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“The more users encounter third-party funding in practice, the more favorably they tend to perceive it”

October 11, 2019
Jeffery Commission

Writing in 2006 for the first international arbitration survey of its kind – International Arbitration: Corporate Attitudes and Practices – Professor Loukas Mistelis explained that the study was both ground-breaking and standard-setting. Twelve years on, there have been eight such studies, with the 2018 survey, released on May 9th, constituting the largest ever undertaken in the field of international arbitration. To date, coverage has rightly focused on the survey findings on preferred seats of international arbitration (the rise of Singapore, as well as the impact of Brexit on London). Equally interesting, however, is what the 2018 survey says about the steady and significant increase not only of awareness but also positive perceptions of third-party funding, particularly as compared to the 2013 and 2015 surveys.

2013 Survey: Corporate Choices in International Arbitration

In 2013, the survey addressed – for the first time, albeit briefly – the prevalence and impact of third-party funding in international arbitration. At that time, third-party funding was relatively uncommon, with only 6% of respondents having used it. The survey suggested, presciently, that it would be “interesting to observe whether, and for what reasons, third-party funders will play a bigger role in arbitration proceedings in the future”.

2015 Survey: Improvements and Innovations in International Arbitration

Two years later, third-party funding was addressed in significantly more detail, not surprising given that it had by then attracted a great deal of attention across the arbitration community. Asked how familiar they were with third-party funding of claimants in international arbitration, 12% of respondents said they had used it themselves, 27% had seen it used, and 51% were aware of it but had not seen it used. Those same respondents were also asked about their perceptions of third-party funding: 74% had a positive or neutral perception. The results were even higher for those respondents who had used third-party funding, with 82% reporting a positive or neutral perception.

2018 Survey: The Evolution of International Arbitration

In the latest survey, the majority of respondents (97%) said they were aware of third-party funding in international arbitration and had a positive perception of it, particularly those who had actually used third-party funding (75%). Consistent with these upward trends, a significant number of respondents (48%) said it would be fair to recover the costs of funding as part of a costs order in the claimant’s favor.

Question 2013 International Arbitration Survey 2015 International Arbitration Survey 2018 International Arbitration Survey
Familiarity with third-party funding of claimants in international arbitration 94% had not used it in practice 91% aware of it, seen or used it in practice 97% aware of it, seen or used it in practice
Perception of third-party funding of claimants in international arbitration   28% positive |
26% neutral
53% positive |
35% neutral
Perception of third-party funding by claimants in international arbitration who have used it   51% positive |
31% neutral
75% positive |
17% neutral
Ability to recover any contingency or success fees as part of costs order in claimant's favor     48% Yes |
52% No

Taken together, the findings across the three most recent international arbitration surveys demonstrate a remarkable increase in awareness of third-party funding over the past five years. This awareness is consistent with practice, as funding has been publicly disclosed in at least 22 investor-state arbitrations, the majority of which were initiated in the last five years. (Procedural Issues in International Investment Arbitration, Oxford University Press, 2018). What is more, in just a three-year span between 2015 and 2018, the perception of third-party funding has unmistakably shifted from neutral to positive among international arbitration users. And this is only likely to continue, as the 2018 survey findings make clear, “the more users encounter third-party funding in practice, the more favorably they tend to perceive it.”