Have there been any significant developments with regard to third party funding in your jurisdiction recently?

International Arbitration (3rd edition)

Egypt Small Flag Egypt

There have been no significant developments, and third party funding remains to be a practice that effectively still does not exist in Egypt.

France Small Flag France

On 21 February 2017, the Paris Bar Council (Conseil de l’Ordre) approved a resolution confirming that third-party funding of legal proceedings facilitates access to justice in international arbitration and is allowed under French law. The resolution addressed the potential interference by a third party in the relationship between the lawyer and the client and the issue of whether the funding arrangement should be disclosed to the arbitrators.

The resolution provides that French lawyers (avocats) should not communicate with, or give advice to, the third party providing funds to their client. A French lawyer may only have a meeting with the funder if the client is present. In addition, a lawyer should advise the client to disclose the existence of any funding arrangement to the arbitrators and inform the client of the adverse consequences (annulment of the award or enforcement problems) that lack of disclosure may create.

Cyprus Small Flag Cyprus

Not applicable in Cyprus.

Czech Republic Small Flag Czech Republic

Third party funding is not regulated under the Czech arbitration law and is therefore allowed based on the principle of contractual freedom. There have been no significant developments in the recent years on third party funding in the Czech Republic.

Romania Small Flag Romania

Albeit not strictly regulated or forbidden under the Romanian law, third party funding is not widespread in Romania.

Serbia Small Flag Serbia

Serbian law does not contain rules of third party funding and in practice there was no significant developments in Serbian jurisdiction.

China Small Flag China

The international investment arbitration trial rules of CIETAC (“Rules”) taking effect in 1 October 2017 was the first set of arbitration rules in China to touch upon the subject of third-party funding. The Rules expressly recognizes “third-party funding” and requires that any third-party funding as well as the identity of the funder to be disclosed without delay to the other party, the tribunal and CIETAC (or its Hong Kong Arbitration Center). The tribunal is also empowered to order disclosure of information related to third-party financing. Moreover, when deciding on arbitration fees and other costs, the arbitral tribunal may consider whether the arbitration is funded by a third party.

Denmark Small Flag Denmark

a. No

Poland Small Flag Poland

In Poland third party funding is not regulated. There is also no publicly available case law discussing this matter.

Switzerland Small Flag Switzerland

Despite the recent increase of third party funding, the issue remains unregulated under Swiss law. There are no rules or restrictions on third-party funders in Switzerland. While, the Swiss Federal Tribunal has expressly confirmed that third party funding is, as a rule, admissible, certain limitations on influencing the client-attorney relationship will need to be respected by third party funders. In particular, in order to avoid any conflict of interest, the third party funder should not unduly interfere with the client-attorney relationship.

UAE Small Flag UAE

The local arbitration market has not been significantly impacted by Third Party Funding although the option has been promoted within the region to interested stakeholders.

United Kingdom Small Flag United Kingdom

In Essar Oilfields Services Ltd v Norscot Rig Management PVT Ltd [2016] EWHC 2361 (Comm), the English Commercial Court confirmed that arbitrators have the power to award the costs of a third party funder. These are considered to be "other costs of the parties" under s.59(1)(c) of the 1996 Act. In early 2018, a joint task force of ICCA and the School of International Arbitration at Queen Mary University of London unveiled the final draft of its report on third-party funding.

Saudi Arabia Small Flag Saudi Arabia

Neither the KSA Law of Arbitration nor the the SCCA Arbitration Rules address the issue of third-party funding. As such, there are no clear regulations governing third-party funding in Saudi Arabia. To our knowledge, there is no available record of the whether there has been any cases involving third party funding in the KSA.

United States Small Flag United States

There has been a rise in the prevalence of third-party funding in the U.S. in recent years. Such development has given rise to concerns between arbitration practitioners, mostly related to potential conflicts of interests between funders and arbitrators. For this reason, the working group who is drafting the amendments to the ICSID rules included an obligation for the parties to disclose whether they are being supported by third-party funding. According to the draft, the parties will have to provide the name of the funder prior to the appointment of the arbitrators, while the arbitrators will be required to disclose whether they have any relationship to the funder. This obligation is to be applied throughout the proceeding. Thus, if the parties obtain third-party funding after the commencement of the arbitration, they are required to disclose such information to the Tribunal then.

Other institutional arbitration rules, such as those of the AAA, the ICDR, the CPR, and JAMS, have not yet incorporated third-party funding provisions into their rules.

Austria Small Flag Austria

Based on anecdotal evidence, the use of third party funders has become considerably more frequent. There is, however, no reliable data available on how often parties finance arbitration proceedings through third-party funders.

Nigeria Small Flag Nigeria

There are no rules on third-party funding in Nigeria. Third-party funding in arbitration is not prohibited in Nigeria. However, there are no known third party funders that are active in the Nigerian market.

Portugal Small Flag Portugal

There are no rules or specific restrictions on third-party funders in Portuguese law.

This issue is still something new and not explored. However, recently there was an increase in the number of conferences and articles where this issue has been addressed which opens the perspective of being also a hot topic in the near future.

Russia Small Flag Russia

Although third-party funding is in a rather nascent state when it comes to legal regulation, it is increasingly gaining interest amongst the Russian arbitration community. Moreover, several funders and third-party funding service already operate on the Russian market.

Ireland Small Flag Ireland

Third party funding of civil litigation has been under the spotlight in Ireland for the past few years, and there have been a number of relevant court decisions. In 2015 the Court of Appeal concluded that after the event insurance could be taken into account when considering whether to grant security for costs against a plaintiff, which was the first indication by the courts that such a policy was permissible. More recently, in a case arising from the State’s award of a mobile phone licence, the plaintiff – which was funded by a professional third party funder – sought court approval of the funding arrangement. In 2017, the Supreme Court held that the funding arrangement fell foul of the rules against maintenance and champerty, which are still part of Irish law, and that legislation would be required to abolish those rules before third party funding of litigation could be permitted. As yet, no such legislation has been enacted. The issue of third party funding in arbitration (whether domestic or international) has not been considered by Irish courts to date.

Norway Small Flag Norway

There has not been any significant legal development with regard to third party funding in Norway recently. However, it is to be noted that third party funders emerge and try actively to promote their services. Our impression is that these providers mainly direct their services towards litigation in the ordinary courts, not so much towards arbitration. As far as commercial arbitration is concerned, the parties will more often than not be self-sufficient with funds to conduct the necessary proceedings.

Germany Small Flag Germany

Neither the German arbitration provisions nor the DIS Arbitration Rules expressly address or regulate third-party funding. Third-party funding is generally permitted in Germany, both in litigation and arbitration. It has been gaining more relevance over the past few years. The main focus of third-party funding, so far, has been on antitrust litigation matters as well as mass litigation rather than individual claims in arbitration.

Croatia Small Flag Croatia

We are not aware of any such developments (or other legislative developments regarding arbitration) in Croatia.

Updated: November 14, 2018