The concept of third-party funding is by now very familiar to the international arbitration community and firmly established in the leading arbitral seats globally.
The main benefit of commercial funding is the obvious one, namely access to justice. Arbitration can be an expensive game and a claimant with a strong claim may simply lack the resources to bring its claim forward, particularly when up against a deep-pocketed respondent. Funding is also increasingly utilised by well-resourced claimants who use it as a strategic risk management tool to improve cash flow and take legal costs off the balance-sheet.
Widespread global acceptance
The number of jurisdictions that do not allow arbitration funding has steadily shrunk, with further developments on that front likely this year. For example, since 2023, there has been a statutory exception to the rule against champerty and maintenance to permit funding of international commercial arbitration and related proceedings in Ireland,[1] although the relevant provisions have not yet entered into force. It may be that commencement is on hold pending publication of the Irish Law Reform Commission’s report and recommendations following its consultation on funding that closed late 2023. Hopefully, we may see developments on that front before the end of the year. The availability of third-party funding should enable more meritorious claims to move forward in Ireland and will likely enhance Ireland’s appeal as an arbitral seat.
Widespread user acceptance
Funding is now firmly on the radar of most arbitration users. Data released by Global Arbitration Review as part of the GAR 100 series suggests that between 2019 and 2023, there were on average just under 200 third-party funded arbitrations per year and, in the same time period, firms reported on average around 1300 arbitrations total per year.[2] Recognising that that particular data set will not reflect the entire market, on any view it is consistent with the use of third-party arbitration funding having increased significantly over recent years.
That trend is likely to continue, but we can also expect ongoing debate about whether and how the use of funding should be regulated in the arbitration context.
Indeed, similar debate has been active over recent months in England and Wales against the backdrop of the Civil Justice Council’s review in relation to litigation funding, with recommendations expected to be made in a final report this summer.
Perceived risks and mitigation steps
As the use of third-party arbitration funding has increased, so too has discussion around the risks it can present. Two of the key perceived risks are: (i) that funding encourages frivolous claims; and (ii) the potential for conflicts of interest.
Frivolous claims? Not good candidates for funding
While it is often asserted, there is a lack of compelling evidence to suggest that funding has led to, or enabled, frivolous claims. On the contrary, the opposite is likely true: studies suggest that only around 3 to 5% of the cases presented to funders get funded.[3]
If a case is unlikely to win on the merits, funding it does not make commercial sense because the funder is likely to lose its investment. In fact, many cases that are strong on the merits will still not be approved for funding because, for example, the economics do not work or enforcement would be challenging.
Conflicts of interest: mitigated through targeted disclosure
The second risk, that the involvement of a third-party funder could present a conflict of interest (e.g. if an arbitrator has connections to a party’s funder) is easier to envisage materialising. In practice, this risk is largely managed through disclosure, though the precise requirements vary.
A number of the major arbitral rules (though not all) now specifically require disclosure of certain information relating to third-party funding.
A recent example is found in the new edition of the SIAC Rules that entered into force at the beginning of this year. [4] Under new Rule 38, parties must disclose: (i) the existence of any third-party funding agreement; and (ii) the funder’s identity and contact details.
Tribunals can also order disclosure of details of the funder’s interest in the outcome of the proceedings and whether it has committed to undertake adverse costs liability (which may be taken into account when apportioning costs).
The SIAC Rules are probably the most comprehensive in their treatment of third-party funding; others deal with it more briefly, others (such as the LCIA Rules) not at all.
In the investor-State context, there has also been some movement towards including funding disclosure obligations in the treaties themselves – we see that for example in CETA.[5]
Depending on the seat of arbitration, there may also be statutory requirements for disclosure. In Hong Kong, for example, the Arbitration Ordinance that entered into force in early 2019 requires a funded party to disclose the fact that a third-party funding agreement has been made and the name of the funder. In Singapore, since 2017, the professional conduct rules for lawyers in that jurisdiction have required counsel in a funded arbitration to make such a disclosure.
