KluwerArbitration

Document information Disclosure and Conflicts of Interest in Relation to Third-

Party Funding
Publication Antonio Crivellaro; Lorenzo Melchionda
BCDR International (*)
Arbitration Review
ABSTRACT
Third-party funding does not raise issues of legality: it is generally admitted by
Bibliographic tribunals without their disputing its inherent legitimacy. Rather, what causes
reference concern is the lack of transparency vis-à-vis the non-funded parties and
tribunals. The threshold issue is, thus, disclosure of third-party funding and the
Antonio Crivellaro and timing and extent of such disclosure. At the outset, the non-funded party has the
Lorenzo Melchionda, right to know whether its opponent is in receipt of third-party funding, who the
'Disclosure and Conflicts of funder is, what the funder’s role and interest in the case are, and whether the
Interest in Relation to funder has purchased the claim, reducing the nominal claimant to a mere front
Third-Party Funding', in man. The arbitrators, in turn, need to know whether the involvement of the
Nassib Ziadé (ed), BCDR funder raises any conflicts of interest for them. This is not to say that third-party
International Arbitration funding should be banned, but there needs to be some rebalancing through the
Review, (© Kluwer Law implementation of a procedure allowing for appropriate disclosure. This article
International; Kluwer Law addresses the way in which parties, tribunals, arbitral institutions, investment
International 2018, Volume treaties, and international soft law rules have been and still are refining rules of
5 Issue 2) pp. 281 - 306 conduct so as to fairly protect the parties’ divergent interests, while
safeguarding the transparency and integrity of the process.

1 INTRODUCTION
Whether the parties to an arbitration should be required to disclose the fact that they
are funded by a third-party funder is an issue which has been debated extensively during
P 282 the past ten years. (1) Arbitral tribunals, especially in investment treaty arbitration,
have considered and ruled on this issue in several cases. (2) Yet, this is still a hotly
debated topic in international arbitration and within the third-party funding industry.
The general opinion is in favor of disclosure. (3) It is fair to say that arbitration
practitioners, users of international arbitration, and arbitral institutions endorse
disclosure by the parties. Recently, the ICSID Secretariat joined this trend when, in a
series of draft amendments to its Arbitration and Conciliation Rules, it proposed to
introduce a duty to disclose the identity of a funder. (4)
When it comes to arbitrators, disclosure may be required under the rules on disclosure
and conflicts of interest that apply to them. (5) What is still controversial is the degree
and extent of such disclosure, especially by the parties. These problems are likely to
become more acute as the third-party funding industry develops, more litigation funds
enter the market, and more parties resort to third-party funding.
This article will try to answer a series of questions related to the disclosure of third-party
funding in international arbitration, namely, why, in the light of the parties’ opposing
P 283 interests, third-party funding should be disclosed (Section 2); who should make the
disclosure (Section 3); what aspects of the third-party funding relationship should be
disclosed (Section 4); and when and how during the arbitration proceedings disclosure
should occur (Section 5).

2 THE OPPOSING INTERESTS OF THE PARTIES AND WHY EARLY DISCLOSURE

OF THIRD-PARTY FUNDING IS RECOMMENDED
The parties involved – claimant, respondent, and funder – may well have conflicting
views on disclosure. These opposing views reflect their conflicting interests.

2.1 THE VIEWPOINT OF THE RESPONDENT

In the classic scenario, in which the claimant is funded by a funder who is not a party to
the proceedings and whose return on the investment is contingent on the outcome of the
case, (6) the respondent will want to know whether the claimant is funded and, if so, by
whom and under what terms.
First, a respondent who knows or suspects that the claimant is funded will
understandably become concerned about potential conflicts of interest involving the
funder, and the tribunal has a legitimate interest in disclosure of the funder’s existence
and identity to verify the existence of such conflicts. (7)
Second, in the eyes of the respondent, the fact that the claimant has decided to have
recourse to a third-party to provide the funds it needs to bring its claim implies that the

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 claimant may be impecunious, and the presence of a third-party funder may affect the
conduct of the arbitration. For instance, if, thanks to third-party funding, the claimant
hires a large defense team and external experts, the respondent may find itself forced to
P 284 follow the same strategy, which will cause its litigation costs to escalate. Although for the
claimant supported by a third-party funder this will not be a problem, it may be for
the respondent, especially one who did not expect or is not willing to have to commit
large financial resources to the case.
Moreover, if the respondent ultimately prevails in the arbitration, it may be concerned
that neither the claimant nor the funder will honor an order by the tribunal to pay the
substantial costs it has incurred to counter the claimant’s aggressive strategy. The
claimant might fail to pay because of impecuniosity and the funder will not be bound by
the tribunal’s order as it is not a party to the case. In brief, the respondent’s interest in
the disclosure of the terms of the funding agreement is justified by its expectation that
the funder will eventually cover a costs award in its favor if the claimant fails to do so.
Alternatively, the respondent might opt to request the tribunal to order security for costs.
The risk of facing an impecunious claimant is not, in and of itself, extraordinary or
uncommon in the world of business and in certain cases it can even be expected.
However, the presence of a third-party funder may exacerbate the losses that the
respondent would have incurred without third-party funding.
Third, the respondent is legitimately entitled to know whether the real party in interest is
the party nominally presenting itself as the claimant or the third-party funder. Apart from
the case of an outright assignment of the claim, if, under the funding agreement, the
third-party funder is entitled to a disproportionate percentage of the final award (e.g.,
more than 50 percent) and/or is granted control over the litigation strategy, the funding
agreement may amount to a de facto assignment of the claim. This may be ascertained
only by examining the terms of the funding agreement concerning control over the
litigation strategy and the sharing of financial benefits. This may be particularly relevant
in investment treaty arbitration, where the investor brings a claim against the host state
on the basis of an investment protection treaty if it qualifies as a protected investor: this
condition is satisfied if the real party in interest is the claimant itself, but would not be
satisfied if the claimant acts as a front man, with the funder being the real party in
interest. (8)

2.2 THE VIEWPOINT OF THE FUNDED PARTY AND THE FUNDER

By contrast, the funded party – usually the claimant – has an interest in minimizing
disclosure. (9)
P 285
First, it has been suggested that third-party funding is no different from other forms of
financing, such as loans, derivative products, or corporate finance, which have not
attracted as much attention as third-party funding. Singling out third-party funding – so
the argument goes – is unfair. (10) While, as noted by the report prepared by the ICCA-
Queen Mary Task Force, this is a minority position, (11) it should not be dismissed out of
hand. One might indeed view third-party funding as one of the various options that a
company may have to finance its operations, including litigation. However, the fact that
other forms of financing, and the ensuing conflicts of interests, may have been neglected
in the public debate or have attracted less attention than third-party funding does not
mean that the issues raised by third-party funding should be underestimated.
Third-party funding has certain unique features that distinguish it from the more
traditional forms of financing. First and foremost, the funds made available by the funder
are used to fund a specific dispute, while in other forms of financing funds are made
available to the funded party, who may use them at its discretion. This is not the case
with third-party funding, where the funder, as the party bearing the risk that the return of
its investment will ultimately depend on the outcome of the case, has “skin in the game”
and will wish to have permanent control over how its money is used. Finally, a peculiarity
of third-party funding is that the funded party is held harmless and relieved of the duty
to pay its legal costs should its claim fail, because its litigation costs will typically be
borne by the funder. By contrast, a losing party that has used a more traditional form of
funding must bear its own costs as an irrecoverable and non-fundable loss. In brief, third-
party funding cannot be likened to traditional means of financing.
Second – and more importantly – the claimant, like any party in the arbitration, has a
right to privacy and to keep its business dealings confidential. The claimant should not
be put in a more difficult position or under special scrutiny simply because it has
decided – or needed – to resort to external financing to bring a claim to enforce its rights.
This is especially true when the claimant claims that its investment has suffered severe
financial damage or has been completely wiped out by the respondent, as may happen
where a contract of vital importance to the claimant is set aside or in event of
expropriation of the investment. All these arguments deserve attention.
P 286
In particular, the funding agreement normally contains commercially sensitive and
confidential information that the funder and the claimant will be justifiably reluctant to

