Funding Fairness: Ciarb’s Proposed Guideline on Third-Party Funding Aims to Set Global Standards

16 May

Introduction

As the use of third-party funding becomes increasingly embedded in the practice of arbitration and other forms of alternative dispute resolution (ADR), the Chartered Institute of Arbitrators (Ciarb) has released its Proposed Guideline on Third-Party Funding (Proposed Guideline).

The Proposed Guideline, which is open for public comment until 17 June 2025, represents a much-needed opportunity to bring clarity and structure to a complex and evolving area of practice.

A Practical Framework for a Shifting Landscape

The Proposed Guideline does not attempt to regulate third-party funding. Instead, it is a non-binding tool designed to assist parties, tribunals and institutions navigating the growing presence of funding in disputes.

Whether present in the form of litigation finance, contingency arrangements, or more traditional mechanisms like insurance, funding now plays a role in a wide range of cases across a significant number of jurisdictions.

This area of arbitration practice is dynamic, with stakeholders required to stay up to date with developments and consider applicable legislation, regulations, institutional rules and industry-specific guidance.

The Proposed Guideline aims to provide a principled yet pragmatic framework that respects this diversity. Part 1 provides an overview of how third party funding is often obtained and how it operates in practice, including its advantages and disadvantages, while Part 2 focuses on arbitration involving a funded party.

Core topics covered in the Proposed Guideline include:

Disclosure and Transparency
Disclosing the existence of funding and the identity of funding at an early stage is recommended, primarily to avoid a potential conflict of interest arising that might adversely affect the progression of arbitral proceedings. Parties should be mindful that the confidentiality of a funding arrangement might conflict with such disclosure obligations.
Tribunal Powers
Addressing how and when arbitrators might inquire into funding arrangements, particularly in the context of security for costs and cost shifting, or if concerns about independence arise. The mere existence of a third-party funding arrangement will not necessarily justify the granting of security for costs. The circumstances in which a successful party’s costs of funding may be recoverable will differ depending on the laws and rules applicable in the arbitral proceedings.
Control and Influence
Providing guidance to ensure that funders to not unduly influence legal strategy or undermine the independence of the parties’ representatives. Best practice suggests that funding agreements should include express provisions regarding control of the conduct of the arbitral proceedings, including settlement.
Institutional Flexibility
Encouraging the adoption of the principles set out in the Proposed Guideline across institutions and jurisdictions, while recognising the importance of considering matters on a case-by-case basis when appropriate. Specifically, institutions are often reluctant to accept payment of advances on costs from non-parties, particularly if a sanctioned entity is involved, and appropriate disclosures are likely to be required.

One Size Does Not Fit All

Notably, the Proposed Guideline is careful not to impose rigid prescriptions. It recognises that funding means different things in different contexts. This is particularly relevant in sectors like maritime arbitration, where insurance arrangements and club funding have long been part of the procedural background.

The Proposed Guideline explicitly avoids imposing a blanket requirement of disclosure of every third-party interest, acknowledging that in some sectors, such practices are so embedded that mandatory disclosure could be both impractical and disruptive.

Instead, the Ciarb proposes a proportional approach: identifying funding arrangements that raise real risks of conflicts of interest or unfairness arising, while leaving room for the observance of sector-specific norms. By way of example, it draws a distinction between traditional insurance (which may not give insurers any control over the conduct of arbitral proceedings) and more interventionist funding arrangements, which arguably merit closer scrutiny.

Collaborative Drafting, Global Scope

The Proposed Guideline is the result of more than a year of work by a diverse drafting committee, co-chaired by Philippa Charles FCIArb and Dr. Hasan Tahsin Azizoğlu. It reflects consultation with practitioners, funders, arbitrators, and institutional representatives from across the globe.

Reflecting on the diligent work of the drafters, Mercy McBrayer FCIArb, Ciarb’s Head of Arbitration Professional Practice, described the Proposed Guideline as “a timely contribution to the evolving landscape of third-party funding in arbitration”.

Have Your Say

As third-party funding matures into a permanent feature of the dispute resolution landscape, stakeholders can shape its future, helping to ensure that the way funding is treated supports fairness, access, and integrity across every sector it touches.

Ciarb is now inviting comments on the Proposed Guideline from all stakeholders in the ADR process, including those outside its membership. This is a rare opportunity to contribute to the development of a new benchmark in global arbitration practice.

To contribute, read the Proposed Guideline and submit your comments by no later than 17 June 2025.

This article is intended for information purposes only and provides a general overview of the relevant legal topic. It does not constitute legal advice and should not be relied upon as such. While we strive for accuracy, the law is subject to change, and we cannot guarantee that the information is current or applicable to specific circumstances. Costigan King accepts no liability for any reliance placed on this material. For further details concerning the subject of the article or for specific advice, please contact a member of our team.