THE RESULTING CHALLENGES OF THIRD-PARTY FUNDING DISCLOSURE IN ARBITRATION
Third-party funding is an increasingly attractive option for parties looking to manage the risks or costs of international arbitration, as well as investors seeking to diversify their investments and potentially achieve attractive returns. While the increasing popularity of third-party funding has in the past given rise to a lively debate about the proper scope of disclosure – with many funders preferring to remain unidentified and certain other stakeholders pushing for greater transparency – recent developments in international arbitration suggest a basic convergence around the importance of disclosing the existence of third-party funding and the identity of the funder during the early stages of an arbitral proceeding.
Earlier this year, the International Chamber of Commerce (ICC) revised its arbitration rules to introduce such a disclosure requirement. Article 11(7) of the 2021 ICC Arbitration Rules now requires parties to “promptly” disclose the existence and identity of “any non-party which has entered into an arrangement for the funding of claims or defenses and under which it has an economic interest in the outcome of the arbitration”. The adoption of this requirement by the most preferred arbitral institution in the world signals the crystallisation of a trend toward disclosure. In large part, this trend has been driven by a recognition of the need to identify and avoid conflicts of interest between funders and arbitrators, which can threaten the enforcement of awards and the perceived integrity of arbitral proceedings. However, in seeking to address one potential problem, the ascension of disclosure will likely generate new challenges that parties and prospective funders should keep in mind when preparing for and engaging in international arbitrations.
Apr-Jun 2021 issue
Cleary Gottlieb Steen & Hamilton LLP