Third party funding in investment arbitration: The india story Deb Aratrika1 1Faculty Associate, KIIT School of law Abstract One of the most highlighted events in recent times that gained prominence in both commercial as well as investor state arbitration is Third Party Funding (TPF). TPF is nothing but the provision of funds by companies made available to both the claimant and the respondent in the arbitration and the third partyfunder is of a character that has no connection to the underlying dispute resolution. He is, in simple words, a natural or legal person, who though not a party to the arbitration himself, enters with an agreement with one of the parties to finance the entire costs of the proceedings in return for a share of the spoils, which is usually a percentage ofproceeds of a successful arbitration. While those in support of TPF state that it broadens the access to justice because in investment arbitration especially, the respondent being the host state, the claimant investor is often not in a position to provide himself with the huge amount offinance including the cost ofproceedings as well as arbitrator fees; those not favoring TPF on the other hand often argue that it increases the frivolity of claims of investors especially and poses a risk to a conflict of interest. TPF is a phenomenon that is commercially gaining popularity in all the major jurisdictions of the world. Even developing countries while signing their BITs prefer a clause where they can have access to third party funding in the event of any arbitration taking place. However, India as a country has not incorporated TPF as part of its new Model BIT. In the light of that, this paper will explore the scope of TPF in the existing law and the erstwhile Arbitration and Conciliation Act, 1996. TPF however has been a subject matter of controversies from various angle; primarily questions have been raised regarding the impact that TPF might have on the independence of arbitrators and jurisdiction of the tribunal While disclosure of TPF will increase transparency in the entire dispute resolution process, such disclosure will raise a doubt in the opposite party’s mind that the claimant or the respondent whosoever is accessing third party funding, will not have financial capacity to pay if the award goes against them. TPF is generally accepted by a claimant investor who invokes arbitration primarily because his investment or assets have been expropriated by the host state. This paper will explore the various instances where third party funding becomes an easy way for access to justice. It will also point out the impact that it has on the arbitral proceedings, independence of arbitrators and finally, the enforcement of the award. TPF also has certain drawbacks that might defeat its entire purpose and thereby not prove to be beneficial to the funded party. The above issues are to be discussed in details in this paper with reference to recent judgements that highlight certain major concerns in this regard. Top Keywords Third party funding, Investment arbitration, Investors, Tribunal, Resolution. Top |