THIRD-PARTY FOUNDING IN INTERNATIONAL COMMERCIAL ARBITRATION: IT IS ABOUT TIME FOR REGULATIONS

Abstract

Third-party funding (TPF) is a species of the common law doctrine of maintenance and champerty. With the burgeoning of global trade, the need for funding arbitral proceeding of high magnitude have witnessed an upward trend. TPF is a method wherein the impecunious party to the dispute enters into a contract with a third-party, who is not a party to the arbitration agreement, to finance the arbitration proceeding and run the risk of either paying or receiving the proceeds, costs, or award awarded against or in favor of such party. TPF, on one hand, provides a gateway to justice to the impecunious party and on the other hand, causes an impediment to the recognition and enforcement mechanism of arbitral awards. TPF flourishes as an alternative to support arbitral proceedings by acting as an investment for the financers but what impact it has on the market, in the long run, is still unclear. TPF assists the struggling party to appoint highly qualified specialists and a learned arbitrator through financial assistance but restricts the party autonomy and raises justifiable doubts as to the independence and impartiality of the arbitrator due to the leverage the financer holds in such an arrangement. Last but not least, TPF may also, at times, result in the disclosure of attorney-client communication to the financer. The present article is an analytical study of TPF as a mechanism in international commercial arbitration and what challenges it poses to its practice. Moreover, the article places reliance on the work of various scholars, and adopting the inductive approach of reasoning, reflects upon the plausible remedies for challenges that TPF poses to international commercial arbitration. Keywords: Third-Party Funding; Commercial Arbitration; International; Challenges; Regulation.