REPORT OF THE ICCA-QUEEN MARY TASK FORCE ON THIRD-PARTY .

Chapter 1IntroductionI.IntroductionModern forms of “third-party funding”1 are no longer new to international arbitration.2Recent years have seen an upsurge in the number of third-party funders, the number offunded cases, the number of law firms working with third-party funders, and thenumber of reported cases involving issues relating to funding. At the same time,international arbitration is increasingly used not only for disputes among commercialparties, but also disputes between states and commercial parties, and in state-to-statearbitrations. The participation of states has, in turn, focused attention from both withinand outside the arbitration community on the integrity of the process, with particularfocus on transparency and arbitrator conflicts of interest.As a result of these various trends, third-party funding has increasingly drawn theattention of commentators and scholars, and even more recently of arbitral institutions,national regulatory authorities, and state trade negotiators.Despite the increased attention, many questions remain about third-party funding inthe context of international arbitration processes, most notably about potentialarbitrator conflicts of interest, confidentiality, privilege, and costs issues. To addressthese questions, in 2013 the International Council for Commercial Arbitration (ICCA),in collaboration with Queen Mary, University of London, convened a Task Force onThird-Party Funding in International Arbitration. Since its inception, the Task Forcehas undertaken sustained study and discussion of relevant issues, and its findings arepresented in the balance of this Report.This introductory chapter provides an overview of the organization and work of theTask Force. This Report is the result of the collective efforts of the Task Force. Theviews expressed are not attributable to any particular Member of the Task Force, andall views expressed are those of the Task Force, and not of Queen Mary or ICCA, itsGoverning Board, or members.1. As examined later in the Report, the meaning and contours of the terms “third-party funder”and “third-party funding” can be ambiguous and, in some instances, contested. Unlessotherwise specified, for example in analysis of definitions in Chapter 3, the term “third-partyfunder” may be understood generally to refer to an entity that has no interest in theunderlying merits of a dispute but provides funding or resources for the purpose of financingthe legal costs and expenses of an international arbitration.2. In some sectors, such as maritime, forms of third-party funding have long-existed. In thisrespect, many of the types of funding addressed in this Report may be regarded as “modern”forms of funding.1

THE ICCA REPORTSII.Composition of the Task ForceThe Task Force is co-chaired by William W. “Rusty” Park, a member of the GoverningBoard of ICCA, Stavros Brekoulakis, a professor at Queen Mary, University ofLondon, and Catherine A. Rogers, also a professor at Queen Mary, University ofLondon, and Penn State Law. The work of the Task Force was coordinated by ICCAExecutive Director Lise Bosman and Deputy Executive Director Lisa Bingham.The Task Force was composed of over fifty members from over twenty differentjurisdictions around the world. The members included arbitrators, individuals whowork for states,3 attorneys from both law firms and in-house positions, representativeswith experience at arbitral institutions, academics, and a range of third-party fundersand brokers. The Task Force first met as a group in February 2014, and on severalsubsequent occasions,4 to engage in substantive roundtable discussions.These discussions were generally organized around reports on specific topicsprepared by designated Sub-Committees and presented to the Task Force. Reporttopics included arbitrator conflicts of interest, costs and security for costs, privilege,and implicated a range of other definitional, policy, and practical issues.The work of the Task Force and this Report also benefitted from extensiveconsultations, individual comments, and numerous roundtable discussions and publicsymposia. During a public comment period that extended from 1 September through 31October 2017,5 the Task Force received over sixty written submissions fromindividuals, law firms, and organizations. It also benefitted from many additionalcomments both at the roundtables and symposia organized by the Task Force co-chairs,and numerous other events at which the Draft was discussed.III. Task Force ObjectivesThe Task Force’s objectives emerged out of its work. No specific work product wasinitially envisaged and no specific mandate explicated. Instead, the Task Force took asits starting objective the identification of issues that arise in relation to third-partyfunding in international arbitration, and the determination of what outputs, if any,3. All individuals on the Task Force serve on the Task Force in their individual capacity.4. Task Force members met in person on a number of occasions, including in London andMiami in 2014, in London in 2015, in Mauritius in 2016, and again in London in October2017. These meetings were graciously hosted by Queen Mary, by law firms of Task Forcemembers and, in the case of the October 2017 meeting, by Wilmer Cutler Pickering Hale andDorr. The Investment Arbitration Sub-Committee met in Paris in 2014, and on several lateroccasions by phone. The Investment Arbitration Sub-Committee was also invited toparticipate in subsequent Task Force meetings.5. A list of events at which the Task Force’s work and drafts have been presented can be foundat http://www.arbitration-icca.org/projects/Third Party Funding.html .2

