Fair Play or Foul? Third-Party Funding and Its Impact on Cost Allocation, Jurisdiction, and Security for Costs in Investment Arbitration

Abstract

The rise of third-party funding (TPF) has significantly reshaped the landscape of international investment arbitration, offering claimants vital financial support while introducing complex challenges that impact cost allocation, jurisdiction, and security for costs. This paper critically examines these challenges, focusing on the need for enhanced regulatory frameworks and tribunal practices to ensure transparency, equitable cost distribution, and accountability of funders, without undermining claimants' access to justice. The research argues for mandatory disclosure of TPF arrangements to prevent conflicts of interest and emphasizes the importance of preserving the consent-based nature of arbitration, particularly in holding funders liable for adverse costs. Additionally, it calls for clearer guidelines on security for costs that balance the claimant's right to pursue claims with the respondent's right to cost recovery. Through a comparative analysis of different regulatory approaches, this study provides strategic insights for stakeholders and advocates for robust measures that safeguard the integrity and fairness of investment arbitration in the context of TPF.