Cost Allocation and Third-Party Funding in International Arbitration

Abstract

Not many studies have been devoted to the issue of cost allocation in general, let alone in the context of third-party funding. The fact that arbitral tribunals enjoy broad discretion in assessing and allocating costs probably explains this relative lack of interest.Yet, third-party funding, be it in the classical sense with a professional funder or when there is a contingency fee arrangement, entails some specificities. One specificity is that there is an element of profit for the funder.This element of profit is the cost of funding itself with a professional funder (quite often a multiple of the initial amount) or, in the case of contingency fee arrangements, the portion of the fees in excess of those based on regular hourly rates. Whether this element of profit is recoverable by way of cost allocation is debated.We would submit that it shifts an abnormal risk onto the losing party and should not, therefore, be recoverable