders were deterred from funding litigation by the prospect of unlimited
liability in costs; but it wouldn’t be fair to successful defendants if costs didn’t usually
follow the event. Excalibur Ventures LLC v. Texas Keystone IncTexas Keystone Inc v.
Psari Holdings Ltd. et al., EWHC 3436 (Comm) (2014).
467
Excalibur Ventures, EWHC 3436 (Comm).
468
Abu-Ghazaleh, 36 So.3d 691, at 693–94.

apply to the funders,469 in appropriate circumstances, persons other than the

parties may be sanctioned for violating the applicable rules,470 which may
arguably include the funders.
An ICC tribunal ordered security for costs because the funding agreement
had no obligation to pay an eventual costs award, and the funder could “walk
away at any time.”471 Another ICC tribunal ordered security for costs because:
[i]f a party has become manifestly insolvent and therefore is likely relying on funds
from third parties in order to finance its own costs of the arbitration, the right to
have access to arbitral justice can only be granted under the condition that those
third parties are also ready and willing to secure the other party’s reasonable costs
to be incurred.472
Moreover, if the funded party is involved in improper conduct that results in

financial sanctions, a question may arise about the possibility of sanctioning
the funder. The sanctions issue may arise also in the discovery process. One
court found the funder in contempt of court for failing to comply with the
discovery demands and the judge’s order.473 The funder could not be held as
having knowledge of the judge’s order to which it was not subject except that
he was served with an order to appear in a deposition or respond to a subpoena
and ignored it.474
469
FED. R. CIV. P. 11(c)(1) (“[T]he court may impose an appropriate sanc-
tion on any attorney, law firm, or party that violated the rule or is responsible for the
violation”).
470
FED. R. CIV. P. 11 advisory committee’s note to 1993 amendments (“When
appropriate, the court can make an additional inquiry in order to determine whether the
sanction should be imposed on such persons, firms, or parties either in addition to or,
in unusual circumstances, instead of the person actually making the presentation to the
court. For example, such an inquiry may be appropriate in cases involving governmen-
tal agencies or other institutional parties that frequently impose substantial restrictions
on the discretion of individual attorneys employed by it”).
471
See supra text accompanying note 260, para 40 (the tribunal in this case applied
a broad fairness test. “The records of the case included the funding agreement that was
transferred from the claimant to respondent which enabled the tribunal to examine its
terms and ultimately granted the security order because (1) the claimant was a holding
company based in Cyprus that was unlikely to be able to pay adverse costs; (2) the
funding agreement did not cover adverse costs; and (3) in the tribunal’s view the
funder’s termination rights under the funding agreement meant that the funder was
“empowered to terminate the Agreement at any time, entirely at its discretion”).
472
See supra text accompanying notes 260 & 261.
473
Frederick, 2018 WL 4627105, at *2.
474
Id.

2.3 Arbitrators’ Decision-making Argued
2.3.1 Cognitive illusions

The logistics of the decision-making process call attention to the methods that
arbitrators may employ in reviewing complex claims, evidence, deliberating
on their decisions, and even drafting awards or separate opinions disposing
of uncommonly large numbers of possibly heterogenous claims. The impor-
tance of the hidden cognitive illusions that arbitrators may fall prey to in their
decisions emanates from the fact that arbitrators make decisions that affect the
quality of justice that the arbitration regime aims at achieving. Arbitrators, as
human beings, may unconsciously follow the cognitive illusions generated
by the existence of TPAF. TPAF may lead to empaneling a single tribunal
and adversely affect efficiency and, at the same time, lead to inconsistent
outcomes. Due to the arbitrators’ prerogatives in deciding disputes, they may
have different frames through which they make their decisions. While arbitra-
tors with no TPAF experience may be swayed by the apparent strength of the
funded claim, arbitrators with TPAF experience may be inclined to believe in
the strength of the funded claim because they are aware of the mechanisms
that precede making the funding decision. Arbitrators therefore should have
the skill of objectively evaluating the claim unfettered by the information that
the claim is, or is not, funded.
Hindsight bias is an integral part of arbitrators’ decision-making because
it modifies memories of preceding events. Some ICSID tribunals clearly
considered previous applications for costs, and compliance with damages
awards, elements in deciding security for costs applications. For instance, the
respondent in RSM v. St Lucia justified its request for security for costs by
the material risk that claimant would be unable to comply with a costs award
because it initiated a number of proceedings subsequent to costs awards that it
did not comply with.475 Respondent argued that the funder would not comply
with the claimant’s obligations to the resulting costs award.476 Ironically,
claimant alleged that respondent was also funded by a third party, and would
suffer no immediate disadvantage and the security for costs would merely
serve the benefit of the third party.477 It can be inferred that the underlying
funded dispute could become a mere tool for serving the irrelevant third party
funders. Further, the tribunal differentiated between the requirements of order-
ing security for costs and the requirements for a decision where one party pays
475
para 32 (Aug 13, 2014).
476
Which Respondent described as “arbitral hit-and-run.” Id. para 33.
477
Id. para 44.

all advances as an exception to the rule upon a showing of “good cause.”478 It

altered the presumptive allocation of advanced payments due to the presence
of TPAF.479
This tribunal seems to have been subject to cognitive bias because it con-
sidered that the existence of TPAF might support the concern that claimant
would not comply with a costs award.480 The tribunal was likely subject to
the representative heuristics and hindsight biases because it considered cir-
cumstances that were brought forward in other proceedings.481 One arbitrator
assented to the decision and added that the funders “should remain at the same
real risk level for costs as the nominal claimant,”482 and that the integrity of
the BIT regimes mandates the real exposure of third party funders to “costs
orders which may go one way to it on success should flow the other direction
on failure.”483
Arbitrators in the same panel may have concrete differences in approaching
TPAF. For instance, in RSM v. St Lucia, Dr. Gavan Griffith, the party-appointed
arbitrator, assented to the tribunal’s decision on security for costs and consid-
ered the preferred ground for making such orders was TPAF.484 Dr. Griffith’s
assenting opinion represented an egocentric bias toward the existence of
TPAF. He depicted the industry as:
increasingly common for BIT claims to be financed by an identified, or (as here)

unidentified third party funder, either related to the nominal claimant or one that
engages in the business venture of advancing money to fund the Claimant’s claim,
essentially as a joint-venture to share the rewards of success but, if security for costs
orders are not made, to risk no more than its spent costs in the event of failure.485
478
Id. para 76.
479
Id. para 76 (referring to the first decision on the security for costs application that
was decided on December 12, 2013, [https://www.italaw.com/sites/default/files/case
-documents/italaw8005.PDF]).
480
para 83 (Aug 13, 2014).
481
Id. paras 85–86.
482
483
Id.
484
Id. para 11.
485
Id. para 12.

He added that “[s]uch a business plan for a related or professional funder is to

embrace the gambler’s Nirvana: Heads I win, and Tails I do not lose.”486 Dr.
Griffith considered that:
as strangers to the BIT entitlement, such funders also should remain at the same
real risk level for costs as the nominal claimant. In this regard, the integrity of the
BIT regimes is apt to be recalibrated in the case of a third party funder, related or
unrelated, to mandate that its real exposure to costs orders which may go one way to
it on success should flow the other direction on failure.487
He concluded that unless contrary circumstances mitigate the situation:
exceptional circumstances may be found to justify security for costs orders arising
under BIT claims as against a third party funder, related or unrelated, which does
not proffer adequate security for adverse cost orders. An example of contrary cir-
cumstances might be to establish that the funded claimant has independent capacity
to meet costs orders.488
He opined that “once it appears that there is third party funding of an investor’s
claims, the onus is cast on the claimant to disclose all relevant factors and
to make a case why security for costs orders should not be made.”489 These
unnecessary views may represent egocentric bias to TPAF. This was unsur-
prisingly the ground for seeking to challenge this arbitrator.490 Although the
tribunal rejected that challenge, it still considered the expressions of his views
as “strong,” “figurative metaphors,” and “extreme in tone.”491 However, these
views fell short, in the tribunal’s view, to establish any underlying bias against
TPAF or funded claimants.492
Moreover, Dr. Griffith appears to fall prey to the anchoring and framing
effects of cognitive bias when he considered that the existence of TPAF
should cast the onus on the claimant to make a case why security for costs
orders should not be made. In the same panel, another arbitrator, Mr. Edward
Nottingham, dissented to the reliance of the majority decision on TPAF to
finance the case.493 He opined that there was no evidence concerning the
486
Id. para 13.
487
Id. para 14.
488
Id. para 16.
489
Id. para 18.
490
491
Id. paras 84, 86.
492
Id.
493
RSM v. St. Lucia, ICSID Case No. ARB/12/10, para 17 (Aug 12, 2014)
(Nottingham, dissenting).

identity of the funder, any other information about the funder, their financial
means, or the arrangement between the claimant and the funder.494 This raised
concerns like the extent of the information to be disclosed and the definition
of TPAF.495
Hindsight bias makes an arbitrator more receptive to the information that
is consistent with the known outcome (funder’s presence or assessment) than
that which is inconsistent. Arbitrators may receive useful information through
anchoring that may advance the quality of their decision-making.496 However,
some anchoring may lead to absurd results. Arbitrators should be wary of the
estimated values presented in the case. It may be difficult for arbitrators to
avoid the TPAF egocentric biases. Relying upon the funder’s assessment may
raise concerns about arbitrators’ ethics.497 Also, knowing the outcome of the
funder’s assessment may have a profound effect on the arbitrator’s decision
which should create a hindsight bias problem. Generally, once the brain
encounters an outcome, it is difficult to develop a new set of beliefs or even
restore the state of mind that existed before encountering that outcome. When
the decision is likely to be affected by a hindsight bias, arbitrators “should
distrust their intuitive assessments of what the parties could have predicted.”498
Rather, they should consider ex ante standards of conduct.499
As such, cognitive biases may affect arbitration as a forum of justice. First,
arbitrators may decide a case based on a faulty prediction about the likely
outcome of the funder’s assessment. Second, the chilling effect of cognitive
bias surrounding the existence of TPAF may pave the way for funders to inter-
fere with the case in order to avoid undesirable results. Understanding the true
effects of cognitive biases over arbitrators could lead to improving funding
relationships. Even if the relationship began with indeterminacies, it should
over time become clearer. Arbitrators’ decision-making powers should not be
reduced to pure mathematical calculations. Even if addressing the arbitrators’
cognitive bias may not produce perfect decisions, it would improve the process
of producing these decisions. Although most arbitrators may allege that they
494
Id. para 18.
495
Id. para 19.
496
Similar to expert opinions. See supra Chapter 4 (2.1.1.2) (discussing the similar-
ity between funders’ assessment and expert opinions).
497
There may exist ethical concerns as to the ex parte communication to assess
the certainty of the decision-maker’s judgment. See generally Charles W. Wolfram,
Modern Legal Ethics § 11.3.3 (1986).
498
Guthrie et al., supra note 292, at 825.
499
Id.

are entirely rational, and are reluctant to acknowledge that cognitive illusion,
cognitive illusions do exist in relation to TPAF.500
Arbitrators should be in a better position to decide cases even where the
decision-making process is exposed to cognitive illusions. Simply, the effects
of cognitive bias should be limited, in one way, by restricting the arbitrator’s
access to the funding information. In most cases, they are irrelevant to the
merits of the underlying dispute. The arbitration regime should respond to
these cognitive illusions’ effects by adopting rules that respond to these con-
cerns. Arbitrators should not be positioned, by the operation of the system,501
in a place where they are exposed to cognitive illusions. If they happen to be
in that place, they should be restricted in accessing the funding information.
There should be objective rules to soften the effects of the cognitive illu-
sions.502 Otherwise, arbitrators can make errors, even when they are confident
in their decision-making processes. These rules should be conclusive in
addressing all the facets of cognitive illusions. They should not reduce the
effects of some cognitive illusions while failing to reduce the effects of others.
In addition, these rules should not adversely affect either party’s position in
the case. For example, cognitive illusions, especially anchoring, framing, and
hindsight bias, in relation to TPAF generally benefit the funded party. The
opposing party may not have the benefit of anchoring because it often takes
the respondent’s position. Anchoring in that sense benefits the funded party,
the claimant, not the opposing party, the respondent. Any rules should address
the effect of cognitive illusions on both sides. Moreover, left unaddressed,
the effects of cognitive illusions may skew arbitral justice by producing more
systemic errors.503
2.3.2 Security for costs

The existence of TPAF may have a chilling effect on arbitrators in deciding not
just the merits of the dispute but also the security for costs orders or awards.
Arbitral decisions may create a fear that issuing the security for costs orders
500
The U.S. Court of Appeals for the Ninth Circuit Judge Marsha S. Berzon has con-
ceded that “researchers have convincingly demonstrated that in many instances people
do not act as the robotic preference maximizers the law often assumes them to be. It
is not that humans are entirely irrational, but rather that our rationality is bounded.”
Marsha S. Berzon, Dissent, “Dissentals,” and Decision-making, 100 Cal. L. Rev. 1479,
1481 (2012).
501
502
The ICSID Amendment Rules may not be enough. They clearly allow arbitrators
to consider TPF as evidence that generates all the concerns raised by the cognitive bias
discussion. Id.
503
Similar to the effects of cognitive illusions on judges. See Guthrie et al., supra
note 292, at 828–29.

would be the norm in any funded case. In addition to the procedural delays that
may arise from frivolous applications for security for costs orders, the costs
may increase and the claimant may not be willing to pay. Funders may be
willing to increase their share in the success percentage of the damage award
due to this delay. Hence, this may create a divergence between the funding
parties that may lead to disagreements and more disputes, aside from the
underlying funded dispute. Some funders consider this a regular part of being
a funder.504 In all cases, the mere presence of the funders may not automatically
justify issuing a security for costs order.505 Some tribunals consider TPAF an
element in justifying the security for costs order. Others consider it an element
that supports the ability to honor a security for costs award.506 Nonetheless,
some cases, such as insolvency, or insufficiency of assets, may trigger the
frequent issuance of security for costs orders.
As such, arbitrators can minimize the effects of cognitive illusions by educat-
ing themselves about the reality of TPAF. The existence of TPAF may require
reallocation of power in the arbitration system, especially between arbitrators
and arbitral institutions as a means of reducing the influences of, among other
things, cognitive illusions. Given the arbitrator’s duty of impartiality, a rational
arbitrator should pay full attribute to that duty with no influence by external
factors such as the existence of TPAF. The fact that a funder exists in a dispute
for either party should not systemically influence the arbitrator’s responses in
deciding the case. The arbitration system itself should operate to support that
premise without leaving it only to the arbitrators’ unfettered authority.
3. POST-ARBITRATORS’ DECISION-MAKING
Discussion so far has emphasized the impact of TPAF on arbitrators’ pre- and
during decision-making process. At another fundamental stage, TPAF may
generate post-decision-making challenges.507 Arbitrators are obliged to render
valid and enforceable awards508 that do not violate public policy.509 However,
504
Scherer et al., Third Party Funding in Europe, supra note 28, at 215. See also
Mick Smith, Mechanics of Third Party Funding Agreements: A Funder’s Perspective,
in Third-Party Funding in International Arbitration 19 note 16 (Victoria Shannon and
Lisa Bench Nieuwveld, 2012).
505
Respondent may actually be the reason for claimant’s financial default.
506
RSM v. St Lucia, ICSID Case No. Arb/12/10, Decision on Security for Costs,
para 83 (Aug 13, 2014).
507
Burford Capital launched a new legal arm devoted to enforcing arbitral awards
for their clients. See Lacey Yong, Burford Launches New Firm with Former Akin Gump
Counsel, Global Arb. Rev. (Oct 5, 2016).
508
See, e.g., ICC Rules of Arbitration art. 42 (2017).
509
The New York Convention art. v.

arbitral awards are now given an international dimension of public policy,510

compared with the local public policy of the arbitral seat.511 Some jurisdictions
may prohibit TPAF for violating local public policy.512 While some jurisdic-
tions do not extend local public policy to international arbitral proceedings
conducted in other jurisdictions,513 others do so.514 However, extending local
public policy to arbitral proceedings that involve TPAF may transfer the paro-
chial public policy restrictions to a transnational one,515 which may contradict
the international dimension of arbitration.516
Courts tend generally to enforce awards issued in funded disputes.517 No
case law was found where an arbitral award was not enforced based solely on
the involvement of TPF. To the contrary, decisions seem to have taken a liberal
approach in addressing funded awards. The post-decision-making stage may,
however, raise some issues, including funders’ control (3.1), disbursing claim
proceeds (3.2), parallel funding proceedings (3.3), and enforcing funded
awards (3.4).
3.1 Funders’ Control
As discussed earlier, funders’ interference in the funded dispute may have

implications on the enforcement proceedings. Funders’ control may open the
door for applying the doctrines of res judicata or collateral estoppel. These
510
Born, supra note 56, at 2620–33, 2827–63.
511
See, e.g., Alexis Mourre & Luca G. Radicati di Brozolo, Towards Finality of
Arbitral Awards: Two Steps Forward and One Step Back, 23(2) J. Int’l Arb. 171, 187
(2006).
512
In some jurisdictions, such as Illinois, these arrangements may constitute a crim-
inal violation due to champerty or maintenance doctrines. See Am. Bar Ass’n Comm.
on Ethics 20/20, White Paper on Alternative Litigation Finance– Informational Report
to the House of Delegates, note 31 (Feb 2012), https://www.americanbar.org/content/
dam/aba/administrative/ethics_2020/20111212_ethics_20_20_alf_white_paper_final
_hod_informational_report.pdf.
513
See, e.g., Melanie Willems, Third Party Funding – A paper for the Society of
Construction Arbitrators (Oct 2009), https://www.constructionarbitrators.org/sites/
default/files/local/browser/documents/SCA%20-%20Third%20Party%20Funding
%20Paper.pdf (noting that English public policy does not apply extraterritorially).
514
See generally Lord Neuberger, Lecture on Harbour Litigation Funding: From
Barretry, Maintenance, and Champerty to Litigation Funding, para 38 (May 8, 2013),
https://www.supremecourt.uk/docs/speech-130508.pdf.
515
230.
516
Id.
517
This fact is supported by some empirical studies that found that litigation funding
decreases the reversal rate of the cases before the court compared with the reversal rate
of the nonfunded cases. Abrams & Chen, Market for Justice, supra note 170, at 1106.

doctrines apply to the privies of the parties whose interests were adequately
represented by another vested with the authority of representation,518 if there
was actual control over the previous proceeding.519 Accordingly, funders who
exercise control over arbitration may be privies to the funded parties, and may
be barred from raising some defenses in the enforcement proceedings if they
happen to directly enforce the award.520
3.2 Proceeds Disbursement
Collecting the award is an indispensable variable of the risk of funding. The

collection of assets may extend to any jurisdiction with all the associated
risks including legal, economic, financial, and even political. Collectively,
these risks may impede the ability to collect the award in a foreign country.
Courts generally tend to enforce the funding terms that relate to disbursing the
proceeds. One court confirmed an arbitral award issued in favor of the funder
against the funded party for the unpaid advances of the award that was issued in
the funded dispute.521 The funded party raised the usury defense, but the court
rejected it because it applies only to loans, not to an ownership interest in the
proceeds for a claim contingent upon the actual existence of the proceeds.522
Another court confirmed an arbitral award for damages against a funded party
who was unwilling to release the funds to the funder.523 In contrast, the United
States District Court of New York, Southern District, addressed the funder’s
allegations that plaintiff’s counsel failed to disburse the funder’s portion of
the settlement of the underlying funded dispute as required by the funding
518
Universitas Educ., 2014 WL 113702, at *2.
519
Id.
520
Id.
521
522
Id. See also Chevron Corp. v. Donziger, 871 F. Supp. 2d 229 (S.D.N.Y. 2012)
(finding that the funder did not allege any right to the litigation funding received by
defendants in order to say that the benefits were received by a third party).
523
Acosta was involved in an accident that raised a negligence lawsuit and Acosta
agreed to sell an interest (purchase agreement) in the anticipated proceeds of this negli-
gence lawsuit to funding for lawsuits (FFL) in exchange for funding pre-settlement liti-
gation. Upon a resolution of the negligence lawsuit, Acosta’s counsel tendered a check
to U.S. Claims for the principal amount only holding the remainder of U.S. Claims’
interest in the escrow account and hence depriving U.S. Claims of the full benefit
of its bargain under the purchase agreement. US Claims OPCO LLC v. Acosta, No.
8:15-CV-1638-T-30, 2015 WL 5687988, at *1–2 (M.D. Fla. Sept. 25, 2015). See also
Fausone, 915 So. 2d 626.

agreement.524 However, the court declined personal jurisdiction525 because the

funder failed to plead sufficient facts for a prima facie showing to bind the
counsel by the forum selection clause.526
3.3 Parallel Funded Proceedings
The interaction between courts and arbitral tribunals in relation to funded

disputes is not limited to enforcing the produced awards. It may extend to the
ongoing funded proceeding. For instance, the United States Court of Appeals,
Fifth Circuit, compelled arbitration that was funded by a litigation financing
company and denied the funded party’s application for a temporary restrain-
ing order to enjoin its arbitration proceedings before the ICSID after the
litigation company moved to dismiss the funded party’s application to enjoin
arbitration.527
3.4 Funded Awards Enforcement
A threshold issue for enforcing funded awards is whether a funder can directly
enforce that award, or through the funded party.528 The issue is of particular
importance where an award is issued, but apparently failed to consider one of
the duly presented claims.529 In that case, the question should remain whether
the funder has standing to raise this issue on its own, or may only do so through
the funded party. One such case involved a plaintiff, Noga, who assigned its
arbitration proceeds to its creditors.530 It involved a question of whether that
assignment of the proceeds deprived it of standing to seek confirmation of the
arbitral award, and whether the assignee of the proceeds must have been joined
as a necessary and indispensable party under Fed. R. Civ. P. 19.531 The plaintiff
pursued all necessary steps for the payment of the award.532 However, the
524
In this case, the funder sued the counsel alleging tortious interference with con-
tractual relations. Vinson, 256 F. Supp. 3d 318.
525
Id.
526
Id.
527
S & T Oil Equip. & Mach., Ltd. v. Juridica Investments Ltd., 456 F. App’x 481
(5th Cir. 2012).
528
See generally George P. Roach, How Restitution and Unjust Enrichment Can
Improve Your Corporate Claim, 26 Rev. Litig. 265, 306 (2007).
529
UNCITRAL Arbitration Rules art. 37(2). See Caron and Reed, Post Award
Proceedings Under the UNCITRAL Arbitration Rules, 11 Arb. Int’l 429 (1995).
530
Compagnie Noga D’Importation et D’Exportation, S.A. v. Russian Fed’n, 361
F.3d 676 (2d Cir. 2004).
531
Id. at 680–81.
532
Id. at 681.

