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CYIL 7 ȍ2016Ȏ THIRD PARTY TO PICK UP THE BILL?…
regulating. Within the investment arbitration community itself opinions diverge. For
some it is time to regulate the “wild west” of third party funding development.35 For
others, “regulation is unnecessary for many reasons.”36 Between two extremes – status
quo, i.e. no regulation, and a complete ban on third party funding in proceedings,
the third way should be pursued.
However, it is worth noticing that this issue in general keeps escaping the regulators’
hawk eye for the time being. There is virtually no regulation as investment treaties nor
the ICSID Convention address third party funding.37 With a notable exception of
the new approach of the European Union which proposes for the Transatlantic Trade
and Investment Partnership (TTIP) regulation of third party funding,38 a recently
inserted identical provision in the CETA39 and more detailed provision into the EU
– Vietnam FTA40 and the Slovakia – Iran investment treaty 41 concluded just at the
beginning of this year, the authors are not aware of any other ongoing efforts of
treaty-makers in this area.
For costs issues this lack of regulation applies as well. We have shown in the
text above that tribunals’ approaches differ and even within arbitrators community
there are voices calling for setting some form of rules, as the example of the Edward
Nottingham’s dissent in RSM Production Corporation v. Saint Lucia illustrates. First
and foremost, regulation should be focused on preventing negative effects on the
third party funding on the arbitration proceedings and the position of respondent.42
In terms of costs, cost-shifting rules could be more predictable. A system of obligatory
moderate advance deposit to cover for potential costs orders, particularly in case of
establishment multilateral investment court in the future, may be the right way to
approach the regulation of the matter.
35 FRANCISCO BLAVI, ‘It’s About Time To Regulate Third Party Funding’ (Kluwer Arbitration Blog ,
17 December 2015)
party-funding/> accessed 4 May 2016.
36 CATHERINE KESSEDJIAN, ‘Good governance of third party funding’ (2014) 130 Columbia FDI
Perspectives, p. 2.
37 ANNA JOUBIN-BRET, ‘Spotlight on Third-Party Funding in Investor-State Arbitration’ (2015) 16(4)
Journal of Investment &Trade, p. 732; NADIA DARWAZEH, ADRIEN LELEU, ‘Disclosure and Security
for Costs or How to Address Imbalances Created by Third-Party Funding’ (2016) 33(2), p. 134.
38 European Commission, Draft text – Investment Chapter, Section 3 – Resolution of Investment Disputes
and Investment Court System, Sub-Section 2: Alternative Dispute Resolution and Consultations
[2015] art. 8.
39 European Commission, Comprehensive Economic and Trade Agreement, Chapter 8 – Investment,
Section F – Resolution of investment disputes between investors and states [2016] art 8.26.
40 European Commission, Agreed Text of EU-Vietnam Free Trade Agreement, Chapter II – Investment,
Section 3. Resolution of Investment Disputes, Sub-Section 1: Scope and Definitions [2016] art. 11.
41 Agreement between the Slovak Republic and the Islamic Republic of Iran for the Promotion and
Reciprocal Protection of Investments [2016] art. 21.6.
42 WILLEM VAN BOOM, ‘Third-Party Financing in International Investment Arbitration’ (2011), p. 54.