Need a refresher on Third-Party Funding?  Take a look at our Wiki Notes on Third-Party Funding and Not-for-profit Third-Party Funding


The increased use of Third-Party Funding in litigation and international arbitration in the last decade has prompted a debate on whether it should be regulated and the means to regulate it. The Third-Party Funding industry has been mostly an unregulated sector worldwide until an upsurge in the number of third-party funders, funded cases, and law firms working with third-party funders shed light on the phenomenon and led to increased scrutiny.

To address the concerns born from this lack of regulation and overseeing authorities, the Third-Party Funding industry has attempted to self-regulate the conduct of third-party funders in their litigation and arbitration funding activities. Members of specialized associations have therefore committed to upholding a set of rules drafted or administered by the said organizations, such as:

  • The Code of Conduct for Litigation Funders administered by the Litigation Funders of England and Wales (ALF);
  • The Best Practices drafted by the International Legal Finance Association (ILFA); and
  • A potential Code of Conduct for Litigation Funders in Europe, which will be established by the soon-to-be-launched European Association of Litigation Funders (EALF).

In general, these rules tend to contain provisions regarding the capital adequacy of funders, the level of control or rather the limited influence third-party funders may exercise over cases they finance, their obligation to respect confidentiality and legal privilege, as well as the respect they owe to the professional and ethical duties imposed on legal counsels of funded parties. Some also contain provisions regarding transparency and the avoidance of conflict of interest, which has been the main point of contention in international arbitration.

These codes of conduct are, however, voluntary and no substantial mechanisms tend to be put in place to ensure that third-party funders fulfil their commitments.

The International Bar Association Guidelines on Conflicts of Interest in International Arbitration 2014 was the first regulatory instrument to acknowledge the potential issues the involvement of third-party funders might create in international arbitration and extend its conflicts of interest rules to funders.

Since then, Third-Party Funding has become an even more common feature of international arbitration. Due to the lack of mandatory reporting/disclosure, no data to this day seems available as to the number of international arbitration cases that benefit from third-party funding. That being said, the growth in the number of cases financed by third-party funders has been so evident that it has prompted key stakeholders such as institutions and States’ to advocate for more transparency in international arbitration, both in commercial and investment arbitration, by way of regulating Third-Party Funding.

As an example, in 2020, Burford Capital, a leader in the sector, reported having spent $595 million on behalf of its clients in legal fees and costs (both in litigation and arbitration) and holding an investment portfolio of $4.5 billion.

While for some time, counsels and parties had to take into consideration how arbitral institutions regulated or not Third-Party Funding, not only when a dispute arose but as soon as when they selected a suitable arbitration clause and arbitral institution, this is no longer a relevant step as arbitral institutions have all, for the most part, embraced the debate and regulated the disclosure of Third-Party Funding in arbitrations brought before them (2).

The Third-Party Funding regulation landscape is also evolving within jurisdictions (1). Some have relaxed or eliminated prohibitions against third-party funding in international arbitration in the last few years (e.g., Hong Kong and Singapore), while also introducing new regulations to ensure some level of control over third-party funding activities, particularly regarding disclosure obligations in international arbitration.

The picture is not all bleak for third-party funders. The reason third-party funding has become so popular in international arbitration is that it does solve some issues related to this dispute resolution mechanism, especially when it comes to access to justice.

Third-party funding has indeed enabled parties to bring meritorious claims that were otherwise financially unsustainable in investment arbitration. Even State parties have had access to third-party funding on occasion.

In international commercial arbitration, third-party funding has also been regarded as a way to offset the high cost of arbitration for parties.

On the regulation front, various means have and may be used to regulate Third-Party Funding, especially in Investor-State Dispute Settlement (ISDS), such as through provisions in investment treaties, multilateral treaties, domestic legislation, and arbitral rules. All of these are the object of this article which will take a look at the latest developments in Third-Party Funding regulations.

2021 has proven to be a particularly fruitful year for proposals to regulate Third-Party Funding. And it looks like 2022 might be the year for increased regulation of Third-Party Funding in arbitral rules as well as in jurisdictions usually silent on the matter, as the EU enters the conversation.

Third-Party Funding around the world: a brief overview of recent developments

Modern trade agreements: not Third-Party Funding friendly when it comes to ISDS

Modern bilateral or multilateral trade agreements tend to either expressly ban Third-Party Funding or to ensure its disclosure in arbitration. See for instance:

New Third-Party Funding regulations in jurisdictions outside the European Union in 2021


Even though third-party funders are now subject to financial services regulations in Australia (since 2020), they still enjoy a great deal of freedom as no centralized rules govern Third-Party Funding activities.

Nevertheless, the Australian Centre for International Commercial Arbitration (ACICA) took it upon itself to introduce new rules in 2021 which provide for the disclosure of both the existence of Third-Party Funding and the identity of the funder at the earliest stage possible of the arbitration procedure. See art. 54 of ACICA Arbitration Rules 2021.


Singapore is known to be one of the first jurisdictions to have openly permitted Third-Party Funding in international arbitration and related court proceedings.

The Singapore International Arbitration Centre (SIAC) has already established the power of investment arbitral tribunal to order the disclosure of the existence and identity of third-party funders involved in investment arbitration disputes administered by SIAC. See art. 24(l) of SIAC Investment Arbitration Rules 2017.

In 2021, however, while Singapore still strictly prohibits Third-Party Funding in domestic litigation, it extended the liberal Third-Party Funding regime it grants to international arbitration to include domestic arbitration and mediations relating to domestic arbitration, as well as to proceedings before the Singapore International Commercial Court, and all associated court proceedings.