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 disclose. Not only does the funding agreement reflect the way in which the funder
conducts its business and structures and negotiates its deals, which is part of the funder’s
intellectual property, but it may also contain important and sensitive information about
the strategies the two parties have agreed on for the conduct of the case. The respondent
might infer from the terms of the funding agreement that the funder is assuming no
liability for a costs award and thus request security for costs, irrespective of whether the
claimant is impecunious. While such a request may be reasonable in the circumstances
of a particular case, it would be arbitrary to infer, as a matter of course, from the simple
fact that the funder will not cover an adverse costs award, that the claimant is unable to
honor it and that the respondent is entitled to security for costs. The respondent may
also rely on the description of the case or on the funder’s rate of return to infer that the
claimant’s case is weak or baseless. This may not necessarily be accurate, given that the
funder’s rate of return depends not only on the strength of the merits of the case but also
on the risks and delay associated with enforcement of the award (especially when states
or state entities are involved).
Accordingly, both the funder and the funded party may have reasons to oppose
disclosure of the existence of third-party funding and the identity of the funder. (12) They
tend to strenuously object to producing the funding agreement for fear that it may open a
Pandora’s box of vexatious requests and endless quarrels. (13)
The situation is different if the roles are reversed and the respondent is the funded party.
Although this case is rather infrequent, it cannot be ruled out that a third party might
agree to cover the legal expenses of a party other than the claimant in exchange for an
P 287 indirect economic advantage, such as obtaining a favorable precedent that can be
used in a similar case, or for the purpose of forming a strategic alliance with a party. (14)

2.3 THE VIEWPOINT OF THE ARBITRATORS

The disclosure of the existence and the identity of the funder is indispensable to the
arbitrators in order to perform a complete conflict check before accepting the
appointment. It should be in the interests of all parties to an arbitration, including
claimants and funders, (15) that the arbitrators have no conflicts of interest. If a conflict
of interest is discovered at a later stage of the arbitration, it will inevitably lead to a
motion to disqualify the conflicted arbitrator. If it surfaces after the close of the
arbitration proceedings, the award may be set aside or enforcement refused. Although it
is disputed whether an unknown conflict of interest constitutes a valid basis for the
disqualification of an arbitrator or setting aside an award, (16) in view of the disrupting
P 288 effects that late discovery of a conflict of interest may have, including endless
litigation, (17) transparency should be the rational choice for all the parties concerned.
(18)
Since arbitrators have a paramount duty to disclose any conflict of interest that may
affect their independence and impartiality (19) and to use best efforts to issue an award
that is enforceable, (20) they are the first to disclose a conflict of interest. The many
examples of conflicts of interests involving funders explain why, in third-party funding,
disclosure is highly recommended.
A prospective arbitrator, or the law firm with which he or she is affiliated, may perform
various professional services for funders. For instance, a prospective arbitrator may
perform due diligence work on prospective cases, may act as consultant to funders, may
serve on advisory committees established by funders, or may be retained as counsel by a
funded party at the request of the funder. The arbitrator may even hold a financial
interest in litigation funds.
Under a different scenario, in a case where one of the parties is funded by a funder, a
prospective arbitrator may act as counsel, or one of his or her law firm partners may act
as counsel, in an unrelated case and for an unrelated client who is funded by the same
funder. He or she may remain unaware of such a connection if no transparent disclosure
is made in advance.
The importance and frequency of these relationships may be mitigating or aggravating
factors (funders sometimes rely on the same law firm or the same lawyer for advice and
P 289 assistance), and the same also applies to the identity of the parties and the
connections between the cases. (21) Other situations may be more difficult to assess, such
as where a funder trusts and frequently appoints, or suggests the appointment of, the
same arbitrator in the cases that it funds.
In sum, seen from the perspective of the members of the tribunal being constituted, the
need for a diligent and transparent preventive disclosure is self-evident.
Many cases of conflict of interest involving funders would be subject to disclosure by both
the funded party and the arbitrator(s) under the IBA Guidelines on Conflicts of Interests in
International Arbitration (2014) (“IBA Guidelines”). Although they are not mandatory rules
but rather soft law, it is worth analyzing briefly the IBA Guidelines because they are
generally accepted or adopted as guidelines by the parties in arbitrations or relied upon
by parties in their arguments and by the arbitrators in their decisions.

2.4 DISCLOSURE OF THIRD-PARTY FUNDING UNDER THE IBA GUIDELINES

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 Pursuant to General Standard 7(a) of the IBA Guidelines, a party is required to inform the
arbitral tribunal, the other parties, and the arbitral institution or the appointing
authority of any relationship, whether direct or indirect, between an arbitrator and the
party or between an arbitrator and any person or entity having a direct economic interest
in, or a duty to indemnify a party for, the award to be rendered in the arbitration. (22) The
reference to “direct economic interest” in the award and to the “duty to indemnify a
party” encompasses third-party funding: according to paragraph (a) of the explanation to
General Standard 7, the duty of disclosure “has been extended to relationships with
persons or entities having a direct economic interest in the award to be rendered in the
arbitration, such as an entity providing funding for the arbitration, or having a duty to
indemnify a party for the award.” The parties are required to comply with this obligation
on their own initiative at the earliest opportunity (General Standard 7(a)).
Pursuant to General Standard 7(d), an arbitrator is under the duty to make reasonable
P 290 enquiries to identify possible conflicts of interest, as well as any facts or circumstances
that could reasonably raise doubts over his or her impartiality or independence. (23)
This principle is complemented by General Standard 6(a), according to which an
arbitrator will normally be deemed to bear the identity of his or her law firm (but each
case should be considered on its own facts), and by General Standard 6(b), according to
which, where a disputing party is a legal entity, any legal or physical person having a
“direct economic interest” in the dispute or a “duty to indemnify” a party for the award to
be rendered in the arbitration may be deemed to “bear the identity” of such party. (24)
Paragraph (b) of the explanation to General Standard 6 explicitly addresses third-party
funding by providing a definition of “third-party funder” and “insurer” as “any person or
entity that is contributing funds, or other material support, to the prosecution or defence
of the case and that has a direct economic interest in, or a duty to indemnify a party for,
the award to be rendered in the arbitration” and by clarifying that third-party funders
and insurers having a direct economic interest in the award may be regarded as “the
equivalent of the party.” (25)
The IBA is not the sole body to have acknowledged third-party funding. In order to
promote transparency and to restore confidence in the arbitration process, so frequently
under attack, more and more arbitral institutions are requiring the disclosure of the
existence of third-party funding and the identity of the funder. (26)
Timely and transparent disclosure by the funded party and/or the funder is an
indispensable condition for the proper implementation of the IBA Guidelines.
P 291

2.5 THE CASE OF PORTFOLIO FUNDING

Portfolio funding is peculiar and difficult to assess using traditional rules and methods.
Under this innovative form of litigation finance, a funder finances a company’s portfolio
of existing and future cases, whether as claimant or respondent, on the basis of a
portfolio due diligence. The funder provides the funds to the funded party, which is free
to draw on them on an “if needed” basis.
The notion of cross-collateralization is inherent in this type of funding which, unlike
traditional single-case funding, does not involve one case, but multiple cases. Indeed,
the funder is remunerated not on the basis of the outcome of a single case, but on the
basis of the overall net financial performance of the portfolio. In certain cases, the
funded party is also allowed to use the funds for general purposes unrelated to litigation.
The benefits for both the funder and the funded party are: (a) flexibility (the funds can be
drawn on to finance cases within the portfolio if and when needed); (b) overall mitigation
of the litigation risk by spreading that risk across all the claims within the portfolio; (c)
reduction of litigation costs and the release of funds that would be tied up in litigations
for the funded party, which may decide to use the funds made available by the funder to
bring claims that would otherwise not be suitable for financing – because the claim does
not have sufficient prospects of success – instead of using its own funds. Portfolio funding
is also available to law firms for claims held by clients of the firm. (27)
In the case of portfolio funding, conflicts of interest are difficult to assess because the
funds, which are not allocated to a specific case but to a portfolio of cases, may or may
not be used to fund all, or even any, of these cases. By the same token, the funder is
remunerated not on the basis of the outcome of a specific case but on the performance of
the portfolio. More importantly, it is not possible to know in advance for which case the
funded party will decide to draw on the funds.
By way of example, let us consider a case where a company receives portfolio financing
from a funder and the prospective arbitrator has a relationship with that funder because
the arbitrator’s law firm does advisory work for the funder on a regular basis or the funder
funds one of the arbitrator’s (or the arbitrator’s law firm’s) cases. If that prospective
arbitrator is appointed by the funded company in a case which is not part of the
portfolio, or which is part of the portfolio but for which the company is not using the funds
P 292 provided by the funder, would the company be required to disclose the existence of
the portfolio funding? Would the arbitrator be required to disclose his relationship with

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 the funder?
According to the ICCA-Queen Mary Report, “it seems inescapable that an arbitrator might
have a potential conflict of interest as a result of such financing.” However, besides cases
where a conflict is clearly discernible, the report does not provide any further
indications, especially in borderline cases such as the one described above. (28)