assignee reserved the right to enforce directly against the respondent, Russian
Federation, their assigned portions of the proceeds following a notice to the
assignor. The Second Circuit remanded the case to the District Court for more
factual records and determination.533 Upon remand, the District Court found
that:
Montreux [one creditor who sought intervention in the enforcement proceedings]

and Noga share[d] a mutual interest in maximizing Noga’s recovery. Given Noga’s
ardent efforts to arbitrate and litigate this dispute over the past thirteen years, the
court had every reason to believe that Noga would continue to further that interest,
leaving Noga and Montreux to wrangle later over the proper division of any recov-
ered monies.534
Montreux lacked a direct and legally protectable interest in the award that
was the subject matter of this action.535 However, the agreement between
Montreux and Noga in this case was different from the assignment agreement,
which justified, to some extent, the absence of any standing to intervene in this
proceeding.
Courts have addressed the interplay between the funding policy and the
arbitration policy during the enforcement of the arbitral award in a foreign
jurisdiction while being challenged in the seat jurisdiction for annulment
proceedings. The U.S. District Court of Columbia addressed the enforcement
of an arbitral award issued in Paris, confirmed in part and subject to vacatur
in part.536 Pending the proceedings before the Paris Court, the funder, as an
assignee of the award’s proceeds, filed a petition against the respondent,
Uzbekistan, in July 2018 seeking to enforce the piece of the award in which
the funded party had prevailed. Although the funder had no direct dealings
with Uzbekistan, he argued that being a funder to the prevailing party in
the underlying dispute had made it eager to have its day in court. However,
the court stayed the proceedings pending the decision of the Paris Court of
Appeal.537 The stay would “serve the purposes of arbitration by reducing
the likelihood of unnecessary and expensive piecemeal litigations.”538 It was
533
Id. at 686.
534
Compagnie Noga D’Importation Et D’Exportation S.A. v. Russian Fed’n, No. 00
CIV. 0632WHP, 2005 WL 1690537, at *5 (S.D.N.Y. July 20, 2005).
535
Id.
536
Gretton Ltd. v. Republic of Uzbekistan, No. CV 18-1755 (JEB), 2019 WL
464793, at *1 (D.D.C. Feb. 6, 2019).
537
Id. at *7.
538
“If the Court were to side with Gretton now and then Oxus were to win on appeal
in Paris, one of them could well be back in a U.S. court seeking to enforce a greater
award amount and litigating some of the issues raised in this case all over again.” Id. at
*4.

unfair to require Uzbekistan to contest similar issues multiple times in multiple

litigation.539 The funder’s interest in collecting the award was not substantial
enough to outweigh lengthening the proceedings, and creating the possibility
of unnecessary litigation.540 “Waiting might be appropriate if the proceedings
abroad were initiated by the party now seeking to enforce the award.”541 The
court was skeptical as to how likely the Paris proceedings were to overturn the
portion of the award subject to enforcement.542 Other considerations weighed
for the stay as well, including duplicative enforcement proceedings in the U.S.
courts, unfairness to the respondent of having proceedings in two fora, and the
international comity issues associated with issuing a decision mere months
before the Paris court was likely to do so.543 The court found that the funder
would presumably receive the benefits of the set-aside proceedings pursued by
the funded party in Paris and that the funder may fund or control the funded
party’s continued actions in the Paris courts. So, it made sense to treat them as
one when their interests and activities were so closely aligned.544
4. CONCLUSION
Judging from the emphasis on the arbitrators’ decision-making in disputes

funded by third parties, one might suppose that, given the absence of an
appropriate regulatory framework, the involved parties may face uncertainties
on fashioning the procedural framework that governs this process. That said,
inaction must be evidence of a conscious decision to introduce a regulatory
framework that makes the process more efficient, and better serves the policies
of TPAF. Following that logic, the next two chapters consider the regulatory
argument for TPAF (Chapter 5) and the funding paradigm (Chapter 6) that
should nurture the abandoned promise of arbitration funding as a tool of access
to justice. To the extent that either regulatory framework proves inadequate,
the question of what, if any, the regulation should do about modern arbitration
funding will be addressed in Chapter 6.
539
Id. at *4.
540
Id.
541
Id. at *5 (quoting Europcar Italia, S.p.A. v. Maiellano Tours, Inc., 156 F.3d 310,
318 (2d. Cir. 1998)).
542
Id. at *6.
543
Id.
544
Id.

5. Regulation calculus
Chapters 3 and 4 sought to show how TPAF may move from a mechanism to
facilitate the disputing party’s access to arbitral justice to a mechanism whose
adverse effects on arbitral justice are certain realities. Now, this chapter argues
that this shift would be mitigated if an institutional choice succeeds where the
individual parties seem hitherto to have failed, namely ensuring an efficient
TPAF that preserves the arbitration system as a forum of justice, not profit. In
fact, the institutional choice may not be the optimal choice, but not for want
of trying.
Legal systems use regulation to respond to the market uncertainties.1 TPAF
operates within a deregulated legal profession.2 This deregulation is argued
to liberalize attorneys and allows them to effectively perform their profession
worldwide.3 Chief among the challenges of arbitration funding is the structural
regulation of TPAF.4 These challenges are more acute in investor–state arbi-
tration, which involves a political character due to the presence of sovereign
states. Rather than depoliticizing investment disputes, which was the primary
objective of creating ISDS,5 TPAF may undercut that objective, and politicize
the ISDS. While TPAF may incentivize funders, who have hidden political
objectives, to help respondent states, it may also help funders challenging
governmental regulations to serve their own agendas against specific states.
This chapter consists of three parts: the first identifies the normative goals of
regulation (1); the second reviews the various responses to TPAF regulation,
whether by banning, permitting, or assimilating (2); the third examines the
regulatory framework, and argues that whereas private initiative is inherently
unreliable, arbitral institutions are better placed to promote TPAF harmony
between formally distinct, but substantively related, bodies of law (3).
1
Generally, law reacts to new innovations by limiting the transferability of these
innovations. For instance, attorneys cannot split the fees with nonattorneys, which may
affect the contractual relationships among attorneys, funders, and the disputants. Model
Rules of Prof’l Conduct R. 5.4 (2017) (“A lawyer or law firm shall not share legal fees
with a nonlawyer”).
2
Catherine A. Rogers, Ethics in International Arbitration, para 5.04 (2014).
3
Id.
4
5
Lise Johnson et al., Investor–State Dispute Settlement: What Are We Trying to
Achieve? Does ISDS Get us There?, Colum. Ctr. on Sustainable Inv. (Dec 11, 2017).
142

Regulation calculus 143
1. REGULATION NORMATIVE GOALS
Since the dawn of arbitration funding, the question of regulation has been
contested, with no proper answer. The existing rules are either overinclusive,
covering different models of funding, or underinclusive, falling short of not
including some necessary elements of funding. The issue is of particular
importance due to the changing dynamics in the funding practice, which now
embraces repeat players who may serve the role of what was described in the
ancient times as “Great Men.”6 Considerably, the involvement of these repeat
players in funding specific cases may give more credit to this description.
TPAF has reached a level of maturity that makes it distinguishable from
other funding practices,7 and so should be its regulation. However, the regu-
latory framework may differ from commercial to investor–state arbitration.8
TPAF may operate efficiently for developing countries to increase their access
to the investor–state system,9 especially with the possibility of allowing sover-
eigns to file counterclaims against investors.10 Developing countries may lack
the advocacy capacity to carry on this kind of dispute in international arbitra-
tion. TPAF should bridge these gaps, and avoid the agency problems between
the involved parties in a system that is notorious for its lack of transparency.11
As such, the regulation of TPAF should have certain objectives. In general,
TPAF regulation should satisfy the twin conditions of funding efficiency and
arbitral justice. First, it should level the playing field between the funding
practice and the arbitration regime. Second, it should maintain a balance
between the funding parties. Third, it should promote transparency.12 Through
these goals, TPAF regulation should mitigate risks, enable the flow of more
6
Richardson, 236 S.W. 1025. See generally supra Chapter 3.
7
8
Due to the public interest at stake, sovereigns have more leverage through their
arsenal of measures, such as expropriation, regulation, withdrawal of treaties, diplo-
matic channels, or even armed forces. See Oscar Schachter, The Right of States to Use
Armed Force, 82 Mich. L. Rev. 1620 (1984).
9
95 Minn. L. Rev. 1268, 1308 (2011) [hereinafter Steinitz, Whose Claim?].
10
Mohamed F. Sweify, Investment–Environment Disputes: Challenges and
Proposals, 14 DePaul Bus. & Com. L.J. 133, 205 (2015).
11
See generally Jack J. Coe, Jr., Transparency in the Resolution of Investor-State
Disputes – Adoption, Adaptation, and Nafta Leadership, 54 U. Kan. L. Rev. 1339
(2006).
12
See, e.g., Letter from John H. Beisner, the U.S. Chamber Institute for Legal
Reform, to Ms. Revecca A. Womeldorf, the Secretary of the Committee on Rules
of Practice and Procedure of the Administrative Office of the United States Courts
on Third Party Litigation Funding (Oct 30, 2015), https://www.uscourts.gov/sites/
default/files/15-cv-kk-suggestion_us_chamber_institute_0.pdf (urging to “take steps

funding opportunities in arbitration, and maximize the benefits that this prac-
tice was principally introduced to serve. Regulation should provide a space
for analyzing funding arrangements that may be used as a preventive measure
for disallowing frivolous claims.13 With ISDS becoming the regular forum
for investment claims and often being integrated into investment treaties as
a purported mechanism to advance their objectives,14 structuring TPAF should
align, and promote, the objectives of these treaties.15 The standards for pro-
tecting investors are mere means to achieve these objectives, and so is TPAF.
Accordingly, the regulatory goals are premised primarily on the contextual
arguments criticizing the current TPAF practices discussed in Chapter 2.
They have a far-reaching goal of crafting rules that better serve the arbitration
system. The remnant prohibition of the champerty doctrine is a major chal-
lenge to reaching these goals. Despite the general relaxation of this doctrine
in application to TPF, this relaxation was qualified by certain conditions.
Chief among these conditions is the funder’s control over the proceeding.16
Nonetheless, the funding industry is an oligopoly, controlled by certain repeat
players, which may open the door for skepticism of the reasons for which
the champerty doctrine was basically relaxed. Powerful funders may take
advantage of unprotected disputants. This concern should raise questions of
regulation, and the true role that TPAF should play in international arbitration.
Limiting the funders’ role throughout the arbitral process should, functionally,
be met with less skepticism.
soon to achieve greater transparency about the growing use of TPLF in federal court
litigation”).
13
Maya Steinitz, Follow the Money? A Proposed Approach for Disclosure of
Litigation Finance Agreements, UC Davis L. Rev. 10–11, 21–22 (2019), https://ssrn
.com/abstract=3360672 [hereinafter Steinitz, Follow Money?].
14
Spenser Karr, A Battle for Choice: Selecting Investor-State Arbitrators Under
the Rcep, 90 Temp. L. Rev. 127, 150 (2017); Organisation for Economic Co-operation
and Development (OECD) Dispute settlement provisions in international investment
agreements: A large sample survey, 9 (2012), http://www.oecd.org/investment/inte
rnationalinvestmentagreements/50291678.pdf.
15
Agreement between the Swiss Confederation and the Arab Republic of Egypt on
the Promotion and Reciprocal Protection of Investments, Swiss–Egypt, Preamble (May
15, 2012); Treaty between the United States of America and the Argentine Republic
Concerning the Reciprocal Encouragement and Protection of Investment, U.S.–
Argentine, Preamble (Oct 20, 1994) (“Recognizing that agreement upon the treatment
to be accorded such investment will stimulate the flow of private capital and the eco-
nomic development of the parties”).
16

1.1 Interests Competed
So far, discussion has focused on the importance of funding; but many of

the points so far made should apply to the funding practice within arbitral
justice. Arbitration creates market-based funding activities for the funders.
As such, TPAF involves public and private interests. While the public interest
is represented, in broad terms, by the access to justice theory and fair and
efficient arbitration systems, private interests represent the individual parties’
interests. Given the imbalances of the current TPAF practice,17 the regulatory
framework should strengthen the parties’ bargaining positions, and strike
a balance between the funding parties throughout the arbitration regime itself.
Accordingly, any regulatory framework should function through the market
forces that influence or even animate the system of justice.
TPAF should better ensure compliance or remedying of noncompliance.
The operation of the funders creates a reputational force that serves as a market
tool for the funders. Funders target not just immediate profit, but also future
funding opportunities. Developing a reputation for controlling the proceedings
may forego future investments with potential funded parties. However, market
forces, including the funders’ reputation, may be insufficient to induce the
funders to fairly interact with the funded party in the underlying proceedings.
1.2 Expected Returns
The expected outcome may constitute a policy consideration for regulating

TPAF. In investor–state arbitration, the decision to sue the host state is gov-
erned by two variables. First, pursuing the claim for a future expected return,
while ceasing the investment. Second, continuing the investment with its
expected return, without pursuing the claim. The expectation damages may
be of particular importance. In ISDS, investors seek the future lost profits in
the present monetary value in a form of expectation damages.18 Compared
with the future profit that may be generated from the continued investment
in the host state, foreign investors may prefer to pursue a treaty-based claim
against the host state to get the expectation damages in the present value.19 As
a facilitative tool to pursuing investment claims, TPAF may change the pol-
itics of the regulatory framework of investor–state arbitration, especially the
cost–benefit analysis of the claim. The availability of TPAF with expectation
17
See supra Chapters 2 and 4.
18
Alison E. Post, Home Court Advantage: Investor Type and Contractual
Resilience in the Argentina Water Sector, 42 Politics & Soc’y 107 (2014).
19
Assuming that the time between initiating a case and enforcing an award is less
than the lifetime of the investment.

damages makes investors’ incentive to arbitrate for the expected return higher
than the incentive to continue investing in the host state. This uncertainty may
undermine the core objectives of the investment treaties that target long-term
investments for the sustainable development of the host states, especially
developing countries.20
Although TPAF can be argued to eliminate the redistributive advantage that
punitive damages have on corporate defendants, by transferring the risks of lit-
igation of these corporate defendants to other social actors,21 it would have less
impact on the redistributive advantage in arbitration. Arbitrators may lack the
authority to award punitive damages in arbitration.22 Arbitration is normally
conducted for the interests of the disputants, with fewer societal interests in
general. However, the relative superiority of the funding arrangement to the
arbitration market ensures just treatments to the funded parties, especially once
one takes into account the economic and social costs of TPAF. These costs are
particularly salient if the funders threaten to interfere with the funded dispute.
In such cases, TPAF would be a tool that risks being “the rule of some groups
over others by and through the law,” rather than a “rule of law that furthers the
common good.”23
1.3 Rule of Law
The contention over the “rule of law” has come to encompass more than formal
conceptions of the law, and now includes substantive norms of law.24 Formal
conceptions address the coordinative functions of goals by providing a frame-
work through which individuals and institutions may interact.25 Substantive
norms attend to the broader values attained through the law. For an effective
rule of law, any normative goal is better institutionalized as part of a culture
20
The United Nations Conference on Trade and Development (“UNCTAD”),
Investor–State Dispute Settlement Cases Pass The 1,000 Mark: Cases and Outcomes
in 2019, Int’l Inv. Agreements 2 (July 2020), https://unctad.org/system/files/official
-document/diaepcbinf2020d6.pdf.
21
See generally Steinitz, Whose Claim?, supra note 9, at 1312.
22
John Y. Gotanda, Awarding Punitive Damages in International Commercial
Arbitrations in the Wake of Mastrobuono v. Shearson Lehman Hutton, Inc., 38 Harv.
Int’l L.J. 59, 78 (1997).
23
Brian Z. Tamanaha, Law as a Means to an End: Threat to the Rule of Law 225
(2006).
24
Jeremy Waldron, The Concept and the Rule of Law, 43 Ga. L. Rev. 1, 48
(2008) (“Law in the first sense requires the existence of certain general norms that serve
as a basis of orientation for people’s behavior, as well as a basis for decision by the
courts”).
25
Id.

of appropriate conduct.26 Ultimately, the real application of the rule of law

would unfold through a practical implementation.27 Given the normative goals
of TPAF, the principle of rule of law should be applied to enhance procedural
fairness, and help coordinate the parties’ behavior.28 In that context, the rule of
law should contribute to increasing the transparency of the process, reducing
the possibility of oppressing the funded parties, and minimizing the risks of
unexpected or retaliatory termination of TPAF arrangements. This promotes
the interests of both funding parties.
2. REGULATION ARGUED
The need for regulation is easier to express than to effectuate. More impor-
tantly, the legal framework may differ from arbitration to litigation. Even
within arbitration, it may differ from investor–state to commercial, domestic,
or international arbitration. However, some have called to ban TPF. The fol-
lowing sections, on banning, permitting, or assimilating TPAF, examine the
regulation argument of TPAF. The first discusses the banning argument of that
practice (2.1), the second considers the importance of permitting and regulat-
ing that practice (2.2), and the third addresses the assimilation of that practice
into the existing rules or creating new rules (2.3).
2.1 Ban
Some call for banning TPAF.29 These calls cite the extreme asymmetry
of TPAF and the absence of an effective mechanism to sanction frivolous
26
Martin Krygier, The Rule of Law: Legality, Teleology, Sociology, in Relocating
the Rule of Law 45, 58–60 (Gianluigi Palombella & Neil Walker eds., 2009).
27
This practical implementation should involve interplay between different players
and different set of rules or standards. See Duncan Kennedy, Form and Substance in
Private Law Adjudication, 89 Harv. L. Rev. 1685 (1976).
28
See, e.g., Scott J. Shapiro, Legality (2011) (discussing the concept of “legal
systems” as “institutions of social planning”).
29
A call for banning TPF in ISDS was adopted by some states in the discussions of
the UNCITRAL’s Working Group III on ISDS reform. Brooke Guven & Lise Johnson,
Third-Party Funding and the Objectives of Investment Treaties: Friends or foes?, Int’l
Inst. for Sustainable Development, Inv. Treaty News (June 27, 2019).

claims.30 That banning call has been answered by some states.31 However,
these imbalances should not be met by an absolute ban of TPAF.32 Historically,
prohibitions on funding lawsuits were meant to protect both the weak parties
and the courts from the Great Men.33 TPAF in fact can be an effective tool
for reforming imbalances between parties, and promoting a system of justice.
In investor–state arbitration, states may make use of this tool through filing
counterclaims or financing their defenses. Through these two tools, TPAF can
restore balance between host states and foreign investors, and decrease frivo-
lous claims. Through counterclaims, investors run the risk of not only losing
their claims and their associated costs, but also a monetary award for the host
state, and reputational damage for future investments.34 Banning TPAF limits
the possibilities for a better use of the arbitration system. By contrast, placing
TPAF within the proper legal framework would broaden its use as a redistrib-
utive tool. No doubt, TPAF should continue to exist. Even with artless funding
practice, it is rather than an absolute ban.
2.2 Permit
The issue of regulation should intertwine with the definition of TPAF. When it
comes to regulation, no one speaks of the same funding practice. While attor-
neys speak of TPAF from the perspective of professional responsibility rules,
funders speak about it from a financing perspective. While disputants speak
of regulation from a procedural perspective, regulators mostly view it from
a public policy perspective. In reality, TPAF is a complicated overlap of all
these perspectives. The complexity of regulation has been recognized by both
private institutions, such as the ICCA and Queen Mary’s Report of the Task
30
Frank J. Garcia, The Case Against Third-Party Funding in Investment Arbitration
(July 30, 2018), https://www.iisd.org/itn/2018/07/30/the-case-against-third-party
-funding-in-investment-arbitration-frank-garcia/. Further, the fact that states lack any
substantive rights under the investment treaties, and have no right of appeal, makes
TPF an unfair disadvantage to states, especially considering the fact that taxpayers of
the respondent state are the true risk cost-bearers. This is in comparison with commer-
cial arbitration, where both private parties are risk-bearers of any potential judgment.
Id.
31
See, e.g., Agreement between the United Arab Emirates and the Argentine
Republic for the Reciprocal Promotion and Protection of Investments, UAE–Argentine,
art. 24, Apr 16, 2018.
32
For possible ways to address these imbalances, see Sergio Puig & Gregory
Shaffer, Imperfect Alternatives: Institutional Choice and the Reform of Investment Law,
112 Am. J. Int’l L. 361, 367–68 (2018).
33
Gilman, 87 Ala. 691, at 698–702.
34
See infra Chapter 5 (3).

Force on Third Party Funding in International Arbitration,35 and public insti-

tutions such as the United Nations Commission on International Trade Law
(UNCITRAL) Working Group III.36 ICSID recently proposed and approved
some rules about TPAF to be considered in ICSID cases.37
2.2.1 Deregulation
While the risks of less regulation seem formidable, there exist vocal opponents
to any form of regulation, even a simple requirement of disclosing the pres-
ence of TPAF.38 TPAF is argued not to have a uniform national rule in order
to give more space for its continued growth.39 At minimum, it was argued to
be left to the existing regulatory framework, financial institutions, or even
self-regulation.40 Still, TPAF may be argued to be better off as a free market
due to the sophistication and expertise of the parties at stake.41
35
The ICCA–Queen Mary Task Force Report on Third-Party Funding in
International Arbitration (Apr 2018), https://www.arbitration-icca.org/media/10/
40280243154551/icca_reports_4_tpf_final_for_print_5_april.pdf [hereinafter Queen
Mary Task Force Report].
36
UNCITRAL, Working Group III, Possible Reform of Investor–State Dispute
Settlement (ISDS) Third-Party Funding – Possible Solutions (38th Session Oct 14,
2019), http://undocs.org/en/A/CN.9/WG.III/WP.172 [hereinafter UNCITRAL 2019
Working Group III].
37
Int’l Ctr. for Settlement of Investment Disputes, Working Paper #4, Proposals
For Amendment of the ICSID Rules, 278 (ICSID, Working Paper No. 4, 2020) R.23,
https://icsid.worldbank.org/sites/default/files/WP_4_Vol_1_En.pdf.
38
See Maxi Scherer, Aren Goldsmith, and Camille Flechet, Third Party Funding
in International Arbitration in Europe: Part 1 – Funders’ Perspectives, Int’l Bus.
L. J. 207, 218 (2012), https://ssrn.com/abstract=2348737. [hereinafter Scherer et al.,
Third Party Funding in Europe]; Jean Kalicki, Third Party Funding in Arbitration:
Innovations and Limits in Self-Regulation (Part 2 of 2) (Mar 14, 2012).
39
Advisory Committee on Civil Rules, Report of the Advisory Committee
on Civil Rules, 176–77, (2018), https://www.uscourts.gov/sites/default/files/2019-01
-standing_agenda_book.pdf.
40
Letter from U.S. Senate to Sir Peter Middleton GCB Chairman, Burford
Capital (Aug 27, 2015), https://www.grassley.senate.gov/sites/default/files/judiciary/
upload/ 2015-08-27 % 20CEG % 2C % 20Cornyn % 20to%20Burford%20Capital%20
%28Commerical%20Litigation%20Funding%29.pdf (expressing concerns about the
non-regulation of the funding industry).
41
Cf. Susan Lorde Martin, Litigation Financing: Another Subprime Industry that
Has a Place in the United States Market, 53 Vill. L. Rev. 83, 104 (2008) [hereinaf-
ter Martin, Litigation Financing Another Subprime] (providing an example of the
airline industry that has increased competition after deregulation. The average fares
have dramatically fallen to the advantage of the customers. Unlike the deregulation of
the telecommunications industry, which was less successful because of its structurally
monopolistic nature).

Unlike deregulation, regulation should enhance an efficient TPAF. It

assumes that regulators, either policymakers, legislators, or rule-makers,
attempt to predict the risks of regulating the industry, and the incentives to
minimize those risks. A regulatory framework facilitates more accurate risk
assessment, and more disciplined remedies that focus on the cause of the risk,
and a gradualist’s approach to mitigating them.42 Deregulation may create
a less transparent system, at the expense of the funded party.43 Absent regula-
tion, arbitrators are powerless in front of unethical behaviors.
Other similar funding practices that are based on risk assessment have
proved to be enhanced through regulation.44 While the funder’s goal is pri-
marily profit, and the attorney’s goal is primarily fees, the funded party strives
for justice to prevail in its claim. There may be a common theme between all
these goals, but the means for each party to achieve it may concretely differ.
Regulation should level the playing field, and ensure that one party’s goal does
not trump the other’s. It should demarcate the borderlines between each party.
Although most funding agreements are standard forms, it appears that rules do
not prohibit an oral funding agreement.45 By its nature, funding agreements
may be subject to the writing formality.46 Unlike some opinions that argue for
42
See generally Laurence H. Meyer, Increasing Global Financial Integrity: The
Roles of Market Discipline, Regulation and Supervision Remarks, 18 Cato J. 345
(1999).
43
TPAF may be manipulated to be a channel for laundering illegally obtained
money, cause pressure on arbitrators ex ante to finance liability actions against the arbi-
trators or arbitral institutions, misuse of information obtained from a funded case in
other cases, or as leverage to play both sides in the same case. See generally Edouard
Bertrand, The Brave New World of Arbitration: Third Party Funding, 29 ASA Bull.
607, 614 (2011).
44
Integrated Financial Engineering, Inc., Report on the Evolution of the U.S.
Housing Finance System: A Historical Survey and Lessons for Emerging Mortgage
Markets (Apr 2006), https://www.huduser.gov/publications/pdf/US_evolution.pdf
(noting that the housing finance system has evolved over time and regulation was effi-
cient in developing this practice).
45
However, some jurisdictions expressly require the funding agreement to be
in writing in order to be valid. Abu Dhabi Global Market (“ADGM”) Courts,
Civil Evidence, Judgments, Enforcement and Judicial Appoints Regulations (ADGM
Regulations) art. 225 (2015) (expressly addressing litigation funding agreements and
the conditions applicable to them in the ADGM and requiring “writing” for a litigation
funding agreement to be valid in the ADGM).
46
Except in cases where the jurisdiction itself subjects some contracts to written
requirements. See, e.g., N.Y. Gen. Oblig. Law § 5-701 (Agreements are required to be
in writing).

a cap on the percentage that the funder may get,47 this percentage is irrelevant
to the regulatory framework.48
Together with the ancient practices that were prohibited for the fear of Great
Men, the involvement of the funders as repeat players, with their arsenal of
expertise and reputation, may create a similar monopoly. Regulation should
balance that fear and allow the parties to choose from a wide variety of
funders. It should promote a transparent competitive market that minimizes
risk of a funders’ abuse. The repeat players may oppress the funded parties by
controlling the process, and the hidden psychological forces that impact the
decision-makers.49 Unlike deregulation, a regulatory framework should strike
a balance between these competing concerns.50
2.2.2 Players
Some funders do not oppose the regulation of TPAF.51 The increasing presence
of funders raises a host of questions that can affect the larger framework of
arbitration. Funders are distinguished from attorneys and persistently escape
regulations governing attorneys to avoid malpractice liability.52 Still, funders
may be held liable on other grounds if they direct the party’s attorneys.53
A funder’s role compared with other players raises concerns over the fair-
ness of the process. Often exceedingly, arbitral decisions should recognize that
fairness is not a one-sided term that focuses on one party at the expense of the
other.54 Similar to the tribunal’s role in balancing investors’ rights and other
47
Joshua G. Richey, Tilted Scales of Justice? The Consequences of Third-Party
Financing of American Litigation, 63 Emory L.J. 489, 518–19 (2013). The New York
City Bar Working Group on TPF suggested a similar capping requirement for con-
sumer funding. See New York City Bar Ass’n, Working Group Report on Litigation
Funding (Feb 28, 2020), http://documents.nycbar.org/files/Report_to_the_President
_by_Litigation_Funding_Working_Group.pdf [hereinafter TPF Working Group].
48
Osprey, 532 S.E.2d 269 (considering the excessive fees a reflection of funder’s
control and hence may invalidate the funding agreement).
49
50
Jasminka Kalajdzic et al., Justice for Profit: A Comparative Analysis of
Australian, Canadian and U.S. Third Party Litigation Funding, 61 Am. J. Comp. L.
93, 143–45 (2013) [hereinafter Kalajdzic et al., Justice for Profit] (arguing for advanta-
geous regulation in Australia).
51
Christopher Hodges et al., Litigation Funding: Status and Issues, Oxford Legal
Studies Research Paper No. 55/2012, 151 (Jan 30, 2012).
52
Thomas J. Salerno et al., Third-Party Litigation Funding: Where Do We Go
Now?, Am. Bankr. Inst. J., 18, 62 (March 2018).
53
Although the funding agreement might be invalid, courts may uphold the
funder’s liabilities on different theories. See, e.g., Saladini, 426 Mass. 231.
54
Alec Stone Sweet et al., Arbitral Lawmaking and State Power: An Empirical
Analysis of Investment Arbitration, 7 J. Int’l Disp. Settlement 1, 16–17 (2017).

claims that may affect a state’s right to regulate social welfare,55 the funding
parties should have a mechanism that balances their arrangement – not because
it affects the social welfare, but because it may affect other players in the pro-
ceeding, including counsels, arbitrators, and opposing parties, as well as the
process itself. By doing so, the funding parties implicitly recognize that they
take into account the interests of the involved parties, and the fairness of the
process itself. The regulatory framework should fit funders within the contours
of the arbitration regulatory framework. This framework should align regula-
tion goals with the substantive and procedural framework of arbitration.56
In investor–state arbitration, while the choice of claimant’s representative
contributes to obtaining a favorable decision, the same may not apply to
respondent states.57 TPAF may reshape the legal outcome depending on which
party is funded.58 Some funders may be dissatisfied with the ruling of the
tribunal and seek to challenge that ruling.59 These rule-changing tactics are
helpful to funders in the short and long run. In the short run, the funder may try
to overturn the outcome of the case in which they have an immediate interest.
In the long run, funders may try to set precedents on the same issue for future
tribunals.60 Repeat funders may take on specific types of claims in order to gain
55
See, e.g., Saluka v. Czech Republic, UNCITRAL, Partial Award, para. 306 (Mar
17, 2006).
56
Some opinions, however, simulate the disclosure of the funding arrangement to
the class action; a coalition that will happen through time, in their views. See Kalajdzic
et al., Justice for Profit, supra note 50, at 137–38.
57
Investors who are represented by top-tier law firms are likely to win more than
those that are not funded by these firms. See generally Brooke Guven and Lise Johnson,
The Policy Implications of Third-Party Funding in Investor-State Dispute Settlement,
CCSI Working Paper 2019, 26 (May 2019) [hereinafter Guven et al., ISDS Policy
Report].
58
Guven et al., ISDS Policy Report, supra note 57, at 27 (describing the advantages
of having repeat players in ISDS).
59
“For example, a funder recently dissatisfied with the tribunal’s interpretation of
an ‘implicit legality requirement’ now seeks to overturn the denial of jurisdiction in the
case. The annulment proceeding will come at a cost but will not, by itself, generate any
financial recovery for the funder; nevertheless, it can be crucial for future success in
that and other disputes that might otherwise close the door to claimants’ claims on ‘ille-
gality’ grounds.” Guven et al., ISDS Policy Report, supra note 57, at 27.
60
Some arbitrators are duly inclined to align their decisions to previously issued
decisions. See, e.g., Burlington Resources Inc. v. Ecuador, ICSID Case No. ARB/08/5,
Decision on Liability, para 187 (Dec 14, 2012) (“[T]he Tribunal believes that, subject
to compelling contrary grounds, it has a duty to adopt solutions established in a series
of consistent cases. It further believes that, subject to the specifics of a given treaty and
of the circumstances of the actual case, it has a duty to seek to contribute to the harmo-
nious development of investment law, and thereby to meet the legitimate expectations
of the community of States and investors towards the certainty of the rule of law”). Cf.

reputational expertise in that area. From a fairness perspective, funded parties

should conduct the proceedings unhindered by the funder’s control. From an
efficiency perspective, funders may be entitled to know beforehand any pro-
cedural path that the disputant could pursue. From an economic perspective,
funders may have concerns about resource allocation, which should involve
optimal protection of their invested money. Absolute protection is neither
optimal nor efficient. It may hamstring the fairness of the arbitral process.
There should be a way to allocate the funding resources so as to preserve fair-
ness, efficiency, and the rule of law.
2.3 Assimilate
TPAF is suggested to be subject to more than one regulatory regime to cover

different aspects of the funding arrangement, where funders may play different
roles.61 Funders accordingly would be incorporated into one of the existing
roles and should be regulated in accordance with a preexisting regulatory
framework.62 If a funding transaction does not fit in any of the existing trans-
actional structures, new regulations would be required.63 In addition, some
have suggested incorporating TPF into the Truth in Lending Act (TILA).
TILA is a regulatory federal tool to strengthen competition among lenders by
enabling their customers to compare the credit options of available lenders.64
However, TILA and TPAF may operatively differ. TILA is meant to protect
regular customers who seek money for personal use or any other purpose.65
Arbitration funding is a tool of profit for funders, and a tool of justice for the
funded parties. Pragmatically, funders are arguably not covered by the defini-
Electrabel S.A. v. Hungary, ICSID Case No. ARB/07/19, Award, para 224 (Nov 15,
2015) (“This Tribunal is required to decide the arguments advanced by the Parties in
this arbitration based on the evidence adduced by the Parties in these proceedings. It
cannot be influenced therefore by the result of a different arbitration, where an inves-
tor’s claim appears to have been formulated differently and decided on different argu-
ments and evidence”).
61
Victoria Shannon Sahani, Reshaping Third-Party Funding, 91 Tul. L. Rev. 405,
412 (2017).
62
Id.
63
Id.
64
Nussbaum v. Mortg. Serv. Am. Co., 913 F. Supp. 1548 (S.D. Fla. 1995) (“Truth in
Lending Act (TILA) was enacted to promote informed borrowing by requiring lenders
to fully disclose to borrowers the terms of credit being extended in credit transac-
tions; disclosure was meant to protect consumers in lending situations from becoming
unknowingly obligated to pay hidden and unreasonable charges imposed by lender and
to permit them to meaningfully compare terms of credit extended by different lenders”).
65
Id. at 1553. 15 U.S.C.A. § 1605(a).

tion of “creditors” under the TILA.66 Credit involves the deferred payment of
a debt, which cannot be contingent upon a future event.67 This differs dramat-
ically from arbitration funding, which is contingent upon the success of the
funded claim. However, the success of TILA in the lending industry may be an
incentive for regulating TPAF. That understandably justifies the call of some
scholars to amend the TILA to broaden the meaning of debt to cover litigation
funding.68 Further, the existing regulations of other practices, such as banks
and financial institutions, do not fit for TPAF. These regulations do not address
the policy concerns that TPAF may generate.
The problem with self-regulation, from a market perspective, arises with
the development of new profit-driven funders. They enter the market and
compete with other funders, then the systemic adaptation of self-regulation to
the market changes. Given the confidentiality of the industry, self-regulation
of TPAF lacks supervision of funders, especially when an allegation of an
ethical violation arises. From a disciplinary perspective, self-regulation is not
effective absent a disciplinary authority. Trading one aspect for another may
mean trading ethical standards for financial ones. This would adversely affect
the opposing party and impair the legitimacy of the arrangement. A TPAF reg-
ulatory framework is arguably better integrated within the existing regulatory
framework, while preserving its autonomy from other rules.69
3. REGULATORY FRAMEWORK
There is a powerful separation in TPAF between fairness, efficiency, and

funding necessity. This separation, relatively manageable in the contract-based
TPAF arrangement, is otherwise decisive. There is no comparative framework
that assesses the range of funding practices considering their relative tradeoffs.
The current practices between funders, or even with the same funder, may
constitute a small club of self-regulated practices for this particular funder or
for a chain of funders who adopt similar practices. That framework should
be premised on the imperfect self-regulatory choice. To assess the funding
tradeoffs, the framework should respond to two concerns: the normative
goals of TPAF and the institutional framework for achieving these goals. The
66
Susan Lorde Martin, The Litigation Financing Industry: The Wild West of
Finance should be Tamed Not Outlawed, 10 Fordham J. Corp. & Fin. L. 55, 68–69
(2004).
67
Id.
68
Id. (arguing to liberalize the meaning of “debt” to include litigation funding con-
tingent on the outcome).
69
ICC is an example of integrating some guidelines that apply to TPF. ICC
Arbitration Rules art. 11(7).

hypothesis informing discussion is that individual initiatives fare no better

than institutions, and both legal logic and policy considerations can explain
why this is so. Specifically, the claim is that arguments of party autonomy,
jurisdictional propriety, arbitral justice, and the institutional environment of
arbitration determine the propriety of the institutional choice of regulating
TPAF. The following sections examine that hypothesis, including the nature of
the regulation (3.1), regulatory actors (3.2), and the framework (3.3) through
which regulation should operate, and whether it should operate within the rules
of the arbitration system.
3.1 Regulation Nature
Law consists of rules that control human behaviors.70 Arbitration has a trans-
national dimension that necessitates delinking the industry from national
jurisdictions. Regulating TPAF may trigger the question of rules or standards
to govern the regulation. While rules are rigid and constraining, standards
provide discretion.71 Once a rule is interpreted and the facts are identified, rules
apply directly to the facts. Standards may provide less guidance than rules,
which may create uncertainty and a space for undesirable behaviors. They
seek to guide rather than dictate an outcome.72 In arbitration, standards may be
considered soft laws.73 A leading TPAF treatise that may constitute one facet
of that soft law is the 2018 ICCA–Queen Mary Report.74
Some scholars argue that the main advantage of a standard is fairness
through context-specificity and
[r]ules typically are more costly than standards to create, whereas standards tend to
be more costly for individuals to interpret when deciding how to act and for an adju-
dicator to apply to past conduct … [W]hen individuals can determine the application
of rules to their contemplated acts more cheaply, conduct is more likely to reflect the
content of previously promulgated rules than of standards that will be given content
only after individuals act.75
70
James R. Maxeiner, Thinking Like A Lawyer Abroad: Putting Justice into Legal
Reasoning, 11 Wash. U. Global Stud. L. Rev. 55, 70 (2012).
71
Tun-Jen Chiang, Private Rules and Standards, Geo. Mason L. & Econ. Research
Paper No. 20-24 (Aug 13, 2020).
72
Id.
73
See, e.g., Int’l Bar Ass’n, Guidelines on Conflicts of Interest in International
Arbitration, n. 6(b) (Oct 23, 2014), https://www.ibanet.org/Publications/publications
_IBA_guides_and_free_materials.aspx.
74
Queen Mary Task Force Report, supra note 35.
75
Steinitz, Follow Money?, supra note 13, at 16.

This view finds support in the novelty of TPAF. No single rule would be able
to encompass the different scenarios that may arise in that practice.76 However,
vague standards may have adverse effects on the parties’ relative bargaining
powers in negotiating the funding arrangement. Uncertainty of the dispute
outcome may increase the transactional costs. In addition, imprecise legal
standards require a neutral party to estimate the strength of the bargaining
forces when the case is adjudicated.
Similar to investor–state arbitration, which is well known for applying
standards rather than rules, standards generate more compliance costs, which
are borne by those whose behaviors should conform to them. Given the poten-
tial loose application of standards, parties may improperly apply them. Vague
legal standards may give the more-able party, the funder, some advantages. As
the dispersion of the dispute outcome becomes wider, there may be a greater
premium on bargaining skills. There may be a space for strategic behaviors
throughout the proceedings, and a wide range of possible tactical moves to
renegotiate the funding agreement. These uncertainties can be reduced by
adopting precise rules rather than imprecise standards. When employed appro-
priately and in a spirit of cooperation, the rules can save time and money, as
well as avoid conflict; otherwise, they can spell trouble.
3.2 Regulatory Actors
The task of regulation should be entrusted to regulators with superior command

of information over the arbitration process and sufficient incentive to opera-
tionalize this information. A quick look at the arbitration system reveals the
key players that control the dynamics of that process: states (3.2.1), national
courts (3.2.2), arbitrators (3.2.3), and arbitral institutions (3.2.4).
3.2.1 States
States, as basic players for national laws, are the first to come to mind on the
question of who may regulate. Generally, state regulators have addressed
other funding practices that make them believe that they apparently under-
stand the funding practices.77 Further, states may feel obliged to regulate this
practice because the challenges it generates result in the public losing faith
in the system. The similarity between TPAF and other funding practices may
indicate that funders are perceived as insurers or lenders. In the meantime,
76
Id.
77
Coffman, 361 P.3d 400, at 410 (characterizing TPF as a loan and capping the rate
of return at 12%).

the regulatory frameworks that are governed by players other than states are
effectively working.78
In addition, TPAF arrangements have extended their scope to finance sov-
ereign states in investor–state arbitration.79 States are already constrained by
their domestic constitutions, administrative laws, and even contractual obliga-
tions. They may be constrained by their own regulation of TPAF. These con-
straints may unduly discourage TPAF. In addition, in the funded investment
cases where the investor prevails, funders get their return from the pockets of
the respondent states’ citizens, who are collectively paying that return through
their taxes. This may create a parochial approach toward funders who finance
investors’ claims.
Further, the industry underlying the dispute may generate some concerns.
Funders are inclined to invest in claims with high expected returns. These
industries may be subject to different governance rules than rules governing
funding the claims arising out of these industries. Although these claims may
be considered investment opportunities for the funders, they are certain threats
to states that may be exacerbated by the existence of TPAF. While funders
would be inclined to be more involved in these cases to protect their invest-
ment, states would be inclined to protect their social interests. As a result,
funders may create undesirable encumbrances on interests that were supposed
to be protected by investment treaties. Accordingly, national government may
improperly regulate such practice with all the complicated implications that
entail.
3.2.2 National courts

National courts may be the fallback choice to address TPAF. They have
expertise in addressing concerns arising out of transactional arrangements.
However, some courts may hesitate to interfere with the funding arrangement
to avoid concerns of freedom of contract, especially when the contract is con-
cluded by persons of “full age and capacity … untainted by infirmity.”80 This
hesitancy was interpreted thereafter as a ban on any general rule prohibiting
the funding of litigation for reward.81 Some call for courts or tribunals to
78
See generally Chapter 2 Regulatory Framework for Arbitration in Julian D. M.
Lew, Loukas A. Mistelis et al., Comparative International Commercial Arbitration
17–30 (2003).
79
Guven et al., ISDS Policy Report, supra note 57, at 9–10.
80
Steinitz, Whose Claim?, supra note 9, at 1280 (citing Campbells Cash and Carry
Pty. Ltd. v. Fostif Pty. Ltd. (2006) 229 CLR 386 (Austl.)).
81
Id.

supervise the funding relationships, akin to consumer protection, and to tailor

securities regulations to address the secondary markets of the funded claims.82
However, a supervisory role for the courts may create uncertainties.
National courts, as institutions, can better apply the rules of TPAF as part of
the regulatory framework, rather than creating or regulating that framework.
They can develop expertise and professional ethos in applying TPAF. Further,
entrusting national courts with that task would create more uncertainties to the
roles they should play in the justice system in holding parties accountable.83 In
international arbitration, the problem is more acute because national courts can
easily apply this framework. Therefore, national courts can facilitate enforce-
ment and compliance rather than creation and regulation.
3.2.3 Arbitrators
Arbitrators may be one choice to create a regulatory framework for TPAF.
However, arbitrators are part of the concerns that TPAF may raise, including
conflict of interests, disclosure, and decision-making concerns. They can also
be argued to be parochial in regulating TPAF practice, in a way that would
allegedly keep them from any further obligations. Arbitrators are not appointed
on a permanent basis. They change roles to serve as arbitrators in some disputes
and counsels in others. Arbitrators’ decisions play a role in particular disputes,
but regulators play a broader role in framing the exposure of a particular indus-
try across the practice. For these reasons, arbitrators, like national courts, can
provide an informative application of the regulatory framework, which would
be a practical backstop to the regulatory decisions that warrant merit-based
regulations. They can simply provide regulators with opportunities for reflect-
ing on a better regulatory product. Arbitrators are better positioned to apply the
regulations that are likely to be produced by the regulators. They can therefore
contribute to the success of this emerging market through its application rather
than regulation.
Arbitrators should not be left without guidance in addressing these regula-
tory issues. They should be accorded deference in undertaking a contextual
82
Guven et al., ISDS Policy Report, supra note 57, at 8, 41.
83
In addition, due to the political appointment of judges in some states, the involve-
ment of national courts in regulating TPAF may be politicized. This may be a signif-
icant concern for the funders. Domestic mechanisms may be created to address TPF
issues similar to the mechanisms that have been developed in some countries to address
the investment issues, through Ombudsmen Investment Office, before adjudication.
See Françoise Nicolas et al., Lessons from Investment Policy Reform in Korea 23, 25
(OECD Working Papers on Int’l Inv., 2013/02, 2013), http://www.oecd.org/daf/inv/
investment-policy/WP-2013_2.pdf (explaining that an ombudsman can help ensure
“foreign investors’ opinions are heard at the highest levels of policy-making”).

analysis of the regulatory rules. In the meantime, the regulatory framework

should not constrain the arbitrators’ powers to enhance the flexibility and
extra-territoriality of arbitration in order to level the playing field. Of course,
arbitrators’ role as guardians of the legitimacy of arbitration does not necessar-
ily entitle them to paternalistic supervising powers over the funding arrange-
ments. Rather, they should have ample opportunities to effectively conduct the
arbitral process.
3.2.4 Arbitral institutions

The balance between regulation and the need of the funding industry is essen-
tially a matter of comparative institutional choice. As a system characterized
by a significant regulatory framework, the regulatory scheme of institutions
with informational advantages to provide comprehensive regulation of arbitra-
tion funding may likely be appropriate for TPAF as well. These goals should
be pursued through an institutional mechanism that embraces all interested
parties, including decision-makers. The choice of arbitral institutions is not
just based on the advantages that they offer for a better TPAF regulation,84
but also based on a comparative analysis of the defects of other choices in
maintaining an effective regulation of TPAF. This choice has considered the
relative nature of international arbitration as a system not associated with
a particular jurisdiction, and the real-world complexity of TPAF, including its
adverse impacts on arbitration.
The institutional choice operates on three main premises. First, TPAF
normative goals should be pursued within the normative goals of arbitration.
Second, the dynamics of the funding parties and their conduct with other
parties need to be addressed through an institutional framework, not an indi-
vidual approach. Third, a comparative analysis of the possible institutions or
entities that may consider the regulation question – an analysis that was based
on a separation between the consequential reality of TPAF and its foundational
premise, i.e., access to justice.
TPAF has undergone dramatic changes in the past decade that warrant
a substantial degree of institutional ordering. It is therefore not surprising that
some funders suggest that arbitral institutions should regulate the issue of
disclosure.85 Building on that view, arbitral institutions are, arguendo, better
positioned to guarantee the efficiency of TPAF. They generally have the
advantages to assume that regulatory task. The following sections examine
these advantages, including informational (3.2.4.1), supervisory (3.2.4.2), and
legitimacy (3.2.4.3).
84
85
Id. at 217–18.

