France: Third-Party Funding – The French Perspective

Last Updated: 25 October 2017
Article by Vannin Capital

Aurthored by Isabelle Michou, Quinn Emanuel Urquhart & Sullivan and Pierre Pic, Teynier Pic with introductory remarks from Yasmin Mohammad, Vannin Capital


The popularity of international arbitration in Paris has been established for decades. This is largely due and thanks to the International Chamber of Commerce based in Paris, which was created in the aftermath of World War I. The ICC created the ICC International Court of Arbitration, its arbitral institution tasked with administering arbitration disputes, shortly thereafter in 1923.

Since the 1920s, the strength of the ICC International Court of Arbitration has grown considerably year after year. In 2016, a total of 966 new cases administered by the ICC were filed involving 3,099 parties from 137 countries. Although not all ICC arbitrations are seated in Paris, clearly this represents the tip of the iceberg as the number of ad hoc and other institutional arbitrations taking place in Paris are difficult to account for. Furthermore, the very large arbitration community based in Paris is a testament to its continuing attractiveness.

Notwithstanding, the turnout and the enthusiasm surrounding the first Paris Arbitration Week1 ("PAW") was remarkable. As the founding member of the PAW Organisation Committee, I was taken by surprise by the unexpected but thoroughly deserved success of the week and of each and every event.

Given the growing importance of thirdparty funding in international arbitration, the topic received much attention during the week. Vannin Capital co-organised and co-hosted with August Debouzy and the Sorbonne Law School an afternoon of debates and round tables on the ethical and financial considerations of third-party funding with a much applauded keynote speech by Charles Nairac, partner at White & Case's Paris arbitration team.

In particular, the Paris Bar took advantage of PAW to release its recommendations to lawyers working on funded cases making sure to clarify that third-party funding was legal in France and a positive step towards access to justice. I had the honour to be invited to speak at the inaugural event held in the prestigious Paris Bar Library to share the views of the funding industry.

With Paris having reclaimed its title of the most popular arbitration seat thanks to Brexit and this significant step taken by the Paris Bar, Paris must be the next natural hub for third-party funding, must it not?

The members of the Paris Bar's Working Committee on third-party funding, Isabelle Michou, partner at Quinn Emanuel Urquhart & Sullivan and Pierre Pic, founding partner of Teynier Pic, follow this introduction with a summary and commentary of the Working Committee's Report and the resulting Resolution.


On 21 February 2017, the Paris Bar Council adopted a Resolution on the practice of third-party funding in international arbitration, which was presented for the first time to the public in April, during Paris Arbitration Week.

This development has been in the pipeline for a while: it was set into motion in September 2015, when three different sub-committees under the aegis of the Paris Bar recognised the need for lawyers of the Paris Bar to examine the interplay between their professional ethics obligations in legal proceedings involving a funder. This may be attributed to a multitude of factors: a steady rise in the practice of thirdparty funding in international arbitration; the lack of regulation within the thirdparty funding industry apart from certain codes of conduct; and possible implications on the ethical obligations of lawyers, especially as members of the Paris Bar. To fill in the gaps therefore, the Paris Bar created a Working Committee to conduct a review of the practice and impact of third-party funding on arbitration and to make proposals in regard to the rules of professional ethics of French lawyers.

This Working Committee was chaired by Isabelle Michou of Quinn Emanuel Urquhart & Sullivan and Pierre Pic of Teynier Pic, and included Louis Degos of K&L Gates, Jean-Yves Garaud of Cleary Gottlieb Steen & Hamilton, Carine Dupeyron of Darrois Villey Maillot Brochier and Jalal El Ahdab of Ginestié Magellan Paley-Vincent. The Working Committee convened on several occasions in 2016; the result of their work is presented in a Report dated 23 November 2016 titled "Le financement de l'arbitrage par les tiers ("Third-party Funding")" and the Resolution adopted therein (


The Resolution of the Paris Bar has come to light at a time when third-party funding related regulations are unfurling halfway across the world: in Singapore and Hong Kong.

In Singapore, the Civil Law (Amendment) Act 2017 was passed on 1 March 2017. It abolished the common-law torts of champerty and maintenance and confirms that third-party funding is not contrary to public policy or illegal for 'prescribed dispute resolution proceedings' including international arbitrations and related court and mediation proceedings.

Concurrently, it also made amendments to the Legal Professional Act and the professional conduct rules for lawyers in Singapore on points of disclosure and financial interest. Practitioners are now required to disclose to the court or tribunal and to every other party to the proceedings, the existence of any third-party funding contract and the identity of any funder involved at the start of the proceedings or as soon as practicable after the funding contract is entered into. Further, lawyers themselves are prohibited from holding financial or other interest in funders or receiving any referral, commission or share of the proceeds from them.

In Hong Kong, it is anticipated that the government will soon introduce legislative amendments to clarify that third-party funding in arbitration is not prohibited by the same doctrines of champerty and maintenance. It remains to be seen if these amendments will introduce added obligations on lawyers; what is known at this stage is that the proposed amendments will set out standards and practices that funders must follow, including financial and ethical obligations. Further, on disclosure, a funded party in Hong Kong must notify the tribunal and every party of the existence of a funding agreement and the identity of the funder.


The Report of the Working Committee which contains the Resolution, is a far-reaching body of work. It provides a comprehensive understanding of the practice itself, its history and its benefits – whether to parties seeking justice via arbitration or to the legal profession on the whole; it looks at the existing regulation in the field or the lack thereof; examines its interplay with the ethical obligations of lawyers, in particular vis-à-vis the duties imposed on members of the Paris Bar; and provides recommendations to lawyers to navigate the many fine lines that third-party funding brings into a legal proceeding. This thorough exercise provides a foundation for the Resolution and acts as the prism through which the Resolution is to be viewed.

Benefits of the increasing prevalence of third-party funding

After a look at the gradual development of third-party funding, the Working Committee affirmed that an increase in the use of this mechanism is undoubtedly a positive development in international arbitration. Evidently, it has resulted in greater access to justice for those clients who are financially incapable of bearing the costs of an arbitration proceeding. It also benefits non-impecunious parties, in essence, small or medium enterprises that may be faced with the need to initiate arbitration without comprising their ability to manage their cashflow. And speaking in terms of the legal profession in general, the arbitral system stands to gain from the involvement of a wide network of skilled professionals interested in making international arbitration as sound and efficient as possible.

Lack of a legal framework

The Working Committee looked at the legal framework surrounding third-party funding – or the lack thereof.

As it stands, the practice is not illegal under French law: in fact, third-party funding has been qualified as a 'contract sui generis' by one French court. