427 / 536
413
CYIL 7 ȍ2016Ȏ
THIRD PARTY TO PICK UP THE BILL?…
More importantly, however, third party funding has a prominent place in discussions
about new approaches to investment dispute settlement mechanisms under investment
protection treaties. Various international organisations, as well practitioners, increasingly
attempt to frame this issue into the broader perspective of an investor – state dispute
settlement reform.
5
Among treaty makers a prominent role as a leader has been taken
by the EU in its recent negotiating activity: the Comprehensive Economic and Trade
Agreement (CETA) and the EU – Vietnam Free Trade Agreement.
This article aims to provide an update on two specific issues in regards to third
party funding in investment treaty arbitration: 1) Security for costs and 2) Allocation
of costs. It reviews the latest case law, analyses its impact on the general discourse and
provides some answers on emerging concerns.
Security for costs
Security for costs is a type of provisional measure that tribunals have power to
order. It is a tool used to preserve the effectiveness of the award and integrity of the
proceeding by protecting the requesting party’s potential right to reimbursement of
costs.
6
A number of tribunals in proceedings under the UNCITRAL Rules, as well
as the ICSID Convention, have addressed this issue. Despite that, the question of
security for costs is still marked by its unpredictability and lack of consistency in
tribunals’ decision-making.
Usually, security is more likely awarded under circumstances leading to mistrust
of the claimant’s financial capabilities and related actions to deflect his potential
liability. When a TPF is present, it indicates the possibility of such a situation when
a claimant benefits from it. However, a parallel obligation to meet a cost award
against the financed party in case of loss is missing.
7
Third party funding thus adds
a new layer of complexity in this area. Should the tribunal take financial involvement
of a TPF into account while deciding whether to grant security for costs? And is it
possible to order the TPF to give security for costs?
Tribunals have to face these questions when a request for security of cost is filed.
8
At this stage, the tribunal needs to analyse the very fact of the existence of third party
5
E. g. DAVID GAUKRODGER, KATHRYN GORDON, ‘Investor-State Dispute Settlement: A Scoping
Paper for the Investment Policy Community’, (2012) 2012/03 OECDWorking Papers on International
Investment, OECD Publishing; ANNA JOUBIN-BRET, ‘Spotlight onThird-Party Funding in Investor-
State Arbitration’ (2015) 16(4) Journal of Investment & Trade.
6
RSM Production Corporation v. Saint Lucia
, ICSID Case No. ARB/12/10, Decision on Saint Lucia’s
Request for Security for Costs (13 August 2014), para 65.
7
MARC J. GOLDSTEIN, ‘Should the Real Parties in Interest Have to Stand Up? – Thoughts about
a Disclosure Regime for Third-Party Funding in International Arbitration’ (2011) 8(4) Transnational
Dispute Management, p. 17.
8
There is a close connection to the dilemma of disclosure of a mere presence of a funding arrangement.
This is frequently discussed and disputed.