Authors: JUDr. Ing. Miloš Olík, Ph.D., LL.M., FCIArb, Mgr. Jan Šlehofer
The Chartered Institute of Arbitrators (CIArb) recently published its Guidelines on Third-Party Funding in International Arbitration, marking an important development in arbitral practice. The use of third-party funding (TPF) has expanded significantly in recent years, raising questions of transparency, consistency, and legitimacy. The Guidelines seek to address these concerns by providing a structured and practical framework for all stakeholders.
At the outset, the Guidelines address the funding process in general and clarify the principal forms of funding, ranging from single-case arrangements to portfolio financing and monetization structures. They also map the typical lifecycle of a funding arrangement, beginning with initial contact and due diligence and culminating in the execution of a funding agreement and its terms. This systematic approach provides an insight a field that has, until now, often been characterized by disparate practices across jurisdictions.
Primary duty of counsel and funding transparency: what the new arbitration guidelines bring
A prominent theme is the requirement of transparency. Funders are expected to demonstrate financial capacity, solvency for at least 36 months, and appropriate risk management mechanisms throughout the life of the dispute. For example, the Guidelines recommend that funded parties request evidence of a funder’s audited accounts and internal decision-making processes before entering into a funding agreement. By codifying such expectations, the Guidelines aim to enhance confidence in the reliability of funders and to mitigate risks that could undermine arbitral proceedings by running out of funds mid-process.
Equally significant is the reaffirmation of the lawyer’s primary duty to the client. The Guidelines emphasize that, notwithstanding a funder’s economic interest, counsel must act solely in the client’s best interest. If a funder seeks to influence counsel’s advice—for instance by encouraging an early settlement for financial reasons—the lawyer should act independently and provide recommendations based solely on the client’s best interests. The guidelines also stress the necessity of rigorous conflict checks, for instance where an arbitrator may have had prior dealings with a funder involved in the proceedings, thereby safeguarding the integrity of the process.
The Guidelines acknowledge that arbitral tribunals may, in certain circumstances, require disclosure of the existence of a third-party funding arrangement. Such disclosure may be particularly relevant in relation to questions of impartiality or when applications for security for costs are made. In this context, the Guidelines highlight that identifying the funder and providing limited information about the funding arrangement may be appropriate to ensure fairness and transparency in the proceedings.
Access to justice for SMEs: New guidelines strengthen TPF’s role in arbitration
Importantly, the Guidelines underscore the role of TPF in promoting access to justice. By enabling parties with limited financial resources to pursue meritorious claims, they can reduce inequality of arms in international arbitration. For instance, a small or medium-sized enterprise might use third-party funding to pursue a claim against a multinational corporation, thereby ensuring that financial asymmetry does not dictate the outcome of the dispute.
For our clients, these Guidelines provide greater predictability and reassurance when considering funding options. They set clearer expectations of funders’ obligations—such as demonstrating long-term solvency, disclosing potential conflicts, and avoiding undue interference—which can reduce risks and strengthen negotiating positions. They can also serve as a respect standard, which may aid smaller companies negotiate more balanced terms with their funders. Above all, the Guidelines reinforce the legitimacy of funding as a tool to pursue or defend claims effectively, allowing clients to focus on the merits of their case rather than financial constraints. Our law firm is ready to assist clients in all stages of the process, from finding the correct funder, entering the funding agreement, as well as represent client’s interests in the arbitration process itself.