3 WHAT SHOULD BE DISCLOSED?

As stated above, the funded party and the funder may legitimately fear that the
introduction of an obligation to disclose third-party funding, far from increasing
transparency and bringing more legitimacy to arbitration, may be unfairly exploited by
the respondent as a pretext for requesting security for costs or the disqualification of
arbitrators, or may encourage fishing expeditions.
The crucial issue is how to balance the interests of the respondent (and the arbitrators) to
be informed of the existence and the identity of the funder with the funded party’s and
the funder’s legitimate concerns. The question to be asked is, thus, what should be
disclosed, and, particularly, whether early disclosure of the existence of the third-party
funding and the identity of the funder may suffice.
It has been suggested that, in these cases, an incremental approach is best. (29) Under
this approach, (i) the degree of disclosure depends solely on the need to protect the
relevant interests and the propriety of the arbitration, instead of principled positions or
a priori views in favor of or against third-party funding, and (ii) the disclosure does not go
beyond what is strictly necessary to protect those interests.
Hence, it must first be established which interest is to be protected at a specific stage of
the arbitration. Then, it must be established what needs to be disclosed in order to
protect that interest. The disclosure obligations will thus be tailored also by taking into
consideration the funded party’s interests and the consequences of the disclosure. As a
result, the interests of the respondent and of the arbitrators in being informed and the
propriety of the arbitration proceedings are protected and transparency is ensured,
while the negative impact on the funder and the funded party is minimized.
P 293
Under this approach, the existence and the identity of the funder are disclosed at the
outset of the arbitration to allow the parties and the arbitrators to assess potential
conflicts of interests. Additional disclosure obligations are likely to be unnecessary to
establish a conflict of interest, and unduly invasive at such an early stage. (30)
This approach seems to be generally accepted. (31) Arbitral institutions and states are
inserting provisions in their rules and investment treaties that require the early
disclosure of the existence of third-party funding and the identity of the funder.

3.1 ARBITRATION RULES PROVIDING FOR EARLY DISCLOSURE

Article 27(2) of the Investment Arbitration Rules of the China International Economic and
Trade Arbitration Commission (“CIETAC Investment Arbitration Rules”), for example,
places the parties under an obligation to inform, in writing and without delay, the other
parties, the arbitral tribunal, and the administering institution of the existence and
nature of the third-party funding agreement and the name and address of the funder. (32)
The CIETAC Investment Arbitration Rules also authorize the arbitral tribunal to order the
disclosure of any relevant information concerning the third-party funding arrangement.
(33) The parties’ failure to comply with the obligation and/or the disclosure order may be
taken into consideration by the tribunal when deciding on the allocation of the costs of
the arbitral proceedings. (34) CIETAC further addresses issues raised by third-party
funding in its Guidelines for Third Party Funding in International Arbitration, where it is
established that the parties should disclose the existence of third-party funding in
connection with any possible conflict of interest under applicable laws and regulations.
(35)
P 294
Rule 24(l) of the Investment Arbitration Rules of the Singapore International Arbitration
Centre in force as of January 1, 2017 (“SIAC Investment Arbitration Rules”) empowers the
arbitral tribunal to order the parties to disclose the existence of third-party funding, the
identity of the funder, and, “where appropriate,” additional information on the funding
relationship such as the details of the funder’s interest in the outcome of the dispute
and/or whether or not the funder has undertaken adverse costs liability. (36)
An interesting approach has been adopted by the Dubai International Financial Centre
(DIFC) Courts. Pursuant to subsection 4 of Practice Direction No. 2 of 2017 on Third Party
Funding in the DIFC Courts dated March 14, 2017, “[a] Funded Party who enters into an LFA
[Litigation Funding Agreement] in respect of Proceedings must put every other party to
the relevant dispute on notice, in accordance with subsection (5) and (6), of the fact that
he has entered into an LFA in respect of the relevant Proceedings. For the avoidance of
doubt, this subsection (4) requires disclosure of the Funder’s identity, but does not
require disclosure of a copy of or any part of the LFA unless the Court orders otherwise.”

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 (37) Although it does not apply to arbitration, Practice Direction No. 2 is a good example
of an incremental approach.
The ICC has not as yet revised its Arbitration Rules to impose an express obligation to
disclose third-party funding. For the moment, the ICC has considered this issue in its
Guidance Note for the disclosure of conflicts by arbitrators adopted on February 12, 2016,
and incorporated into the ICC Note to Parties and Arbitral Tribunals on the Conduct of the
Arbitration. The Guidance Note provides that, when making a disclosure, arbitrators
should consider “relationships with any entity having a direct economic interest in the
dispute or an obligation to indemnify a party for the award.” This clear reference to third-
P 295 party funding is identical to the definition of third-party funding in General Standard
7(a) of the IBA Guidelines cited above. However, this recommendation does not concern
the parties, but only the arbitrators. (38)
Likewise, the arbitration rules of the Center for Arbitration and Mediation of the Chamber
of Commerce Brazil-Canada (“CAM/CCBC”) do not provide for an obligation to disclose
third-party funding. However, on July 20, 2016 the CAM/CCBC adopted Administrative
Resolution No. 18, Article 4 of which recommends that the parties should disclose the
existence of third-party funding, including identification of the funder, as soon as
possible. However, such disclosure is not made to the parties or the tribunal directly, but
to the arbitral institution, which will communicate it to the arbitrators and to the other
parties. (39)
The 2017 Rules of Arbitration of the Bahrain Chamber for Dispute Resolution do not
expressly provide for disclosure of third-party funding. However, the arbitrators’
obligation to be and remain “at all times impartial and independent of the parties”
(Article 10.1), their continuing duty of disclosure (Article 10.6), and the statement of
impartiality and independence that arbitrators have to submit, in which “any
circumstances that may give rise to justifiable doubts as to his or her impartiality or
independence” have to be disclosed (Article 10.4), may address at least the most flagrant
cases of conflict. (40) This corresponds to a generally accepted standard. (41)
The parties’ obligation to disclose at the outset the existence of third-party funding and
the identity of the funder has been included in the 2018 proposed amendments to the
ICSID Arbitration Rules. According to this proposed amendment, disclosure has to be
made to the ICSID Secretariat immediately upon the registration of the request for
arbitration or in the course of the proceedings if a funding agreement is concluded at a
P 296 later date. The obligation to disclose extends to any change of situation, including the
termination of the funding agreement. (42) Achieving transparency is the main purpose of
disclosure. Failure to comply with this disclosure obligation and the reasons for such
failure may be taken into consideration by the arbitral tribunal when allocating the
arbitration costs, if it finds that such failure “reflects on the conduct of a party in the
proceeding to such an extent that an adverse costs order is appropriate.” However, it is
clarified that this is a question of fact and is not expressly addressed in the proposed
amendment. (43)

3.2 INVESTMENT TREATIES PROVIDING FOR EARLY DISCLOSURE

An incremental obligation to disclose the existence of a third-party funding agreement
and the identity of the funder at the outset of the arbitration has been introduced not
only in institutional arbitration rules, but also in international investment agreements,
especially in the new generation of the so-called “mega-regional” agreements, such as
the Comprehensive Economic and Trade Agreement (“CETA”) and other agreements
recently negotiated and/or concluded by the European Union. (44)
Article 8(26) of the CETA requires that the party receiving third-party funding disclose its
existence and the identity of the funder to the other party and to the arbitral tribunal
when submitting its claim or when the funding agreement is entered into if this occurs at
a later date. (45) The term “third-party funding” in the CETA is very broad and means “any
P 297 funding provided by a natural or legal person who is not a disputing party but who
enters into an agreement with a disputing party in order to finance part or all of the cost
of the proceedings either through a donation or grant, or in return for remuneration
dependent on the outcome of the dispute.” (46)
A virtually identical provision is contained in the EU Proposal for Investment Protection
and Resolution of Investment Disputes to be inserted in the Transatlantic Trade and
Investment Partnership (“TTIP”). (47)
In the negotiated text of the EU-Vietnam FTA (“EUVFTA”), Article 11 provides that the
disputing party benefitting from third-party funding should notify the other party and the
tribunal (the Investment Court) about the existence and nature of the funding
arrangement. (48) As with the CETA, disclosure must be made at the time of the filing of
the claim or when the funding agreement is entered into if this occurs at a later date. (49)
The EUVFTA also provides that compliance with the disclosure obligation “shall” be taken
into account by the adjudication body when deciding on the allocation of the costs of the
proceedings. (50)
Similar provisions are contained in the EU-Singapore Investment Protection Agreement,
which has not yet entered into force. (51)

