Research On The Third-party Funding Of International Commercial Arbitration

Third-party funding first emerged in countries of common law legal family.As there was a principle of prohibiting “maintenance and champerty” at that time,third-party funding was banned as a form of “maintenance and champerty ".With the development of the capital economy,relevant laws on " maintenance and champerty” have been abolished,therefore,some countries such as the UK and Australia have gradually acknowledged the legality of third-party funding in litigation.In recent years,as one of the resolution mechanisms of international disputes,international commercial arbitration has ushered in rapid development due to its characteristics of high efficiency,strong confidentiality and high autonomy.However,it is known that the amount of disputes involved in international commercial arbitration is relatively high and the relevant arbitration fees charged according to the general rates is also very high.As a result,the disputing parties who are unable to pay such high amount of arbitration fee begin to seek funding from third parties unrelated to the case,therefore,the third-party funding takes place more and more frequently in the field of international commercial arbitration.Considering that the third-party funding not only can make it possible that the parties who are unable to pay the arbitration fee can go into arbitration procedure to protect their own legitimate rights and interests,but also can provide a new financing channel for investors（mainly professional venture capital groups）,the third-party funding has great development potential and value in the venture capital market,which has prompted more and more countries to encourage the development the emergence of third-party funders in international commercial arbitration has caused great pressure on international commercial arbitration procedures,and it is necessary to solve many new problems.Arbitration procedures involving third parties lead to new conflicts of interest.The rules of the arbitration legislation and arbitration organizations in various legal units have stipulated corresponding disclosure obligations,which add a conflict of interest which may arise between third parties and arbitrators instead of being limited to the conflicts of interest between traditional arbitrators and disputing parties.According to the Guidelines for Arbitration Court and Arbitration Parties issued by The ICC International Court of Arbitration,in case that there is close relationship between the arbitrators and the disputing parties,this relationship must be disclosed.In 2017,the first edition of the arbitration rules formulated by Singapore International Arbitration Centre came into force,which hasstipulated the disclosure of the third-party funding agreement by the disputing parties.The Code of Conduct for Litigation Funders issued by the Association of Litigation Funders of England ＆ Wales attempts to regulate the behavior of third-party funders,which is only is limited to its members and has played a leading role that is worth learning from.Although the intervention of third-party funding leads to certain threats to the original confidentiality of the arbitration procedures,on condition that the funding agreement is well disclosed,and the third party is included in the subject with confidentiality obligation,the contradiction between the funding and the confidentiality of the arbitration procedures can be resolved.General speaking,when the funded party wins,the losing party needn’t pay the“success fee” of the third party funder,but in some cases,after violating the agreement with the applicant,the respondent attempts to make the applicant trapped in financial distress by unfair means and force the applicant to give up the claim for arbitration.In order to seek justice,the applicant has to sign a funding agreement with a third-party funder to achieve the goal of arbitration.On this basis,the respondent who is the losing party shall compensate for the funding costs of third-party funder.However,these cases are only exceptions,and it is because of the respondent’s improper behavior that causes the applicant to seek funding.Therefore,the sharing of arbitration fees needs to follow the principle of justice and equity according to specific situations after measuring each element.In terms of the security for costs,it is necessary to fully consider the third-party funding behavior,based on which whether to issue a security will be evaluated,and the specific criteria should be judged based on the current status of both parties and the funder.In China’s mainland ,there are few legislation or arbitration rules related to while some private companies or associations have started to develop business related to third-party funding.In order to promote the development of third-party funding industry in the mainland,the mainland may formulate specific arbitration rules by virtue of the legislative experience of Hong Kong,China,which is very worth learning from,namely,pushing forward the formulation of separate laws or separate rules to effectively supplement the existing rules.The relevant contents should not only pay attention to the disclosure of the third-party funding and how the funders affect the case and the disputing parties,but also should specify the security for costs as well as the sharing of unfavorable cost.The results of the international commercial arbitration involving third-party funding should truly reflect the dual justice of procedures and substances,so as to effectively support the development of international commercial arbitration involving third-party funding.