"Selon que vous serez puissant ou misérable, les jugements de cour vous rendront blanc ou noir."

(Lafontaine, Les animaux malades de la peste)

INTRODUCTION

Third-party funding is not a new phenomenon. Fee arrangements with lawyers, loans by financial institutions and contracts with insurance companies to cover or limit the risks of a dispute have existed for a long time. However, the type of third-party funding envisaged in this paper is specific. It is unnecessary to define the concept, but it is important to highlight its main features, namely: (i) proceedings are contemplated or already in motion; (ii) a party, usually the claimant, secures funding from a third-party (often a specialized professional funder); (iii) in return, the third-party receives a share of the proceeds1 of the litigation or arbitration.2

At present, the most controversial issue is whether the funder (or more specifically the funded party) should voluntarily disclose the existence of the funding agreement (and possibly part of its content as well) to all other participants in an arbitration (see further section 1). A tribunal that knows about the existence of third-party funding in a particular case may then have to examine whether the third-party funder has become a party to the arbitration as a result of its potential intervention in the negotiation and performance of the parties' contract or because of its influence on, or control of, the proceedings (see further section 2). More generally, third-party funding may affect various stages or aspects of the arbitral proceedings, even where the funder remains a third party. It is submitted, however, that the impact will be limited (see further section 3).

1 THE DISCLOSURE OF THIRD-PARTY FUNDING

The issue that arises here is whether there is a duty to disclose the existence of third-party funding. It will be shown that no specific obligation, as such, exists (a) and that there would have to be unusual circumstances before considering that such an obligation arises out of the more general obligation of good faith (b). Whether it would be opportune to establish an obligation to disclose third-party funding is a question that will also be examined (c).

a. Is there an obligation to disclose third-party funding?

As in the case of an insurer who is not subrogated to the rights of the insured party, the funder will generally not become a party to the arbitration and will prefer to remain "backstage", even if it wishes (and does in fact manage) to monitor and possibly exercise a certain control over the proceedings.

In the absence of any voluntary disclosure, other participants in the proceedings may not even be aware that one or more parties are funded by a third party. This raises the question whether the rules and practice in international arbitration compel the disclosure of third-party funding.

There are various ways in which a tribunal may become aware of the existence (and possibly the content) of a third-party funding arrangement, even if past experience suggests that a third-party funder will, more often than not, prefer and try to remain unknown to the other participants. For instance, the funded party may reveal the existence of third-party funding either early in the proceedings or at a later stage, or the funder itself may be under an obligation to make such a disclosure and inform the market, for example if it is a listed company. Another way in which a tribunal may become aware of third-party funding is if some evidence in the record refers to third-party funding or if - as in some investment arbitrations - the matter becomes public knowledge. The non-funded party could also suspect the existence of third-party funding and ask the funded party to confirm this or, alternatively, ask the tribunal to issue an order to disclose the existence or content of a third-party funding agreement.

However, funded parties and tribunals will be reluctant, respectively, to disclose or order the production of the funding agreement. Funding legal proceedings is a private matter and may give rise to issues of contractual confidentiality given that "most funding agreements contain confidentiality provisions".3 Sensitive information such as the economic terms of the agreement could be revealed, and this might enable other parties to know or predict the funded party's settlement value.

Importantly, funding legal proceedings should not constitute a circumstance that is directly or sufficiently "relevant to the case or material to its outcome".4 This assertion does not mean that the third-party funding agreement will not influence the funded party's conduct in the arbitration. Neither does it mean that third-party funding will not be relevant for the determination and allocation of the arbitration costs. What it does mean is that third-party funding should have no impact on the merits of the case (see section 3.c.iii infra). Perhaps this explains (at least partly) why no generally accepted rules or practice in international arbitration require that a party disclose the way in which it is funding its claim or defence.5

In fact, institutional rules do not seem to consider how a party will fund its claim. As in the more familiar situation in which a party legitimately decides not to disclose the fact that it is insured or that its lawyers agreed to a contingent fee agreement, a party is under no obligation, as such, to reveal that its costs are funded by a professional funder.

Nevertheless, it is submitted that the obligation to disclose other circumstances could, in turn, require the disclosure of the third-party funding arrangement. First and foremost, the funding agreement may be relevant for the valid constitution of the tribunal, since one of the parties could be funded by a third-party funder with which one of the arbitrators has a conflict of interest. In this regard, General Standard 7(a) of the IBA Guidelines on Conflicts of Interest in International Arbitration of 22 May 2004 provides that

"A party shall inform an arbitrator, the Arbitral Tribunal, the other parties and the arbitration institution or other appointing authority (if any) about any direct or indirect relationship between it (or another company of the same group of companies) and the arbitrator. The party shall do so on its own initiative before the beginning of the proceeding or as soon as it becomes aware of such relationship."

The funding agreement may also be relevant in a motion for security for costs, but the circumstances in such a case would probably have to be unusual or extreme. The funded party's insolvency may not suffice to warrant an order for security for costs, and the possibility or fact that the concerned party is "funded" should thus in principle not be decisive either.

b. The relevance of good faith

In a recent article, Bernardo M. Cremades opined that "[o]n occasion, the participation of third-party financiers in arbitration without the corresponding disclosure to the other party and arbitral tribunal could imply a breach of the procedural good faith with which the parties should conduct themselves".6

Indeed, parties to an arbitration have a general duty to participate in good faith in the arbitral process. This duty arises from, or is closely related to, the maxim pacta sunt servanda and from the general body of procedural rules. The 2012 ICC Rules of Arbitration, for instance, point to the effects of this duty (2012 ICC Rules, arts. 22, 37(5) and 41).