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 3.3 CASES WHERE TRIBUNALS HAVE ORDERED DISCLOSURE OF THE EXISTENCE OF
THIRD-PARTY FUNDING AND THE IDENTITY OF THE FUNDER
Several of the arbitral tribunals that have so far been confronted with a claim funded by
a third-party funder have ordered the disclosure of the existence and the identity of the
funders in order to promote transparency and protect the integrity of the arbitration
P 298 process. With a few exceptions, absent sufficient evidence that the claim had been
assigned to the funder or that the claimant was impecunious or unable to pay a potential
award of costs, they have generally refrained from ordering the production of the entire
funding agreement, which was regarded as unnecessarily burdensome on the funded
party.
In EuroGas v. Slovak Republic, the tribunal ordered the disclosure of the existence and
the identity of a third-party funder in an oral order issued during a hearing on provisional
measures and security for costs. The order was based on the ground that disclosure
allows the assessment of arbitrators’ potential conflicts of interest. At the same time, the
tribunal rejected the respondent’s request to order the claimants to enter into an ad hoc
confidentiality agreement preventing them from sharing confidential information with
the funder, holding that the funder should be subject to “normal obligations of
confidentiality.” (52)
In South American Silver v. Bolivia, an UNCITRAL arbitration, the respondent sought
disclosure of the identity of the claimant’s funder and the terms of the third-party
funding agreement. The respondent argued that disclosure was warranted for several
reasons, namely, to allow the arbitrators to consider potential conflicts of interest, to
identify the real party in interest, and, given the alleged economic difficulties of the
claimant and its parent company, to evaluate whether the funder would have been
required to cover an award of costs. In this context, the respondent also filed a request
for security for costs. The tribunal ordered that the identity of the funder be disclosed for
the sake of transparency, but, based on the facts of the case and the evidence produced,
was not convinced that disclosure of the entire third-party funding agreement was
warranted or needed. (53)
In Guaracachi v. Bolivia, another UNCITRAL tribunal declined to grant the respondent’s
request for disclosure of the funding agreement and related documentation. In the
context of an application for security for costs, the tribunal held that the respondent had
P 299 failed to establish that there were sufficient grounds to order such disclosure given
that the funder’s identity, which the respondent had learned of from an independent
source, was sufficient for the members of the arbitral tribunal to exclude the existence of
conflicts. The tribunal also observed that, under Articles 11 to 13 of the UNCITRAL
Arbitration Rules, it is incumbent on arbitrators to disclose any conflicts of interest of
which they may be aware but that no production of document by the parties is envisaged.
At the same time, the tribunal stated that, when assessing the respondent’s application
for security for costs pursuant to Article 9 of the IBA Guidelines on the Taking of Evidence
in International Arbitration, it could draw inferences from the claimant’s refusal to
produce the funding agreement and to clarify whether the funding agreement covered a
costs award. (54)

3.4 DISCLOSURE OF THE FUNDING AGREEMENT

The next question is, thus, under what circumstances the funded party may be requested
to disclose the funding agreement. The disclosure of the funding agreement, or part
thereof, may become necessary in at least two cases.
First, if a claimant relies on third-party funding to bring a claim because it is
impecunious, the respondent is entitled to know whether, under the funding agreement,
the funder is required to cover an eventual award of costs. Indeed, if this is not the case,
the respondent may be entitled to request that the claimant post security for costs.
Second, the respondent is entitled to know whether the claim has been assigned. In this
case, the respondent may object that the real party in interest is no longer the claimant
but the funder, which is not a signatory to the arbitration agreement. The assignment of
the claim may be particularly relevant in the context of an investment treaty arbitration,
where the respondent state may object that the tribunal lacks ratione materiae and
ratione personae jurisdiction because (i) the claimant is the funder and the funder does
not qualify for treaty protection because it is not a foreign investor and made no
investment in the host state, and (ii) the original investor no longer holds the claim as a
result of its having been assigned to the funder. (55)
P 300
Whatever the case may be, a respondent interested in the content of the third-party
funding agreement should substantiate its request for disclosure. In particular, the
respondent (i) should show that the terms of the funding agreement are relevant to a
request for security for costs or to an objection to ratione personae or ratione materiae
jurisdiction, and (ii) should provide prima facie evidence of the claimant’s impecuniosity
or inability to honor an award of costs, and/or of the assignment of the claim to the
funder. The mere allegation of these facts should not be sufficient since it may result in a
fishing expedition. (56)

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 Even when disclosure is warranted, the production of the entire funding agreement may
not be necessary to ensure the protection of the respondent’s interests. For instance,
when disclosure is requested in support of a motion for security for costs, the disclosure
of the provisions of the funding agreement concerning the funder’s obligations and
financial liability (or a summary thereof) may be sufficient to understand whether the
funder will ultimately cover an award of costs or not.
In the cases referred to above, and particularly in South American Silver v. Bolivia, the
tribunals limited disclosure to the identity of the funders and rejected requests for
further disclosure that were not sufficiently substantiated.
In Manuel García Armas et al. v. Venezuela (57) – the sole case in which the disclosure of
the funding agreement was ordered (once again, in the context of a request for security
for costs) – the tribunal explained that its decision was grounded “en su deber de
salvaguardar la integridad del procedimiento.” Based on the documents publicly
available, it is unclear what the tribunal intended by “the protection of the integrity of
the arbitration,” given that transparency was ensured by the claimant’s compliance with
the order to disclose the identity of the funder. (58) At the same time, the tribunal
P 301 ordered the claimants to hand the third-party funding agreement over to the tribunal
itself, the PCA, and ICSID, but not to the respondent, possibly in order to protect
privileged and confidential information contained in the funding agreement. Only after
analyzing the content of the agreement, which was produced by the claimants in
redacted form, did the tribunal make it available to the respondent. It held that, by
proceeding in this way, the legitimate right of the respondent to be apprised of the
contents of the funding agreement and especially any bearing it would have on an
adverse costs order against the claimants was fully protected. At the same time, the
claimant’s legitimate interest in withholding certain information was protected as well.
(59)
Although the disclosure of the provisions of the third-party funding agreement on the
exclusion of the funder’s liability for adverse costs was unquestionably relevant to the
respondent’s request for security for costs, this tribunal seems to have given priority to
the interests of the respondent state over those of the claimants and the funder. (60) At
the same time, the tribunal stated that its decision to grant security for costs was
justified by the “exceptional circumstances” of the case, including the fact that the
funder would not cover adverse costs, but emphasized that the existence of third-party
funding does not per se prove insolvency. (61)
A more balanced solution was found in Muhammet Çap v. Turkmenistan, where the
tribunal ordered disclosure of both the identity of the funder and the terms of the third-
party funding agreement on grounds of transparency and in view of an application for
P 302 security for costs that the respondent intended to file. Based on the available record,
the tribunal’s disclosure order covered “the nature of the arrangements concluded with
the third-party funder(s), including whether and to what extent it/they will share in any
successes that Claimants may achieve in this arbitration.” (62) In other words, it seems
that the tribunal’s order could be complied with by providing a general description of
the relevant terms of the funding agreement without disclosing the funding agreement
itself. Although the tribunal was not absolutely clear in explaining the basis for its
decision, (63) it is commendable that the disclosure obligation was limited to what was
strictly necessary, that is, the relevant terms of the funding agreement, including the
financial arrangements.

4 WHO SHOULD MAKE THE DISCLOSURE?

Under nearly all national laws and arbitration rules, arbitrators are required to disclose
any conflicts of interest that may affect their independence and impartiality. (64)
Therefore, the arbitrators are required to disclose any relation they or their law firms
may have with a funder that is funding one of the parties. (65) Yet an arbitrator may be
genuinely unaware that a funder with which he or his law firm has a relationship is
funding a party in the arbitration in which he is sitting as arbitrator. Likewise, an
arbitrator may be unaware of the fact that, in an unrelated case, a funder is funding a
party that is represented by one of his law firm partners. Therefore, even if an arbitrator
is fully transparent, his disclosure may be incomplete.
At the same time, an arbitrator is required to carry out a diligent research of possible
conflicts. Pursuant to Standard 7(d) of the IBA Guidelines, “[a]n arbitrator is under a duty
to make reasonable enquiries to identify any conflict of interest, as well as any facts or
circumstances that may reasonably give rise to doubts as to his or her impartiality or
P 303 independence,” and the arbitrator’s failure to disclose a situation of conflict “is not
excused” when the lack of knowledge is due to an incomplete or negligent check.
The next question, therefore, is how far should an arbitrator go in checking for potential
conflicts of interest. An inquiry by an arbitrator about the existence of third-party funding
and the identity of the funder would be “part of an arbitrator’s fulfilment of this duty”
because “it would be difficult to argue that asking parties about whether they are funded
does not fall within the duty to ‘make reasonable enquiries.’” (66) In this respect, it has
been suggested that “arbitrators’ duty to make reasonable inquires presumably obliges
them to request disclosure of the existence of funding and the identity of the funder in

