“Three is none? Third-party funding in investment disputes: The UNCITRAL working document”

International Justice Journal (Issue 2, 2022) has published an article by Senior partner Ilya Lifshits and lawyer Anastasia Shatalova “Three is none? Third-party funding in investment disputes: The UNCITRAL working document”.

Since 2017 the UNCITRAL Working Group III has been working on reforming the investor-state dispute settlement system. One of the initiatives in this project is the development of draft provisions on third-party funding. Such funding constitutes a challenge to the investment dispute resolution system since third parties get an opportunity to use the system to earn a substantial profit and such funding may increase the number of frivolous claims against states. Rules of many arbitral institutions have been amended to require disclosure of a third-party funder or the provisions of a funding agreement. However, disclosure alone may not be sufficient to remedy the adverse effects of funding a case by a third-party who does not participate in the proceedings. The UNCITRAL Secretariat’s Draft provisions offer both an outright prohibition of this funding and various models for limiting it. The authors on the base of doctrinal sources and general scientific and specialized research methods critically assess the models proposed by the Secretariat and suggest their own vision of the regulation of third-party funding in investment disputes. The authors argue that third-party finding should be allowed only in two situations: non-profit funding and funding of small and medium-sized enterprises. This approach would arguably help to avoid vague wording as well as varying interpretations by arbitrators of the provisions of the current UNCITRAL Secretariat’s draft provisions on the allowed types of third-party funding of financing. At the same time this approach would not violate the right to access to justice of certain categories of investors. The authors believe that the provisions developed by states’ delegations under the auspices of UNCITRAL could become a universal model for arbitral institutions engaged in ISDS and for inclusion in the text of international investment treaties.

You can find out more about publication, the contents of the current issue (No. 2 2022) and its purchase options on website of the journal.