UNIVERSITY PARK, Pa. – Next month in London, a group of about three dozen arbitrators, attorneys, law professors, and other leading experts will convene the third meeting of an international task force charged with studying and making recommendations regarding the procedures, ethics, and policy issues that have arisen in the relatively recent practice of third-party funding in international arbitration.
Co-chaired by Catherine Rogers, professor of law and Paul and Marjorie Price Faculty Scholar at Penn State Law, the Task Force on Third-Party Funding in International Arbitration was convened by the International Council for Commercial Arbitration in collaboration with Queen Mary College at the University of London, where Rogers also serves as professor and director of the Institute for Ethics, Regulation, and the Rule of Law.
Third-party funders are playing an increasingly larger role in international arbitration, with more and more institutions financing disputes in return for a portion of the proceeds from a successful case. The financing is coming from insurance companies, investment banks, and hedge funds as well as specialized institutions that focus solely on investing in arbitral disputes. The stakes are high. Funders cumulatively have many billions of dollars that they are ready to spend on legal services to pursue claims around the world, and increasingly international arbitration disputes are drawing some of that funding.
According to a paper by task force co-chairs Rogers and William “Rusty” Park, president of the London Court of International Arbitration, international arbitration cases are attractive to funders because they often involve high-value claims, have little to no appeal options, and are streamlined procedurally. Further, international conventions on arbitration make enforcement nearly certain.
Third-party funding can provide access to justice for parties who cannot afford to bring a claim, but it also raises several concerns, including potential conflicts of interest between funders, arbitrators, parties, and counsel, transparency and disclosure issues, and ethical questions, among others. The task force, which brings together representatives from all relevant stakeholders, is charged with examining these concerns, and making recommendations to preserve the effectiveness and legitimacy of international commercial arbitration.
“International arbitration is so successful because of the real and perceived legitimacy that has been built over the years,” says Rogers. “As a consequence, the entire community has an interest in finding reasonable and workable answers to the new questions raised by the arrival of funders.”
The task force first convened in February 2014 in London and again in April in Miami, however work continues remotely and through several working groups that focus more closely on particular issues. Rogers is a member of the Investment Arbitration Working Group, which is looking specifically at how investor claims in international arbitration are being supported by third-party funding. This working group has grown to include membership from outside of the initial task force to include specialized expertise that is unique to investment arbitration.
The group includes Meg Kinner, secretary general of the World Bank’s International Center for Settlement of Investment Disputes, and individuals (participating in a personal capacity) from other international organizations including the International Court of Justice, the United Nations Conference on Trade and Development, and the Organization for Economic Cooperation and Development. Its membership includes individuals from the governments of the Dominican Republic, Egypt, Germany, Singapore, Slovakia, Spain, and the United States (also participating in a personal capacity) as well as in-house counsel from major corporations that are active in investment arbitration, and leading arbitrators and academics.
The Investment Arbitration Working Group had its first meeting on January 29 in Paris, ahead of the larger task force meeting in February. “The discussion was both lively and constructive, with an emphasis on the need to focus on clear, well-defined issues and avoid the abstract and often misleading rhetoric that sometimes prevails when these topics are discussed,” says Rogers.
Rogers, a scholar of international arbitration and professional ethics, is a reporter for the American Law Institute’s new Restatement of the U.S. Law (Third) of International Commercial Arbitration, one of the ICC Palestine’s delegated members of the Court of Arbitration for the new Jerusalem Arbitration Centre, and a member of the board of directors of the International Judicial Academy. She is also working to found Arbitrator Intelligence, an interactive informational network to increase equal access to information and increase accountability in the arbitrator selection process. Her latest book, Ethics in International Arbitration, is the first monograph to systematically analyze the existing ambiguities and conflicting rules that apply to the conduct of arbitrators, counsel, expert witnesses, and third-party funders in international arbitration.