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 every case because, absent such disclosure, they may have conflicts that are not known.”
(67)
In addition, some arbitrations rules, such as the SIAC Investment Arbitration Rules and
the CIETAC Investment Arbitration Rules mentioned above, expressly empower
arbitrators to order disclosure of third-party funding. Arbitrators arguably already
possess this power as part of their “inherent powers” to protect the propriety of the
arbitration and prevent abuses, or as part of their power to order the parties to produce
relevant documents and information, which is granted to them by several arbitration
rules. (68) The systematic use of this power even after the arbitral tribunal has been
constituted may help to uncover potential situations of conflict that surface only later in
the proceedings. Indeed, it would not be too late for an arbitrator to resign if a conflict is
uncovered. However, since an order to disclose relevant evidence would need to be
made by all the arbitrators, or at least a majority of them, this power would be
ineffectual in the event of disagreement.
At the same time, as has also been suggested, requiring the arbitrators to disclose any
relation they have with a funder would expose them to the risk of violating their
confidentiality obligations, unduly expand the duty of disclosure incumbent on them,
and be ineffective if the funded party fails to disclose the identity of the funder. (69) No
matter how diligent they may be, arbitrators are not investigative agencies. Indeed, the
existence of third-party funding and the identity of the funder is known only to the
funded party and the funder, and the duty to disclose therefore lies above all with them.
As explained above, under Standard 7(a) of the IBA Guidelines, the parties are required
to disclose to the arbitrators, the other parties, and the arbitration institution any
relationship, direct or indirect, between the arbitrator and that party and between the
P 304 arbitrator and the funder. In doing so, the parties are required to “perform reasonable
enquiries.” However, Standard 7(a)–(b) does not impose a generalized obligation to
disclose the existence and the identity of the funder: the only “enquires” and disclosure
that a party is required to make are those concerning the relationship between the
arbitrators and the funder. In addition, a party may have “blind spots,” given that the
funded party may not necessarily be aware of all the relationships between the funder
and the arbitrator or his law firm.
The funders (and the funded party’s counsel) also have a role to play in ensuring the
propriety of the arbitration. Although, technically speaking, they are not parties to the
arbitration, and a disclosure order issued by the tribunal would therefore not be binding
on them, (70) certain information can only be provided by the funders. While the funders
are not attorneys and therefore not bound by the same rules of ethics as the parties’
attorneys, they have in many cases been founded by former lawyers with substantial
litigation experience, who will be alert to the possibility of conflicts of interests under
the applicable rules and the IBA Guidelines and can help to ensure complete disclosure
by the funded party.
In conclusion, while a general obligation to disclose the existence of third-party funding
and the identity of the funder at the outset may certainly be helpful, only cooperation
among all interested parties may ensure transparency and minimize the risks associated
with late discovery of conflicts of interests.
As arbitration practitioners, the authors of this article are satisfied that funders are
generally keen to make the necessary disclosures. This at least is true of serious and
competent funders who behave professionally and in accordance with the ethical in
standards that they are required to meet as respectable players in this business.

5 WHEN AND HOW SHOULD DISCLOSURE BE MADE?

If the incremental method described above is followed, the timing of the disclosure
should depend on the interests that disclosure aims to protect.
The disclosure of the identity of the funder in order to detect conflicts of interest is most
effective when made at the outset of the arbitration, by the claimant in its request for
arbitration (71) or by the arbitrator in his/her statement of independence. As observed
above, a disclosure order issued by a tribunal after its constitution may not come too
P 305 late given that the parties may have yet to plead their case, so the replacement of an
arbitrator would not create too much disruption. (72)
Conversely, when information about the funding agreement is needed in support of a
motion for security for costs or in relation to an objection to jurisdiction, its disclosure
can be made later in the proceedings.

6 CONCLUSIONS
An incremental approach, as advocated in this article, is gaining momentum not only
within the arbitration community, but also among arbitral institutions and governments.
If properly applied, this method prevents the negative effects that the late discovery of a
conflict of interest may have on a dispute, without encroaching on the rights of the
funded party and the funder. If further disclosure is justified on other grounds, such as
security for costs, ad hoc production orders can be tailored by the arbitrators to protect

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 the respondent’s rights while minimizing the impact on the funder and the funded party.
At the same time, introducing a disclosure obligation would help restore confidence in
international arbitration and would fend off the often unjustified criticism leveled at
third-party funders who, far from being “mercantile adventurers” seeking for “the
gambler’s Nirvana: Heads I win, and Tails I do not lose,” (73) are providing a valuable
contribution to the development of international arbitration.
P 305

References
*) Professor Antonio Crivellaro is Emeritus Partner with the law firm BonelliErede; he is
based in Milan, Italy. Lorenzo Melchionda is Local Partner with the law firm
BonelliErede; he is based in Dubai, UAE. The authors wish to thank Dr. Carlo de
Stefano, Associate in the Milan office of BonelliErede, for his assistance in the
preparation of this article. The views expressed by the authors do not necessarily
reflect those of their law firm or of their clients.
1) See Antonio Crivellaro, Third-Party Funding and “Mass” Claims in Investment
Arbitrations, in Bernardo Cremades and Antonias Dimolitsa (eds.), Third-Party Funding
in International Arbitration, ICC Dossier X, 137 (ICC 2013) [hereinafter “Cremades and
Dimolitsa”]; Laurent Lévy and Régis Bonnan, Third-Party Funding: Disclosure, Joinder
and Impact on Arbitral Proceedings, in Cremades and Dimolitsa, 78; Maxi Scherer,
Third-Party Funding in International Arbitration: Towards Mandatory Disclosure of
Funding Agreements?, in Cremades and Dimolitsa, 95; Aren Goldsmith and Lorenzo
Melchionda, Third-Party Funding: Toward the Development of an Incremental
Methodology for Disclosure, 2016 Les Cahiers de l’Arbitrage/Paris Journal of
International Arbitration 339; Eduardo Zuleta Jaramillo, Security for Costs: Authority of
the Tribunal and Third-Party Funding, in Meg Kinnear et al. (eds.), Building
International Investment Law: The First 50 Years of ICSID 567 (Kluwer Law International
2015); Eric De Brabandere and Julia Lepeltak, Third-Party Funding in International
Investment Arbitration, 27 ICSID Review 379 (2012); Elizabeth Chan, Proposed Guidelines
for the Disclosure of Third-Party Funding Arrangements, 26 Am. Rev. Int’l Arb. 281
(2015); Gary J. Shaw, Third-Party Funding in Investment Arbitration: How Non-Disclosure
Can Cause Harm for the Sake of Profit, 33 Arb. Int’l 109 (2017); Louise Barrington, Third-
Party Funding and the International Arbitrator, in Patricia Shaughnessy and Sherlin
Tung (eds.), The Powers and Duties of an Arbitrator: Liber Amicorum Pierre A. Karrer 15
(Kluwer Law International 2017); Valentina Frignati, Ethical Implications of Third-Party
Funding in International Arbitration, 32 Arb. Int’l 505 (2016); Nadia Darwazeh and
Adrien Leleu, Disclosure and Security for Costs or How to address Imbalances Created
by Third-Party Funding, 33 J. Int’l Arb. 133 (2016); Philippe Pinsolle, Third Party Funding
and Security for Costs, 2013 Les Cahiers de l’Arbitrage/Paris Journal of International
Arbitration 399; William Kirtley and Koralie Wietrzykowski, Should an Arbitral Tribunal
Order Security for Costs When an Impecunious Claimant is Relying upon Third-Party
Funding?, 30 J. Int’l Arb. 17 (2013); Eduard Bertrand, The Brave New World of Arbitration:
Third-Party Funding, 29 ASA Bull. 3 (2011); Catherine Kessedjian, Good Governance of
Third Party Funding, Columbia FDI Perspectives No. 130 (September 15, 2014).
2) See, for instance, Jean-Christophe Honlet, Recent Decisions on Third-Party Funding in
Investment Arbitration, 30 ICSID Review 699 (2015). See also infra note 13.
3) Catherine A. Rogers, Ethics in International Arbitration 199 (Oxford University Press
2014).
4) ICSID Secretariat, Proposals for Amendment of the ICSID Rules – Working Paper, vol. 3
(August 2, 2018), Arbitration Rule 21 (p. 129) and Conciliation Rule 13 (p. 354).
5) See International Council for Commercial Arbitration (ICCA), Report of the ICCA-Queen
Mary Task Force on Third-Party Funding in International Arbitration 83 (April 2018)
[hereinafter the “ICCA-Queen Mary Report”], where reference is made to the results of
a survey carried out by Queen Mary, University of London and White & Case, 2015
International Arbitration Survey: Improvements and Innovations in International
Arbitration (2015), available at
[Link]
ul-international-arbit.... According to that survey, 76 percent of those surveyed
answered that disclosure of the existence of third-party funding should be
mandatory, 63 percent that disclosure of the identity of the funders should be
mandatory, and 71 percent that the disclosure of the funding agreement in its
entirety is not required. However, only 39 percent of the people surveyed were
exposed to third-party funding in their profession.

