Third Party Funding in Investor-State Dispute Settlement

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Modern forms of third party funding are no longer new to international arbitration. Recent years have seen significant increases in the number of funders, the number of funded cases, the number of law firms working with funders and the number of reported cases involving issues relating to funding. When third-party funding is used in investor-state arbitration (ISDS) it raises myriad policy questions, some of which are debated in the context of third-party funding generally, and some of which are unique to ISDS.

In this Working Paper, The Policy Implications of Third-Party Funding in Investor-State Dispute Settlement, CCSI analyzes underexplored yet critical policy issues surrounding the use of third-party funding in ISDS. It considers the costs and benefits of the practice, asks whether it is desirable or undesirable that third-parties be permitted to invest in ISDS claims, and if so, under what circumstances and in order to achieve what objectives, and overviews policy responses, including a total or partial ban and various regulatory responses, that may be appropriate to manage identified impacts. A shorter version of the Working Paper, Third-Party Funding and the Objectives of Investment Treaties: Friends or Foes, appeared in Investment Treaty News.

In connection with ISDS reform efforts proceeding in UNCITRAL’s Working Group III, CCSI submitted a “Draft Text Providing for Transparency and Prohibiting Certain Forms of Third-Party Funding in Investor-State Dispute Settlement” which sets forth specific language that could be used to prohibit certain forms of third-party funding.

The following presentations also outline some of the questions and concerns surrounding third party funding in ISDS that are being explored by CCSI:

Relatedly, CCSI and the International Council for Commercial Arbitration (ICCA)-Queen Mary Task Force on Third-Party Funding co-hosted a roundtable discussion on October 17, 2017 that considered the public policy implications of third-party funding in investor-state dispute settlement. The roundtable provided the opportunity for various stakeholders who have diverse perspectives on the use of third-party funding in ISDS to constructively discuss the Public Comment Draft of the ICCA-Queen Mary Task Force Report on Third-Party Funding (Draft Report) and the public policy issues raised therein. The outcome document from the roundtable is available here.