That there is no such thing as a free lunch remains a debatable statement. But that there is no such thing as a free arbitration is not. The issue is not whether or not arbitration is more expensive that litigation, in particular in the light of the success of the Report on Techniques for Controlling Time and Costs in ICC Arbitration.* The respective costs of litigation and arbitration depend mainly on the characteristics of the legal system of each country, on the complexity of each case as well as the possibilities of recourses existing in each jurisdiction. The issue is that, as a form of private justice, arbitration is meant to be exclusively financed by the parties. This does not apply to litigation. As access to justice is a constitutional right throughout the world, ways and means have been devised in order that this right might be exercised in national courts. They are not always very efficient but at least the concern is universally shared. On the contrary, an impecunious party to an arbitration agreement may be de facto deprived of the right of access to justice when it is unable to sustain the costs of the arbitration procedure. In the Pirelli case, for example, the Paris Court of Appeals in November 2011 set aside an ICC award because of the arbitral tribunal's refusal to deal with counterclaims due to the respondent's failure to pay the special deposit applicable to them, on the grounds that this was at odds with the right of access to justice and the principle of equality among the parties. The French Cour de Cassation annulled this decision in March 2013,† but only because the Court of Appeals had not checked whether the counterclaims were really intertwined with the claimants' claims, admitting that - if such had been the case - the right of access to justice and the principle of equality would actually have been breached. Thus, the tension between the need to finance arbitral proceedings and access to justice is not an abstract issue.

Third-party funding of arbitration offers a solution to this irritating problem. It is a scheme where a party unconnected to a claim finances all or part of one of the parties' arbitration costs, in most cases the claimant. The funder is remunerated by an agreed percentage of the proceeds of the award, a success fee, a combination of the two or through more sophisticated devices. In the case of an unfavourable award, the funder's investment is lost. Such arrangements, said to originate from Australia where they appeared in the 1990s, are made with specialized finance corporations that have their biggest markets in the UK and the US. However, since 2010, they are operating worldwide, both in common law and civil law countries.

Situations where a claimant is not personally financing its claim are not unheard of. It happens when an insurer has already compensated a party for its damages (or a substantial part thereof) on the condition that the party files an arbitration claim against the author of the damage. Likewise, a claimant is not financing its case when its counsel is working on a contingency fee basis. However, beyond the fact that the claimant is not personally financing its claim, such situations have very little in common with third-party funding. The insurer is financing a claim in order to recover the money it has paid out. The attorney working on a contingency fee basis is primarily financing his or her representation activities, before receiving a success fee. Third-party funding is an investment per se in arbitration by a corporation specialized in this business. It should come as no surprise that, as any new novelty, third-party funding has been and remains controversial. In common law countries, medieval concepts such as maintenance and champerty were even referred to, although, in modern times, their only function is to protect uneducated persons ignorant of the availability of legal aid, which, as mentioned above, does not exist in arbitration! In civil law countries, the old principle nul ne plaide par procureur, which requires anyone acting as a plaintiff or defendant in a lawsuit to make his identity known individually in the legal proceedings, was opposed to third-party funding, although it hardly seems applicable in the circumstances, as the funder is not acting in the arbitration. It does not buy the claim, it finances it. The suggestion that third-party funding might encourage frivolous claims was also made, without considering that no serious corporation would finance a claim without being convinced through due diligence that it has a good chance of success.

All this merits little concern given that there is no doubt that third-party funding allows easier access to arbitration for impecunious claimants with meritorious claims, and, as such, represents progress. Yet, one must not ignore the difficulties generated by the involvement of a funder in arbitration, due to the specificity of arbitration proceedings. Third-party funding raises ethical issues relating to the level of independence of counsel in the control of the proceedings and in particular in the choice of the arbitrator. Can an arbitrator act in a case where the claimant is financed by the same third-party funder who is also financing a different claimant in another case in which a partner of the law firm of the arbitrator is acting as that claimant's counsel? As long as the intervention of the third-part funder is not disclosed, the matter may raise serious concerns.

This is only one of the many sensitive issues that were discussed by advocates, arbitrators, experts, scholars and, above all, representatives from some major third-party funding corporations at the 32nd Annual Meeting of the ICC Institute of World Business Law on November 26, 2012. The programme, prepared with efficiency, diplomacy and great intelligence by Antonias Dimolitsa, Vice-Chair of the Institute, and Bernardo Cremades, one of the very active members of its Council, is at the origin of this Xth Dossier of the Institute. There is no doubt that it will be a masterpiece in the collection.

Yves Derains

* ICC publication no. 861E.

† Cass. Civ. 1er, March 28, 2013, n° 392