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 6) Another form of litigation finance, which may sometimes be similar to third-party
funding, is the after-the-event (“ATE”) insurance. Under ATE insurance, which is issued
once a dispute has commenced, an insurer covers the legal costs and fees of the
insured, and sometimes also those of its opponent in the dispute, in the event that
the insured is ordered to pay part or all of its opponent’s legal costs and fees. The
insurance is primarily intended to hedge against the risk of an adverse costs order.
Certain models of ATE insurance, under which the premium is payable only if the
insured is successful, display obvious similarities with classic third-party funding, in
the sense that the insurer is remunerated only if the insured wins the case. ATE
insurance has evolved, may take different forms, and sometimes is issued in
combination with third-party funding. However, given the lower amounts normally
involved in ATE insurance, compared to third-party funding, and the lack of
systematic and deep relationships between the companies that offer ATE insurance
products (normally branches of larger insurance groups) and arbitrators and
arbitration practitioners, the present article will focus on classic third-party funding
rather than this form of litigation insurance.
7) Burcu Osmanoglu, Third-Party Funding in International Commercial Arbitration and
Arbitrator Conflict of Interest, 32 J. Int’l Arb. 325 (2015).
8) See Crivellaro, supranote 1, at 137; Aren Goldsmith and Lorenzo Melchionda, Third
Party Funding in International Arbitration: Everything You Ever Wanted To Know (But
Were Afraid to Ask), pt. 2, 2012 RDAI/IBLJ 221, 228–235; Philippe Pinsolle, Le
financement de l’arbitrage par les tiers, 2001 Rev. arb. 385.
9) Frignati, supranote 1, 511.
10) See ICCA-Queen Mary Report at 85, notes 171–173. See in particular Christopher P.
Bogart, Third-Party Financing of International Arbitration, in The European Arbitration
Review 2017 (Global Arbitration Review 2016): “Indeed, it is fair to say that litigation
finance is increasingly becoming simply another form of corporate finance.”
11) See ICCA-Queen Mary Report at 86.
12) Intuitively, this may be different in the – rather unusual – case of funding for
philanthropic or political reasons. In that case, the funder funds a case not in view of
a return, but to promote a political or social cause. Therefore, the funder may have
an interest in making the funding of a sensitive case public, in order to create
debate, to attract attention, to raise additional funds, etc. For instance, the US
research and advocacy group The Campaign for Tobacco-Free Kids (affiliated to the
Bloomberg Foundation) publicly disclosed that it funded Uruguay’s defense in the
case Philip Morris Brands Sàrl, Philip Morris Products S.A. and Abal Hermanos S.A. v.
Oriental Republic of Uruguay, ICSID Case No. ARB/10/7.
13) See Goldsmith and Melchionda, supranote 1, at 341–342; ICCA-Queen Mary Report at
86: “Opposition to disclosure, some funders explain, is not so much related to
maintaining their presence or identity as secret. It is instead a reaction to perceived
procedural and strategic consequences of disclosure, such as allegedly frivolous
challenges to arbitrators and unfounded requests for security for costs. It was also
suggested by some that these responses to disclosure may not simply be a matter of
case strategy, but an intentional effort to drive up the cost of the case to make the
funding model untenable.”
14) For instance, in a dispute between A and B, partners in a joint venture, where A files a
claim against B on the ground that it has been excluded from the joint venture and
replaced by C, A and C may agree that C will cover the litigation costs that B may
incur in the arbitration commenced by A. A similar situation occurred in the case
RMS Production Corporation v. Grenada. In that case, the claimant alleged that the
respondent denied the claimant’s application for an oil exploration license and
terminated an investment agreement because another company called Global
Petroleum Group paid a bribe to the Attorney-General of Grenada. During the
arbitration, the claimant did not ask the tribunal to decide on its allegation of
corruption, but only to consider the evidence of corruption in the assessment of the
credibility of the Attorney-General, who appeared as a witness. The tribunal rejected
the claimant’s claims, including the charges of corruption, as unfounded. The
claimant filed a request for annulment and, during the annulment proceedings,
requested the Ad Hoc Committee to exercise its inherent powers and independent
jurisdiction to ascertain whether the Attorney-General had been bribed by Global
Petroleum Group, which is exactly what the claimant argued that the tribunal need
not do. In particular, the claimant requested the Ad Hoc Committee to instruct
Grenada to disclose the details of its relationship with Global Petroleum, “beginning
with ‘disclosure of who is paying [the respondent’s counsel’s] fees in the current
annulment proceeding.’” See RSM Production Corporation v. Grenada, ICSID Case No.
ARB/05/14, Decision on the Application of RSM Production Corporation for a
Preliminary Ruling (December 7, 2009), ¶¶ 1–11. The Committee rejected the
claimant’s request on the ground that it did not correspond to any of the five grounds
for annulment under Article 52 of the ICSID Convention. See RSM Production
Corporation v. Grenada, ICSID Case No. ARB/05/14, Decision on the Application of RSM
Production Corporation for a Preliminary Ruling (December 7, 2009), ¶ 5, and Decision
Order of the Committee Discontinuing the Proceeding and Decision on Costs (April 28,
2011), ¶ 48.

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 15) In both private conversations and public settings, funders have always emphasized
that, to increase their chances of recovery, it is in their interest to have an arbitration
panel composed of arbitrators independent of the parties. An award issued by an
arbitral tribunal lacking the requisite independence and impartiality would likely be
subject to annulment proceedings and refused enforcement, which would deprive
the funders of their return.
16) See the debate on this issue in relation to third-party funding in the ICCA-Queen Mary
Report at 112–115.
17) The Tecnimont v. Avax case is a good example of disruption created by the late
challenge of an award prompted by a conflict of interest of which the arbitrator had
not been aware and which had not been disclosed. After several proceedings before
the French courts, the Court of Cassation finally confirmed the award. See the
judgments of the Court of Cassation, Civil Division No. 1, Société Tecnimont S.p.A. v.
J.&P. Avax (No. 11-26529) (June 25, 2014); and Court of Cassation, Civil Division No. 1,
Société J.&P. Avax v. Société Tecnimont S.p.A. (No. 09-12.716) (November 4, 2010). The
last judgment in this saga was a decision of the Paris Court of Appeal on April 12,
2016. The arbitration, which had lasted for approximately fifteen years and had been
stayed pending the annulment proceedings, resumed for quantum determination.
18) Lack of independence or impartiality is a ground for annulment of arbitral awards
(see Gary B. Born, International Commercial Arbitration 3165 (2nd ed., Kluwer Law
International 2014)), and for refusing their enforcement under the New York
Convention, Articles V(1)(d), V(2)(b), and, arguably, Article V(1)(b) (ibid. at 3525–3526,
3533–3534, 3585–3593.
19) Ibid. at 1895–1907: “An essential aspect of the process of constituting an arbitral
tribunal is the disclosure to the parties (and appointing authority) by prospective
arbitrators and arbitrators of relationships or other circumstances which might raise
justifiable doubts regarding their independence and impartiality. Most national laws
and institutional rules obligate (prospective) arbitrators to make such disclosures,
both prior to accepting a nomination and, in the event of new developments, during
the course of the arbitration. The timely and complete performance of this disclosure
obligation is vital to the integrity of the arbitral process.”
20) ICC Arbitration Rules, Article 42 (“In all matters not expressly provided for in the
Rules, the Court and the arbitral tribunal shall act in the spirit of the Rules and shall
make every effort to make sure that the award is enforceable at law.”); J.D.M. Lew, The
Law Applicable to the Form and Substance of the Arbitration Clause, in Improving the
Efficiency of Arbitration Agreements and Awards: 40 Years of Application of the New
York Convention, ICCA Congress Series No. 9, 114, 119 (A. J. van den Berg ed., 1998).
21) Goldsmith and Melchionda, supranote 8, at 225.
22) IBA Guidelines on Conflicts of Interest in International Arbitration 2014, General
Standard 7(a): “A party shall inform an arbitrator, the Arbitral Tribunal, the other
parties and the arbitration institution or other appointing authority (if any) of any
relationship, direct or indirect, between the arbitrator and the party (or another
company of the same group of companies, or an individual having a controlling
influence on the party in the arbitration), or between the arbitrator and any person
or entity with a direct economic interest in, or a duty to indemnify a party for, the
award to be rendered in the arbitration. The party shall do so on its own initiative at
the earliest opportunity.”
23) Ibid., General Standard 7(d): “An arbitrator is under a duty to make reasonable
enquiries to identify any conflict of interest, as well as any facts or circumstances
that may reasonably give rise to doubts as to his or her impartiality or
independence. Failure to disclose a conflict is not excused by lack of knowledge, if
the arbitrator does not perform such reasonable enquiries.”
24) Ibid., General Standard 6(a) and (b): “(a) The arbitrator is in principle considered to
bear the identity of his or her law firm, but when considering the relevance of facts or
circumstances to determine whether a potential conflict of interest exists, or whether
disclosure should be made, the activities of an arbitrator’s law firm, if any, and the
relationship of the arbitrator with the law firm, should be considered in each
individual case. The fact that the activities of the arbitrator’s firm involve one of the
parties shall not necessarily constitute a source of such conflict, or a reason for
disclosure. Similarly, if one of the parties is a member of a group with which the
arbitrator’s firm has a relationship, such fact should be considered in each individual
case, but shall not necessarily constitute by itself a source of a conflict of interest, or
a reason for disclosure. (b) “If one of the parties is a legal entity, any legal or physical
person having a controlling influence on the legal entity, or a direct economic
interest in, or a duty to indemnify a party for, the award to be rendered in the
arbitration, may be considered to bear the identity of such party.”
25) Ibid., paragraph (b) of the explanation to General Standard 6: “Third-party funders
and insurers in relation to the dispute may have a direct economic interest in the
award, and as such may be considered to be the equivalent of the party. For these
purposes, the terms ‘third-party funder’ and ‘insurer’ refer to any person or entity
that is contributing funds, or other material support, to the prosecution or defence of
the case and that has a direct economic interest in, or a duty to indemnify a party
for, the award to be rendered in the arbitration.”
26) See Section 3.1 below.
27) See ICCA-Queen Mary Report at 38–39.