THIRD-PARTY FUNDING IN INTERNATIONAL ARBITRATIONwould be appropriate to address those issues. Moreover, the diverse composition of theTask Force necessitated that any objectives identified satisfy the range of perspectivesand interests represented among its Members.Initially, the range of views among Task Force members largely reflected the rangeof perspectives that had been publicly expressed within the larger internationalarbitration community. Some Members were generally disinclined to produce any formof prescriptive guidance, both for substantive reasons (examined in greater detailbelow) and in light of what some regard as an excess of “para-regulatory” or soft lawinstruments in international arbitration.6 Others believed that the Task Force shouldaim to produce for international arbitration either a code of conduct for third-partyfunders, similar to the Litigation Funders Code in England and Wales, or other form ofregulation.Despite these initial differences, the Task Force quickly identified two points onwhich Members of the Task Force agreed. First, Members agreed that all stakeholderswould benefit from greater understanding about what third-party funding is and frommulti-lateral dialogue about the issues it raises in international arbitration. From thisobservation, one of the Task Force’s primary objectives emerged: to facilitateeducation and informed dialogue.Second, Members agreed that stakeholders in international arbitration would benefitfrom greater consistency and more informed decision-making in addressing issuesrelating to third-party funding.7 The challenge, of course, is that however desirableconsistency may be in the abstract, disagreement remains – both on the Task Force andbeyond – about how and on what terms such consistency should be achieved.6. See generally D. FAVALLI, ed., The Sense and Non-sense of Guidelines, Rules, and otherPara-regulatory Texts in International Arbitration, ASA Special Series No. 37 (Juris 2015);but see Queen Mary Survey, (finding an overall positive perception of guidelines and softlaw instruments, with only 31% responding either that they were too numerous or not useful)Queen Mary, University of London and White & Case, “2015 International ArbitrationSurvey: Improvements and Innovations in International Arbitration” (2015) available at http://www.arbitration.qmul.ac.uk/docs/ 164761.pdf (last accessed 21 August 2017).7. Norton Rose Fulbright, International Arbitration Report (September 2016) available at onal-arbitration-report-issue-7-142408.pdf (last accessed 29 August 2017) (In the words of one funder, “What we seek inrelation to the twin issues of adverse costs and security for costs is certainty. We simplywant to know when and on what bases we will be liable to pay these amounts.”); See alsoW. H. VAN BOOM (“In investment arbitration, the parties do not have certainty at thebeginning of proceedings if, and to what extent, the English or American rule will be appliedconcerning cost-shifting. This probably renders it unappealing for TPF funders to voluntarilydisclose their involvement.”); see also W. H. VAN BOOM, “Third-Party Financing inInternational Investment Arbitration” (31 December 2011) p. 50, available at: https://ssrn.com/abstract 2027114 or http://dx.doi.org/10.2139/ssrn.2027114 (lastaccessed 14 March 2018).3

THE ICCA REPORTSIn both public debates and on the Task Force, discussion has largely moved beyondquestions about whether third-party funding should be permitted,8 to evaluation of howto address specific issues implicated by third-party funding.9 Divergent perspectives onthese issues remain, however, and in turn affect how differently situated stakeholdersview the appropriate means and standards for achieving consistency.The Task Force began its work cognizant of the tensions among a need forconsistency, the continued evolution in debates about third-party funding, and (asdiscussed in greater detail below) the rapid pace of new developments both ininternational arbitration practice and the funding market. Against the backdrop of thesetensions, the Task Force began its work by identifying the most frequently occurringissues that arise in relation to third-party funding in international arbitration.Since the Task Force was initially constituted in 2013, there have been severalimportant developments relating to third-party funding. The funding market hasexpanded in several respects. The number of funded cases has increased significantly.The number and geographic diversity of third-party funders has also increased, withnew entities continuing to enter the market and consequently increase the aggregateamounts available for funding. It is particularly notably that, since the founding of theTask Force, new third-party fu

Task Force. This Report is the result of the collective efforts of the Task Force. The views expressed are not attributable to any particular Member of the Task Force, and all views expressed are those of the Task Force, and not of Queen Mary or ICCA, its Governing Board, or members. 1. As examined later in the Report, the meaning and contours of the terms “third-party funder” and “third .