3.2.4.1 Informational advantage

A comparative analysis of the arbitration informational advantage with the
funding informational one is particularly helpful for assuaging concerns of
arbitration funding. Left unaddressed, it may disrupt achievement of the
regulatory objectives by introducing into the arbitration system, for instance,
unbalanced relationships that are premised on informational disadvantages.
The powerful party will be integrated into the market in a way that gives it
a first-hand knowledge about the system, to the detriment of the less power-
ful party. More particularly, with the funders’ ties to institutions, individual
parties would be able to enhance their bargaining positions by signaling to
their opponents.
Arbitral institutions have better access to information on the ongoing pro-
ceedings and the parties.86 Given the impact inherent in the funding arrange-
ment, there is a reason to doubt the funding parties’ capacity to equalize the
bargaining power in negotiation. Therefore, the possibility of having a funding
agreement that may not have the optimal impact upon the arbitration process
can be a sufficient argument for the involvement of arbitral institutions with
the funding arrangement.
3.2.4.2 Supervisory advantage

Funders have become integral parties in arbitration. It is not unusual to
include them among other players with which arbitral institutions monitor and
function. Arbitral institutions have a unique position to monitor the funding
arrangements in every individual case. Generally, many considerations support
the position that arbitral institutions should develop the regime in relation to all
players at stake. The new funding perspective can maintain a balance between
the funding parties through arbitral institutions.87 In other words, the funding
agreement should be a subject that is monitored by arbitral institutions, to
86
Int’l Ctr. for Dispute Resolution, International Dispute Resolution Procedures
art. 37 (2014). See also Transnational Note, Confidentiality vs. Transparency In
Commercial Arbitration: A False Contradiction To Overcome (Dec 28, 2012),
https://blogs.law.nyu.edu/transnational/2012/12/confidentiality-vs-transparency-in
-commercial-arbitration-a-false/(“In administered arbitration, the institution can play
– because of its neutrality – a very important and unique role in balancing the right
of the parties to keep some information confidential, on one side, and the interests of
the various players (users, practitioners, scholars, arbitrators and institutions) to have
access to information related to arbitration proceedings, on the other”).
87
This idea finds an analogy from a different body of law that is based on the
judges’ state parens patriae powers, which permits the judge state powers over the
divorcing parties’ agreement over child support, custody, and visitation to revisit these
agreements. Robert H. Mnookin et al., Bargaining in the Shadow of the Law: The Case
of Divorce, 88 Yale L.J. 950, 954–55 (1979).

better serve the funded process, and level the playing field between all parties
at stake.88
The procedural and substantive mechanisms for implementing this approach
are conventionally seen from a highly regulatory perspective. An analysis
seems to be premised on the notion that the distribution powers between the
funding parties should be determined through a procedural mechanism in
which legal standards are maintained by a neutral institutional third party.89
Arbitral institutions are argued to provide an efficient and fair mechanism for
enforcing funding agreements, and for deciding the side disputes that may
arise between the funding parties.90 Against the backdrop of a fair process
between equally balanced disputants, the funding parties should be encouraged
to subject their funding issues to arbitral institutions. Arbitral institutions have
an interest in ensuring that the results of the bargaining process are fair, despite
the presence of the funder. This supervisory role protects the funding parties
from their own ignorance, and prevents an unfair outcome from the parties’
unequal bargaining capacity.
There may be reasons to doubt the necessity of the institutional supervision
of the funding arrangements for the purpose of equalizing the balance of the
parties. Paradigmatically, this arrangement involves funders who are highly
sophisticated in funding matters. In other instances, the funding arrangement
may involve funding parties with similar sophistications. However, there
remains some legitimate concerns that some funded parties may be taken
advantage of. There is a realistic hope that the arbitral institutions’ super-
visory role can address these issues. The problem with the current practice
is that funding arrangements have no standards or procedural mechanisms
designed specifically to ensure equal bargaining power between the funding
parties. Furthermore, jurisdictional issues may hamstring the arbitrators in that
vein. A better system would define the norms that should govern the funding
arrangements and use these norms to identify the institutional scrutiny of the
cases falling outside what is ordinarily thought to be reasonable. Institutional
rulemaking finds support in Judge Edward W. Nottingham’s dissenting
opinion in RSM v. St Lucia, which stated that “the general concerns about
third-party funding and security for costs can and should be addressed by the
88
89
Similarly, RSM v. St. Lucia, ICSID Case No. ARB/12/10, para 20 (Aug 12, 2014)
(Nottingham, dissenting), https://www.italaw.com/sites/default/files/case-documents/
italaw3318.pdf.
90
This practice is not unusual for arbitral institutions. These are side disputes that
arise throughout the proceedings. Arbitral institutions have a role in deciding these
side disputes rather than arbitrators or leaving it to the parties themselves because they
assume that parties have their own disagreement on these issues.

Administrative Council in its rule-making capacity, if there is a problem that

needs to be dealt with.”91
In treaty arbitration, addressing TPAF through arbitral institutions is more
effective than BITs. ICSID can adapt its arbitration rules more easily than
states amending their investment treaties.92 In addition, most BITs include
standards, rather than rules, to govern potential disputes. As argued earlier,
rules are better legal instruments than standards in regulating TPAF. In addi-
tion, BITs frequently refer to ICSID arbitration, or other arbitration rules, to
resolve disputes. In other words, changing the TPAF regulatory framework
through arbitral institutions would mean incorporating these rules within the
investment treaty as exactly as the arbitration rules of the arbitral institution.
Moreover, this would guarantee the application of the new TPAF framework
by arbitral institutions and BITs even without expressly referring to it. This is
cost- and time-efficient.
3.2.4.3 Legitimacy advantage

Arbitral institutions are frequently amending their institutional rules to cope
with development in the arbitration field. These amendments are not surpris-
ing to the parties. An “opt in” or “opt out” system is effective to avoid any
legitimacy concerns. Incorporating TPAF into the arbitration regime through
arbitral institutions would develop the funders’ understanding of the unique
concerns that arise upon deploying capital in arbitration. With the progress
of the case, the funding parties should operate within the arbitral institution’s
framework for managing the performance of the funding agreement. This will
ensure familiarity and convenience. TPAF regulation through arbitral institu-
tions would require funders to maintain a line of credit to ensure their financial
viability. It should control access to privileged information and prevent the
funder from crossing lines. It should also maintain the funded parties’ control
over the underlying funded dispute, and prevent funders from interfering or
making decisions. This regulatory framework aims at achieving a balance
between the parties to the dispute, without the impact of TPAF over the effi-
ciency of the proceedings or the opposing party, which in turn should enhance
the legitimacy of arbitration funding.
91
RSM v. St. Lucia, ICSID Case No. ARB/12/10, para 20 (Aug 12, 2014)
(Nottingham, dissenting).
92
UNCITRAL Working Group III, supra note 36, para 27. Arbitral institutions
periodically amend their rules to respond to the practitioners’ needs. The International
Court of Arbitration of the International Chamber of Commerce has unveiled revised
Rules of Arbitration that entered into force in January 2021. See ICC unveils revised
Rules of Arbitration (08/10/2020), https://iccwbo.org/media-wall/news-speeches/icc
-unveils-revised-rules-of-arbitration/.

3.3 Regulation Achieved
The implicit policy questions are ones of emphasis and degree: to what extent
should the law permit the funder to work through the arbitral process? To what
extent should the disputant be empowered to delineate its own process, even
with the existence of a third party funder? What substantive or procedural
safeguards are necessary to protect the integrity and efficiency of the arbitral
process? Still, remnant prohibitions of champerty may lead to inconsistency,
which may be a stumbling block to an effective regulation.93
TPAF regulation should ensure harmony between substantively related,
but formally distinct, relationships, in the absence of a clear and comprehen-
sive mechanism that governs all the relevant parties. Considering its dismal
record, nonregulation will likely continue to threaten the legitimacy of TPAF.
At this juncture, two points are clear. First, as the preceding discussion has
shown, nothing more than imperfect palliatives is available to respond to the
challenges of TPAF. Second, individual contractual agreements alone cannot
respond to these challenges. Arbitration funding users are in no real position
to craft rules that govern their differences. States’ regulation of these arrange-
ments may weigh against the autonomous nature of these arrangements. These
fundamental points are the outcome of an investigation into what at first
appears to be a neglected issue, namely, the interrelation between justice and
funding. Absent regulation of TPAF, the arbitration regime may be unable
to ensure justice to the parties. This section attempts to locate responses to
these thorny issues via the political and ideological commitments of modern
international arbitration.
3.3.1 Universal regulation

A universal consensus on a specific method of regulation is difficult to
achieve. To overcome that challenge, rules should be crafted to determine the
regulatory framework that balances the interests of the different participants
in the process. This goal may be achieved through institutional coordination.
However, within the same regulatory framework, the extent of regulation may
differ from one issue to another. In TPAF, disclosure, for instance, may be
governed by different rules than performance of the TPAF agreements. The
method of regulation should be based on problem-specific measures to regu-
late TPAF.94 As such, a single forum can embrace both systems. For an optimal
regulation, arbitral institutions will equally balance the goals of TPAF and the
goals of arbitration. However, there is little reason to believe that most funders
93
Kalajdzic et al., Justice for Profit, supra note 50, at 143–45.
94

would welcome that proposal as opposed to nonregulation. Nonetheless,

institutional choices should be given weight in deciding these different goals,
especially when they seem to collide.
3.3.2 Self-regulation
TPAF cannot be left to self-regulation. In certain situations, attorneys may,
or should, withdraw from representing clients, especially if the client has
engaged in criminal wrongdoings and uses the attorney’s services to do so.95
Professional ethical rules, however, prohibit attorneys from then affirmatively
switching sides, and using confidential information gained in the original rep-
resentation against the former client.96 No such rules prohibit similar conduct
by third party funders. The Chevron case is representative of that situation.
This was a litigation case against Chevron brought in Ecuador funded by
a funder who later filed a declaration on behalf of Chevron against the plain-
tiffs at a time when it appeared the funder still had a financial interest in the
plaintiffs’ underlying claim.97 The funder’s declaration was alleged to contain
confidential information, and the funder later issued a joint statement with
Chevron denouncing the plaintiffs and their counsel.98
In investor–state arbitration, TPAF regulation may involve crafting invest-
ment treaties or amending existing ones. Interpretation of substantive protec-
tions under the investment treaties may be broad to allow states to use TPAF
in order to balance bargaining powers between the parties. Addressing TPAF
in investment treaties has two benefits. First, it may legitimize the funding
arrangement even before the dispute arises. Second, it may address concerns
that TPAF will impact developing countries. Investors may be incentivized to
pursue arbitration against the state, rather than continuing the investment. In
that case, the host state will have the right to defend and counterclaim with the
benefits of using TPAF as well. TPAF regulatory framework is premised on
the fact that funders are financially stronger than the funded parties because
95
Model Rules of Prof’l Conduct R. 1.16(a)(1) (2020) (“(a) Except as stated in
paragraph (c), a lawyer shall not represent a client or, where representation has com-
menced, shall withdraw from the representation of a client if: (1) the representation will
result in violation of the rules of professional conduct or other law; …”).
96
Model Rules of Prof’l Conduct R. 1.8(b) & 1.9(c) (2020).
97
Chevron Corp. v. Donziger, No. 11-CV-0691 (LAK) (S.D.N.Y. July 30, 2013).
98
Roger Parloff, Have You Got a Piece of This Lawsuit?, 68 (June 28, 2011),
https://fortune.com/2011/06/28/have-you-got-a-piece-of-this-lawsuit-2/. Chevron and
Burford, Chevron and Burford Joint Statement Regarding the Lago Agrio Litigation
(Apr 17, 2013), https://www.chevron.com/stories/chevron-and-burford-joint-statement
-regarding-the-lago-agrio-litigation.

of their ability to contractually bargain, obtain resources, and in some cases

control the underlying dispute.99 As such, self-regulation is improper.
3.3.3 License regime

Some may call for a form of licensing for financial providers to build up
a capital cap and credibility requirements.100 However, TPAF should not be
viewed as a mere financial tool, like loans. Rather, it should be an area of
investment to evade the threats of the champerty doctrine. It has been sug-
gested that funders should operate within a license regime and provide courts
with greater oversights of the funding agreements either through the approval
of the court or the power to amend, reject, or vary the funding terms.101 This
would require the funder to indemnify the plaintiff against adverse costs order
or create a presumption of security for costs. This license scheme may allow
for sanctions when funders fail to fulfill their obligations. With the license
regime, funders would include data collection about the industry similar to that
of the mortgage industry.102 This information about the funders would provide
the parties seeking funding with data about potential funders.103
Whatever value this opinion may bring, it applies to litigation funding before
national courts. This view does not necessarily apply to international arbitra-
tion, which requires less formality, fewer rules, and more cultural variations. In
addition, license regimes are not often used in international arbitration. Neither
arbitrators nor counsels are required to be licensed in a given jurisdiction to act
in arbitration.104 Requiring funders to be licensed in international arbitration
would unlevel the playing field. The TPAF regulatory framework supposes
that funders are operating within the arbitration system for a more efficient and
fair process, without a need for more formality.
However, the TPAF regulatory framework applies substantively whenever
there is a funding agreement for an arbitration dispute, regardless of licen-
99
A failed attempt to regulate TPF was the Litigation Funding Transparency Act
of 2018 (LFTA). It was reintroduced on February 13, 2019, to increase transparency
in TPF by requiring disclosure of litigation funding arrangements in class actions and
multidistrict litigation in federal courts to the court and all the parties. See Steinitz,
Follow Money?, supra note 13, at 4 (criticizing this regulation attempt).
100
Martin, Litigation Financing Another Subprime, supra note 41, at 114–16. See
generally, TPF Working Group, supra note 47.
101
See Steinitz, Whose Claim? supra note 9, at 1330.
102
Martin, Litigation Financing Another Subprime, supra note 41, at 114–16.
103
Richey, supra note 47, at 522.
104
Even with arbitral institutions that have a list of accredited arbitrators for future
appointments, this list is not exclusive and does not limit the parties’ choice of nonlisted
arbitrators.

sure.105 The license regime may exacerbate the problem by giving funders
a license to engage in deceptive practices to seek high returns.106 Moreover,
the license regime may not correspond to the increasing flow of arbitration
funding, and may constitute a barrier to enter the funding market. This barrier
may indirectly disturb the basic purpose of introducing TPAF, i.e., enabling
parties to pursue their claims. Adding a new barrier by requiring a specific
license for funders may complicate the disputants’ means of approaching
funders and limit the pool of funders. Moreover, the license regime may
reinvigorate the idea of “Great Men” by abusing the license regime, and limit
it to a small number of funders. The funding market should be substantively
canvassed rather than formally observed.
3.3.4 Regulation attempted

As a threshold matter, regulating TPAF should not blindly follow its litigation
counterpart.107 Because funders can withdraw from the proceedings and leave
the funded party with no means to continue, some suggest obtaining insurance
policies to cover the amount of the promised funding.108 However, this view
is impractical. Adding insurance policies, with their regulatory frameworks,
is not optimal.109 It may exacerbate the issue rather than simplify it. Insurance
policies would require further procedures to pay back the funded party,
involving the insurance company and potential investigations. Others call for
creating a Model Rules of Professional Responsibility for Third Party Funders
to govern the ethical aspects of this industry.110 However, this view adds more
rules to the existing ones, which may complicate the situation with unnecessary
codes. Further, it addresses the funders separately from the arbitration regime.
One view is to treat litigation according to the type of claim, the funder, and
the funded party.111 Others argue for different regulatory treatment for funded
claims based on the plaintiff’s financial profile, reasons for seeking funding,
105
Arbitrators do not have model rules of professional responsibility to make an
analogy.
106
Richey, supra note 47, at 515–17.
107
On borrowing TPF principles from TPF in litigation, see Victoria A. Shannon,
Harmonizing Third-Party Litigation Funding Regulation, 36 Cardozo L. Rev. 861,
886–88 (2015) [hereinafter Shannon, Harmonizing].
108
Shannon, Harmonizing, supra note 107, at 907–09.
109
One tribunal found that the funder made arrangement to support any costs award
against the claimant up to €1 million and found no reason to investigate whether the
funder would arrange insurance coverage or other security for a potentially higher
amount of costs. Eskosol v. Italian Republic, ICSID Case No. ARB/15/50, Decision on
Provisional Measures, para 44 (Apr 12, 2017).
110
Shannon, Harmonizing, supra note 107, at 907–09.
111

and the characteristics of the funded party.112 A party who seeks funding as
a form of corporate finance should be treated differently from a regulatory per-
spective than a party who seeks funding because they lack resources and oth-
erwise risk deprivation of access to justice.113 However, the reasons for funding
should not be critical factors for the regulatory regime.114 Nevertheless, this
view may be interpreted to seek substantive balance in TPAF as per the status
of the funded party. The motivation may be considered in weighing some
aspects of the arrangement, such as disclosure.115 It may suggest a supervisory
and transparent approach underlie the funding arrangement, including how the
case is funded, by whom, and for what purpose.
3.3.5 Regulation challenges

The regulatory proposals do not seem to achieve the efficiency and justice of
the regulatory framework.116 One challenge to regulating TPAF in investor–
state arbitration is jurisdictions that ban some suits against the government.117
Even in the jurisdictions that allow these suits, there may be some limits on
the identities of the potential claimants to avoid undesirable motives to sue.118
However, such restrictive statutes may not apply in arbitration.119 The policy
behind such bans at the domestic level may not necessarily apply at the inter-
national level.120 However, TPAF may deter the states on two fronts. First, it
may deter the government from taking some measures for the public inter-
est,121 due to fear of challenge by claimants backed by third parties. Second,
it may deter states from defending investment claims with all their associated
costs, including reputational harm, potential liability, and monetary damages.
These concerns are triggered by the absence of any appellate review of the
investment decisions. Applying the concept of fairness just to protect foreign
112
Steinitz, Follow Money?, supra note 13, at 22–23.
113
Steinitz, Whose Claim?, supra note 9, at 1325–26 (proposing a framework to
reform the funder–client relationship with a court supervision role of that relationship).
114
Mackenzie Architects, P.C. v. VLG Real Estates Developers, LLC, No.
15-CV-1105, 2017 WL 4898743, at *3 (N.D.N.Y. Mar 3, 2017) (discovery request
should not be allowed for merely proving the pursuit of litigation motivation).
115
Steinitz, Follow Money?, supra note 13, at 23–24.
116
Id. at 5.
117
The U.S. restricts TPF of domestic claims against the federal government. United
States Anti-Assignment of Claims Act, 31 USC § 3727.
118
Guven et al., ISDS Policy Report, supra note 57, at 17–18.
119
Id. at 18.
120
Id.
121
In that sense, funders may be argued to control states’ public policy issues. See
Munir Maniruzzaman, Third Party Funding in International Arbitration– A Menace or
Panacea?, Kluwer Arb. Blog (Dec 29, 2012).

investors would create imbalances122 and may cast doubts on the rule of law of
TPAF. Further, investor–state arbitration is basically governed by standards,
not rules, such as fair and equitable treatment, national treatment, reasonable
expectations, arbitrary discrimination, and expropriation.123 Given the impre-
cise application of these standards, arbitrators may interpret these standards
differently,124 especially with the lack of binding precedents in international
arbitration. This impreciseness may result in difficulty in rooting out frivolous
claims. Adopting one interpretation of these standards is not frivolous because
the interpretation may be adopted by other tribunals. Even if the claim has been
rejected before, there is no prohibition on raising it before future tribunals,
which are not obliged to follow the previous one. Accordingly, the structure of
the investor–state regime gives much leeway to TPAF, both policy-wise and
practical-wise, that makes TPAF practice imprecise.125 Nonetheless, TPAF
may impact the development of the law.126 Some studies indicate that funders
prompt the claimant to secure favorable decisions from the tribunals.127
122
See, e.g., Frank J. Garcia et al., Reforming the International Investment Regime:
Lessons from International Trade Law, 18 J. Int’l Econ. L. 861 (2015).
123
See generally David A. Gantz, Challenges for the United States in Negotiating
A Bit with China: Reconciling Reciprocal Investment Protection with Policy Concerns,
31 Ariz. J. Int’l & Comp. L. 203, 211 (2014).
124
Guven et al., ISDS Policy Report, supra note 57, at 21.
125
States may continuously and for good reason raise legal points even if they
were rejected by previous tribunals. See, e.g., BG Group v. Argentina, UNCITRAL,
Award para 114 (Dec 24, 2007) (where Argentina had raised its argument that share-
holders could only bring interference claim with their corporate rights as sharehold-
ers). In Urbaser v. Argentina, ICSID Case No. ARB/07/26, Decision on Jurisdiction,
para 43, 204–54 (Dec 19, 2012) (Argentina raised an argument that shareholders could
only bring claims for harms to rights or losses suffered as shareholders was rejected).
However, the situation is different for investors and funders. States may give up on
invoking specific positions in treaty interpretation, but investors and funders may be
more inclined, through shifting and spreading risks, to continue advance arguments that
were previously rejected. For more details, see Guven et al., ISDS Policy Report, supra
note 57, at 25–26.
126
Some empirical studies provide that funded cases are being cited more than
unfunded ones. David S. Abrams, Daniel L. Chen, A Market for Justice: A First
Empirical Look at Third Party Litigation Funding, 15 U. Pa. J. Bus. L. 1075, 1105–06
(2013).
127
Often, claimants who prevail in ISDS spend between 1.75 and 2 times more than
respondents. See Tim Hart, Study of Damages in International Center for the Settlement
of Investment Disputes Cases, 3 Transnat’l Disp. Mgmt. 11, 29 (2014). Funders may
also facilitate full access to information and detailed knowledge of the process of
investment proceedings. The full access to such information dramatically contributes to
the determination of the dispute outcome. Karen Remmer, The Outcomes of Investment
Treaty Arbitration: A Reassessment, in Yearbook on International Investment Law &