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 28) Ibid., p. 91. The report mentions the following examples: (i) a prospective arbitrator
who is a partner in a law firm that has entered into a portfolio financing agreement
with a funder that is funding a case that is part of the portfolio, or (ii) an arbitrator
who sits on the board of a funder that has funded the case in which he has been
proposed for appointment and the case constitutes a part of the portfolio financing
agreement, or (iii) repeated appointment of the same arbitrator in cases included in
the same portfolio financing agreement.
29) See ICCA-Queen Mary Report; Goldsmith and Melchionda, supranote 1, at 339–343.
30) More extensive disclosure obligations may be required to assess the existence of
conflicts of interest in the case of portfolio financing; see Section 2.5 above.
31) See ICCA-Queen Mary Report, Principle A.1: “A party and/or its representative should,
on their own initiative, disclose the existence of a third-party funding arrangement
and the identity of the funder to the arbitrators and the arbitral institution or
appointing authority (if any), either as part of a first appearance or submission, or as
soon as practicable after funding is provided or an arrangement to provide funding
for the arbitration is entered into.”
32) CIETAC Investment Arbitration Rules, Article 27(2).
33) Ibid.
34) CIETAC Investment Arbitration Rules, Article 27(3).
35) CIETAC, Guidelines for Third Party Funding in International Arbitration (August 31,
2017): “A party obtaining Funding should without delay disclose to the tribunal and
other party any circumstances arising from that Funding that might give rise to any
possible issues of conflict of interest under applicable laws and rules” (Article 2.9).
“Funding” is defined as the contribution of funds or other material support to a party
in arbitration by a professional third person or entity that has, as a result, “a direct
economic interest in the award to be rendered in the arbitration” (Article 1.2). The
Guidelines are not mandatory and the parties and the arbitrators “shall not be
deemed to have adopted all or any part of the Guidelines simply because of their
participation in arbitration proceedings in which there is an element of Funding”
(Article 1.4).
36) SIAC Investment Arbitration Rules, Rule 24: “Unless otherwise agreed by the Parties,
in addition to the other powers specified in these Rules, and except as prohibited by
the mandatory rules of law applicable to the arbitration, the Tribunal shall have the
power to:...l. order the disclosure of the existence of a Party’s third-party funding
arrangement and/or the identity of the third-party funder and, where appropriate,
details of the third-party funder’s interest in the outcome of the proceedings, and/or
whether or not the third-party.”
37) Under Practice Direction No. 2, “Funding” means “any form of financial assistance
which potentially confers to the Funder an economic benefit which is linked to the
outcome of the Proceedings, including but not limited to receiving a share of the
Proceeds”; a “Funder” includes a parent company, a subsidiary or a group of entities
that provides funding, but does not include the law firm that represents the funded
party; and “Proceeds” means all pecuniary gain obtained by the funded party as a
result of a judgment, a settlement or “as otherwise defined or described in the LFA.”
38) ICC Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration (October
30, 2017), ¶ 24: “Relationships between arbitrators, as well as relationships with any
entity having a direct economic interest in the dispute or an obligation to indemnify
a party for the award, should also be considered in the circumstances of each case.”
For a commentary on the ICC Guidance Note, see A. Goldsmith and L. Melchionda, The
ICC’s Guidance Note on Disclosure and Third-Party Funding: A Step in the Right
Direction, Kluwer Arbitration Blog (March 14, 2016),
[Link]
on-disclosure-and-thi....
39) CAM-CCBC, Resolution 18/2016, Article 4: “In order to avoid potential conflicts of
interest, CAM-CCBC recommends the parties to report the existence of third-party
funding to CAM-CCBC at the earliest opportunity. The complete qualification of the
funder should be included in this communication.”
40) Pursuant to Article 11.1, “Any arbitrator may be challenged by a party if
circumstances exist that give rise to justifiable doubts as to the arbitrator’s
impartiality or independence …” The caveat in Article 10.7 that any disclosure by an
arbitrator “does not indicate belief by the arbitrator that the disclosed information
does in fact give rise to justifiable doubts as to the arbitrator’s impartiality or
independence” should encourage transparency by making sure that a disclosure
does not entail the automatic disqualification of the arbitrator.
41) See, for instance the UNCITRAL Arbitration Rules of 1976 (Articles 9 and 10) and 2010
(Articles 11 and 12).

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 42) Proposals for Amendment of the ICSID Rules – Consolidated Draft Rules (August 2,
2018), Article 21(2) and (3): “(2) A party shall file a written notice disclosing that it has
third-party funding and the name of the third-party funder. Such notice shall be sent
to the Secretariat immediately upon registration of the Request for arbitration, or
upon concluding a third-party funding arrangement after registration. (3) Each party
shall have a continuing obligation to disclose any changes to the information
referred to in paragraph (2) occurring after the initial disclosure, including
termination of the funding arrangement.” An identical provision is found in the ICSID
Additional Facility Arbitration Rules. Third-party funding is broadly defined as “the
provision of funds or other material support for the pursuit or defense of a
proceeding, by a natural or juridical person that is not a party to the dispute (‘third-
party funder’), to a party to the proceeding, an affiliate of that party, or a law firm
representing that party. Such funds or material support may be provided: (a) through
a donation or grant; or (b) in return for a premium or in exchange for remuneration or
reimbursement wholly or partially dependent on the outcome of the proceeding.”
43) Proposals for Amendment of the ICSID Rules – Working Paper, ICSID Secretariat, vol. 3
(August 2, 2018), ¶¶ 255, 271.
44) See Christian J. Tams, Procedural Aspects of Investor-State Dispute Settlement: The
Emergence of a European Approach?, 15 J. World Inv. & Trade 585 (2014).
45) CETA, Article 8(26): “1. Where there is third party funding, the disputing party
benefiting from it shall disclose to the other disputing party and to the Tribunal the
name and address of the third party funder. 2. The disclosure shall be made at the
time of the submission of a claim, or, if the financing agreement is concluded or the
donation or grant is made after the submission of a claim, without delay as soon as
the agreement is concluded or the donation or grant is made.”
46) CETA, Article 8(1).
47) TTIP, EU Proposal for Investment Protection and Resolution of Investment Disputes
(November 12, 2015), Article 8.
48) EUVFTA, text as of January 2016, Article 11(1): “Where there is third party funding, the
disputing party benefiting from it shall notify to the other disputing party and to the
division of the Tribunal, or where the division of the Tribunal is not established, to
the President of the Tribunal the existence and nature of the funding arrangement,
and the name and address of the third party funder.”
49) Ibid., Article 11(2): “Such notification shall be made at the time of submission of a
claim, or, where the financing agreement is concluded or the donation or grant is
made after the submission of a claim, without delay as soon as the agreement
concluded or the donation or grant is made.”
50) Ibid., Article 11(3): “When deciding on the cost of proceedings pursuant to Article 27(4)
(Provisional Award) the Tribunal shall take into account whether the requirements
provided for in paragraphs 1 and 2 have been respected.”
51) EU-Singapore Investment Protection Agreement, text as of April 2018, Article 3(8):
“Any disputing party benefiting from third party funding shall notify the other
disputing party and the Tribunal of the name and address of the third party funder.
Such notification shall be made at the time of submission of a claim, or without
delay as soon as the third party funding is agreed, donated or granted, as
applicable.”
52) EuroGas Inc. and Belmont Resources Inc. v. The Slovak Republic, ICSID Case No.
ARB/14/14, Claimants’ Full Application for Provisional Measures (August 11, 2014);
Respondent’s Request for Provisional Measures and Opposition to Claimants’
Application for Provisional Measures (September 10, 2014), ¶¶ 70–71; Claimants’
Reply on Provisional Measures and Answer to the Respondent’s Request for
Provisional Measures (October 16, 2014) ¶¶ 223–233; Respondent’s Reply Application
for Provisional Measures and Rejoinder to Claimants’ Application for Provisional
Measures (November 21, 2014), ¶¶ 75–76; Claimants’ Rejoinder to Respondent’s
Application for Provisional Measures (December 22, 2014), ¶¶ 142–152; Transcript of
the First Session and Hearing on Provisional Measures (March 17, 2015), 33–38, ¶¶
144–145.
53) South American Silver Limited v. The Plurinational State of Bolivia, UNCITRAL, PCA Case
No. 2013-15, Procedural Order No. 7 (July 21, 2015), ¶¶ 23–27; Solicitud de Cautio
Judicatura Solvi y comunicación de información (October 8, 2015), ¶¶ 27–40;
Oposición del Demandante a la solicitud de Cautio Judicatum Solvi y comunicación
de información de Bolivia (December 14, 2015), ¶¶ 37–40; Procedural Order No. 10
(January 11, 2016), ¶¶ 74, 79–82. The claimant disclosed the existence of third-party
funding in its request for arbitration. The tribunal ultimately rejected the request for
security for costs, observing that “the mere existence of a third-party funder is not an
exceptional situation justifying security for costs,” Procedural Order No. 10 (January
11, 2016), ¶ 74.

