Disclosure of third-party funding arrangements

​​AFSA International – a branch of the Arbitration Foundation of Southern Africa – has recently released its new rules, which require the disclosure of third-party funding (TPF) arrangements in the international arbitrations it administers.

TPF arrangements are an increasingly common feature in arbitration proceedings.  As a result, international arbitration institutions are gradually amending their rules to regulate parties' funding of international arbitration proceedings through TPF arrangements. One of the most recent institutions to do so is AFSA International.

This article considers the main criticisms of TPF arrangements and attempts by international arbitration institutions to address these concerns through disclosure requirements.

Concerns with TPF arrangements

A prominent concern with international arbitration proceedings is that there is an element of uncertainty as to how the proceedings will develop, their duration and their ultimate outcome, given the involvement of opposing parties.  These factors may result in extensive legal costs which may in turn translate into significant financial risk for the parties involved.

The allure of TPF from the funded party's perspective is the versatility it offers as an effective financial risk management tool. Parties are able to finance disputes without significantly compromising their financial position. The attraction of TPF, from a funder's point of view, is the possibility of receiving a return on its investment in the form of a fixed, predetermined amount or percentage of the arbitral award.

There are, however, some criticisms of TPF arrangements. There is the possibility of a conflict of interest arising from the involvement of the third-party funder, particularly if it has any connection with an arbitrator presiding over the proceedings. The existence of a TPF arrangement indicates that the funded party's ability to self-finance its involvement in the proceedings is in doubt.  This may place in question the enforceability of an adverse award against the funded party, as well as the funded party's ability to foot the bill if a costs order is awarded against it. This latter concern raises the question whether the existence of a TPF arrangement would provide grounds for the other party / parties to apply for security for costs, and whether and to what extent the third-party funder should be held liable for all or at least a portion of an adverse costs order.

In order to address these concerns, it is necessary for a party to be aware of the existence and, where appropriate, the contents of a TPF arrangement. In most proceedings, however, the disclosure of TPF arrangements is not required and will only occur if the funded party voluntarily discloses these details or it is required to do so by the tribunal.

In South Africa, the latter concern takes on an interesting dimension. South African courts have recognised that a funder in terms of a TPF arrangement can be held liable for the costs of the proceedings. In the case of Price Waterhouse Coopers Inc and Others v IMF (Australia) Ltd and Another 2013 (6) SA 126 (GNP), the High Court held that a TPF funder may be directly liable for costs but also established that it is necessary to join the funder to the proceedings to enable the Courts to exercise their discretion regarding costs against them.  Further, in the case of EP Property Projects (Pty) Ltd v Registrar of Deeds, Cape Town 2014 1 SA 141 (WCC), the High Court held that cost orders would generally not be granted against what it referred to as "pure funders". A "pure funder" is one which does not seek to control the course of the litigation and lacks any personal interest in the litigation. However, where the funder controls the proceedings and has a personal interest in its success, then the funder is effectively obtaining access for its own purposes and becoming the "real" litigant. It is then considered that such a funder may be held jointly and severally liable for any adverse cost order.

Comparative analysis of the regulation of TPF arrangements by key international arbitral institutions

In the face of these concerns, the most obvious point of regulation of TPF arrangements is the mandatory disclosure of certain details of such arrangements. A number of international arbitration institutions have taken steps to amend their rules to mandate disclosure in this regard.

Article 27 of AFSA International's Rules (which took effect on 1 June 2021) requires that a party to an arbitration under the rules who enters into a Third-Party Funding Agreement (as defined in Article 27) shall notify all other parties to the arbitration, the Arbitral Tribunal and the AFSA Secretariat of (a) the existence of the Third-Party Funding Agreement; and (b) the identity of the Third-Party Funder (as defined in Article 27).

This appears to be a fairly reserved approach – requiring that a minimal amount of information is disclosed.  It should be noted, however, that this approach is probably the most common among international arbitration institutions, with a few differences between them.

Article 27 of the AFSA International's Rules is very similar in content to Article 44 of the Hong King International Arbitration Centre's 2018 Administered Arbitration Rules (the HKIAC's 2018 rules).  Unlike the HKIAC's 2018 rules, however, AFSA International's Rules do not expressly state that the tribunal may take into account TPF arrangements when determining an award in respect of the costs of the arbitration.

Article 11(7) of International Chamber of Commerce's (the ICC's) 2021 Arbitration Rules also requires parties to disclose to the Secretariat, the tribunal and the other parties, the existence and identity of any third party involved in a TPF arrangement, where that third party has an economic interest in the outcome of the arbitration. This requirement is specifically aimed at assisting arbitrators to disclose conflicts of interest which they may have with funders.
The Singapore International Arbitration Centre's (SIAC's) Investment Arbitration Rules (which, it is noted, only apply to disputes involving a State, a State-controlled entity or intergovernmental organisation), however, go a step further.  Rule 24(I) provides a tribunal with the power to order disclosure of the existence of a TPF arrangement, the identity of the funder and also where appropriate the funder's interest in the outcome of the proceedings and liability in respect of costs. 

Limited, albeit mandatory, disclosure of the existence of and the identity of the funder in a TPF arrangement, without disclosing the contents of the arrangement, may be insufficient for purposes of determining whether the funder should be held liable for costs.  Wider disclosure of the contents of a TPF arrangement may, however, prejudice the funded party's litigation strategy or contradict the legal privilege potentially applicable to such information.

Article 23 of the Madrid International Arbitration Centre seeks to strike a balance in this regard. It not only requires a party to disclose the existence of a TPF arrangement and the identity of the funder, but also expressly gives the tribunal the authority to request the funded party to disclose further information regarding the funder and the TPF arrangement which it considers appropriate, subject to applicable rules on non-disclosure, professional secrecy or attorney-client privilege.


The growing consensus that there is a need to address the concerns raised by TPF arrangements through mandatory disclosure is evident in the slow but steady adoption by arbitral institutions of formal rules to this effect.


These materials are provided for general information purposes only and do not constitute legal or other professional advice. While every effort is made to update the information regularly and to offer the most current, correct and accurate information, we accept no liability or responsibility whatsoever if any information is, for whatever reason, incorrect, inaccurate or dated. We accept no responsibility for any loss or damage, whether direct, indirect or consequential, which may arise from access to or reliance on the information contained herein.

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