In addition, funders may fund straddling types of cases. Each case may have
its own particularities that requires a different regulatory framework. Still,
the regulatory framework should have a common nucleus that applies to any
funding arrangement, for any type of claim. There should also be space for
discretionary usage. Accordingly, the structure of the funding arrangement is
important. These scenarios may create systemic effects on the justice system
and the funding industry.128
With no counterclaims in ISDS, the investor’s sole risk when pursuing
an ISDS claim is losing that claim. That fact may affect the investor’s
risk assessment of pursuing the claim through ISDS or through any other
method, including diplomatic channels, domestic law, or contractual claims.
Sovereigns can defend themselves in these fora, and also counterclaim against
investors. However, in ISDS, sovereigns do not have this procedural right.
These parameters place investors in a better position regarding risk of loss in
ISDS than respondent states. In that sense, TPAF reduces the risk assessment
of investors while increasing that risk for sovereigns. These asymmetries may
push sovereign states to prematurely settle for less. The nonavailability of the
counterclaim mechanism in ISDS may disincentivize funders from funding
the sovereign’s defenses, and leave them with fewer funding options than
investors.129 In other words, the ISDS structure will thwart access to justice
for TPAF if it favors only one party to the detriment of the other. The power
dynamics in that sense would affect the states’ right to due process because
of the financial capabilities of the funders. They can exhaust all procedural
mechanisms against states.
There is a separation between TPAF and its regulatory framework. The
framework should address the merits and demerits of TPAF en masse in
order to tackle its systemic inequities. Regulation through arbitral institutions
would create homogeneity in TPAF practice. Arbitration forums and funding
institutions would explicitly abide by rules rather than standards. Arbitral
institutions would clarify gray areas in the funding practice, which would give
more weight to their regulatory powers. As such, the institutional regulatory
framework would be more effective. Any violation of the regulatory frame-
work would be disciplined. Absent a disciplinary mechanism that governs the
funding arrangement, the arbitral process will be burdened with irrelevant dis-
putes, for no one’s benefit. The political realities of regulating TPAF generate
an extremely difficult task. Funders, upon entering the arbitration field, should
Policy 2015–16 (Johnson & Sachs eds 2018). See generally Guven et al., ISDS Policy
Report, supra note 57, at 26.
128
Steinitz, Follow Money?, supra note 13, at 28.
129
Especially with the lessened possibility to fund the defense side with the current
claimants-like funding models. Guven et al., ISDS Policy Report, supra note 57, at 10.

have a duty to the arbitration system that is not limited to providing financial
services, but instead extends to the proper functions of the system itself.
Accordingly, the driving forces for a TPAF regulatory framework would be
arbitral rules and arbitral institutions. TPAF regulation should take place at the
institutional level. This would provide a clear vision for the parties, and even
national courts, when addressing the enforcement of funded awards.
4. CONCLUSION
Arbitration has an open-door policy. It is unrealistic to let a newly developed

system undermine that policy. Regulating TPAF should better serve its own
goals without undermining them, intentionally or unintentionally. The pres-
ence of TPAF may reshape the arbitration landscape. Funders are argued to
target claims against developing countries that lack sufficient resources to
defend themselves against foreign investors.130 TPAF would impact not just
the underlying dispute but also the resources available for the parties, which
may question the legitimacy of the system as a whole.131 The lopsided impact
of TPAF may lead, especially in treaty arbitration, to a disproportionate
number of claims against respondents.132
Regulating TPAF should address a funding paradigm that freely facilitates
a secondary market for transacting in arbitration claims. Such a secondary
market would amplify the capital flow across borders. After a comparative
analysis of imperfect choices, arbitral institutions are the better institutional
choice because they secure market availability for all. This analysis reveals
that the current arbitration regime should not simply rely on current funding
models. Nor should it be replaced with a new regulatory regime that exacer-
bates rules concerns. Reliance is better placed on arbitral institutions, backed
by funding market mechanisms that can serve both practices.
130
Funders may be less likely to fund claims against strong sovereigns such as the
U.S. See Guven et al., ISDS Policy Report, supra note 57, note 156.
131
Id. at 36.
132
Frank J. Garcia, Third-Party Funding as Exploitation of the Investment Treaty
System, 59 B.C.L. Rev. 2911 (2018) (characterizing TPF in ISDS as deliberately and
systemically exploitative).

6. Nurturing the promise
This book originated in the belief that something has to be done for TPAF.
The focus of enquiry shifted from the implications of TPAF to its premise,
i.e., access to justice. Writers agree that the practice of arbitration funding is
growing.1 However, they rarely give its premise more than cursory attention.
Throughout the preceding chapters, there was a disjunction between the
premise and the implication of TPAF that creates troubles for its regulation.
This disjunction resulted in abandoning the promise of TPF as a tool of access
to justice.
At this point, two issues should be addressed: first, the approach that should
be adopted for defining TPAF; second, the formal funding paradigm that
should nurture the abandoned promise of an efficient TPAF, and why that
paradigm is efficient in nurturing that promise. This paradigm is premised on
the failure of the other proposals to comprehensively address the regulation
question.2 These two questions are the results of an investigation into what
appeared to be a proper funding practice but, with investigation, proved to
be concerning. The argument leading up to these two issues comprised two
components: the first, showing how systemically inconsistent TPAF practice
is, and how this undercuts faith in the system; the second, establishing how the
practical necessity of TPAF alone cannot redeem this practice. Together, these
findings led to the question of how to regulate TPAF in a way that restores
faith in its propriety, and responds to these systemic inconsistencies. This
chapter attempts to locate the answer to these issues by taking an ideological
and political commitment of the modern international arbitration funding. Two
parts comprise this chapter. The first tries to succinctly define TPAF (1), and
the second analyzes the funding paradigm that better serves the arbitration
funding system (2).
1
Burford Litigation Finance Survey, 11 (2017) [hereinafter Burford 2017 Survey]
(showing the growth of TPF in practice).
2
See, e.g., Int’l Ctr. for Settlement of Investment Disputes, Working Paper #4,
Proposals For Amendment of the ICSID Rules, 278 (ICSID, Working Paper No. 4,
2020) R.23 [hereinafter ICSID Amendment Proposals, Working Paper No. 4], https://
icsid.worldbank.org/sites/default/files/WP_4_Vol_1_En.pdf.. See also UNCITRAL,
Working Group III, Possible Reform of Investor–State Dispute Settlement (ISDS)
Third-Party Funding – Possible Solutions (38th Session Oct 14, 2019), http://undocs
.org/en/A/CN.9/WG.III/WP.172 [hereinafter UNCITRAL 2019 Working Group III].
171

1. THIRD PARTY FUNDING DEFINED
1.1 Definitions Attempted
Without precisely defining TPAF, its regulation would be amorphous.3 TPAF

has been subject to different definitions that vary pursuant to their sources,
including treaties,4 institutional rules,5 and soft laws.6 Some definitions
are now standard centerpieces. Nevertheless, most of these definitions are
ill-equipped to provide comprehensive guidance for the interaction of the
parties to the funding arrangement.
The confidentiality surrounding TPAF, and the treatment of funding as pro-
prietary information, has created a hazy view of the practice. Although TPAF
may be distinguished from other similar funding practices,7 determining what
TPAF is may still be problematic. This section presents some of the attempts
of defining TPAF, and tries to develop a concrete definition that can discipline
the funding paradigm. The definition must respond to the concerns this prac-
tice has raised from a justice, economic, ethical, and legal perspective. The
various permutations of the different definitions have implications for who
should be the funder and what is funding.8
3
Catherine A. Rogers, Ethics in International Arbitration, 192–94 (2014) [herein-
after Rogers, Ethics].
4
E.g., Comprehensive Economic and Trade Agreement, EU–Canada, § A art. 8.1,
http://trade.ec.europa.eu/doclib/docs/2016/february/tradoc_154329.pdf.
5
China International Economic and Trade Arbitration Commission Hong Kong
Centre, Guidelines for Third-Party Funding in Arbitration (May 23, 2016), https://
hkarbitration.files.wordpress.com/2016/05/cietac-draft-guidelines-17-may-16.pdf.
6
Int’l Bar Ass’n, Guidelines on Conflicts of Interest in International Arbitration,
n. 6(b) (Oct 23, 2014), https://www.ibanet.org/Publications/publications_IBA_guides
_and_free_materials.aspx [hereinafter Conflicts of Interest] (referring indirectly to the
definition of TPF in its Explanation to General Standard 7 “Duty of the Parties and the
Arbitrator” by stating that “(a) … The parties’ duty of disclosure of any relationship,
direct or indirect, between the arbitrator and the party … has been extended to rela-
tionships with persons or entities having a direct economic interest in the award to be
rendered in the arbitration, such as an entity providing funding for the arbitration, or
having a duty to indemnify a party for the award”).
7
8
The ICCA–Queen Mary Task Force Report on Third-Party Funding in
International Arbitration (Apr 2018), https://www.arbitration-icca.org/media/10/
40280243154551/icca_reports_4_tpf_final_for_print_5_april.pdf [hereinafter Queen
Mary Task Force Report] (recognizing that TPF is too ambiguous to be defined).

Nurturing the promise 173
1.1.1 IBA Guidelines definition

The IBA Guidelines on Conflict of Interests refer to a third party funder as
“any person or entity that is contributing funds, or other material support, to
the prosecution or defence [sic] of the case and that has a direct economic
interest in, or a duty to indemnify a party for, the award to be rendered in the
arbitration” who “may have a direct economic interest in the award.”9 The IBA
Guidelines are not mandatory, and the parties may agree not to apply them. In
addition, this definition is broad enough to lump funders in with lenders and
fails to include some models of TPAF in its scope.10
In Muhammet Çap v. Turkmenistan,11 the tribunal considered similar factors
to those of the IBA Guidelines to justify the nondisclosure order of the funding
arrangements, including (a) avoiding conflict of interests, (b) transparency as
to the identity of the real party in interest, (c) fairly deciding cost allocation,
(d) application for security for costs applications, and (e) ensuring confiden-
tial information of the proceedings was not disclosed to parties with ulterior
motives.12 Nevertheless, these guidelines were considered in a later stage in
the same case where the tribunal ordered claimants to disclose the identity
of the funder and the detailed terms of that funding.13 The “direct economic
interest” referred to in the IBA definition is underinclusive because it may not
cover cases where the parent company (if it is to be a third party to the dispute)
finances a case by another company although the parent company has an indi-
rect economic interest in the award. In addition, including only “legal entities”
misses claims brought by individuals.
9
Conflicts of Interest, supra note 6, n. 13–25 (2014).
10
Victoria Shannon Sahani, Judging Third-Party Funding, 63 UCLA L. Rev. 388,
408–09 (2016).
11
Muhammet v. Turkmenistan, ICSID Case No. ARB/12/6, Decision on Jurisdiction
(Feb 13, 2015).
12
Id. para 50.
13
The tribunal relied on the following factors: (a) enhancing transparency by
ensuring the integrity of the proceedings and their impact upon the arbitrators, (b) the
security for costs order may be based upon the existence of the third party funder, (c)
claimants’ nondenial of the existence of third party funders, and (d) reference to another
case i.e., Kılıç İnşaat İthalat İhracat Sanayi ve Ticaret Anonim Şirketi where the order
for costs in favor of respondent has not been paid although the claimant has funded
the annulment proceedings. Muhammet v. Turkmenistan, ICSID Case No. ARB/12/6,
Procedural Order No. 3, paras 8–12 (June 12, 2015), https://www.italaw.com/sites/
default/files/case-documents/italaw4350.pdf.

1.1.2 Control considered

Due to the various aspects that TPAF may cover, some suggest a versatile
definition depending on the issues at stake.14 Typically, third party funders are
unrelated to the parties and their arbitration agreement and often get involved
after the dispute arises. The funder’s financial interest in the dispute outcome
may trigger the funder’s exercise of control over the proceedings and funders
therefore may be deemed nonsignatories to the arbitration agreement.
The existence of an external funder may trigger the extension theory based
on different grounds, including the implied consent, group of companies,
estoppel, or others.15 However, funders do not generally have corporate ties
to the funded parties or the underlying subject matter of the contract.16 The
extension of the jurisdiction of the tribunal to the funder may disturb the
parties’ consent as a basic principle of arbitration. Nevertheless, the procedural
integrity and fairness and principles of estoppel may arguably weigh for sub-
jecting third party funders to the tribunal’s jurisdiction by agreeing to fund one
party in an arbitral process.17 Even in these cases, funders cannot be generally
parties to the arbitration agreement. Still, based on the extension theory of the
arbitration agreement,18 some suggest a definition that includes the “control”
of the claim and possible extension of the arbitration clause to the funders. The
suggested definition is:
an agreement whereby a natural or legal entity provides funding resources to

a party, in such terms that will allow or entail the extension to the funder of the arbi-
tration clause and having a retribution such as the repayment or a benefit (financial
or otherwise) from or linked to an award rendered in the arbitration.19
However, this definition may trigger rule of law concerns. First, it establishes
an indispensable relationship between the funding agreement and the arbitra-
tion agreement to which the funder was not a party.20 Second, the extension
of the arbitration agreement to the funder necessarily extends the jurisdiction
of the tribunal over the funders. In that case, it is not clear whether the funder
is considered a party to the dispute or a necessary party for some specific
14
Duarte G. Henriques, Third-Party Funding – In Search of a Definition, 28 Am.
Rev. Int’l Arb. 405, 413 (2017) [hereinafter Henriques, Search of Definition].
15
A “third party funder may be joined to the arbitral proceedings as an additional
party based on theories such as implied consent, group of companies, estoppel and other
doctrines.” Gary B. Born, International Commercial Arbitration 1598 (2021).
16
Id. at 1599.
17
Id.
18
Id. at 1598–99.
19
Henriques, Search of Definition, supra note 14, at 413.
20
Born, supra note 15, at 1598–99.

purpose, such as the costs. Third, this definition facilitates consideration of the
funders in the security for costs applications. Fourth, extending the arbitration
agreement to the funders may denote that funders can be held jointly liable
along with the funded party for liability awards in cases the funded party has
lost. In that case, this definition transfers TPAF into a different legal system,
i.e., insurance liability, and disrupts the underlying philosophy of TPAF. This
definition undermines the basic principles of consent in international arbitra-
tion. With that definition, in case of loss, the funder may still be liable for the
liability award against the funded party.
1.1.3 International treaties definitions

Many legal instruments provide TPAF definitions. For instance, Article 2 of
the European Union–Vietnam Free Trade Agreement, defines TPAF as:
any funding provided by a natural or juridical person who is not a party to the
dispute but who enters into an agreement with a disputing party in order to finance
part or all of the cost of the proceedings in return for a remuneration dependent on
the outcome of the dispute or in the form of a donation or grant.
The international treaty between Canada and the Member States of the
European Union enacting the Comprehensive Economic and Trade Agreement
(CETA) referred to TPF in Articles 8.1 and 8.26 of Chapter 8 as “Investment.”
Article 8.1 defines TPAF as:
any funding provided by a natural or legal person who is ‘not a party to the dispute’
but who enters into an agreement with a disputing party in order to finance part or
all of the cost of the proceedings either through a ‘donation or grant,’ or in return for
remuneration dependent on the outcome of the dispute.21
These definitions are so broad as to conflate TPAF practice with other similar
funding practices. It covers not only the TPAF model but also attorney
funding. Attorneys are not parties to the dispute, though they are related to
the dispute based on the attorney–client relationship. Further, the definition
refers to “disputing party” without specifying claimants or respondents. In
addition, the definition refers to “donation or grant,” which would cover TPF
for nonprofit purposes.
The UNCITRAL Working Group III defined TPAF as:
an agreement by an entity (the “third-party funder”) that is not a party to a dispute

to provide funds or other material support to a disputing party (usually the claimant
21
Vannin Capital, Third-Party Funding In Investor–State Arbitrations: “A Common
Practice” That Is “Relatively Widespread” (Nov 1, 2017).

or a law firm representing the claimant), in return for a remuneration, which is

dependent on the outcome of the dispute. The remuneration can take any form,
though more common forms include a multiple of the funding, a percentage of the
proceeds, a fixed amount, or a combination of the above.22
This definition is underinclusive because it refers only to claimants as disput-

ing parties without respondents. TPAF should be equally used by both parties.
Further, this definition refers equally to funding a claimant or funding a law
firm representing a claimant. Also, the reference to “other material support” is
vague because the definition does not specify if the material support is finan-
cial or another kind of support.
1.1.4 Institutional definitions

In their “Code of Conduct for Litigation Funders,” the Association of
Litigation Funders of England and Wales defined TPF as follows:23
A Funder has access to funds immediately within its control or acts as the exclusive
investment advisor to an investment fund which has access to funds immediately
within its control, such funds being invested pursuant to a Litigation Funding
Agreement (LFA) to enable a Litigant to meet the costs of resolving disputes by
litigation or arbitration (including pre-action costs) in return for the Funder: (a)
receiving a share of the proceeds if the claim is successful (as defined in the LFA);
and (b) not seeking any payment from the Litigant in excess of the amount of the
proceeds of the dispute that is being funded, unless the Litigant is in material breach
of the provisions of the LFA.24
Despite its comprehensiveness, the word “enable” in this definition may refer
to the financially incapable parties with the exclusion of the financially capable
ones. The definition refers also to the “pre-action costs,” which may imply that
the party was not a “disputant” at that time because the action did not start yet.
Pre-action costs are broad enough to refer to any money spent in anticipation
of the dispute and may raise some disagreements. Further, this definition
22
UNCITRAL 2019 Working Group III, supra note 2, para 5.
23
Ass’t of Lit. Funders of England and Wales, Code of Conduct for Litigation
Funders (2018), http://associationoflitigationfunders.com/wp-content/uploads/2018/
03/Code-Of-Conduct-for-Litigation-Funders-at-Jan-2018-FINAL.pdf. [hereinafter
ALF Code of Conduct]. See Lord Justice Jackson, Third Party Funding or Litigation
Funding, Sixth Lecture in Civ. Lit. Costs Rev. Implementation Program at Royal
Courts of Justice (Nov 23, 2011), http://associationoflitigationfunders.com/wp-content/
uploads/2014/02/Sixth-Lecture-by-Lord-Justice-Jackson-in-the-Civil-Litigation-Costs
-Review-.pdf.
24
ALF Code of Conduct, supra note 23, art. 2.

covers the material breach of the party, which should be an indispensable

component of that relationship.
In 2018, the ICSID25 proposed amendments to include a definition of TPAF
as follows:
the provision of funds or other material support for the pursuit or defence of a pro-
ceeding, by a natural or juridical person that is not a party to the dispute (“third-party
funder”), to a party to the proceeding, an affiliate of that party, or a law firm rep-
resenting that party. Such funds or material support may be provided: (a) through
a donation or grant; or (b) in return for a premium or in exchange for remuneration
or reimbursement wholly or partially dependent on the outcome of the proceeding.26
However, in 2020, the ICSID proposed new amendments to its rules, including
a refined definition of TPF, due to the criticisms it has received from different
states. Some states suggested replacing “its affiliate or its representative” with
“directly and indirectly,” which was adopted in Working Paper Number 4 in
order to capture the funding provided to the party through affiliates as well as
the ultimate beneficial owner.27 The new definition also addressed concerns
raised by some states for more comprehensive disclosure, authority to settle
a claim, and liability for adverse costs. This was accomplished by retaining
the authority of the tribunal to disclose any information related to TPAF if it
became relevant.28 The amendments included a new paragraph to expressly
refer to that possibility.29
The 2020 Proposed Amendment referred to TPAF in Rule 14 as:
any non-party from which the party, directly or indirectly, has received funds for
the pursuit or defense of the proceeding through a donation or grant, or in return for
remuneration dependent on the outcome of the proceeding (‘third party funding’).
(2) A non-party referred to in paragraph (1) does not include a representative of
a party.30
This definition is broad in terms of parties and subject matter. It covers both
claimants and respondents in pursuing or defending the case. In addition, it
refers to “proceeding,” not “claim,” which covers the claim and its related
issues at any stage of litigation. However, the definition has avoided the
broad terms of the 2018 definition by expressly excluding representatives of
25
UNCITRAL 2019 Working Group III, supra note 2.
26
ICSID Secretariat, Proposals for Amendment of the ICSID Rules, (Aug 02,
2018), https://icsid.worldbank.org/en/Documents/Synopsis_English.pdf.
27
28
Id.
29
Id.
30
Id. at 37.

the parties. Further, this model is not for commercial purposes because the
financial services may be provided for donation or grant. Finally, the definition
avoids the “wholly or partially” part of the 2018 definition to remuneration and
hence avoids the problem of defining what partial remuneration is and when
it can apply.
1.1.5 Scholarly definitions

Many scholars have proposed different definitions of TPAF. One definition
refers to:
funding of an arbitration by a party who has no preexisting interest in the dispute,

usually on the basis that, if the funded party is successful in the dispute, the funder
will be paid out of the proceeds of any amounts recovered as a consequence of the
dispute, often as a percentage of the recovered amount.31
Despite the comprehensive Report of the ICCA–Queen Mary Task Force, it

has failed to provide any workable definition. Some funders justify that failure
by citing the insistence of the Report on using legal, rather than capital and
finance, terminologies to define the flows of capital and financial arrange-
ments.32 The Report has been criticized for using theoretical rhetoric rather
than realistic examination of TPAF.33 For instance, the Task Force mentions
that its TPAF definition “comprehends funding of a portfolio of claims held
by business or represented by a law firm, or in funding provided to a law firm
and collateralized by funds anticipated to be received from cases represented
by that firm.”34 The Report focuses on the form, rather than the substance, of
TPAF.35 A law firm serving its clients on a contingent basis may borrow from
a bank or a funding firm to finance the ongoing contingency cases in which
the bank would require security for the capital provided. The bank, unlike the
TPAF firm, would require other guarantees to secure the repayment. Whereas
31
Rogers, Ethics, supra note 3, Ch. 5. See also Victoria Shannon & Lisa B.
Nieuwveld, Third-Party Funding in International Arbitration (2012) (discussing dif-
ferent definitions of TPF).
32
Christopher P. Bogart, Deeply flawed: A perspective on the ICCA–Queen Mary
Task Force on third-party funding (Oct 6, 2017), https://www.burfordcapital.com/
insights/insights-container/deeply-flawed-a-perspective-on-the-icca-queen-mary-task
-force-on-third-party-funding/ [hereinafter Bogart, Deeply Flawed].
33
Id.
34
Queen Mary Task Force Report, supra note 8, at 51.
35
For instance, a funding agreement to finance arbitration is TPF, while an equity
investment of that same amount to a vehicle holding the claim and paying the legal fees
is not TPF. These two transactions, though substantially the same from a financial per-
spective, are not both the same forms of TPF, according to the Task Force definition.
See Bogart, Deeply Flawed, supra note 32.

the funding firm would suffice with the recovery from the cases. The definition
in that way conflates different funding models.
TPAF should be succinctly defined to reflect a specific paradigm of funding,
and should be subject to a regulatory framework that embraces that para-
digm. This creates certainty in the funding practice, and enhances the mutual
expectations of the parties at stake. On one hand, funders realistically waive
their own financial resources to fund another’s dispute. On the other hand, it
is the funded party’s privilege to procedurally conduct its own dispute using
another’s funds. Any definitional approach of TPAF should not be separated
from that reality.
1.2 Attempts Avalanched
It takes little imagination to conceive the myriad ways in which arbitration

claims may be funded. Simply, any external funding source may be included
within the broad ambit of TPAF. TPAF is not just a payment of the legal
fees and expenses in return for a share in the ultimate outcome of a funded
dispute.36 TPAF should be tailored to a set of criteria that distinguishes this
practice from any comparable funding practice. The rapid development of
funding practices made it difficult to reach a uniform definition. Accordingly,
the definitional approach may necessarily exclude some forms of arbitration
funding from its scope. Nevertheless, some common features would focus
more on risk assumption and the funder’s control over the claim, rather than
the form of the funding arrangement itself. This section tries to shed light on
the important characteristics that should be included in the definition.
1.2.1 Definition needed

The challenges of defining TPAF stem basically from the discrepancies about
the nature of this arrangement, and the different models that may be included
within its ambit. The question remains: why do we define? Put differently,
what are the consequences of “not defining”? As a starting point, defining
TPAF is necessary for its regulation. Without a concise and concrete defini-
tion, regulating TPAF would not be possible. The need for defining TPAF also
stems from the need for legal certainty that is inherent in any legal system.
Reasonable minds may still differ on the methodology for defining TPAF.
Importantly, this methodology should emphasize the players at stake and the
subject matter of the arrangement. A related methodological question may
address the basis for defining TPAF. In other words, should the definition be
based upon “what funders do” or “what the funding arrangement is.” Defining
36
Id.

