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The Duty to Disclose Third-Party Funding in Investment Arbitration

[This article has been authored by Aryan Tulsyan and Aroha Kadyan, third-year law students from JGLS.]

Keywords: Investment Arbitration, Third-Party Funding, Duty to Disclose, Transparency, Confidentiality.


International Investment Arbitration entails considerable expense for both the investor and the State party involved in such arbitration proceedings. The bankrolling of a proceeding by a third-party funder has become increasingly common in International Investment Arbitration. Third-Party Funding (“TPF”) is when a party to an arbitration receives monetary assistance from a third party in exchange for a pre-determined profit. Usually, such assistance is utilised towards the recipient party's legal and arbitration-related costs. This article attempts to situate the position of the duty to disclose TPF as it contemporarily exists in law, and finds that it skews arbitral proceedings towards transparency in the Transparency-Confidentiality Spectrum. The article first discusses the concept of the duty to disclose TPF, and then looks at the essentials of arbitral proceedings: transparency and confidentiality. Finally, the article situates the duty to disclose TPF in the Transparency-Confidentiality Spectrum.

What is the Duty to Disclose Third-Party Funding?

Third-party funding has a significant impact on an arbitral proceeding. It is may impact or jeopardize the integrity of the proceedings, and the way the funders, the parties, and the arbitral tribunal interact. The general impartiality and independence of the proceedings and the prospects of justice may be threatened by the conflict of the arbitrator’s interests. The disclosure of third-party funding is one possible way to regulate this situation. It can broadly be of two types; in the first type, the party merely discloses to the other party the fact that it is being funded by a third party. However, the second type is more elaborate in nature, and the other party is made aware of specific details of the TPF, such as the nature of the contract, the identity of the party-funder, and so on.

Transparency and Confidentiality in Investment Arbitration

In investment arbitration, transparency broadly includes the obligation of host states to publish all the legal rules, regulations and other statutory requirements affecting investors. It is becoming increasingly important owing to increased non-governmental participation along with the involvement of non-investment considerations. This view is supported by recent developments such as the adoption of the UNCITRAL Transparency Rules and the Mauritius Convention, as well as their incorporation into the draft texts of the Transatlantic Partnership and EU-Canada FTA. Transparency also affects various aspects of International Investment Law and Investor-State Arbitration, including fair and equitable treatment, expropriation, compensation, full protection and security, and publication of awards. Furthermore, instruments like the ICSID Convention, the New York Convention, NAFTA, as well as the UNCITRAL Arbitration Rules assure a transparent Investment Arbitration mechanism.

On the other hand, confidentiality is considered to be a unique and distinctive feature of arbitration. Within the context of Investor-State Arbitration, confidentiality includes, but is not limited to, preventing the disclosure of important material such as the evidence, claims, documents, counterclaims, and any other information prepared for and exchanged during the course of arbitration, awards, etc., to third parties.

There could arise a conflict between transparency and confidentiality, both of which are important to investment arbitration. One example of the competing interest of, and tensions between, transparency and confidentiality within investment arbitration is the participation of NGOs as amicus curiae. On one hand, the acceptance of amicus briefs is a sign of the transparency of the investment arbitral tribunal. On the other hand, confidentiality is reinforced when the amicus curiae are not allowed to take part in the arbitration proceedings and are also refused access to documents.

Situating the Duty to Disclose TPF between Transparency and Confidentiality

The involvement of third-party funders in investment arbitration should be analysed from the Transparency-Confidentiality dichotomy. In general, transparency in arbitration would involve the disclosure of a third-party funding relationship, whereas confidentiality would involve the concealment of such relationships. 76 per cent of international arbitration practitioners have agreed that the duty to disclose the existence of TPF should be mandatory, whereas 63 per cent have agreed that the identity of the third-party funder should be disclosed as well, as per the 2015 International Arbitration Survey conducted by White and Case along with Queen Mary University.

A brief analysis of previous investment arbitration disputes can showcase how TPF disclosures stumble between the Transparency-Confidentiality dichotomy, and how tribunals try to balance both aspects. The Tribunal in EuroGas and Belmont v. Slovak Republic ordered the claimant to reveal the identity of their third-party funder in furtherance of transparency in the arbitration proceedings. Further, in the cases of Muhammet Cap v. Turkmenistan and South American Silver v Bolivia, the Tribunal directed the Claimant to disclose the identity of their third-party funders, and disclose the terms of their funding agreements. Thus, here we see different degrees of a transparency-confidentiality balance.

Although there is a dearth of a binding rule on the disclosure of TPF relations, it is imperative to look at the way in which arbitral institutions in the current legal systems situate the duty to disclose in the context of transparency and confidentiality. Standard 7(a) of the IBA Guidelines imposes a duty upon the parties to disclose the existence of a funding relationship. The 2018 Report of the ICCA-Queen Mary University Task Force on TPF in International Arbitration also suggested that the disclosure of third-party funders should be mandatory to prevent future challenges to the award based on the independence of the arbitrator. The Report was bolstered by the UNCITRAL Working Group III Report, which reiterated the need to ensure transparency. Lastly, the 4th Edition of the ICSID Working Paper (February 2020) proposed an amendment to the ICSID Rules of Procedure, to provide for the mandatory disclosure of the name and address of the third-party funder, and the nature of the funding. These recent recommendations show how arbitral institutions are leaning towards transparency as the duty to disclose is preferred by many.

Therefore, it is apparent that in the subject of TPF, transparency trumps confidentiality to a certain extent. However, there may be certain scenarios where confidentiality might trump transparency. For example, if the dispute is between the national government of a State and its defence contractor, it is likely that an arbitral tribunal would consider protecting the interests of confidentiality.

One can still attain a balance between transparency and confidentiality by tweaking the level of disclosure. A full and complete disclosure of the existence of a TPF relationship, along with details of the funding agreement, would mean a completely transparent setup. However, the mere disclosure of the existence of a TPF relationship, without the disclosure of the nature and the details of the funding agreement, could strike a balance between transparency and confidentiality.


It can rightly be concluded that upon perusing the various arguments with respect to the scope of the duty to disclose TPF in investment arbitration, this obligation can be placed more towards the side of transparency as compared to that of confidentiality. As argued in the preceding section, the IBA Guidelines as well as the ICCA-Queen Mary University Report have suggested that the disclosure of third-party funders should be compulsory, to preclude potential challenges to the award based on the independence of the arbitrator. Other reports such as the Working Group III Report as well as the ICSID Working Paper (4th ed.) have also reiterated the need to ensure transparency. These recent recommendations show how arbitral institutions are leaning towards transparency as the duty to disclose is preferred by many. Therefore, upon analysing such legislations and reports, it is found that in the context of the duty to disclose TPF and the Transparency-Confidentiality Spectrum, transparency surpasses confidentiality.

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