There could be unusual cases where, for example, the third-party funder is not only funding the proceedings but also enjoying the full benefits (and incurring all the risks) of the arbitration. There could also be cases where the third-party funder is motivated by something other than pure financial gain or the business opportunity represented by the proceeds of the arbitration, such as cases where the funder's objective is to acquire a personal interest in a claim against the non-funded party or cases where the funder's motivation is to harm the non-funded party. In these cases, one is no longer faced with a bona fide funder but with different considerations that may, in turn, be relevant to the arbitration, such as the identity of the actual party in interest.

Realistically, however, an arbitral tribunal will not raise the issue sua sponte unless it considers that the advantages in raising this question will outweigh the disadvantages in terms of creating new issues and more delays. In most instances, raising the issue sua sponte is likely to be unnecessary and even counterproductive. As its relevance to the merits of the dispute is not apparent, the ascertainment of the existence of a third-party funding arrangement will be of no interest to the arbitrators unless it requires some measures to ensure a fair proceeding. Such a need may arise in specific circumstances, but not in most cases, as will now be shown.

The possibility that the funded party has greater access to external funding than its adversary should not be a sufficient reason to create a duty of disclosure arising from the general duty of good faith. In both litigation and arbitration, it is quite common for one party to have more wherewithal than the other, and this in itself should not raise concerns of procedural inequality. Neither should arbitral tribunals place significant emphasis on the consideration that claimants may have easier access to external funding than respondents or that third-party funding will, in practice, be restricted to monetary claims (as opposed to requests for pure declaratory relief or specific performance).

Moreover, it is doubtful that the existence of third-party funding in a particular dispute in international arbitration would violate the public policy of a state for the sole reason that the lawyers breached their professional and ethical duties or may be liable under the torts of maintenance, champerty or barratry7 in jurisdictions where these torts still form part of the law.8 It should also be rare for state courts to hold that the funding agreement violates their public policy,9 and, even if this were the case, it is not clear what, if any, decisive impact such a possible finding would have on the arbitration.

With respect to civil law countries, the potential legal difficulty could differ and relate to the applicable rule (before some state courts) that requires disclosing the identity of the party in interest if the ostensible party is in fact nothing but an agent of the former. This is the meaning ascribed, in France, to the maxim nul ne plaide par procureur (see section 3.b.iii infra). However, it must be acknowledged there is no general rule to this effect in international arbitration, as there is nothing unlawful in maintaining the confidentiality of an arrangement in respect of the claim's beneficial ownership.

To conclude, the general procedural duty of good faith should rarely be deemed to require a party's disclosure of its external funding agreement. Thus, it is submitted that parties are currently under no obligation to abide by a new practice of disclosure and that arbitral tribunals should not systematically have to raise the issue on their own initiative.

c. Should the rules and practice be changed?

A hotly debated issue is whether the compulsory disclosure of third-party funding to the tribunal is desirable and whether it should become the general rule. In other words, should the non-funded party have a right to such disclosure? Obviously, such an obligation would bind only the parties to the arbitration and not the third-party funder itself, unless it became a party as such (see section 2 infra).

There is some support for the proposition that disclosure of the existence of a funding agreement should become mandatory and that the institutional arbitral rules should be changed.10 However, amending the institutional rules could lead arbitral institutions (or arbitrators) to question the parties as to the existence of third-party funding in every case, thereby generalizing an obligation to disclose all third-party funding agreements. This would almost certainly be time-consuming and would probably also be unnecessary. In addition, it would create various side-issues. For instance, should a purely commercial loan be disclosed if the financing bank received the proceeds of the arbitration as a security? Would the standard depend on whether the financing is "non-recourse" (project finance), which is obviously similar to third-party financing?

It is acknowledged that there may be instances where the duty to disclose certain circumstances includes the existence of a third-party funding arrangement (see section 1.a supra).11 However, it does not follow that particular obligations should be generalized into a more general duty to report any and all cases of third-party funding.

It thus seems preferable to keep the current practice as it is. In other words, the funded party should only be required to disclose the third-party funding if there is a good reason for doing so, for example if it creates a conflict of interest for the panel or one of its members.

2 THE JOINDER OF THE THIRD-PARTY FUNDER

There are several legal mechanisms by which a third party may become a successor to a party and then a party in interest (e.g., subrogation, implied consent, other transfers of rights of the contract of which the arbitration agreement is an accessory and, possibly, novation or alter ego). In these cases, the successor will become a party to the arbitration.

