Expansive Disclosure: Regulating Third-Party Funding for Future Analysis and Reform

Abstract

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.