On 6 May, Ciarb published its new Guidelines on Third Party Funding in Arbitration (“the Guidelines”). The Guidelines, presently in ‘proposed’ form for public comment, provide an overview of how third party funding can affect the positions of the various stakeholders in arbitral proceedings, including the parties, the tribunal and any arbitral institution. This article identifies some key topics addressed in the Guidelines.

Stewarts’ Risk and Funding Partner, Julian Chamberlayne, was one of a select group of experts on the working group that helped produce the Guidelines. Julian authored chapter 4 and co-authored chapters 7, 8 and 9.

Julian also recently took part in the Ciarb “Let’s discuss” webinar in March on various issues arising from funding in arbitration, which assisted in finalising the Guidelines. Julian and senior associate Olivia Amos review the relevant issues and the Guidelines themselves in this article.

The process for securing funding

One of the topics discussed at the webinar was the process for securing funding and how parties seeking funding can best navigate it. Some of the questions that arose included:

• How do parties select funders, and who advises the funded party?
• What are the important questions to ask funders?
• What key terms should parties scrutinise most closely when negotiating a funding agreement?

While the process for securing funding will differ depending on the funders approached, market conditions and the jurisdiction in which the parties are operating, Chapter 1 of the Guidelines sets out the broad stages for how discussions with funders often start and progress.

In our experience, the need for informed legal advice on funding arises at the beginning of the process when the funded party is deciding which funders to approach. Stewarts conducts extensive due diligence on prospective funders before producing a shortlist to recommend to clients.

The Guidelines emphasise the importance of conducting such due diligence, which “can ensure that both the funder and the funded party have confidence and certainty as to the availability of the required funding and its management” (Guideline 4). Chapter 4 also highlights the nature of the questions to ask funders, which include issues such as (i) the corporate structure of the entity providing the funds, (ii) its ability to fund the case (and for how long), (iii) whether it ring-fences funds and how it provides for unbudgeted contingencies, (iv) to what extent it relies on insurance indemnities to meet adverse costs or security for costs applications, and (v) its systems for preventing conflicts of interests between funded cases and protecting confidentiality.

When presenting the claim to prospective funders, it is “crucial” that the funder understands the economics of the case (namely, the likely costs to fund the case versus the likely returns in a ‘win’) (Guideline 5). Parties with legal advisors experienced in funding claims (with all the contingencies anticipated and provided for in a ‘funder ready’ budget) will be best placed to produce the “realistic” rather than the “optimistic” proposal the Guidelines advise.

Chapter 8 summarises the key terms that parties and their legal advisors should pay most attention to when negotiating the funding agreement. These include:

• How the funding multiple is calculated (section ii). In particular, whether any multiple return is based on funding actually deployed, the funding committed or the funding tranche incepted.
• The mechanism for budget variation requests (section iii). It should not be assumed a funder will be able (or, indeed, willing) to fund increases to the case budget at any given time. The Guidelines explain that there should be a clearly defined procedure for such requests, how any disputes in this regard are determined and whether the funded party can seek additional funding from another funder if such a request is refused.
• The ‘waterfall’ or ‘priorities’ agreement (section vi). These provisions are of the utmost importance as they set out how any recoveries in the claim will be distributed. As explained in the Guidelines: “In cases where the recoveries have been lower than initially predicted, and/or the costs materially higher, the terms of the waterfall and any priorities agreement […] may become more important than the underlying contractual entitlements of the individual stakeholders.”
• Termination events (section vii). The parties’ rights to terminate the funding agreement and what mechanisms are available for any disputes in this regard should be clear. This is particularly important where the funder terminates the agreement, as this usually means the claim cannot continue (unless alternative funding is secured and the previous funder’s rights to any return are dealt with under the new funding arrangement). The Guidelines contain informative guidance on the types of termination provisions usually included in funding agreements and issues parties should be aware of.
• Rights to influence key decisions. The parties must be clear on what rights a funder has to influence key decisions in the claim, such as making or responding to settlement offers. (See further below in the section on ‘Funder control’).

We endorse the point made in the Guidelines that funding agreements are often high-value and complex commercial contracts, so it is “crucial” that funded parties receive “informed” legal advice when negotiating the funding agreement (Guideline 8).