However, the question to be examined here is under what conditions the third-party funder may be brought in as a supplemental party to the arbitration rather than as a party in interest (since the latter is not specific to third-party funding). In other words, when and how may a third-party funder be joined to the arbitration? Two distinct situations will be examined: (a) the intervention by the third-party funder in the negotiation and performance of the contract and (b) the intervention by the third-party funder in the arbitral proceedings. The timing of a request for joinder and its possible consequences on the constitution of the arbitral tribunal will also be briefly examined (c).

a. The third-party funder's intervention in the negotiation and performance of the contract

French law is more generous than others in allowing the joinder of parties that did not sign the arbitration agreement. Under French law, it is possible to join a third party that participated in the negotiation or the performance of the contract, since the Cour de cassation held that "l'effet de la clause compromissoire s'étend aux parties directement impliquées dans l'exécution du contrat et les litiges qui peuvent en résulter".12

However, the joinder of a third party is far from a matter of course, even under French law. First, the third-party funder is unlikely to have had any role in the negotiation of the contract between the two parties. It is typically when the parties are already in dispute that one of them will seek external funding. Secondly, the third-party funder is unlikely to have had any role in the performance of the contract, since its interest is to make a profit in the arbitration and not to participate in the parties' contractual relationship. At most, the funder - if it did have a material role in initiating or pursuing the arbitration proceedings - might be deemed to have participated in the performance of the arbitration agreement but not in the performance of the contract. However, funding a party in arbitration should not in itself be sufficient to hold that the funder accepts, even implicitly, to be bound by the arbitration clause.

In addition, the French position is criticized as overly generous by a number of eminent writers:

"The fact that a party is 'directly implicated' in contractual performance and 'aware of' an arbitration clause, or had 'congruent interests', should generally be insufficient, without more, to subject that party to an arbitration agreement. Rather, save where alter ego, estoppel, or similar non-consensual theories are involved, it remains essential to root the application of arbitration agreements to non-signatories in the parties' intentions and in generally-applicable contractual and legal principles. This is required by the bedrock requirement that arbitration agreements are consensual instruments, and is necessary for reasons of commercial predictability. The touchstone should be whether the parties intended that a non-signatory be bound by and benefit from the arbitration clause. Answering that question cannot be achieved through abstract generalizations, but requires focused consideration of the arbitration clause's language and the relations and dealings among the parties in a specific factual setting."13

b. The third-party funder's intervention in the arbitral proceedings

As stated above (section 2.a), the French Cour de cassation held that "l'effet de la clause compromissoire s'étend aux parties directement impliquées dans l'exécution du contrat et les litiges qui peuvent en résulter".14 The emphasis should be on the words "les litiges qui peuvent en résulter" (i.e., "the disputes that may arise"), from which we may infer that a party may be joined not only if it is involved in the negotiation or the performance of the agreement but also if it is involved (presumably actively) in the dispute, that is to say, the proceedings. However, beyond this possibility of joining a party to proceedings in which it has factually implicated itself, it seems that there is no actual case law on this matter and no actual instances of such a joinder.

This is what one French author concludes:

"Même en appliquant le critère souple de la jurisprudence française, il nous semble douteux qu'un tiers qui intervient au moment où le contentieux naît pour financer ce contentieux, quel que soit son degré d'implication dans le contentieux lui-même et le degré de contrôle que le contrat de financement lui octroiera, puisse être considéré comme devenant partie à la convention d'arbitrage. Par définition, ce tiers n'aura participé ni à la négociation, ni à l'exécution du contrat, même s'il aura permis l'action en justice par son intervention. Seul demeurerait donc l'intérêt du tiers dans l'issue de la procédure qui fait effectivement partie des critères appliqués, la Cour de cassation ayant jugé que 'l'effet de la clause compromissoire s'étend aux parties directement impliquées dans l'exécution du contrat et les litiges qui peuvent en résulter'. Toutefois, ce critère d'implication dans le litige n'a jamais, à notre connaissance, été jugé suffisant à lui seul, c'est-à-dire en l'absence d'implication dans la négociation ou l'exécution du contrat. Dans ces conditions, il nous semble qu'il sera en général difficile, hors circonstance particulière, d'élever le tiers qui se contente de financer une réclamation au rang de partie à la convention d'arbitrage. La question de savoir dans quelle mesure ce tiers pourrait être condamné aux frais de l'arbitrage semble dès lors résolue par avance par l'absence de compétence du tribunal arbitral à l'égard de ce tiers."15

In other words, the third-party funder should not become a party to the arbitration clause on the sole basis of its participation in the proceedings. Even a funder that takes an active part in the arbitration will usually avoid appearing and participating openly before the tribunal. In addition, the open participation on the part of the funder should not necessarily lead to the conclusion that it has become a party; the funder's open participation in the proceedings likely denotes its intent to assist the funded party and its lawyers and, at most, help to demonstrate its desire to control or influence the proceedings (but not its intent to be bound by the contract's arbitration clause, save perhaps in exceptional circumstances). Again, the situation is not very different from the insurer that does not wish to participate as a party but will often have a very active role in the defence of its insured party's interests in the arbitration.

Neither should the full funding of the proceedings suffice in itself to warrant a joinder, for there is no reason to consider this factor as tantamount to an acceptance by conduct. Of course, an exception should be made for extreme cases, but it remains otherwise unclear why a third-party professional funder should become a party to the case and not, for instance, a lawyer who agrees to a contingency fee arrangement. Both act to promote the party's position, and both have a personal and financial interest in the outcome of the dispute.