TPAF by its actors would necessarily exclude non-third party funders, even
if they make TPAF arrangements. Conversely, defining TPAF by nature of
the transaction itself would necessarily define the party to this transaction as
a third party funder, even if it is not formally considered a third party funder.
Therefore, every part of the definition falls short on some front. A definition
should consider the nature of the transaction and the parties who conclude it
in order to, eventually, serve the regulation question. Some entities as a matter
of fact may perform TPAF activities and other activities which would dis-
quiet the definition process.37 Entities that do not consider themselves third
party funders may conduct TPAF activities. Therefore, both “funding” and
“funders” may exist in the market, and have no association with one another.
The assumption that TPAF is what third party funders do and third party
funders are those who carry out funding activities is based upon the “personifi-
cation” of an activity.38 This personification refers to the fact that TPAF exists
only where a third party funder carries out that activity to be characterized as
TPAF.39 This has prompted some scholars to define TPAF based on “what”
the activity is rather than “who” undertakes it. This leads to who shall be
defined as a third party funder.40 However, this approach does not cover an
entity who undertakes more than one activity, including TPAF. This concern
is of particular importance because if TPAF should be regulated, it would be
through its players and what they do. There may be concerns about whether
regulation would cover all activities conducted by that entity, including non-
funding activities.41
Following the methodology of judicial reasoning, some suggest that there
are some key factors that should be determined – compared with the facts of
the case – in order to apply these factors to the commercial funding model – as
compared with the legal rules that apply to the facts to reach a judgment. This
way, they reach a definition of TPF.42 These key factors include: (a) economic
function of TPF: an irrelevant or external party is funding a disputing party
to pursue a claim or defense; (b) the goals of funding: whether profitable
investment or others; (c) the legal claim is the subject matter of the funding
37
For instance, half of Burford’s business-wide commitments in 2018 were in busi-
nesses outside the core litigation finance. See Burford Annual Report, 5 (2018), https://
www.burfordcapital.com/media/1526/bur-31172-annual-report-2018-web.pdf [herein-
after Burford 2018 Report].
38
Henriques, Search of Definition, supra note 14, at 418.
39
Id.
40
Id.
41
Id. at 419 (discussing the motives for funding a dispute and how that motive may
shape the funding model).
42
Id. at 420.

arrangement; (d) the remuneration; (e) the regulation or nonregulation of the

funding industry: whether private autonomy governs the freedom of contract;
(f) the required formalities to funding agreements: writing is required or not:
(g) the bipolar funding relationship: whether it is framed as a bilateral rela-
tionship between the funded and the funder parties or the attorney; (h) ethical
considerations of the attorney’s interference with the funding relationship; and
(i) the interference and control of a third party over the arbitration claim.43
1.2.2 Definition reached

The problem of defining TPAF is that there are many forms of TPAF, and
attempts at tailoring one definition for all these forms eventually fail. The
definition should be narrowly tailored to the commercial funding paradigm
and broad enough to cover the detailed concerns that have been raised by other
models. As such, the working definition for the purpose of this book would be:
an irrelevant party to the dispute with no pre-existing interest or relationship to the

dispute or its parties nor any controlling power over the underlying dispute that
provides funding services to a disputing party for pursuing or defending arbitrated
claim(s) for monetary relief in an arbitration (potential or ongoing) proceeding for
profit with an expected return of a share in the monetary outcome if the claim(s) is
successful.
1.2.2.1 An irrelevant party to the dispute…

International arbitration is a hallmark for the parties’ freedom to fashion their
proceedings. It is fundamental that a party cannot arbitrate a dispute absent an
agreement to do so. Arbitration agreements are typically bipolar agreements,
whose scope does not normally extend to irrelevant parties to the arbitration
proceedings.44 Accordingly, as long as the funder is not a party to the arbitra-
tion agreement, it should be an irrelevant party.
The factual and conceptual nexus between arbitration agreements and
funding agreements is sometimes too difficult to overlook, especially with the
funded party being a party to both agreements. The level of impact of both
agreements upon each other, however, depends ultimately on the scope of the
arbitration agreement, which may address the dispute funding. Yet, the scope
and subject matter of both agreements are distinct. Moreover, the motive for
concluding both agreements is certainly different. While the parties conclude
the arbitration agreement to govern their potential, or existing, disputes, the
43
Id. at 423–26 (explaining these factors).
44
See Gary B. Born, International Commercial Arbitration 2376, 1142–1205
(2014) (discussing the extension of arbitration agreements to funders).

funding agreement may be concluded for different motives that may differ
from the funder to the funded party.
“Irrelevant to the dispute” refers to the underlying relationship between the
parties to the dispute. Any related party may have standing in the claim on
its own. Mere funding is not sufficient to qualify the funder as a “third party
funder.” Therefore, “irrelevant” parties exclude from their scope the parent
companies. There is a preexisting relationship between the parent company
and its affiliates, which may justify the extension of the arbitration agreement
to it, in certain circumstances. That possibility may not be available to the
funder because of the independence of the funding agreement from the arbitra-
tion agreement. Any direct or indirect relationship between the disputing party
and any third party in relation to the underlying dispute does not qualify this
third party as an “irrelevant party.”45
1.2.2.2 …with no pre-existing interest or relationship to the dispute or its

parties…
The same analysis applies to “with no pre-existing interest or relationship.”
Although most laws, including the Model Law, require a written agreement to
arbitrate, there is no such requirement for signing the arbitration agreement.46
Despite the bilateral undertaking to arbitrate, the question may arise as to
whether a third party funder may enforce, or be bound by, the arbitration
agreement. Typically, in international arbitration, the disputing party may
engage a funder who enters into a funding agreement to provide discrete
financial aspects of the arbitration dispute. Should aspects of the proceedings
be unsound, in the unfunded party’s view, the unfunded party may seek to hold
the funder accountable.47
1.2.2.3 …nor any controlling power over the underlying dispute…

Funders may monitor case progress to ensure its compliance with the funder’s
initial assessment. They have legitimate interests in monitoring the costs of the
case in order not to exceed their budget. Funders may disintermediate the client
45
46
United Nations Comm’n on Int’l Trade Law, UNCITRAL Model Law on
International Commercial Arbitration art. 7(2) (1985 amend. 2006), https://uncitral.un
.org/sites/uncitral.un.org/files/media-documents/uncitral/en/19-09955_e_ebook.pdf.
47
The unfunded party may bring all the parties together in one proceeding; to do so
would be economical and efficient to avoid inconsistent results. Unlike litigation, the
consent-based nature of arbitration would be a challenge for achieving this purpose.
More importantly, the problem of equal opportunity to appoint arbitrators may rigor-
ously arise. See, e.g., Cour de cassation [Cass.] Siemens AG and BKMI Industriean
Lagen Gmbtt v. Dutco Construction Co., 1 Ch. civ., Jan 7, 1992 (Fr.).

dynamic and make the process more efficient and predictable. The parties may
on occasion make procedural decisions for noneconomic reasons.48 TPAF
is a mere assignment of the dispute proceeds, not the claim itself. Control
is a principal element that transfers the assignment of the proceeds into an
assignment of the claim.49 It is measured by the funder’s level of influence over
the proceeding, settlement decisions, and changing counsels.50 While some
funders adopt the “passive investors” approach, others tend to be more active.51
However, the funder’s interference in the underlying proceedings is not per
se an exercise of control,52 especially where the plaintiff retains the sole legal
right to initiate the proceedings.53 Repeat funders may have indirect control
over the arbitration if it is conducted by the same counsel.54 More specifically,
funders seem unlikely to remain passive if odd strategies are adopted by the
party’s counsel.55 Still, the funders’ pursuit of profit may warrant indirect
control over the dispute.
The original disputing party should therefore retain control over the claim.
That definition balances the party’s control with the funder’s interests, in order
to view the funding industry as enhancing the arbitration system. The irrele-
vant funder should not exercise any direct or indirect control over the dispute.
The definitional approach caters to the commercial funder who is funding the
dispute in a manner that facilitates access to justice for the disputing party, and
is not otherwise objectionable. Such funding will make the disputing party the
primary interested party and in control of the proceeding.
1.2.2.4 …that provides funding services…

Funders’ potential powers over the proceeding have given way to unprece-
dented funding practices. The pro-arbitration funding policy should reflect
48
See Burford 2018 Report, supra note 37, at 28.
49
Odell, 192 N.C. App. 298.
50
Id.
51
Some refer to “hands-off” and “hands-on” types of funders. Radek Goral, Justice
Dealers: The Ecosystem of American Litigation Finance, 21 Stan. J.L. Bus. & Fin. 98,
113 (2015). Some funders find no wrong in exercising some form of control because
they have an intimate understanding of the claim. Other funders support monitoring the
case, not concretely influencing it, which may be considered a litigation support. See
generally Maxi Scherer, Aren Goldsmith, and Camille Flechet, Third Party Funding
in International Arbitration in Europe: Part 1 – Funders’ Perspectives, Int’l Bus. L. J.
207, 211 (2012), https://ssrn.com/abstract=2348737 [hereinafter Scherer et al., Third
Party Funding in Europe].
52
WAG Acquisition, LLC, 2019 WL 3804135.
53
Id.
54
Burford 2018 Report, supra note 37, at 28 (discussing funders’ approaches to
influencing the case).
55

avoidance of any historical concerns that surrounded the funding practices.56

Coupled with the deviation from the champerty doctrine, arbitration funding
was viewed as a financial tool that enabled the disputing party to overcome
cost barriers in pursuing its arbitration dispute. Funders should be contractu-
ally obliged by that framework. Exceeding that framework might call other
funding practices into play, such as assignment. Funders always allocate a spe-
cific budget to the dispute that includes the attorneys’ fees, arbitrators’ fees,
administrative fees, experts’ fees, or any other agreed upon arbitration costs.
Depending on the complexity of the case and the stage at which the funding
is sought, the budget may vary. However, funders should limit their role to
being funding providers, and not use their financial capabilities to threaten the
funded parties with cutting off the budget as a disguised reason for escaping
the funding agreement.
1.2.2.5 …to a disputing party for pursuing or defending arbitrated claim…

TPAF is an investment in the claim proceeds. The funded party should be
a party to the dispute conducted through arbitration. TPAF should be consist-
ent with the normative goals of arbitration. The paramount role of the funding
agreement warrants that its scope should be performed with utmost care. That
is equally true whether the funding agreement is concluded after the dispute
has arisen or in anticipation of one. The language of the funding agreement
may have a substantial impact on the scope of financing. While it may appear
purely semantical, financing a party to pursue or defend a “claim” is critically
a narrower class than financing a party to pursue a “case” or a “dispute.”57 In
addition, financing a claim against one specific party is narrower than financ-
ing a claim. The latter would include the claim against this particular party and
any other party that may ensue. This definition also covers both claimants and
respondents.
Given the foregoing, precision and clarity would discipline the scope of
TPAF. Several techniques may be followed to curtail the scope of TPAF.
One way is to clearly list the number of claims or the type of claims to be
financed. Another is to tie funding a particular dispute to a period of time.
Each technique would certainly have its positive and negative impacts.58 The
identification of the parties against whom the dispute is pursued is also critical.
56
57
Bailey, 2010 WL 11574140, at *1 (defining the scope of the term “case”).
58

1.2.2.6 …for monetary relief…

This definitional scope applies only to monetary reliefs. It excludes the
nonmonetary reliefs sought by the disputing party. It has been argued that
commodifying legal claims may create an undesirable consequence of treating
the claim as any other commodity that can be quantified only by a dollar value
with no other intrinsic value.59 However, TPAF in this book addresses claims
between complex business entities that pursue the legal claim for monetary
relief. Accordingly, a successful resolution is normally an award or a settle-
ment that monetarily favors the funded party and should be recoverable from
the opposing party.
1.2.2.7 …in an arbitration (potential or ongoing) proceeding…

TPAF arrangements may be concluded either before or during the underlying
arbitration proceedings. Generally, arbitration begins once the request for arbi-
tration is filed or sent to the other parties.60 Although arbitration proceedings
begin, progress, and conclude through a typical general pattern, each is still
influenced by elements dictated by the parties, arbitrators, or by the applicable
law or rules. The funding arrangement should be in force until the arbitration
proceedings come to an end. The influence of the funding agreement is funda-
mental and pervasive. It is the origin of whatever funding the funded party may
have and should continue until the funded party concludes the dispute.
1.2.2.8 …for profit…

While the purpose of TPAF from a funder’s perspective is financial, TPAF
is a financial tool that facilitates the disputing party pursuing its claim. The
monetary expected return is the funder’s ultimate goal. It justifies the confi-
dentiality that funders bestow on their arrangements. The format of the funding
parties’ collaboration will vary, and is often influenced greatly by pursuit of
profit. Therefore, this definition excludes dispute funding for philanthropic
purposes or any claim that has nonmonetary purposes, such as funding to
set precedents in particular types of disputes, change rules, and the like. The
remuneration in these cases is different. Although these forms of funding may
be considered investments, they do not have a monetary investment motive, so
they should be subject to different funding models.
59
95 Minn. L. Rev. 1268, 1321 (2011).
60
United Nations Comm’n on Int’l Trade Law, UNCITRAL Model Law on
International Commercial Arbitration art. 7(2) (1985 amend. 2006), https://uncitral.un
.org/sites/uncitral.un.org/files/media-documents/uncitral/en/19-09955_e_ebook.pdf,
art. 21. ICSID Convention art. 36(1).

1.2.2.9 …with an expected return of a share in the monetary outcome if the

claim is successful
The prerogative of rendering an award is sometimes addressed in the funding
agreement. The condition that the award is issued in a written form is central
to achieving the goals of TPAF. The arbitral award will be acceptable for both
funding parties as a natural reaction to the funding agreement they concluded.
Central to TPAF is the risk that this investment brings to the funder. This risk
supposes that the funder expects a future return out of that investment that takes
the form of a share of the dispute outcome. A risky investment assumes that the
funder merely expects, not guarantees, that return. The percentage may vary
between 30% and 40% of the outcome, or three times the money spent in the
dispute, whichever is greater. It would be good practice for the funded party,
upon receipt of the award, to jointly peruse it with the funder without delay.
Upon issuing the award, the future value of the funder’s investment becomes
present. Funders in that sense will have a direct interest in the produced award,
and the uncertain profit becomes, subject of course to challenge proceedings
of the award, a certain one. The funding agreement should precisely govern the
disbursement of the proceeds of the award.61 The same is true for a settlement
agreement that ends the dispute.
By connecting doctrine to ideology and the formed definition to the form-
ative framework, the following section aims at proposing, through a doctrinal
analysis, the politics of the paradigm that should nurture the abandoned
promise of modern arbitration funding.
2. NURTURING THE PROMISE
Combined with the decline in legal market,62 the introduction of new technol-
ogies necessitates progressive theories in legal services. These include, among
others, creating a market of legal claims through TPF.63 Very generally, this
section claims that TPAF should stand fundamentally as an expression of the
modern liberal commitment of international arbitration. This liberal commit-
ment should promote greater freedom for individual parties, unfettered by
public constraints, through which a posture of formal equality between the
private actors must be observed.
61
62
Eli Wald, Foreword: The Great Recession and the Legal Profession, 78 Fordham
L. Rev. 2051 (2010) (analyzing the downturns in the services of the legal market).
63
Funding firms include Burford (https:// www .burfordcapital
.com/
), Juridica
(http://www.juridicainvestments.com/), Bentham Capital (https://www.benthamam
.com.au/), Themis Capital (https://www.themislc.com/), and Fulbrook Capital (http://
fulbrookmanagement.com/).

Built upon the preceding chapters, the TPAF paradigm should legitimize
institutionalizing arbitration funding as an idea. By fostering TPAF’s image as
a private, efficient, and fair process through institutional reforms that ensure an
equitable arbitral process according to the normative goals of TPAF, arbitra-
tion is promoting TPAF as an untainted financial tool of access to justice. To
effectively play its ideologically assigned role, TPAF should be both strength-
ened and cleansed: strengthened by sacralizing the disputing party’s autonomy
in conducting its claim, and prescribing deferential procedures to that end;
cleansed by ridding itself of compromising the funding parties’ interests. Both
tasks may be accomplished by the institutional regulation of TPAF.
Due to its salient benefits of improving legal economics and business effi-
ciency, TPAF has become an innovator.64 Most notably, single-case funding
is the most used form of funding.65 The aggregate effect of the TPAF growth
would increase the number of better-informed parties, which would positively
impact the international system of dispute resolution.66
TPAF should neatly delineate the existing rules that govern the conduct of
its players. As repeat players, funders have systemic impacts on arbitration.
Funders try to build up a good reputation with their investment.67 This repu-
tation is subject to the existing rules and potential sanctions that may extend
to funders.68 The mere fear of sanctions may systemically affect the funders’
behavior throughout the proceedings. For example, funders may legitimately
justify their interference in the proceedings to discharge these alleged sanc-
64
Burford 2017 Survey, supra note 1, at 20.
65
Id. at 22.
66
These parties may be divided into two types: “access to justice” parties who
“need” TPAF to enable them to pursue their arbitration claims, and “corporate finance”
parties who “want” TPAF to optimize their accounting, free up capital, or for other
business reasons. This subcategory of sophisticated claimants is referred to in Maya
Steinitz & Abigail C. Field, A Model Litigation Finance Contract, 99 Iowa L. Rev. 711,
716 (2014).
67
Courts have recognized that dimension when one court decided that funders care
about getting future clients. Soc’y of Missionaries, 2014 WL 1715376.
68
An English court has thoroughly highlighted these rationales by deciding that
funding institutions do not owe the same ethical duties as attorneys and so they play
more shadowy roles than attorneys. The court noted that these funding institutions do
not appear in an open court and hence the court may subject them to sanctions for con-
tempt of court or abuse of process with less speed and facility than for attorneys. The
court may supervise the litigation parties more than the case where the litigation is con-
ducted by one side while on the other side there are nominal parties, the party in control
of the litigation is beyond the court’s direct control. Campbells Cash & Carry Pty. Ltd.
v. Fostif Pty. Ltd. (2006) 229 CLR 386, 487 (Austl.) (Callinan & Heydon, JJ., concur-
ring), http://eresources.hcourt.gov.au/downloadPdf/2006/HCA/41.

tions. Therefore, defining roles benefits not only the funders but also the
attorneys who perform their representation in a clear framework.
A model funding arrangement assumes that the disputing party remains the
owner of the claim, even with a funder’s “tolerable control.” On one hand,
funders have legitimate interests to exercise some influence over the proceed-
ings due to their financial stake in the claim. On the other hand, the disputing
parties are more aware of their cases than the funders. These conflicting inter-
ests leave worthy parties unfunded.69 Two points will help in conceptualizing
the new TPAF paradigm. The first responds, through an institutional approach,
to the concerns that were identified in the preceding chapters from both arbitra-
tion and funding perspectives (2.1). The second establishes the structure of the
TPAF paradigm that nurtures the abandoned promise of TPF (2.2).
2.1 Beyond Concerns
The dominant style of analysis of present-day arbitration funding is

economic-autarkic, which always appeals to criteria intrinsic to economic
rather than justice values. Today, the increase of funders’ control has caused
liberal economic thoughts to emphasize financial rather than justice aspects of
TPAF. Recognizing the limitations of the earlier analysis, the assumption of
a distinctly justice-driven legal landscape is the better way to respond to the
challenge of competing ideologies and maintain relevance. No matter what its
premise might be, liberal economics should reflect justice. This section aspires
to give a brief foundation on which to judge the funding paradigm that the
following section presents.
The response to the challenges that TPAF faces should stand as a commit-
ment to institutional approach that aims at a greater contractual freedom and
justice in the system. This institutional approach allows individuals to pursue,
in their self-determined way, their autonomously determined goals through an
apportionment of tasks between private parties and institutions. For arbitration
users, arbitral institutions are arenas where self-directed parties pursue their
self-autonomous goals. An agreement is the primary mode of social engage-
ment between them and the institutions. In this sense, if they interfere, institu-
tions do so largely as coordinators of the parties’ arrangement. Readers may
disagree with this particular proposal but still accept the analytic framework
being proposed – which may ultimately matter most.
69
Dubai International Finance Centre, Practice Direction No. 2/2017 on Third Party
Funding, (Mar 14, 2017), https://www.difccourts.ae/2017/03/14/practice-direction-no
-2-2017-third-party-funding-difc-courts/. Baker McKenzie, Third party funding in the
UAE, Global Arbitration News (Apr 25, 2019), https://www.lexology.com/library/
detail.aspx?g=080b0d27-480f-46c3-ae10-afe7b5b336ec.