Interestingly, mandatory disclosure of funding arrangements was not one of the reforms introduced in the new English Arbitration Act 2025. Presumably, the intention is that any concerns in this regard can be met by selecting arbitral rules that expressly address funding arrangements. Leaving it to arbitral institutions to respond to this evolving market allows for greater flexibility than imposing statutory requirements: arbitral rules can be and are amended with greater ease and frequency than legislation.
In terms of the level of disclosure required, funded parties generally won’t be required to disclose all of the terms of the funding agreement, many of which will simply not be relevant. It’s important to weigh the goal of transparency against the need to avoid being so onerous as to deter funders and reduce access to justice, and also to avoid defendants using information gleaned from funding terms to their own strategic benefit.
As a slightly different perspective on potential funding-related conflicts, it is worth noting the decision issued in October last year by an ICSID Tribunal in Silver Bull Resources v United Mexican States on the claimant’s proposal to disqualify Professor Philippe Sands KC.[6]
There, the funded claimant sought to disqualify Professor Sands on the basis of remarks he made about the use of funding in treaty claims while sitting as arbitrator in separate ICSID proceedings, Eco Oro v Colombia.[7] The claimant argued that those comments showed a predisposition against parties using third-party funding in treaty arbitrations.
The co-arbitrators dismissed the challenge, holding that Professor Sands had not said that third-party funding is always unjustified, that he thinks worse of funded parties, or that funded claims were more likely to be unmeritorious – rather he had identified wider concerns around the practice. It will be interesting to see whether and how variations of this argument are run in the future.
Conclusion
As funding has become a more prominent feature of the arbitration (and domestic litigation) landscape in many jurisdictions, it is natural that concerns have arisen as to what risks it might bring and how those risks should be managed. The arbitration community has so far proved adept in nimbly adapting to the evolving funding market and introducing considered and proportionate reforms that protect the interests of arbitration users without deterring third-party funders from continuing to support meritorious claims and, at a wider level, the business of arbitration. As such, there is good reason to expect that funding will continue to play an important and valuable role in the arbitration ecosystem.
Written by:
Emily Wyse Jackson
Senior Legal Counsel
[1] Courts and Civil Law (Miscellaneous Provisions) Act 2023
[2] See https://globalarbitrationreview.com/survey/gar-100/2024
[3] “A Review of Litigation Funding in England and Wales: A Legal Literature and Empirical Study”, Prof. Rachael Mulheron KC (Hon), 28 March 2024, p. 33: “The acceptance rates of pitched cases is extraordinarily low, and very consistent, amongst litigation funders – only between 3% and 5% of all funding opportunities pitched are accepted.”
[4] A broadly similar level of disclosure is required under (i) HKIAC Arbitration Rules 2024: funded parties must disclose the existence of a funding agreement, the identity of the funder and any subsequent changes to that information (article 44); (ii) ICSID Arbitration Rules 2022: require the parties to disclose whether they have third-party funding, the source of the funding, and to keep the disclosure of information current throughout the proceedings. Parties are not required to disclose the funding agreement or its content, although the tribunal may order disclosure of further information; (iii) 2021 ICC Arbitration Rules: article 11(7) that requires each party to "promptly inform the Secretariat, the arbitral tribunal and the other parties, of the existence and identity of any non-party which has entered into an arrangement for the funding of claims or defences and under which it has an economic interest in the outcome of the arbitration."
[5] See EU-Canada Comprehensive Economic and Trade Agreement, Art 8.26: requirement for a funded party to disclose the name and address of its funder (relevant provisions not yet in force).
[6] Silver Bull Resources, Inc. v. United Mexican States, ICSID Case No. ARB/23/24, Decision on the Claimant's Proposal to Disqualify Prof. Philippe Sands, 21 October 2024.
[7] Eco Oro Minerals Corp. v. Republic of Colombia, ICSID Case No. ARB/16/41, Declaration on Costs of Arbitrator Philippe Sands, 4 April 2024.