It may be added that the funder's full control over the procedural strategy should also not suffice in itself for allowing the joinder, even if such control may be deemed to violate the rules or standards of practice observed in a particular country. In this respect, it is interesting to note that article 7(c) of the Code of Conduct for Litigation Funders of the Association of Litigation Funders of England and Wales provides that a funder will "not seek to influence the Litigant's solicitor or barrister to cede control or conduct of the dispute to the Funder".

c. The potential consequences of joinder on the constitution of the arbitral tribunal

Timing may become an important matter in the unlikely event that a third-party funder is joined to the arbitration. Indeed, the third-party funder may have the same rights as the other parties in appointing the arbitrators if the joinder is sought before the tribunal is constituted. The principle of equality of the parties is a matter of public policy and will apply to the appointment of arbitrators, in relation to which each party should have the same rights and duties.

In ICC proceedings, a request for joinder must be filed before the confirmation or appointment of any arbitrator by the Court or the Secretary General (ICC Rules, art. 7(1)16). However, the entitlement on the part of the third-party funder to participate in the process of nominating the arbitrators may become a source of dispute. For example, the funder may not agree with the funded party on the choice of arbitrator(s). Worse still, if all the parties are unable to agree to a method for the constitution of the arbitral tribunal (see ICC Rules, art. 12(8)17), the non-funded party may argue that the funded party should not prevent it from selecting "its" arbitrator by choosing this method of funding the arbitration.

In addition, third-party funding has the potential to lead to more challenges of the arbitrators, thus constituting a further source of impact on the composition of the tribunal (see section 3 infra).

3 THE FUNDER'S IMPACT ON THE TRIBUNAL AND THE ARBITRAL PROCEEDINGS

Possibly the greatest impact of third-party funding on the arbitral proceedings, other than the issue of costs, which is not examined in this contribution, relates to the constitution of and challenges to the arbitral tribunal. It is submitted that third-party funding is unlikely to have a significant impact on other aspects or stages of the proceedings.

a. The impact on the constitution of and challenges to the tribunal

A party should disclose any fact that may be relevant to the valid constitution of the arbitral tribunal. This duty is found in General Standard 7(a) of the IBA Guidelines on Conflicts of Interest in International Arbitration of 22 May 2004.

Thus, third-party funding may create new conflicts of interest for lawyers and arbitrators that have to be disclosed and may lead to more challenges, even if third-party funders are not "affiliate(s)" of the parties under the four lists mentioned in the IBA Guidelines. For instance, a third-party funder may have hired as counsel (or retained the services of the firm of) an arbitrator who is acting as an arbitrator in a different case where one of the parties is funded by the same funder.

Importantly, the current trend seems to promote extensive disclosures on the part of arbitrators who may be under an obligation to search proactively for conflicts. Should the arbitrators have reasons to suspect that a third-party funder is funding one of the parties and that this might impair the independence or impartiality of the panel or one of its members, they will have a duty to raise the issue ex officio, because the valid constitution of the tribunal will be at stake.18

At the same time, and more generally, parties seem to be bound by an increasingly recognized duty of good faith.19 In that sense, parties (and not only arbitrators) may have the same positive obligation of diligence in their search for possible conflicts. In Switzerland, for example, the Swiss Federal Tribunal will bar a party that failed to look into the possible conflicts involving an arbitrator from later challenging that arbitrator if an early search could have led to the discovery of the conflict.

The possible obligation to disclose the funding agreement, however, will arise only as an indirect consequence of the duty to disclose some other fact or circumstance (see section 1.a supra). This nuance is perhaps best understood if one addresses the consequences of a failure to disclose. Let us assume that a party fails to disclose that its funder is creating a conflict for an arbitrator or the tribunal. Here, the legal consequence could be the annulment of the award or the impossibility to enforce it on the basis that "[t]he composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place", pursuant to article V(d) of the New York Convention, but the legal basis and justification for doing so would lie in the failure to disclose the conflict rather than in the third-party funding itself.

In any event, third-party funding has the potential to lead to more disclosures (and challenges), since arbitrators may find themselves in conflicts of interest with third-party funders.20 There may be specific or unusual situations. Let us assume, for example, that the arbitration clause provides that an arbitrator shall be of a nationality other than those of the parties and that the non-funded party discovers, during the proceedings, that a third-party funder is funding the opposing side. In this situation, the non-funded party (or even the funded party if it is not estopped by its own conduct in participating in the ground for the challenge) could potentially seek to challenge the arbitrator nominated by the funded party on the basis (i) that the arbitrator shares the same nationality as that of the third-party funder and (ii) that the third-party funder arguably became a party to the arbitration as a result of its participation in the arbitration agreement or the proceedings. The non-funded party could even try to set aside the award if it becomes aware of those circumstances after the notification of the award. It must be said, however, that the probability of success of this legal action would be low, since the non-funded party would face the difficult hurdle of establishing that the third-party funder became a party to the dispute.

The non-funded party could also try to challenge the tribunal on the basis that the arbitrators are biased in favour of the funded party because of their assumptions that a "third-party funder brings a highly commercial and objective perspective to claim assessment"21 and that a third-party funder only typically invests in cases that have a high probability of success. However, this is a purely factual matter to which no general answer can be reliably offered. In addition, the argument does seem far-fetched: arbitrators do not seem to be unduly influenced in situations in which they know that lawyers - working on a contingency fee basis - will have already made a thorough inquiry into the merits of the case before agreeing to fund it. In addition, if this argument were to be accepted, one could also object to the submission of legal opinions or expert reports in arbitrations, since a well-respected expert will have as much influence on arbitrators, if not more, than a third-party funder who, after a diligent assessment of the case, decides to fund one of the parties.

b. The impact of third-party funding on the admssibility of the claim

i. Standing

A third-party funder - even one that chooses to remain backstage - may have an influence on the standing of the claimant in investment arbitration, particularly if the funding precedes the initiation of the arbitration.

