REVISITING THIRD-PARTY FUNDING– AN ANALYSIS OF THE NEW ICSID ARBITRATION RULES

—Robin Grover

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The use of third-party funding (TPF) as a means of financing investment arbitrations has seen an exponential surge in the last two decades. It has gained traction and credibility as it has the potential to increase access to justice, while allowing the funded party to maintain cash flow. However, in the absence of any governing regulations, such an increase in the use of TPF has led to two primary concerns: potential conflicts of interest,and increased risk in recovering arbitration costs. Against this backdrop, the International Centre for Settlement of Investment Disputes (ICSID) amended its arbitration rules in 2022 (ICSID AR) and introduced two new provisions to address these concerns around TPF:(i) Rule 14 of the ICSID AR introducing disclosure requirements for TPF; (ii)and Rule 53 of the ICSID AR directing an arbitral tribunal to consider the existence of TPF as evidence of the ‘relevant circumstances’ to be considered for the determination of a request for security for costs (SFC). The author argues that while the mandatory disclosure requirement in terms of Rule 14 is well-motivated and necessary to reduce conflicts, the language of Rule 14 may fail to address some of the concerns around disclosure. These concerns include - the inadequacy of penalty for non-compliance with the disclosure requirement, issues of conflict arising on account of funding obtained by parties after the constitution of the arbitral tribunal, and the relevance of a specific provision granting an arbitral tribunal the power to order disclosure of any additional information. Further, this paper argues that TPF should have no bearing on requests for SFC. In this backdrop, this paper examines the viability of adding the existence of TPF as evidence of the ‘relevant circumstances’ to be considered for determination of a request for SFC.