Funder control

Another topic discussed at the webinar was the issue (or perceived issue) of how much ‘control’ of the claim by funders is appropriate and to what extent funders exercise implicit control by the simple fact of them funding the claim.

Funders should not directly control the litigation, but they have a significant financial stake in the claim and should be entitled to take reasonable steps to safeguard their investment. However, the circumstances in which they can do so need to be clearly stated in the funding agreement. In this regard, the Guidelines:

• explain that funders will want to be involved in key decisions in the proceedings (paragraph 10.3)
• highlight common scenarios in which the funded party will usually require the funder’s consent, including discontinuing the claim, changing legal representatives (or their payment terms), pursuing a related claim, seeking additional funding and disclosing the funding terms (Chapter 8, section viii), and
• address the importance of ensuring there is clarity in the funding agreement as to what involvement the funder will have in the claim. In particular, how settlement scenarios should be approached and how any disputes between the funder and the funded party in this regard should be dealt with (paragraphs 16.5, 18.2, 18.3)

Properly advised funded parties will ensure that the funding agreement does not cross the line on control and that the funder does not become the decision maker in the claim. However, funders will often have ways to exert passive control over the litigation due to their significant financial interest in the case. Despite this, in our experience, funders rarely seek to exercise excessive control over the claim.

The Guidelines also make the important point that any agreements on the degree of control a funder may exercise in conducting the claim must comply with relevant applicable laws (including the governing law of the funding agreement, the seat of the arbitration and/or the laws of any jurisdictions in which the funded party may need to enforce any award) (paragraph 16.4).

Disclosure of funding agreements

The last key topic from the webinar was the extent to which funding arrangements should be disclosed to the tribunal and opposing party and why.

It is natural for funded parties and funders to be reluctant to disclose details of their funding arrangements. The terms are private, often commercially sensitive and (at least in some jurisdictions) based on privileged information. They may also indicate the funder or the funded party’s perceived merits of the claim.

However, there is growing acceptance in the arbitration community that limited disclosure (the fact of funding and the funder’s identity) as soon as possible in the proceedings is important. This is to ensure that no related conflicts of interest issues arise that could jeopardise the validity and/or enforceability of any award or to mitigate the effects of such issues if they do arise.

This growing acceptance of limited disclosure is reflected in the arbitration rules or guidance of major arbitral institutes, such as ICSID (ICSID Arbitration Rules (2022), Rule 14), the ICC (ICC Arbitration Rules (2021), Article 11(7)), the SCC (SCC Arbitration Institute, SCC Policy: Disclosure of third parties with an interest in the outcome of the dispute (October 2024)) and SIAC (SIAC Arbitration Rules (2025), Rule 38.1). These require parties to disclose such information and, in some cases, give tribunals the power to require the disclosure of further information about the funding arrangements (ICSID Arbitration Rules (2022), Rule 14(4); SIAC Arbitration Rules (2025), Rule 38.4). The Guidelines explain that even where such disclosure is not required under the rules of the institute administering the arbitration, some disclosure may still be required by the laws of the jurisdiction in which the arbitration is seated. Instructing legal counsel who can properly advise on such issues is essential.

Comment

Julian Chamberlayne comments on the Guidelines:

“These Guidelines pull together the collective experience of many arbitral practitioners with first-hand funding experience from around the globe, the experience of several of the most prominent international funders and from lawyers who specialise in funding issues.

“During the ‘Let’s discuss’ webinar that Ciarb recently ran, only 9% of the audience (made up of arbitral practitioners from around the globe), had worked on a case involving third party funding. Of the minority with first-hand funding experience, many have only worked on a few funded cases, working with just one or two funders. This suggests there is a real need for the Guidelines I hope they will be a valuable resource for the international arbitration community when addressing the many complexities of funding agreements, working with funders or otherwise working on funded cases.

“For those in the arbitration community who want to further their understanding of funding in arbitration, I would encourage them to read ‘Funding International Arbitration’ (2024), which is a detailed guide to navigating funding in international arbitration and co-edited by our Head of International Arbitration and Head of India Practice at Stewarts, Sherina Petit.”