It is important to note that lawyers registered to practice in Singapore involved in arbitrations seated in Singapore have a professional duty to disclose the existence of Third-Party Funding their clients receive. No such disclosure obligation exists for lawyers practicing outside of Singapore involved in Singapore seated arbitrations. The disclosure obligation is therefore put on counsels and not on parties.

2022: The European Union is entering the Third-Party Funding conversation

For the most part, the EU has been silent regarding Third-Party Funding in litigation and international arbitration until it became an unavoidable topic. In 2020, a Directive on representative actions included some safeguards against abusive practices by third-party funders which, however, only apply to claims brought under this Directive.

A growing fear among members of the European Parliament that third-party funders regularly take profits far in excess of other financial companies emerged, following the expansion of Third-Party Funding activities in the EU. Once the idea that justice might be treated as a financial asset or liability transpired, third-party funders began to be seen as extracting profits from the European justice systems without proper safeguards, regulations and most of all transparency.

In, 2021, the Parliament’s Legal Affairs Committee, therefore, drafted a set of rules to regulate Third-Party Funding in the EU and published a draft report containing recommendations for the European Commission, including a proposal for a directive on responsible private funding of litigation.

The draft reflects and deals with the concerns mentioned -that third-party funders may charge excessive fees and take control over legal proceedings within the EU justice systems. It goes as far as declaring that a dire need to protect European citizens from third-party funders’ financial exploitation exists.

The main propositions therefore include:

  • the prohibition for third-party funders to take control over the cases they finance;
  • the prohibition for third-party funders to charge excessive fees by establishing a cap on fees;
  • an obligation to disclose the existence of a funding agreement in proceedings;
  • safeguards against conflicts of interest; and
  • oversight of third-party funders to ensure the same sort of safeguards and transparency as other financial services, through a licensing system.

Should the draft be adopted in a plenary session of the Parliament, the European Commission would then prepare a proposal for a directive.

It is yet to be determined the impact such a Directive would have on international arbitration seated in an EU jurisdiction or filing for enforcement in an EU jurisdiction. One of the possibilities could be that this Directive enters the realm of public policy in the EU and prevents the enforcement of awards within the EU that do not comply with the said Directive.

The new trend in arbitral institutions rules: providing for the disclosure of Third-Party Funding as a minimum

Of late, arbitral institutions have acknowledged the existence of Third-Party Funding and the requirement for increased transparency. Many have therefore included provisions dealing with Third-Party Funding. However, some institutions have made simple recommendations rather than adding compulsory provisions to their rules:

The emergence of this trend has now made it a rare occurrence for leading arbitral institutions not to expressly address the Third-Party Funding issue. In 2021, leading arbitral institutions joined the movement and adopted modern rules containing Third-Party Funding provisions:

The London Court of International Arbitration (LCIA) has yet to provide guidance on the matter, even though it revised its rules in 2020.

The language may change from one institution to another: some require not only the disclosure of the existence of a Third-Party Funding but also its identity so arbitrators can ensure their lack of conflict of interest, and some may even give more freedom to arbitral tribunals to ask for some of the terms of the funding agreements.

Other leading institutions are looking into amending their rules in 2022.

2021 United Nations Commission On International Trade Law (UNCITRAL) Initial Draft on the Regulation of Third-Party Funding in ISDS

Since 2017, UNICTRAL Working Group III -composed of member States, observer States, and observer intergovernmental and non-governmental organizations-, has been working on identifying concerns and issues regarding investor-State dispute settlement in order to propose reform solutions.

Last year, UNCITRAL published its Initial Draft Provisions on the Regulation of Third-Party Funding in Investor-State Dispute Settlement and opened it for comments. The draft proposed several types of models for regulating Third-Party Funding in ISDS and their sanctions, from most to least prohibitive:

  • the “Prohibition models”: this model of regulations is designed to prohibit third-party funding in ISDS altogether;
  • the “Restriction models”: this model of regulations permits but restricts certain types of third-party funding;
  • a stand-alone regulation model: the disclosure of Third-Party Funding, with various propositions as to the extent of the disclosure and the powers of arbitral tribunals to order it.

In addition to these potential regulations, the draft indicates that the Working Group may want to consider establishing a code of conduct for third-party funders.

The Working Group felt it was important to clarify that Third-Party Funding cannot be considered as an investment and TPFer as investors which would be protected under investment treaties.

2022 Proposed Amendments to the Regulations & Rules for International Centre for Settlement Disputes (ICSID) Convention Proceedings

The correlation between the concerns regarding transparency of international arbitration and the independence and impartiality of arbitrators identified by UNCITRAL Working Group III and the areas for potential amendment of ICSID rules is clear.

Drawing from the conclusions of the UNCITRAL Working Group III discussions, ICSID therefore launched its own consultation of ICSID member States and the general public to identify where reforms may be needed in its sets of rules.

As a result, ICSID submitted amended rules for a vote of approval by Member States on January 20, 2022.

In Arbitration Rule 14 of the Proposed Amendments to the Regulations & Rules for ICSID, Third-Party Funding is treated as a transparency issue. ICSID, therefore, chose a disclosure model whereby parties have an obligation to disclose the existence of Third-Party Funding as well as the identity of their third-party funders to potential arbitrators prior to their appointment to ensure their lack of conflict of interest.

If approved, the updated rules would go into effect on July 1, 2022.


Third-Party Funding need not be seen as an impediment to transparency in international arbitration. The current regulation wave will hopefully answer common concerns expressed by key stakeholders, regarding conflict of interest especially, and permit greater access to justice in general, and international arbitration in particular, for impoverished parties as well as for companies looking for a convenient risk-sharing mechanism.