Gamblers, Loan Sharks & Third-Party Funders

Abstract

International arbitration is proving to be an irresistible allure for third-party funders. International arbitration cases are particularly attractive because of the prevalence of high-value claims, the speed of proceedings, the potential for reduced evidentiary costs and streamlined procedures, the ability to control variables such as expertise of the decisionmaker, the potential for legal arbitrage to avoid national restrictions on such funding, and the highly enforceable nature of arbitral awards. As a result, third-party funding seems to be a permanent fixture in international arbitration. Their increasing presence, however, raises a host of complex legal and ethical questions that can affect all various actors, most notably counsel and arbitrators, as well as the larger framework of the international arbitral regime. Notwithstanding their potential impact, the very definition of third-party funders and the mechanics of how they operate remains largely unknown. Adding to this uncertainty, third-party funders in international arbitration are uniquely untethered from any formal or national professional regulation or national mandatory laws. Meanwhile, ambiguities about counsel ethics in international arbitration and funder participation in arbitrator selection raise peculiar dilemmas that have few ready answers. Debate has begun, but to date, careful analysis of and specific proposals in response to these complex issues has been lacking. This book chapter provides one of the first sources to undertake sustained analysis of the the peculiar quandaries raised by the presence of third-party funding in international arbitration and suggest concrete solutions. As a chapter in a forthcoming book ETHICS IN INTERNATIONAL ARBITRATION (Oxford University Press, 2014), it examines how issues relating to third-party funders should be integrated into a larger regime of self-regulation of professional conduct in international arbitral proceedings.