New International Law Research Guide on Third-Party Funding in Investor-State Dispute Settlement

GlobaLex, a very good electronic collection created by the Hauser Global Law School Program at the New York University School of Law, has published a new research guide on Third-Party Funding in Investor-State Dispute Settlement:

"Third-party litigation funding is a rapidly expanding industry composed of speculative investors who finance legal claims in a number of disputes, in exchange for influence over case management and a contingency in the recovery. As third-party funding now becomes increasingly widespread in investment arbitration, it becomes critically important for policymakers, academics, IGOs/NGOs, arbitral institutions and practitioners alike to understand how third-party funding works in the investment arbitration setting and its implications, as well as ongoing reform efforts addressing the role of this funding mechanism in investor-state dispute settlement (...)"

"Investment arbitration differs from private commercial arbitration in a number of key respects relevant to understanding the implications of third-party funding. First, investment arbitration in the ISDS [investor-state dispute settlement] system involves States as respondents, rather than commercial parties. Therefore, claims and costs are paid from State budgets (i.e. taxpayers) rather than a commercial defendant’s resources or shareholders. Second, ISDS proceeds under a set of substantive rules (BITs) which create rights for investors but primarily only duties for States, meaning States can generally not raise counterclaims and cannot recover in turn (except costs in certain cases) from investor claimants. Third, ISDS takes place under procedural rules (ICSID or UNCITRAL arbitration rules are the primary ones) that allow claimants to select one of the three arbitrators, and which do not allow for appeal."

"Third-party funding in this setting has drawn particular attention because it has a more profound impact on investment policy and a host of other issues, than it necessarily raises in other settings. Third-party funding has become one element in the heated debates about “the purpose, function, and legitimacy of the laws governing foreign investment and investment arbitration.” This is so because the increasing costs, increasingly large monetary awards, and growing number of cases have become matters of recent public concern regarding the ISDS system. Third-party funding raises issues related to conflicts of interest, access to justice, disclosure and transparency, to ongoing investigation of the risk, costs and balance of ISDS procedures."

"This research guide aims to provide the tools necessary for your understanding and researching of third-party funding in the context of investor-state arbitration. A selected bibliography of scholarly writings, publications from IGOs/NGOs and institutional repositories that may inform you about the history, background and development of third-party funding in ISDS and the current debate is included in Section 8."