For instance, it is important to determine whether the party with the real interest in the claim holds the nationality of either state party to the relevant bilateral investment treaty. In general, it is the investment treaty that will define the terms of the tribunal's jurisdiction, as it embodies the consent of the host state to the arbitration. There is some case law on the effects of the investor's assignment of its rights. In principle, this will not cause the investor to lose its standing in the claim, whether the assignment is of the claim itself or the proceeds of the arbitration.22

ii. Interest to the claim (intérêt à l'action)

The third-party funding arrangement may be structured in many ways. In some instances, it will not create any new or specific difficulties. For example, if the full claim is assigned to the third-party funder before the arbitration is even initiated and if there is no dispute as to the validity of the assignment, the third-party funder will be a party to the arbitration just as any other party would be.

One may also think of instances where the third-party funder acquires an interest in part (or even in the entirety) of the claim. Is there an obstacle to the admissibility of the claim if the funded party no longer has any personal interest in the arbitration?

Another example arises where the third-party funder acquires control of the party itself rather than its claim. This is not as unusual as it may seem, especially if the party is a subsidiary holding substantially no other asset, such as a special purpose vehicle. This does not mean that no difficulties will arise (such a change in control may affect the composition of the tribunal or the standing for a claim in investment arbitration), but this would not be new or specific to third-party funding.

All these examples call for the same preliminary remark, namely that this is not how third-party funding works in practice. Nevertheless, what would be the legal consequences under the doctrine of "pas d'intérêt, pas d'action" ?

The intérêt à l'action doctrine - which is well established in France23 - does not seem to have gained much acceptance in international arbitration, subject to its requirement on the basis of the applicable domestic law. In any event, the application of this doctrine would probably not bar the funded party from pursuing its action if, despite having lost its economic interest, it continues to hold a legal interest. Thus, the admissibility of the funded party's claim does not seem to be the real issue. Rather, the main questions would seem to relate to the contractual arrangements and possibly diverging (economic) interests of the funded party and the funder. These questions, however, remain res inter alios acta for the opposing non-funded party and the arbitrators.

iii. Nul ne plaide par procureur

This legal maxim is well known in France and other continental jurisdictions. A French writer defines it as "[une] maxime générale par laquelle la partie dans un procès plaide sous son propre nom et non sous celui de son mandant à l'exception du pupille, de l'aliéné ou, sous le régime monarchique, du roi".24 It is debatable whether this maxim would apply in international arbitration in France, but this question will not be examined in this contribution.

What may be said is that this maxim does not preclude a person from representing a party in arbitration; a nominee may act in its own name for the benefit of the "real" party, subject to fraud or other abuses. However, at least in France, the maxim "nul ne plaide par procureur" requires the nominee to disclose the identity of the "principal",25 not the identity of the "agent". Thus, in the context of third-party funding, the maxim would apply only if the funder is actually the beneficial party to the arbitration, which is generally not the case since, among other reasons, the funder acquires a right to the proceeds of the procedure rather than a rights to the claims per se.

It may be added that article 23(1)(a) of the ICC Rules requires the Terms of Reference to mention the names and contact details "of each of the parties and of any person(s) representing a party in the arbitration".26 This would typically mean the name and contact details of the parties and their lawyers, not the funders.

The effects of third-party funding on the arbitral proceedings and, in particular, on the drafting of the Terms of Reference, call for additional observations.

The impact on the arbitral proceedings

This section will focus on the effects of third-party funding on the Terms of Reference, intervention and requests for document production. It will not address the effects of third-party funding on the role or conduct of the lawyers or on the costs of the arbitration (e.g., applications for security for costs or the question whether third-party funding, if known, should lead arbitrators to adopt an extremely cost-conscious approach in order to avoid disadvantaging one of the parties, be it the funded or non-funded party). These questions are addressed in other contributions to this volume.

i. Terms of Reference

As regards the Terms of Reference, the main issue is whether the parties should disclose the existence (and content) of the third-party funding contract at such an early stage of the arbitration and whether the arbitrators should look into this matter sua sponte. As examined above (in section 1.a), the answer should generally be negative. Article 23 of the ICC Rules does not call for a different solution. Of course, the arbitrators and the parties are at liberty to conclude Terms of Reference that, for example, mandate the disclosure of third-party funding, but arbitrators should not be prone to inserting clauses to this effect on their own initiative if no special reason exists for doing so.

Whether a party's potential financial inability to pay for the arbitration costs could constitute a special circumstance that requires the disclosure of third-party funding will depend on many circumstances, in particular on the place of the arbitration and, even more so, on the specific rules applicable in a given arbitration. To a large extent, the question is coterminous to the possibility of an order of security for costs in such an instance, but it may also be relevant to the final allocation of costs. However, in this latter event, the relevance of the third-party funding will arise subsequently and not at the time of the conclusion of the Terms of Reference.

