Third-Party Funding in ISDS: Time for Regulation?

The practice of third-party funding is increasingly developed and can provide very interesting tools both for access to justice and for managing a company's legal risk in general. However, it is also highly contested for how it can alter the balance of litigation and deviate from the usual dynamics of directly conflicting interests between the parties. If we then analyze the phenomenon in the context of investment arbitration, the critical points increase, especially since the sovereign party cannot usually manage its own litigation according to the same dynamics as a private party. This raises both technical and policy issues, ranging from the potential conflicts of interest the mechanism may entail, to the influence of third-party funders on the litigation strategy, with interests that may go beyond those of the individual party seeking funding, to the court's jurisdiction over the third party, and to costs. These critical issues primarily led ICSID to include a disclosure requirement of third-party funding in its latest rules, just as they prompted UNCITRAL Working Group III on ISDS to address the issue and discuss whether it would be useful to regulate it at the international level. This paper, without claiming to be exhaustive, aims first to describe the critical issues most frequently raised by the debate and then to propose the solutions currently envisioned within UNCITRAL. Since negotiations are still ongoing, definitive conclusions cannot be drawn, but interesting insights can be gleaned into the logic of the debate, especially when placed within the broader context of ISDS reform. The author's participation in the Working Group's work as a representative of a state delegation partially limits her freedom of analysis but nevertheless allows her to account for the most concrete and salient elements of the debate.