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 54) Guaracachi America, Inc. and Rurelec PLC v. The Plurinational State of Bolivia,
UNCITRAL, PCA Case No. 2011-17, Procedural Order No. 13 (February 21, 2013), ¶¶ 5–11.
The tribunal ultimately rejected the respondent’s application for security for costs,
observing that the respondent had failed to substantiate its request for the
“extraordinary measure” that it had requested and to show “a sufficient causal link
such that the Tribunal can infer from the mere existence of third party funding that
the Claimants will not be able to pay an eventual award of costs rendered against
them, regardless of whether the funder is liable for costs or not”; see Procedural
Order No. 14 (March 11, 2013) ¶¶ 5–11.
55) For instance, in Teinver S.A., Transportes de Cercanías S.A. and Autobuses Urbanos del
Sur S.A. v. The Argentine Republic, ICSID Case No. ARB/09/1, Decision on Jurisdiction
(December 21, 2012), ¶¶ 255–259, the claimants entered into a funding agreement
with Burford Capital Limited. Argentina objected that, by virtue of the funding
agreement, the real claimant was Burford, which did not meet the jurisdictional
requirements under the ICSID Convention and the Spain-Argentina BIT because it was
not a Spanish investor and had made no investment in Argentina. The tribunal found
that, even if a de jure or de facto assignment had occurred, it took place after the
filing of the arbitration. Without having to consider the impact of the funding
agreement on ratione materiae and ratione personae jurisdictional requirements, the
tribunal dismissed the objection on the basis of the principle that jurisdiction is
determined on the date of filing and that only events occurring before that date
could affect jurisdiction.
56) Goldsmith and Melchionda, supranote 1, at 339–343.
57) Manuel García Armas et al. v. Bolivarian Republic of Venezuela, PCA Case No. 2016-08,
Orden Procesal No. 4 and Resolución Procesal No. 3. (December 9, 2016).
Unfortunately, Order No. 3, which contained the production order, is not public; a
summary of these procedural orders is available in Orden Procesal No. 9 – Decisión
sobre la Solicitud de Medidas Provisionales de la Demandada (June 20, 2018), ¶¶ 1–
3, 195.
58) It may be argued that the tribunal regarded the right to an enforceable award,
including an award of costs, as part of the notion of the integrity of the arbitration;
see Manuel García Armas et al. v. Bolivarian Republic of Venezuela, PCA Case No. 2016-
08, Orden Procesal No. 9 – Decisión sobre la Solicitud de Medidas Provisionales de la
Demandada (June 20, 2018), ¶ 201. The tribunal’s reference to Eskosol S.p.A. in
liquidazione v. Italian Republic, ICSID Case No. ARB/15/50, Procedural Order No. 3 –
Decision on Respondent’s Request for Provisional Measures (April 12, 2017), ¶ 33, is
moot, however: while the Eskosol tribunal acknowledged that the concern about the
collection of costs awards “is sometimes framed as part of a broader right to effective
relief, considered to be part of the panoply of rights encompassed by the notion of
procedural integrity,” it noted that “there is something analytically curious about the
notion that an ICSID tribunal, while not empowered to protect a claimant’s ability to
collect on a possible merits award, nonetheless should intervene to protect a State’s
asserted ‘right’ to collect on a possible costs award” and that “some tribunals have
expressed doubt about whether there really is a ‘right’ in play for security-for-costs
that is entitled to protection under Article 47 and Rule 39(1),” ibid., ¶¶ 34–35.
59) Manuel García Armas et al. v. Bolivarian Republic of Venezuela, PCA Case No. 2016-08,
Orden Procesal No. 9 – Decisión sobre la Solicitud de Medidas Provisionales de la
Demandada (June 20, 2018), ¶ 3: “de tal forma se protege tanto el interés legítimo de
la Demandada en conocer lo dispuesto en el Acuerdo de Financiamiento, en
particular, respecto del evento de una condena en costas adversa a los
Demandantes, como el interés de los Demandantes, igualmente legítimo, de que se
proteja cierta información, por ellos omitida en los documentos comunicados al
Tribunal.”
60) The tribunal was probably influenced by the weaknesses of the claimants’ case,
which the tribunal emphasized in its prima facie analysis of the respondent’s
objections, ibid., ¶¶ 203–204. At the same time, the tribunal refused to consider the
claimants’ argument that their critical financial situation was caused by the
respondent’s misconduct since “hacerlo sería prejuzgar cuestiones centrales que
hacen al fondo de la disputa,” ¶ 214.
61) Ibid., ¶¶ 250–251: “la existencia de financiamiento por terceros no genera per se
prueba de insolvencia, ni debería ser suficiente en sí misma para justificar el
otorgamiento de una garantía por costas.”
62) Muhammet Çap & Sehil Inşaat Endustri ve Ticaret Ltd Sti v. Turkmenistan, ICSID Case
No. ARB/12/6, Procedural Order No. 3, (June 12, 2015), ¶ 13.
63) Although the tribunal stated that it was “unclear on what basis [Respondent’s
application for security for costs] will be made,” the tribunal was “sympathetic to
Respondent’s concern that if it is successful in this arbitration and a costs order is
made in its favour, Claimants will be unable to meet these costs and the third-party
funder will have disappeared as it is not a party to this arbitration,” ibid., ¶¶ 8–12.

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 64) Born, supranote 18, 1895–1907: “An essential aspect of the process of constituting an
arbitral tribunal is the disclosure to the parties (and appointing authority) by
prospective arbitrators and arbitrators of relationships or other circumstances which
might raise justifiable doubts regarding their independence and impartiality. Most
national laws and institutional rules obligate (prospective) arbitrators to make such
disclosures, both prior to accepting a nomination and, in the event of new
developments, during the course of the arbitration. The timely and complete
performance of this disclosure obligation is vital to the integrity of the arbitral
process.”
65) Barrington, supranote 1, at 15.
66) ICCA-Queen Mary Report at 115.
67) Ibid. at 112.
68) Goldsmith, and Melchionda, supranote 1, at 343–345.
69) Le Club des juristes, Financement du procès par les tiers 55 (June 2014).
70) Funders may nonetheless be the target of a discovery order issued by a US federal
court on the basis of 28 U.S.C. § 1782; see Aren Goldsmith and Lorenzo Melchionda,
Third Party Funding in International Arbitration: Everything You Ever Wanted To Know
(But Were Afraid to Ask), pt. 1, 2012 RDAI/IBLJ 53, 67–69.
71) Standard 7(a) of the IBA Guidelines provides that a party should disclose any
relevant relationship “on its own initiative at the earliest opportunity.”
72) Jennifer A. Trusz, Full Disclosure? Conflicts of Interest Arising from Third-Party Funding
in International Commercial Arbitration, 101 Geo. L. J. 1649, 1673 (2013); Lévy and
Bonnan, supranote 1, at 85; Frignati, supranote 1, at 521.
73) This expression was used by arbitrator Gavan Griffith QC in his Assenting Reasons to
the Decision on Saint Lucia’s Request for Security for Costs in RSM Production
Corporation v. Saint Lucia, ICSID Case No. ARB/12/10 (August 12, 2013), ¶ 13.

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