In the absence of a request from either party, arbitrators should also be reluctant to insert clauses that prohibit or unduly restrict third-party funding, since such funding may not only allow access to arbitral tribunals - one of the advantages often mentioned in the legal literature - but may also relate to, or form part of, a basic and constitutionally protected economic freedom; in this regard, see the Swiss Federal Tribunal's decision of 10 December 2004.27

The above proposition that arbitrators should not take the initiative of inserting clauses that prohibit or expressly allow third-party funding does not mean that parties and arbitrators should not pay particular attention to the way in which the usual confidentiality provision will be drafted and inserted into the Terms of Reference. Obviously, the confidentiality clause will not prevent the parties from disclosing private information about the case to their respective lawyers, but can the same be said regarding undisclosed third-party funders that are not acting as the representative lawyers of the funded party? Could a non-funded party that only becomes aware of the third-party funding arrangement subsequently to signing the Terms of Reference not argue that the third-party funding arrangement violates the confidentiality clause of the Terms of Reference? The answer may depend on the factual circumstances of the case, but the point is that the funded party (or a non-funded party possibly contemplating third-party funding at a later stage of the proceedings) will have to consider the language of the confidentiality clause along with the structure of its separate financing arrangement.

ii. Intervention

Is it permissible or desirable for the "real" party in interest - possibly a third-party funder - that is not a party to the arbitration to intervene in the proceedings? The answer should generally be negative. Indeed, it is unclear how two legal persons could pursue the same claim in the same proceeding, one as a beneficial owner and the other as a nominee. Moreover, such intervention would raise numerous procedural issues and unnecessary complications whenever the funder and funded party disagreed on an argument, motion or other procedural decision. Thus, in situations where a third-party funder would disagree with the funded party on the legal and procedural strategy, the tribunal could (and probably should) proceed on the basis that the funder is a third-party whose requests do not have to be examined at all.

It must be acknowledged, however, that a dispute between the funder and the funded party may still have an impact on the proceedings. First, the unsatisfied funder may submit correspondence to the tribunal that will likely prompt a reaction from the lawyers (on both sides) and, in turn, prompt the tribunal to react. Second, the tribunal will be placed in a difficult situation if it knows the terms of the financing agreement and the situation is such that the funded party is clearly acting in violation of such agreement to the detriment of the funder. The principle res inter alios acta could provide a simple answer, but in practice many difficulties would remain, for instance if the funded party is left without any funding or if the third-party funder seeks an injunction before a state court. One of the unintended effects of the use and growth of third-party funding may thus be more parallel proceedings in international arbitration.

Another possible but extreme situation arises where the funder - as the beneficially interested party - attempts to substitute the nominee (i.e., the funded party) by revealing the actual situation between the two to the tribunal and terminating the effects of the nominee's agreement towards the arbitral tribunal and opposing party.

Of course, the solutions to these difficult cases will depend upon their specific factual circumstances, but arbitral tribunals would most likely require the other party's consent before allowing such a formal change of party during the proceedings.

A separate difficulty could arise if the non-funded party objects to the presence of the funder at the hearing as a part of the funded party's team. However, this is a situation that would neither be new nor specific to third-party funders. In addition, the third-party funder's decision to send a lawyer or another qualified person as an "observer" may not even alert the opposing side or the tribunal to the existence of the third-party funding.

iii. Document production

In principle, third-party funding should not affect parties' requests and arbitral decisions in respect of document production, since the funder is unlikely to be in possession of documents that are relevant or material to the outcome of the dispute and that are not already in the funded party's possession. In addition, it should be exceedingly rare for an arbitral tribunal to order the production of documents from a third party.

Another question arises where the funded party is requested to produce documents prepared and drafted by the funder in evaluating the potential success of the claim. However, this is also unlikely to present a serious difficulty in most cases. It is not clear why the funder would have disclosed such documents to the funded party, which in practice means that the funded party would not be in possession and control of such documents. Even if there were a case for disclosure, issues of confidentiality would inevitably arise (a fortiori if the funding agreement contains a confidentiality clause that prohibits disclosure of any such document).

With respect to communications between the client and its lawyer (or the third-party funder), there is presumably no privilege per se in international arbitration that would allow the party (i.e., the client) to refuse the production of documents for the sole reason that they were prepared in the process of finding a funder in the arbitration. In addition, the transfer of documents to third parties may be deemed a waiver of legal advice privilege.28 However, such documents could benefit from other protections such as the attorney's work product, the "common interest privilege" or grounds of commercial confidentiality that the arbitrators would find sufficiently compelling (see article 9(2)(e) of the IBA Rules on the Taking of Evidence in International Commercial Arbitration of 29 May 201029). The important point is that the funder's interest in remaining unknown may deserve protection.

iv. Witness testimony

It should often be unnecessary to summon the third-party funder as a witness to the evidentiary hearing. This follows from the general proposition that a third-party funder will generally not know anything more on the substance of the dispute than the funded party.

CONCLUSION

Third-party funding has the potential to create new opportunities for parties and will probably lead to new and different procedural motions in arbitrations. As a result, more issues may have to be examined - and more decisions may have to be taken - by arbitrators, and this contribution has not addressed all of them. Still, the frequency of or difficulties posed by these issues should not be overestimated. Many stages of the proceedings should remain largely unaffected, and, despite voices to the contrary, it is submitted that arbitrators should be in a position to address and resolve these new issues and difficulties without changing current arbitral practice or amending the arbitration rules of the major arbitral institutions.

