Steps in third-party funding arrangements

If a party is seeking third-party finding, it will usually start with an assessment of its own case, along with the chances of success, before identifying a suitable funder.

Once a funder is identified, the party should undertake proper due diligence to assess the reliability, reputation and financial viability before opening dialogue with the funder (whether a natural or legal person). Practitioners may wish to map their due diligence process along the lines of anti-money laundering/combatting financial terrorism procedures and/or make use of the checklist developed by the International Council for Commercial Arbitration-Queen Mary Task Force.

The funder may ask the party to prepare and submit documents relating to the case for it to conduct its own assessment. The documents will usually include:

1. the evidence of fact
2. any expert reports
3. legal advice (on both the claim and quantum)
4. the identity of the opposing party (including what is known about the party), and
5. a detailed breakdown of the funding sought.

Once the party receives an indication, the funder may ask for exclusivity before proceeding to negotiation. Practitioners need to consider this carefully and perhaps also consider putting in place non-disclosure agreements.

In proceeding with the negotiation and any final agreement, the Report by the ICCA-Queen Mary Task Force on Third-Party Funding in International Arbitration (April 2018) identified a number of best practices which may provide a helpful steer.