The Third-Party Funding In International Investment Arbitration

Recently,third-party funding emerged in the field of international investment arbitration.As a new financing means,it can not only provide investors with funding,but also transfer the risk of losing a lawsuit from the investor to the funder.With the funding,more investors can resort to international investment arbitration.However,in the lack of appropriate regulation,third-party funding also imposes lots of adverse effects on the host state.Therefore,legal regulation of third-party funding in international investment arbitration should be improved as soon as possible in order to prevent the interests of the host state from being damaged and to maintain the balance of interests between investors and host states.In addition to the introduction and conclusion,the full text is made of three chapters.The first chapter briefly introduces the general situation of third-party funding in international investment arbitration.By defining the third-party funding in international investment arbitration,the research object of this paper can be limited to non-recourse financing in international investment arbitration.After briefly reviewing the origin of the third-party funding system and its legalization in Australia,Britain and other regions,it then introduces the current development of third-party funding in international investment arbitration,analyzing the reasons why the third-party funding can develop with such a rapid speed.Finally,the present regulation of third-party funding in international investment arbitration is summarized to point out that the current regulation is far from enough.The second chapter analyzes in detail the adverse effects of third-party funding in international investment arbitration on the host state.Firstly,the intervention of the third-party funding may impact the impartiality and independence of arbitrators.There are a lot of complicated relations between funders and arbitrators and these relations will probably constitute a very secret conflict of interest which may seriously damage the impartiality and independence of arbitrators and jeopardize the right of the host state to a fair decision.Secondly,the third-party funding can disable the function of arbitration costs on filtration.With third-party funding,a large number of cases with low success rates and small claims will be submitted to international investment arbitration.As a result,the host state have to spend more time and money on responding the lawsuits.What's worse,its economic sovereignty and public interest may also be threatened.Thirdly,by increasing the uncertainty of the performance of arbitration costs award,the third-party funding may cause the failure of the reimbursement to the host state when the relevant regulations and safeguards are absent.In the third chapter,based on the the interests of the host state,some suggestions are put forward to improve the regulation of third-party funding in international investment arbitration.On the one hand,we should strengthen the disclosure obligations of the investor and clarify the relevant powers of the arbitral tribunal by revising the ICSID rules.Specifically,relevant provisions on the content,object and time of disclosure should be improved,and the binding force of these provisions should be strengthened.With regard to the powers of the arbitral tribunal,the obligation of the arbitrator to disclose third-party funding and its power to require the investor to disclose third-party funding should be clearly defined.Also,third-party funding should be induced explicitly as a factor that ought to be taken into consideration when the tribunal is deciding on the allocation for costs or the security for costs.On the other hand,the funders should also be specifically regulated.Obligations of funders to disclose the conflicts of interest,capital adequacy requirements and restrictions on termination of the funding agreements should be stipulated in self-regulation rules and even in the legislative rules.Finally,the host state should also take some preventive measures to prevent its own interests from being damaged.