1
The third-party funder could obtain an assignment of the rights in dispute , but this would give rise to issues that are not specific to third-party funding and will not be addressed here.

2
See Philippe Pinso lle ,Le financement de l'arbitrage par les tiers, Revue de l'arbitrage 2 (2011), pp. 385-387.

3
Alison Ross, 'The dynamics of third-party funding', Global Arbitration Review 7(1) (2012), p. 19.

4
See, for instance, article 3(3) (b)of the IBA Rules onthe Taking of Evidence in International Arbitration (2010): "A Request to Produce shall contain ... a statement as to how the Documents requested are relevant to the case and material to its outcome...".

5
"There appear to be no relevant rules of the leading arbitral institutions requiring a party to disclose if it is being funded." Susanna Khouri, Kate Hurford and Clive Bowman, 'Third party funding in international commercial and treaty arbitration - a panacea or a plague? A discussion of the risks and benefits of third party funding', Transnational Dispute Management 8(4) (2011), p. 9, available at http://www.transnational-dispute-management.com/article. asp?key=1747.

6
Bernardo Cremades, 'Third Party Funding in International Arbitration', 23 September 2011, p. 7, available at http://bcremades.com/en/publications. aspx. See also Georgios Petrochilos, Procedural Law in International Arbitration (2004), p. 216.

7
Maintenance is defined as "[t]he promotion or support of litigation by a third party who has no legitimate interest in the proceedings"; champerty is defined as "the support of litigation by a third party in return for a share of the proceeds"; and barratry is defined as "habitually raising or inciting disputes in the courts". See Oxford Dictionary of Law, 7th edn. (OUP 2009), pp. 56 and 337. It is submitted that there is no principle forbidding "champerty" as such in international arbitration.

8
Singapore, for example, is reported to apply champerty in boh litigation and arbitration proceedings. "The doctrine of champerty applies to arbitration proceedings as well as litigation, as recently held by the appeal court in Otech Pakistan Pvt Ltd v Clough Engineering Ltd. Public policy considerations of purity of justice and the interests of vulnerable litigants continue to shape the courts' attitude when they face cases where one party agrees to help another bring a claim in exchange for a share of whatever is recovered." Alvin Yeo and Swee Koh, 'Third-Part Funding - Case notes on third-party funding', Global Arbitration Review 3(1) (2008), available at http://www.globalarbitrationreview.com/ journal/article/15965/third-part-funding-case-notes-third-party-funding. See also Thio Yi, Karen Teo and Peter Ladd, 'Singapore', in Richard Clark, ed., The Dispute Resolution Review, 3rd edn. (2011), p. 740. Another example is India, which reportedly prohibits third-party funding. See Vivek Vashi and Sushma Nagaraj, 'India', in Simon Bushell, contrib. ed., Dispute Resolution in 48 jurisdictions worldwide (2010), p. 103: "Third-party funding is not permitted."

9
See, for instance, section 14(2) of the Criminal Law Act 1967, which provides that "[t]he abolition of criminal and civil liability under the law of England and Wales for maintenance and champerty shall not affect any rule of that law as to the cases in which a contract is to be treated as contrary to public policy or otherwise illegal." See: http://www.legislation.gov.uk/ukpga/1967/58.

10
See, for instance, the interesting suggestion in Marc J. Goldstein, 'Should the Real Parties in Interest Have to Stand up? - Thoughts about a Disclosure Regime for Third-Party Funding in International Arbitration', Transnational Dispute Management 8(4) (2011), at p. 8: "Another solution would be for the administering institution, in an institutional arbitration, to require parties and counsel to disclose the identity of any financer involved, and require arbitrator nominees to disclose to the institution the identity of any financers with whom they or their law firms have relationships. If there is no match, there is no issue, and the existence of financing and identity of the financer would not need to be disclosed to the Tribunal or the non-funded party. If there were a match that presented an evident conflict of interest, the institution could decline to confirm the arbitrator, without disclosure of the reasons to the parties."

11
For example, in the absence of disclosure from the parties, arbitrators may never become aware that they have a conflict of interest with a funder in a particular case, a situation that could have particularly detrimental consequences if the fact becomes known at an advanced stage of the proceedings. This consideration will have considerable weight in jurisdictions where the award may be challenged for the irregular constitution of the arbitral tribunal if one of the arbitrators had a conflict (even if it was unbeknown to him or her). The argument, however, is not entirely convincing. Apart from the practical and legal difficulties (in terms of time, cost and confidentiality) in requiring any and all externally-funded parties to disclose the identity of the funder to the arbitral tribunal and/or arbitral institution, the funder and the funded party should be in a position to know whether there is a risk of conflict of interest, in which case the funded party should be under a duty to reveal this circumstance to the other participants (including the arbitrators). In addition, it remains unclear why the funded party would not make such disclosure in such a situation, for it would otherwise face the risk of being deemed to have waived its right to challenge the arbitrator or, alternatively, be faced with an opponent who could legitimately decide to challenge the arbitrator on the ground that the potential conflict of interest was not disclosed. In other words, it is submitted that there would exist, in such cases, an actual duty to disclose the possible irregular constitution of the arbitral tribunal, thus making it unnecessary to generalize an obligation to disclose all cases of third-party funding.

