Third-Party Funding as Exploitation of the Investment Treaty System

Abstract

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.