Third Party Funding in Investment Arbitration

Boston College Law School Faculty Papers

The Case Against Third-Party Funding in ISDS: Executive Summary

The Lisbon Treaty has enlarged the EU’s competences in external investment policy. The EU could thus increase its protagonist role in third-party funding (TPF) regulation in a manner analogous to its achievements in the investment regime, where the EU managed to rally the member states behind DG Trade’s vision. A treaty-based analysis combined with a political evaluation suggest the EU is expanding its field of competences either when it has a clear mandate or by establishing a modus vivendi as it has been the case with its external relations, particularly at the United Nations. There is therefore a case to be made that the EU would have the competence and the interest to expand its investment reform leadership to encompass TPF regulation. Hong Kong and Singapore have added provisions on TPF in their respective national arbitration legislation explicitly allowing TPF as part of a neoliberal strategy to attract arbitration while ignoring the risk of increased forum shopping. In contrast, the EU CETA and EU-Vietnam Treaties are the only treaties to conceptualize and impose a disclosure of TPF, which nevertheless falls short of addressing concerning the adverse consequences of TPF in ISDS.

Law and Justice in the Americas Working Paper Series

The Case for an EU Protagonist Role on Third Party Funding Regulation

Third-party funding (TPF) is a relatively new phenomenon in the field of international investment arbitration. TPF takes place when a non-party to a dispute provides funding to one of the parties (usually the claimant) in return for a percentage of the amount recovered. International investment arbitration is a unique context, however, because investor-states dispute settlement puts States always in the role of respondent and private investors in the role of claimants. Despite this apparent imbalance, TPF proponents argue, among other things, that it provides much needed access to justice for poorer clients and adds value to the system by providing a more disinterested evaluation of legal arguments. Those claims do not stand up to the facts as we have them, however. There have been several efforts to regulate TPF, including mandatory disclosure rules (applied only to the identity of the funder) and more expansive discretionary disclosure. These efforts do not go far enough. Instead, we need mandatory expansive disclosure of the identity of the funder and key terms of the funding agreement. This will provide scaffolding to the international investment arbitration system by avoiding conflicts of interest, aligning with institutional interests in transparency, and providing data for ongoing empirical research.

The Regulation of Third Party Funding: Gathering Data for Future Analysis and Reform

The United Nations Commission on International Trade Law (UNCITRAL) is considering changes to its rules governing international arbitration proceedings. UNCITRAL Working Group III is analyzing possible reforms of the arbitral rules to address the risks associated with the increased prevalence of third-party funded investment arbitration claims. Funders claim that existing regulation is sufficient, arguing in part that funding provides access to justice for impecunious claimants who otherwise would be unable to bring claims. This essay argues that funders’ access to justice reasoning is flawed at best and dangerously misleading at worst. UNCITRAL must take immediate action to address the potential for exploitative practices by funders in the investment context.

Third-Party Funding in Investment Arbitration: Misappropriation of Access to Justice Rhetoric by Global Speculative Finance

Third-party funding of international investment arbitration is on the rise. Through TPF funders will cover the legal fees of investors filing claims under investment treaties in exchange for a portion of the arbitral award. Proponents of third-party funding claim that it provides access to justice for parties that normally would not have the funds to arbitrate against state actors. Given that the international investment law that governs these claims is unbalanced, and that funding only flows towards investor-claimants, and at the expense of states and their taxpayers, allowing third-party funding in investment arbitration risks creating unjustifiable wealth transfers from the citizens of target states for the benefit of speculators. Reform is needed to prevent the deleterious effects of third-party funding on developing and newly-industrialized states and on the investment law regime itself.

Third-Party Funding as Exploitation of the Investment Treaty System

Transcription of a panel at the conference "Reforming International Investment Law: Opportunities, Challenges, Paradigms", sponsored by Boston College Law School and the Pontifical Catholic University of Chile. This transcription was presented in April 2018 as a public comment on the Draft Report of the ICCA/Queen Mary Task Force on Third Party Funding in International Arbitration.

Third Party Funding in Investment Arbitration

Items in this collection

The Case Against Third-Party Funding in ISDS: Executive Summary

The Case for an EU Protagonist Role on Third Party Funding Regulation

The Regulation of Third Party Funding: Gathering Data for Future Analysis and Reform

Third-Party Funding in Investment Arbitration: Misappropriation of Access to Justice Rhetoric by Global Speculative Finance

Third-Party Funding as Exploitation of the Investment Treaty System

TPF and ISDS: A Public Comment on the Draft Report of the ICCA/Queen Mary Task Force on Third Party Funding in International Arbitration

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The Case for an EU Protagonist Role on Third Party Funding Regulation

The Regulation of Third Party Funding: Gathering Data for Future Analysis and Reform

Third-Party Funding in Investment Arbitration: Misappropriation of Access to Justice Rhetoric by Global Speculative Finance

Third-Party Funding as Exploitation of the Investment Treaty System

TPF and ISDS: A Public Comment on the Draft Report of the ICCA/Queen Mary Task Force on Third Party Funding in International Arbitration

Items in this collection