The Validity and Challenges of Third-Party Funding in the Saudi Arbitration Framework

Abstract

Third-party funding (TPF) is a new concept in which a third-party funds one of the disputing parties for potential share outcomes while the funded party is not obligated to repay the funds if the case is unsuccessful. In recent decades, the TPF has become more prominent for dispute parties who have faced financial obstacles to access to justice. However, the validity of the TPF agreements in Saudi Arabia remains to be determined. As the ruler of Saudi laws, Shariah prohibited agreements involving gharar (uncertainty) and usury as public policy concerns. Therefore, to break the silence surrounding TPF, this dissertation examined the validity of TPF from Shariah and Saudi perspectives. Consequently, the dissertation concluded that TPF complies with Shariah, based on the Muzara'ah partnership model, with sharing risks. This dissertation also introduces a Saudi roadmap for a TPF framework, which recommends the following (third-party funding arrangements in the Muzara'ah model comply with Saudi public policy. 2) Amendments to Saudi arbitration law require mandatory TPF disclosure to avoid conflicts of interest. 3) A code established by a supervisory body to monitor the TPF’s confidentiality and ethical practices in Saudi Arabia.