Best practice

The ICCA-Queen Mary Task Force has identified a number of best practices (SIAC, HKIAC and CIETAC have also issued guidelines and practice notes which should be considered alongside where third-party funding involves any of those states), which include:

Disclosure and conflicts of interest: a party should disclose both the fact and identity of third party funding. Following such disclosure, the arbitral tribunal and arbitrators must also conduct their own checks for any potential conflicts of interest between an arbitrator and a third-party funder. If there are, they must make appropriate disclosures or take other appropriate actions that may be required under applicable laws, rules or guidelines.

Privilege and professional secrecy: the existence of funding and the identity of a third-party funder is not subject to any legal privilege, even if the funding agreement is subject to confidentiality between the parties. However, such agreements may well include legally privilege material and, therefore, disclosure of the agreement must only be ordered in exceptional circumstances. It is important that the party seeking funding takes appropriate legal advice relating to privilege in the relevant jurisdiction.

Costs and security for costs: recovery of costs should not be denied on the basis that a party seeking costs is funded by a third-party funder. Therefore, when assessing costs incurred, the assessment should include the costs of the funder.

Funding agreement terms: a party must ensure that the funding agreement is in writing, and the terms are clearly understood between it and the funder, and reflect the intentions of both sides. The agreement should set out the amounts to be provided, the basis of the recovery arrangements and how the award sum is to be divided.

Termination of agreement or withdrawal terms must be set out in the agreement, including the bases of any termination or withdrawal by the parties.

There should be a dispute resolution provision: as the agreement is a contractual arrangement, parties should include dispute resolution arrangements.

Transparency: both the party and the funder need to conduct their own due diligence, including enhanced due diligence in appropriate circumstances.

There should be clear terms as to day-to-day “case management and strategic decisions” (party control).