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Report on third-party funding in international arbitration to be released April 17


UNIVERSITY PARK, Pa. -- A global task force of the International Council for Commercial Arbitration (ICCA) and the School of International Arbitration at Queen Mary University of London will release its report on third-party funding in international arbitration at the ICCA Congress on April 17 in Sydney, Australia. The task force is co-chaired by Catherine A. Rogers, professor of law and Paul and Marjorie Price Faculty Scholar at Penn State Law.



Established in 2013 and consisting of more than 50 members representing over 20 jurisdictions from around the world, the ICCA-Queen Mary Task Force on Third-Party Funding in International Arbitration includes arbitrators, in-house and external counsel, individuals who work for various governments, academics, and third-party funders. Since its inception, the task force has undertaken sustained study and discussion of the key issues arising from third-party funding of arbitration. The final report also includes input from consultations, individual comments, and numerous roundtable discussions and public symposia from the public comment period.

Third-party funders are playing an increasingly prominent role in international arbitration, with more and more entities financing disputes in return for a portion of the proceeds from a successful case. The financing is coming from insurance companies, investment banks, hedge funds as well as specialized institutions that focus solely on investing in arbitral disputes, and on occasion even non-governmental organizations. 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.

Such 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, privilege, and disclosure issues, and questions about costs and security for costs, among others. The task force’s report puts forth recommendations to preserve the effectiveness and legitimacy of international commercial arbitration. Its focus is on those issues that most directly affect arbitration proceedings, namely the impact of third-party funding on costs and security for costs, attorney-client privilege, and conflicts, together with overarching chapters on definitions, best practices, and policy issues in investment arbitration.

The final report comprises eight chapters. The first three chapters consist of introductory and background material, including the history of the task force, an overview of the market and mechanics of third-party funding, and definitions of third-party funders and third-party funding.

The next three chapters cover disclosure and conflicts of interest, privilege, and costs. To assist readers in referencing the report, each of these three substantive chapters begins with a distilled list of principles that summarize the conclusions of each chapter.

Chapter seven provides a summary of best practices in funding arrangements with guidance for new parties seeking funding, new third-party funders entering the market, and the increasing number of arbitrators and counsel that are encountering funding for the first time.

The final chapter examines third-party funding in investment arbitration and the broader policy issues that may affect how the report’s principles are applied in investment arbitration. It also addresses a limited range of specialized issues that have arisen with respect to funding in investment arbitration.

“In light of how rapidly international arbitration practice and funding models are evolving, the ICCA-Queen Mary Report does not aim to be either definitive or permanent,” the report’s co-chairs write on the Kluwer Arbitration Blog. “While this report will not be the last word on issues relating to third-party funding, we believe it develops an important set of conceptual frameworks and analysis that are much needed.”

In addition to Rogers, the task force’s co-chairs are Stavros Brekoulakis, professor of international arbitration and commercial law at Queen Mary, and William W. (Rusty) Park, professor of law at Boston University School of Law.

The report will be launched at a breakfast event during the ICCA Congress on April 17.

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