12
Cass. Civ. 1er, 27 March 2007, Sociétés ABS et AGF lart c/ Société Amcor technology et autres, Rev. Arb. (2007), p. 785, note J. El Adhab.

13
Gary Born, International Commercial Arbitration, vol. I (2009), p. 1206. See also the decision of the Supreme Court of the United Kingdom of 3 November 2010 in Dallah Real Estate and Tourism Holding Company (Appellant) v. The Ministry of Religious Affairs, Government of Pakistan (Respondent), [2010] UKSC 46.

14
Cass. Civ. 1er, 27 March 2007, Sociétés ABS et AGF lart c/ Société Amcor technology et autres, Rev. Arb. (2007), p. 785, note J. El Adhab.

15
Philippe Pinsolle, 'Le financement de l'arbitrage par les tiers', Revue de l'arbitrage 2 (2011), pp. 400-401.

16
Article 7(1): " A party wishing to join an additional party to the arbitration shall submit its request for arbitration against the additional party (the "Request for Joinder") to the Secretariat. The date on which the Request for Joinder is received by the Secretariat shall, for all purposes, be deemed to be the date of the commencement of arbitration against the additional party. Any such joinder shall be subject to the provisions of Articles 6(3)-6(7) and 9. No additional party may be joined after the confirmation or appointment of any arbitrator, unless all parties, including the additional party, otherwise agree. The Secretariat may fix a time limit for the submission of a Request for Joinder."

17
Article 12(8) of the ICC Rules reads as follows: "In the absence of a joint nomination pursuant to Articles 12(6) or 12(7) and where all parties are unable to agree to a method for the constitution of the arbitral tribunal, the Court may appoint each member of the arbitral tribunal and shall designate one of them to act as president. In such case, the Court shall be at liberty to choose any person it regards as suitable to act as arbitrator, applying Article 13 when it considers this appropriate."

18
Cour d'appel Reims, Tecnimont, 2 November 2011.

19
Cour d'appel Reims, Tecnimont, 2 November 2011.

20
See Marc J. Goldstein, 'Should the Real Parties in Interest Have to Stand up? - Thoughts about a Disclosure Regime for Third-Party Funding in International Arbitration', Transnational Dispute Management 8(4) (2011), at p. 5: "The possibilities for conflicts of interest arising from relationships between prospective arbitrators and financers are considerable. An arbitrator, or her law partner, may be serving as counsel in cases financed for her client by the same financer that is assisting a party appearing before her. Arbitrators may have former law partners who are executives of financers. Arbitrators' law firms may be counsel to financers."

21
Susanna Khouri, Kate Hurford and Clive Bowman, 'Third party funding in international commercial and treaty arbitration - a panacea or a plague? A discussion of the risks and benefits of third party funding', Transnational Dispute Management 8(4) (2011), p. 5, available at http://www.transnational-dispute-management.com/article.asp?key=1747.

22
See CSOB v. Slovak Republic, ICSID case no. ARB/97/4, para. 32. See also Philippe Pinsolle, 'Le financement de l'arbitrage par les tiers', Revue de l'arbitrage 2 (2011), pp. 403-409.

23
Article 31 of the French Code de Procédure Civile reads as follows: "L'action est ouverte à tous ceux qui ont un intérêt légitime au succès ou au rejet d'une prétention, sous réserve des cas dans lesquels la loi attribue le droit d'agir aux seules personnes qu'elle qualifie pour élever ou combattre une prétention, ou pour défendre un intérêt déterminé."

24
Rémy Cabrillac, Dictionnaire du Vocabulaire Juridique (Editions du Juris-Classeur 2002).

25
Philippe Pinsolle, 'Le financement de l'arbitrage par les tiers', Revue de l'arbitrage 2 (2011), p. 398: "... la règle Nul ne plaide par procureur, qui impose de révéler la véritable partie au procès...".

26
Article 23 of the ICC Rules reads as follows: "As soon as it has received the file from the Secretariat, the arbitral tribunal shall draw up, on the basis of documents or in the presence of the parties and in the light of their most recent submissions, a document defining its Terms of Reference. This document shall include the following particulars: (a) the names in full, description, address and other contact details of each of the parties and of any person(s) representing a party in the arbitration...".

27
ATF [Swiss Federal Tribunal decision] 131 I 223.This case did not arise out of , or relate to, a specific arbitration. Instead, it arose out of a draft law proposed by the Cantonal Council of Zurich that, inter alia, prohibited (and punished by a fine of up to CHF 20,000) the funding of litigation by third parties in return for a share of the proceeds. See Noradèle Radjai, 'Case Notes on Third-Party Funding', Global Arbitration Review 3(1) (2008), p. 37.

28
Meriam Alrashid, Jane Wessel and John Laird, 'Impact of Third Party Funding on Privilege in Litigation and International Arbitration', Dispute Resolution International (October 2012), p. 107. See also Anne-Marie Guillerme, 'Retour d'expérience des juristes d'entreprise', Journée d'études: Financement de contentieux par un tiers / Third Party Litigation Funding, 2 April 2012, para. 59.

29
"The Arbitral Tribunal shall, at the request of a Party or on its own motion, exclude from evidence or production any document, statement, oral testimony or inspection for any of the following reasons: ... grounds of commercial or technical confidentiality that the Arbitral Tribunal determines to be compelling."