The fundamental assumption characterizing the mainstream scholarship on

arbitration funding needs only to be restated for the ideology to show through.
First, the current theoretical funding models are doctrinaire, constricting, and
dogmatic. There is a pragmatically rebuttable presumption of disfavoring these
models. Second, although the common law includes many areas where control
over litigation may be alienated, the TPAF paradigm should not trade off claim
control. Third, TPAF is, above all, voluntary. The funding parties freely agree
to this funding arrangement by contract. Arbitral institutions coordinate with
them to accomplish what they alone may imperfectly achieve. In contrast to
other arbitration actors, arbitral institutions are necessary to safeguard due
process, and to maintain efficiency in the enforcement of TPAF. Fourth, the
core of arbitration funding is the appropriate relationship between the funding
parties on one hand, and the arbitral process on the other. By distinguishing
between the private funding parties who can freely agree on their own terms,
and the operation of the arbitral process, the mainstream TPAF scholarship
either sets funders’ interests before the funded parties’, or redefines the arbitral
justice from a private parties’ perspective. Finally, TPAF is a financial service
market whose benefits accrue not just to its users, but also to other actors and to
the arbitration system itself. It requires the technical equipment for this market.
This book advocates for a voluntarily funded adjudicative process, to whose
efficiency arbitral institutions remain purposefully committed, and for whose
functioning institutions retain meaningful responsibility by installing appro-
priate procedural, and when necessary even quasi-substantive, safeguards. The
claim here is that the characteristics of arbitration – party autonomy, arbitral
justice, and the typical contractual freedom – may account for an openness to
an institutional-based approach to TPAF. Accepting that new conceptualiza-
tion of TPAF should internalize the limitations of the TPAF arrangements.
Chapter 5 crystalized the propriety of an institutional approach to TPAF
regulation. It explained why that approach seems relevant in the first place,
and why other approaches all ultimately fail. Hence, the new paradigm is an
attempt to understand the curious combination of contractual choices for the
parties, and enthusiasm for the institutional alternatives to these choices.
Recalling the concerns of the current TPAF practices presented in Chapters 3
and 4, an institutional-based approach is the best hope for a pragmatic consen-
sual resolution to these concerns. The powers exercised by arbitral institutions,
as nonstate actors, are ideologically nonsuspect. This should conceptualize the
interplay between the free, consensual nature of TPAF arrangements, and the
framework through which they should operate. Claim control is the primary
concern that TPAF should avoid.70 Funders’ control may generate adverse pro-
70
See supra Chapter 4 (1.2.2) and Chapter 4 (2).

cedural, substantive, doctrinal, and political implications. Procedurally, it may

threaten the tribunals’ jurisdictional powers over the party. Substantively, it
may, upon disclosure, impact the arbitrators’ decision-making, and create ine-
quality and due process concerns. Doctrinally, it can transfer the legal doctrine
from TPAF to assignment of claims. Politically, it may contradict the nature
of arbitration funding as a risky investment.71 In the meantime, the funders’
financial stake in the outcome may justify a monitoring role to ensure that the
original funding provisions are being properly performed.72
Conceptually, the fundamental pillars of the TPAF paradigm should be
based on the following framework. First, despite the mandatory disclosure of
the existence of the funding arrangement, there should not be any disclosure of
the funding documents. Second, the institutional-based approach should inter-
nalize the concerns that may arise throughout the performance of the funding
arrangement. Third, the institutional-based approach necessitates procedural
reforms to maintain the same procedural rights for both disputing parties. In
order to maintain that procedural reform in investor–state arbitration, the ISDS
system should allow sovereigns to file counterclaims, and allow both parties to
avail themselves of the same funding opportunities.
Hitherto, the general argument was mainly refuting; funding arrangements
by themselves do not mitigate the funding concerns. The critique has focused
on the incoherence and indeterminateness of the doctrinal arguments usually
deployed to support current funding practices. Current funding models origi-
nate in two common fallacies, namely, the exaggeration of the funder’s role
at the expense of the funded party, and the erosion of arbitral justice to favor
economic values. These models look at one half of the funding arrangements
while ignoring the other half. By reducing these concerns to a choice between
all or nothing, this view of the funding arrangement is both theoretically
wrong and practically harmful. At this point, the argument should show up
the manifestation of an extra-legal mode of thought that has co-opted the
institutional-based approach in TPAF. By excluding the possibility of the
funders’ control, an institutional-based approach becomes the optimal choice
to consider in aligning the interests and visions of the funding arrangements.
However, structural choices are not necessarily revolutionary. A middle course
may exist to gradually reconcile the new innovation.
71
Surveys show that funders finance only 10% of the cases that seek financing.
72

2.1.1 Institutions and funders: partnership

The role of arbitral institutions has been fully recognized either through the
parties’ incorporation of the institutional rules into their agreements or through
the courts’ support of the operations of these institutions.73 They first started
informally,74 and gradually began to play a crucial role in professionalizing
and providing more predictability and efficiency to the arbitration process.
Since its early days, arbitral institutions have been called upon to resolve
increasingly complex and diverse controversies.75 Further, arbitral institutions
have witnessed a new level of development by forming partnerships with other
entities to promote transparency and efficiency of the system.76 Analogously,
the proposed paradigm is premised on the notion that arbitral institutions may
partner with funders to provide more efficient TPAF services either before,
during, or after the arbitration proceedings.
The role of arbitral institutions is no longer limited to arbitration services;
it has extended to other dispute resolution related services as well.77 Adding
financial services by partnering with funders aligns with the arsenal of services
provided by arbitral institutions, which would generally enhance arbitration
services. The movement toward institutionalizing funders78 may correspond to
the partnership with arbitral institutions. Once again, this is not to suggest that
the partnership between funders and arbitral institutions may affect in any way
the neutrality of the latter or to favor one party over the other. Still, arbitral
73
Emmanuel Gaillard and John Savage (eds), Fouchard Gaillard Goldman on
International Commercial Arbitration, 483–84 (1999).
74
A speech given by Gary B. Born at the New York International Arbitration
Center on the Past, Present, and Future of International Arbitration (Dec 10, 2019).
75
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614,
638–39, 105 S. Ct. 3346, 3360, 87 L. Ed. 2d 444 (1985).
76
One of these partnerships is Arbitrator Intelligence, in which arbitral institu-
tions provide information on the conduct of arbitrators to help produce more efficient
future appointments by the parties. Arbitrator Intelligence, https://arbitratorintelligence
.com/. In addition, there is a general collaboration between funders and arbitral insti-
tutions to enhance and promote the use of arbitration funding and increase the aware-
ness of arbitration funding in international arbitration. See Bentham IMF and New York
International Arbitration Center sign three-year strategic collaboration agreement
(Oct 11, 2019), https://omnibridgeway.com/insights/blog/blog-posts/global/2019/10/
10/bentham-imf-and-new-york-international-arbitration-center-(nyiac)-sign-three-year
-strategic-collaboration-agreement.
77
E.g., ADR, expert determinations, adjudication, or dispute boards with possibil-
ity of developing some mechanisms for specific types of disputes or industries. Rémy
Gerbay, Chapter 3: An Overview of the Activities of Arbitral Institutions: Institutional
Arbitration as a Multifaceted Reality, in The Functions of Arbitral Institutions, 55,
58 (Kluwer L. Int’l 2016).
78
Susan Lorde Martin, The Litigation Financing Industry: The Wild West of
Finance should be Tamed Not Outlawed, 10 Fordham J. Corp. & Fin. L. 55, 73 (2004).

institutions remain neutral and distant from either party because they do not
take any role in deciding the dispute or the ongoing arbitral proceedings before
the arbitrators.79
The direct relationship between the funding parties does not guarantee
equal bargaining powers, either in negotiating or performing the funding
agreements. There should be an independent, neutral, and powerful third party
that bridges their positions.80 Rather than partnering with law firms or clients,81
funders may partner with arbitral institutions. Partnership in that sense does
not mean that the arbitral institution and the funder will own the legal claim.
Still, the legal claim is owned by the disputing party. Rather, the funder may
partner directly with the arbitral institution so that the funded party deals with
the arbitral institution and not the funder. Still, the funded party can directly
deal with the funder. In this case, the arbitral institution would assume a super-
visory role over the funding arrangement until deciding the dispute. In princi-
ple, arbitral institutions will act as intermediaries between the funding parties
to stabilize their balance of power, and ensure a fair and just proceeding. This
structured model should resolve several concerns that arise from the unsettled
TPAF practice.
Internally, the partnership between funders and arbitral institutions would
allow the institution to manage the funds through a funding committee. This
funding committee should represent a trust entity between the funding parties
that owns the proceeds of the funded claim.82 The role of arbitral institutions
should be limited to guiding the funding parties in concluding the funding
arrangement by facilitating the availability of the funding options. Where the
party manages to get funding from an outside funder, the role of the arbitral
institution will be limited to managing the funding process through the funding
committee.
The role of arbitral institutions has transferred from a mere administrative
forum for arbitration disputes into a quasi-judicial forum where they decide
ancillary disputes related to arbitration.83 It is therefore not unusual to grant
arbitral institutions quasi-judicial functions to decide the funding disputes that
79
80
One arbitrator calls for institutions to address the problems generated from TPF.
RSM v. St. Lucia, ICSID Case No. ARB/12/10, para 20 (Aug 12, 2014) (Nottingham,
dissenting).
81
See supra Chapter 2 (2) (critically analyzing the current models of partnering
with clients or law firms).
82
This idea is based in general on the trust structure that is incorporated in a lit-
igation funding agreement between Treca Financial Solutions and Claimant, https://
amlawdaily.typepad.com/chevron_fundingagreement.pdf.
83
In terms of preliminary jurisdictional determination, arbitral institutions provide
a gate-keeping function. The ICC Court provides prompt preliminary determination of

may arise throughout the funded proceedings. The funding committee should
promote transparency by accurately reflecting what was spent in pursuing
the claim. It should balance the desire to invest in the claim with maintain-
ing prudent levels of expenses. This will make funders confident that their
investment is properly pursued. It would also avoid any discrepancies between
the funding parties because they would turn to the committee to settle their
differences.
2.1.2 Players
The choice of arbitral institutions, as discussed in the preceding chapter, is
based on a comparative analysis of the other players who cannot assume that
role. Law firms, for instance, should handle the underlying dispute, not the
funding arrangement. Arbitrators might have some concerns about managing
TPAF due to the jurisdictional issues and the scope of their mandate, which
should not reach beyond the underlying dispute. Considering the disadvantages
of having any other player manage TPAF, arbitral institutions are functionally
tailored to manage arbitration disputes. Arbitral institutions therefore would be
better at managing funding arrangements and balancing its common impacts
on the arbitration proceedings.
2.1.3 Executive framework

TPAF could create a private dynamic that systematically favors large funding
corporations over the funded party. Funders, as repeat players, with their
substantial market powers, would have an interest in keeping the funding
arrangement beyond the reach of arbitral institutions. Yet, the impact of these
arrangements upon the arbitration system has been criticized by many practi-
tioners on a wide swath of issues, which prompts the disjunction between the
funding parties and the management of the funding process.
Arbitral institutions would better govern the executive framework of TPAF.
Their permanence and visibility, as compared with individual arbitrators, the
disputing parties, or even the funders, as well as their knowledge, expertise,
and direct involvement in the arbitration proceedings, give them unri-
valed institutional competence to orchestrate the performance of the funding
arrangement. They can provide functions to the funding industry similar to
those provided by bar associations to the legal industry. They have acquired
a level of legitimacy through international conventions, national laws, and in
practice, which makes them an inextricable part of the international arbitration
objections that an arbitration agreement may not even exist. ICC Arbitration Rules art.
6(4) (2017).

law.84 The importance of their role in managing arbitration should not be

underrated. Generally, the institution’s involvement in arbitration gives rise to
a distinction between institutional and ad hoc arbitrations. Ad hoc arbitrations
give more space to the parties’ intentions in orchestrating the proceedings
and the powers resulting therefrom. The institutional rules may apply once
the parties so agree. They assume that the institution will be empowered with
supervision over the funding arrangement to a greater or lesser extent. The
mechanism for supervising the funding arrangement should be provided by
the arbitration rules of each arbitral institution. Of course, the funding parties
are still involved within the conduct of the arrangement, but the institution
would act for their benefit, not against it. This view finds support in the general
attitude of most international conventions, which favor institutional arbitration
through an institutional process rather than an ad hoc one.85
Thus, arbitral institutions should safeguard the legitimacy of the arbitral
process by preventing any potential control or abuse of the funders. The
parties’ choice of a specific institution presumes that they agreed to subject any
funding arrangement to the funding rules incorporated in the institutional rules.
The presumption is not necessarily irrebuttable. The intention of the parties to
the arbitration agreement, the role of the arbitral institution, and the language
of the arbitration agreement may serve to rebut this presumption. In that
regard, arbitral institutions provide the advantage of efficiency. They should
be at liberty to provide in their rules that the institution will only intervene on
a collateral basis to support the funding arrangement, if the parties concluded
the agreement without the interference of the arbitral institution. However,
the ongoing proceedings should be subject to the arbitral institution unless the
parties otherwise agree.
2.1.4 Funders’ operation

Arbitral institutions can partner with many funders. That way, arbitral institu-
tions can receive the approval of different parties from different countries in
negotiating the funding arrangement. This mechanism serves two purposes.
First, it would increase the diversity of the disputes and the arbitration users.
Second, it would enhance the market of TPAF. The potential funded party
84
Gaillard et al., supra note 73, para 811.
85
E.g., European Convention on International Commercial Arbitration, art. IV(4)
(Apr 21, 1961), https://www.jus.uio.no/lm/europe.international.commercial.arbitration
.convention.geneva.1961/doc.html#20. Even in ad hoc arbitration, the parties have
the freedom to make use of the funding committee jurisdiction to govern the funding
arrangement underlying their dispute. In this case, the parties voluntarily subject their
ad hoc process to the jurisdiction of the funding committee to govern their funding
dispute. However, in this case, the funder’s consent should be warranted.

would have more than one funder to seek funding from, which would increase
the probability of funding the case. Funders would have a variety of diverse
cases and participants, which would increase their investment opportunities
and diversify their portfolio. Arbitral institutions, therefore, may compile a
“list of funders,” similar to the list of arbitrators,86 to provide the parties when
they consider funding a case, analogous to the institution’s support to the
parties in choosing their arbitrators.87 The institutional rules would serve as
fallback rules that bridge the gap between the parties and the funders.
The presumption is that the party would seek funding from the list of
funders that the arbitral institution compiles. However, this presumption
does not negate the fact that the party may seek funding from a different
third party. In this case, the arbitral institution would assume a supervisory
function during the proceedings to stabilize the balance between the funding
parties in a way that does not adversely affect the arbitral process. Because
mutually-agreed-upon terms between the parties to the dispute, in relation to
the execution of TPAF with the funder, are rare, arbitral institutions should
explicitly reserve the responsibility of supervising the performance of the
TPAF arrangement, unless otherwise agreed upon.88
Because arbitral institutions play a crucial role in the arbitral process,89
they may play the same role in arbitration funding. The real challenge is to
ensure those arbitral institutions retain funders with expertise in an array of
disputes. Experience tells that a list of funders will be successful; other similar
mechanisms, such as arbitrators’ lists, have proved to be successful. Upon
establishing a list of funders, arbitral institutions should define their particular
field of expertise, and train them in the procedural features of arbitration
under their institutional rules. Funders would become more familiar with the
86
Arbitral institutions provide profiles for each arbitrator for the parties to choose
from. Born, supra note 44, at 1712. Similarly, the funders’ list may promote the confi-
dentiality and the efficiency of the arbitration process by enabling the parties to access
the funders’ data and ease their communication for potential funding.
87
Report of the United Nations Commission on International Trade Law on the
Work of its Eighth Session para 84 (Apr 1975) (“Experience had shown that arbitral
institutions and appointing authorities acted with complete impartiality even when one
of their appointees was challenged. Such institutions and appointing authorities were
deeply concerned with preserving their reputation for integrity”), https://www.uncitral
.org/pdf/english/yearbooks/yb-1975-e/vol6-p9-45-e.pdf.
88
E.g., ICC Arbitration Rules art. 12(5), 13(1&2) (2012). Born, supra note 44,
at 1701 (“a number of institutional rules expressly or impliedly reserve to the arbitral
institution the responsibility for confirming the parties’ or co-arbitrators’ proposal for
presiding arbitrator”).
89
See generally Silke Noa Elrifai et al., Arbitral Institutions Through the Magnifier:
On the Nature of Their Decisions and Exposure to Suit, 19 Cardozo J. Conflict Resol.
309, 311–12 (2018).

intricacies of the proceedings and the role of arbitral institutions in enhancing

them. More importantly, funders would be sensitive to the arbitral process and
their responsibilities within it. Due to the confidentiality of the funding indus-
try, partnering with arbitral institutions should maintain that confidentiality;
arbitral institutions are already under an obligation of confidentiality about any
dispute conducted under their auspices.
Although it may be argued that developing a list of funders may result in
delays, it is worth, on balance,90 the risk, because it would eventually maximize
the parties’ legitimate expectations of the process and protect the core princi-
ples of arbitration.
2.2 Paradigm Structured
The structure of the funding paradigm is premised on a new entity. This entity
should be created by the funding parties. It is analogous to the trust entity,
where the funding parties are the owners and beneficiaries of that entity, and
the advanced fund, and the future proceeds of the claim are the corpus of the
trust. In that sense, arbitral institutions should be the managers of that entity
for its constituents.91 They would protect the interests of those beneficiaries.
Moreover, arbitrators would be able to play their role in the arbitration pro-
ceedings despite the existence of TPAF, whose issues will be resolved by the
arbitral institutions through an internal funding committee. This committee
should operate both in commercial and treaty arbitrations.
The trust entity creates a relationship between its beneficiaries, the funding
parties, and its managers, the arbitral institutions. Any enforcement issue
should be resolved principally by arbitral institutions creating: (a) a vertical
relationship between the constituents of the trust and the arbitral institutions,
through which the latter manages the corpus of the trust that gives the arbitral
institution a recognized legal relationship to the trust beneficiaries; and (b)
90
Cf. Born, supra note 44, at 1712. The book does not address the criteria required
for choosing the list of funders because there is still a small number of funders who
exclusively specialize in the funding practice and take the form of institutional funders.
It is worth noting, however, that diversity should be a key in diversifying the list of
funders and so the funded disputes.
91
“The law recognizes two major types of trusts, express and implied. An express
trust is a fiduciary relationship with respect to property, arising as a result of a manifes-
tation of an intention to create it and subjecting the person in whom the title is vested
to equitable duties to deal with it for the benefit of others.” Gabel v. Richley, 101 Ohio
App. 3d 356, 362–63, 655 N.E.2d 773, 778 (2d Dis. Montgomery Ct. 1995) (internal
quotations omitted). However, the idea of trust for the purpose of the funding commit-
tee does not borrow the entire principles of the “trust” entity. It is a mere simulation to
the players to facilitate the operation of the entity.

a horizontal relationship between arbitrators and arbitral institutions pertaining

to the funding arrangement. This view finds support in the funding practice
itself. Some funders agree on using a “referee” to solve any disagreement that
may arise from the funding agreement.92 Although there is a consensus that
this referee should be a neutral third party, there is no agreement on who that
referee should be.93 As a neutral third party, the funding committee at the arbi-
tral institution should assume the role of referee, and ensure equity between
the funding parties. That way, TPAF would be a tool to enhance access to
justice, maximize investment profits, and promote a transparent process from
initiation, through negotiation and performance, until finalization.
2.2.1 Tasks allocated

The funding committee should avoid any discrepancies that may arise if the
management of the trust is left to the parties. The institutional rules would
govern the creation of the trust, its operation, and management. Although the
institutional framework is more efficient than the individual one, it may be
argued to violate freedom of contract as a basis for party autonomy in arbi-
tration. However, there is no such impact on the freedom of contract. Before
concluding the funding agreement, the funding parties would know about the
institutional rules that would govern the underlying dispute. By concluding
their agreement, they impliedly assent to the operation of the funding trust by
these rules.
The allocation of tasks between arbitral institutions and arbitrators over the
underlying dispute is not uncommon in institutional arbitration. For instance,
Article 6(3) of the ICC Rules allocates functions between the ICC Court and
the arbitral tribunal by stating that “pleas concerning the existence, validity
or scope of the arbitration agreement or concerning whether all of the claims
made in the arbitration may be determined together in a single arbitration”
unless the Secretary General refers the matter to the ICC Court. Article 6(4)
then provides that in cases referred to the ICC Court, “the arbitration shall
proceed if and to the extent that the [ICC Court] is prima facie satisfied that
an arbitration agreement under the Rules may exist.”94 Further, the proposed
TPAF paradigm should avoid the ethical problems that may arise from appli-
cable privileges. It assumes that the funder pays, the trust operates, and the
disputing party fulsomely pursues its claim. The funding committee serves
to facilitate the arbitral process, and so the disputing party can enjoy fulsome
92
See generally Scherer et al., Third Party Funding in Europe, supra note 51, at
217.
93
Id.
94
ICC Arbitration Rules, art. 6(4) (2017).

control within a clear and efficient “inter-institutional” dialogue between arbi-

tration funding users and arbitral institutions.
2.2.2 Institution jurisdiction

The trust entity should be created by the funding agreement.95 It is important
to ensure that the wording of the funding agreement is adequate to fulfill the
mutual intention of the parties to create the trust. The funding agreement
should be drafted in broad and inclusionary terms to enable the arbitral insti-
tution to administer the funding arrangement through the funding committee,
rather than referring only to the arbitration institutional rules. Similar to the
effects of the arbitration agreement, the funding agreement should have posi-
tive and negative effects. The existence of the funding agreement would give
a basis for the institutional funding committee to manage the funding issues.96
The funding agreement would preclude any other entity from deciding the
funding issues on a jurisdictional ground. The funding committee may make
a prima facie determination of the existence and validity of the funding agree-
ment, as a basis for conducting its mandate. However, if there is a real dispute
concerning the funding agreement itself, the funding committee should decline
its mandate pending a decision on the validity of the funding agreement, as per
its dispute resolution clause.
The jurisdictional basis of the funding committee is premised on the funding
agreement and the arbitration agreement. Although the jurisdiction of the
funding committee is directly derived from the funding agreement, it is indi-
rectly derived from the arbitration agreement, which refers to the arbitral insti-
tution to administer the arbitral proceeding. The rules governing the mandate
of the committee are then incorporated. Similar to the arbitral institution’s
determination of its “preliminary jurisdiction” to decide whether it has juris-
diction to administer the underlying dispute,97 the funding committee, as part
of the arbitral institution, should conduct a preliminary jurisdictional check to
determine whether, according to the funding agreement, it has jurisdiction to
conduct its mandate. The jurisdictional decision of the funding committee will,
of course, be subject to the final determination of the adjudicatory body spec-
ified in the dispute resolution provision of the funding agreement. However,
the basic idea is that similar to the arbitral institution’s power to determine its
95
See Treca Financial Solutions Agreement, https://amlawdaily.typepad.com/
chevron_fundingagreement.pdf.
96
Cf. ICC Arbitration Rules, art. 6(2) (2017) (“By agreeing to arbitration under
the Rules, the parties have accepted that the arbitration shall be administered by the
Court”).
97
See generally Elrifai et al., supra note 89, at 313 (discussing the power of the
arbitral institutions in screening requests for arbitration on a preliminary basis).

preliminary jurisdiction over the dispute, the funding committee can exercise
jurisdictional discretion to decide whether it has jurisdiction over the funding
parties. Similar to an arbitrator’s challenge when some institutional rules
reserve the right to determine the outcome of the challenge,98 the funding
committee may likewise exercise jurisdiction over financially related issues
that may affect the ongoing arbitral proceedings.
The funding parties should check the applicable laws in the arbitral seat in
order to establish the extent and limits of the funding committee, and whether
it might violate public policy. Furthermore, the applicable law may be a source
of the committee’s jurisdiction as a place of performing the funding agree-
ment. The funding agreement should be clear also in defining the cases where
both parties may use the termination clause. This should only be used in the
case of material breaches. In case of discrepancies between the parties as to
what constitutes a material breach, it has been suggested as a way of protecting
the party to incorporate a clause that provides for the joint appointment of an
“independent assessor.”99 This suggestion aligns with the funding committee’s
jurisdiction. In this case, the independent assessor will be the funding com-
mittee. The funding committee should enjoy the same level of independency
and neutrality toward the parties and arbitrators. As such, it should serve as an
objective assessor in conducting its mandate.
2.2.3 Institution mandate

Institutional committees occupy a very important place in the work of arbitral
institutions. They are better positioned to control information relevant to the
conduct of the arbitral process. However, evaluating their role within that
proposed paradigm should involve an inquiry as to the ideal conduct of arbi-
tral proceedings. Arbitral institutions are private entities entrusted by private
parties to administer the dispute. By entrusting these institutions with this role,
what is the extent of the regulatory supervision over the private enforcement of
the funding agreement? What potential might the funding committee have to
evaluate the relevant funding information? Some courts have assumed a super-
visory role to “scrutinize an agreement to finance a lawsuit with care” in order
to appropriately safeguard the undertaking of courts.100 Building on that view,
98
Michael F. Hoellering, Managing International Commercial Arbitration: The
Institution’s Role, Disp. Resol. J. 12, 15 (1994) (“The institution reserves the right to
determine the outcome of challenges, in the event that the parties do not agree, or the
challenged arbitrator does not withdraw”). See generally Born, supra note 44, at 1831.
99
Mick Smith, Mechanics of Third Party Funding Agreements: A Funder’s
Perspective, in Third-Party Funding in International Arbitration 22 (Victoria Shannon
and Lisa Bench Nieuwveld, 2012).
100
Saladini, 426 Mass. 231.

the funding committee, as a neutral and independent body, should assume

a supervisory role to scrutinize the funding agreement, and appropriately safe-
guard its conclusion and performance. The trust is created to deal only with
the financial arrangement throughout the proceedings. The committee should
be able to resolve any issues arising out of this financial arrangement before,
during, and after concluding the proceedings.101
From a funding perspective, the funding committee should approve the
advancement of the funds into the dispute in order to ensure compliance with
periodical funding requests, the funding terms, and the financial needs of the
dispute. It should be permanently enshrined within the arbitral institutions, not
just for the life of a given funding arrangement. The actual role of the commit-
tee varies across the dispute, including advising on efficient cash management
instruments and their compliance with the funding agreement, canvassing the
funding request and the funding agreement, supervising the relationship of the
funding parties, giving opinions to the arbitral tribunal on conflict of interests
between the parties and the arbitrators, resolving any disagreement between
the funding parties, ensuring the equality of both parties, allocating the per-
centage of the dispute outcome between the funding parties, preparing a final
report on the use of the funds, and finally issuing this report to the funding
parties. Generally, the members of the funding committee should be impartial
and conversant with relevant practices affecting the funding practice.102
Throughout the negotiation phase, the committee should manage the nego-
tiations of both funding parties. It exercises a checks and balances function to
keep the equity between both parties, with relative informality. It may act as
an intermediary between the funding parties to reach a decision on funding
the dispute. The committee may end the negotiation phase, in case of an
impasse, with a recommendation that may serve as a basis for concluding
the funding arrangement. Nevertheless, the committee’s function during the
negotiation phase should contemplate that the funding parties retain the right
to pursue the dispute based on their joint funding decision, not the committee’s
recommendation.
Throughout the arbitration proceedings, the mandate of the funding com-
mittee will be limited to managing the funding trust for the benefit of both
parties, in a way that does not adversely impact the ongoing proceedings. The
101
This power may be analogous to the powers of the ICC Court to decide some
urgent disputes. ICC Arbitration Rules art. 1(3) (2017).
102
The funding committee should assist in the negotiation stage similar to the
dispute resolution boards in the construction contracts that are in place from the com-
mencement of the project and deal with the problems as they arise in an independ-
ent and impartial way to produce nonbinding recommendations. Dispute Resolution
Boards, https://www.disputescentre.com.au/dispute-board/.

committee does not interfere with the funded dispute; this is still the exclusive
jurisdiction of the arbitrators.103 It manages, directs, and controls the funding
trust, not the underlying funding agreement. That should be subject to the
normal dispute resolution provision in the funding agreement itself.
Where an issue does arise as to the scope of the funding committee’s
mandate, the issue should be determined by the funding committee itself.104
The funding agreement should govern discrepancies that may arise from
settling the case, disbursing the proceeds, or even the resolution or withdrawal
of the case.105 Any disposition of the funds should be decided by the funding
committee’s internal system. Then the payment should be released. It should
set forth the priority of payment to facilitate the committee’s mandate after the
award or settlement through repaying first the funders, then the lawyers for
any conditional success fees, and the rest to the funded party.106 The partners in
the funding trust are also beneficiaries who take no role in the conduct of the
funding process, have no authority or right to act for or bind such funds, and
have no influence over the disposition of the assets of the trust. The funding
committee would act as a manager of the trust fund for the purpose of conduct-
ing the claim according to the original funding agreement.
2.2.4 Funding disclosure

The proposed paradigm assumes that the existence of TPAF must be disclosed.
However, that disclosure should not be made to arbitrators; it should be
made to the funding committee.107 As discussed above,108 there are cognitive
illusions about the existence of TPAF that arbitrators may certainly fall prey
to. This disclosure mechanism enables the funding committee to properly
manage the funding operation between the funding parties, unfettered by
103
Similar to ICC Arbitration Rules art. 1 (2017).
104
However, the parties may choose to resort to the competent court of the place of
performing the funding agreement to decide that issue. In that case, the funding com-
mittee should not determine its scope because there would be no parties’ agreement
which is the basis for the committee’s jurisdiction.
105
One funder explained that any contractual clause can hardly be of much help in
the case of conflicts if there is a lack of effective communication with the client. See
generally Scherer et al., Third Party Funding in Europe, supra note 51, at 217.
106
107
The proposed, now approved, amendments to the ICSID rules adopt a similar
approach by requiring the funded party to immediately disclose the TPF arrangement
to the Centre once the proceedings commence. ICSID Amendment Proposals, Working
Paper No. 4, supra note 2. See also UNCITRAL 2019 Working Group III, supra note
2.
108

the ongoing arbitral proceedings.109 It would eliminate any potential impact

upon the arbitral proceedings and arbitrators. The funding committee would
perform a test for potential conflict of interests between the funder and the
parties to the arbitration dispute.110 Disclosure to the funding committee
would protect the integrity of the proceedings with no chilling impact upon
the arbitrators’ decision-making.111 That said, arbitrators would supposedly
treat both disputing parties equally, even with the existence of TPAF. Still,
given the parties’ unfettered freedom of contract, TPAF documents may be
disclosed to the arbitrators if the parties so agree. In that case, the parties run
the risk of entrusting the disclosure mandate to arbitrators, with the potential
chilling impacts this implies. However, in this case, the parties are making an
informed choice to entrust the arbitrators with this task. Unlike arbitrators, the
committee would act as a gatekeeper; they would clear any potential conflict,
and protect the decision-making process and the ongoing proceedings from the
adverse impacts of disclosing the TPAF documents. Further, unlike arbitrators
who may share the funding arrangement after the dispute, because they may
not be subject to any confidentiality obligation of that funding arrangement,112
arbitral institutions are expected to keep the funding information confidential.
2.2.5 Public confidence

The shift from national litigation as a public forum to arbitration as a private
forum for deciding disputes, along with the use of TPAF, may be viewed to
undermine the policy metrics of adjudication and lawmaking. Entrusting the
management of the funding arrangement to arbitral institutions, rather than
private parties, would promote public confidence in arbitration funding. This
new paradigm should be performed by accountable bodies, accompanied by
public scrutiny, to effectuate change in the legal structure of arbitration funding.
Therefore, the funding parties should contract, thereby making it more likely
that arbitral institutions, as private enforcement apparatuses, facilitate arbitra-
tion proceedings for the parties. This combination is one that arbitral institu-
109
The challenge of the arbitrator does not toll the ongoing proceeding. E.g.,
UNCITRAL Arbitration Rules art. 13. Similarly, funding issues are resolved by a sep-
arate entity and do not affect the progress of the dispute.
110
Entrusting arbitrators with the power to disclose the scope of TPAF may have
adverse effects on their decision-making powers. See supra Chapter 4 (2.1).
111
Similarly, see Jennifer A. Trusz, Full Disclosure? Conflicts of Interest Arising
from Third-Party Funding in International Commercial Arbitration, 101 Geo. L.J.
1649, 1666–67 (2013). See also Marc J. Goldstein, Should the Real Parties in Interest
Have to Stand Up? –- Thoughts About a Disclosure Regime for Third-Party Funding in
International Arbitration, 8 Transnat’l Disp. Mgmt. 4, 8 (2011).
112
Cf. Susan Lorde Martin, Litigation Financing: Another Subprime Industry that
Has a Place in the United States Market, 53 Vill. L. Rev. 83, 103–04 (2008).

tions would be able to achieve. They can achieve a reworking of obligations

under arbitration agreements and funding agreements. Arbitral institutions
have the know-how of orchestrating arbitration proceedings in every given
dispute. The funding process will be no exception. Plus, the funding parties
would have no leverage over one another or the arbitral process. This proposed
paradigm responds to the regulatory argument of finding an institutional plat-
form for regulating TPAF. Rather than the “do-it-yourself” approach, where
the funding parties execute the funding process through their funding agree-
ment divorced from the international arbitration framework for which this
funding arrangement was introduced to serve, the inclusive approach of “let
institutions do it” enables funding arrangements to work through the interna-
tional arbitration system while maintaining public confidence in that process.
2.2.6 Control concerns

The degree of potential control may differ from one funder to another. The
disputing parties should exercise autonomy over their legal claims. Waiving
autonomy over claims for the funder would violate the normative procedural
goals of arbitration. Further, funders’ control over the claim may create a de
facto assignment, which may have systemic effects over the dispute, especially
in investment arbitration.113 The funding trust is not an assignment of claim.
The claimant retains all the rights and can pursue its claim before the tribunal.
The beneficiaries of this trust are the funding parties, who should not assume
any managerial powers. If the claim is assigned to this trust, both of them can
exercise powers over the assigned claim, and they can direct the manager of
the trust on how to pursue the claim. This is not the case in the funding trust,
where the party can autonomously continue pursuing its claim. The industry
needs more clear rules. These clear rules find support in the funding trust par-
adigm with the required confidentiality of the funding industry.
2.2.7 Termination rights

Terminating the funding agreements would be subject to the funding com-
mittee’s discretion, unless a material issue arises. Any issue relating to either
party’s willingness to terminate the funding agreement should be reported to
the funding committee, which will decide. This approach would avoid poten-
tial abuse by the funder over the funded party, and maintain the procedural
balance between both parties even in terminating funding agreements. Even if
either party terminates the agreement, the committee should continue working
on the funding process until the issue of termination is fully decided, unless
the parties mutually consent to the termination. The funding agreement should
113

require the funder to notify the funded party expeditiously if the funder fore-
sees or reasonably believes that it will no longer meet any of the prescribed
requirements for funding.114
2.2.8 Fiduciary duties

In the funding trust, both funding parties are trustees, the claim involves
monetary remedies, and the trust corpus is the advanced funds and the
future claim proceeds.115 This approach may impose fiduciary duties on both
funding parties. They should maximize the net proceeds as a commercial goal.
Although fiduciary duties may not be appealing to the funders, they act as
balancing rods against the decisional power of the trustees by forcing them
not to act against the trust’s interests.116 Further, issuing certificates to other
funders in exchange for raising additional funds without making them trustees
is quite appealing.117 Funders may sell the certificates while retaining the claim
through the remaining trustees.118 This would enhance a secondary market of
TPAF via trading the net proceeds of the funded claim, and retaining a mana-
gerial role in the funding committee. This would maintain equilibrium between
the funded party and any funder who trades in the claim proceeds.
2.2.9 In sum
The proposed TPAF paradigm would make a difference by accommodating
the uncertainties that surround trading in legal claims and the ultimate costs
of litigation, which may diminish the value of the asset, and eventually the
possibility of settlement. It would also maximize the efficiency and fairness
of the arbitral process. Funders will be able to minimize their risks and move
on without fear of misuse of the financial resources by the funded party. The
funding agreement cannot foresee the future funding process through the
different stages of the proceedings. At each stage, a different set of funding
rounds would be valued anew, not by the funder119 or the funded party, but
by the funding committee at the arbitral institution. The committee should
address, therefore, the information asymmetry and uncertainty surrounding
the proceedings. However, unlike the staged funding model,120 these funding
rounds do not involve reassessment of the investment. The committee will
114
ADGM Lit. Funding Rules R. 14.
115
Cf. Maya Steinitz, Incorporating Legal Claims, 90 Notre Dame L. Rev. 1155,
1206 (2015).
116
Id.
117
Id.
118
Id.
119
Cf. supra Chapter 2 (2.2) (Staged Funding Model).
120
Id.

assess the necessity of the funding requests by the funded party, considering
the progress of the case. In this way, the funder is still obliged to continue the
proceeding unless some other legal reasons arise for termination.121 The poten-
tial risk of the funder’s control over the arbitral proceedings, even if in fact
there is no actual control, may justify the partnership between arbitral institu-
tions and funders.122 These institutions would maintain a level of noninfluence
over either party or even the arbitrators, and more importantly the funders.
This paradigm would contribute to regulating TPAF at the institutional
level. That said, TPAF would be part of the institutional rules of the arbitral
institutions. By agreeing to apply the institutional rules, parties would be aware
that TPAF is subject to institutional rules through the managerial role of the
funding committee. Still, the funding parties, from a functional perspective,
are necessary for the regulatory enforcement of this paradigm. The integrative
goal of this paradigm to bring arbitral institutions into the landscape, instead
of private parties, is appropriate and necessary for the regulation of TPAF.
Arbitral institutions, as private enforcement entities, attract attention to the
role of TPAF in achieving particular regulatory objectives. This paradigm does
not seek to change the structural system of international arbitration. Rather, it
should be kept as is, but eliminate the uncertainties of TPAF.
3. CONCLUSION
The proposed regulation is unlikely to happen soon. Unfortunately, the

existing funding practices provide funders with extensive leeway to steer the
funding arrangement, and likely control the strategic decisions of the under-
lying dispute. Even the proposed funding models that have appeared recently
have raised concerns rather than responded to existing ones. The preceding
chapters have presented a detailed analysis of these concerns, backed by court
and arbitration decisions. They constitute threats to the arbitration regime
as a forum of justice as opposed to a forum of profit. Self-regulation, or
a case-by-case approach to funding practices, are not compelling solutions to
novel problems, especially with no formal rule on point. The actors in charge
of regulating and applying these rules may be real roadblocks, especially
with the chilling impacts of TPAF arrangements on arbitrators. The proposed
121
The funded party should use the funds for only funding the dispute. Detling, 2019
WL 2284726.
122
This proposal finds support in the idea of arbitrators’ appearance of bias. Most
national courts and arbitral institutions base their decisions to disqualify arbitrators on
the reasonable “appearance” of bias, not actual bias. In a significant number of cases
they will presumptively disqualify unbiased arbitrators due to the apparent risk (or the
appearance) of actual bias. Commonwealth Coatings, 393 U.S. 145, 151 (1968).

funding paradigm would enshrine arbitrators as decision-makers addressing

the underlying funded dispute, unfettered by any potential illusions. As for the
continued growth and maturity of TPF in arbitration, this paradigm is much
needed to keep arbitration as a forum of justice, even with the addition of
funding services as a manifestation of access to justice.
Readers still might suspect that the proposed paradigm is ambitiously
theoretical as to be inconvenient. There is no denying of a potential force of
critique. Yet, there are sound methodological considerations underlying the
structure of the present book. This proposal may not be immediately feasible,
but instead has a long-term goal. It may be contested or upon application may
be deemed unworkable or may be in the future displaced by a more innovative
proposal. However, contesting, debating, and experimenting proposals are
healthy and essential in the development process of arbitration funding. What
ultimately determined this line of enquiry was a desire to provide an alterna-
tive narrative to scholarship that did not quite ring true. The real purpose of
the criticism is to combat the arbitrary constraints on the party’s autonomy
in conducting their claims, even with the necessity of funding, to demon-
strate that this practice is not supported by natural justice, nor is it actually
immutable. With that assumption, there was a willingness to query, challenge,
and re-imagine the basic terms of arbitral justice. That is what this book has
produced in this chapter.
Once again, this is not to suggest that, by itself, the concerns about funding
practices are sufficiently important to warrant majorly rethinking the entire
system, but to discipline it. Upon critical examination, there existed a reason to
believe that the system is not ideal, and more reasons existed to produce, with
might and main, this book. Either way, this critical examination should provide
the readers with clarity on what is and what ought to be an ideal arbitration
funding paradigm.


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Introduction – Third party funding: profit

Mohamed Sweify - 9781802208832

with litigation. TPF is no exception.5 Similar to its “public cousin,”6 litigation,

Mohamed Sweify - 9781802208832

claimant in initiating, continuing, or completing an arbitration proceeding.11 In

Mohamed Sweify - 9781802208832

Mohamed Sweify - 9781802208832

including arbitration unless otherwise indicated. Commercial or investment

Mohamed Sweify - 9781802208832

arbitrators’ decision-making process. This stage identifies the components of

Mohamed Sweify - 9781802208832

Procedural innovative mechanisms that seemed unreasonable one day can

Mohamed Sweify - 9781802208832

Mohamed Sweify - 9781802208832

TPAF is frequently referred to as litigation funding, dispute funding, arbitra-

Mohamed Sweify - 9781802208832

1. THIRD PARTY FUNDING DISTINGUISHED

Traditionally, disputants used to escape litigation costs by turning to law firms

1.1 Attorney Funding

TPAF is distinguished from attorney funding (or “contingency fees”).13 A third

Mohamed Sweify - 9781802208832

Regulatorily, funders are not subject to the same professional responsibility

Mohamed Sweify - 9781802208832

Similar to insurance arrangements, funding agreements are manifestations

Mohamed Sweify - 9781802208832

in case of winning.24 This defense-side funding is called before-the-event

Mohamed Sweify - 9781802208832

Any financial arrangement, including loans, is necessarily transactional in

Mohamed Sweify - 9781802208832

limited to funding a specific dispute. In addition, the loan arrangement is

Assignment is an act of transferring to another all or part of one’s property,

Mohamed Sweify - 9781802208832

An assignment of claim involves, accordingly, the sale of the entire claim

Access to justice is a norm of international law.45 It commonly refers to “injury

Mohamed Sweify - 9781802208832

cedural fairness and due process in relation to judicial proceedings, whether

Mohamed Sweify - 9781802208832

arbitration invite the application of the procedural justice in order to evaluate

Mohamed Sweify - 9781802208832

2.1 “Access to Justice” Determined

Access to justice is an ambiguous concept that can be construed in different

Mohamed Sweify - 9781802208832

process may disfavor the financially incapable, powerless, or unprivileged

2.2 “Access to Arbitral Justice” Rationale

Modern arbitration scholarship frequently relies on access-to-justice principles

Mohamed Sweify - 9781802208832

Mohamed Sweify - 9781802208832

Mohamed Sweify - 9781802208832

Despite the demurrers’ views that TPAF for nonimpecunious claimants

Mohamed Sweify - 9781802208832

1. THIRD PARTY FUNDING MARKET

With the evolution of property laws,1 TPAF appeared as a transaction over

Mohamed Sweify - 9781802208832

Mohamed Sweify - 9781802208832

monetary and nonmonetary interests.10 In this case, commodification of legal

1.1 External Factors

Mohamed Sweify - 9781802208832

1.1.1 Alternative funding

Mohamed Sweify - 9781802208832

1.1.2 Jurisdictional barriers

Mohamed Sweify - 9781802208832

attractive one. Some jurisdictions do not permit the transfer of ownership of

1.1.3 Dispute outcome

1.2 Internal Factors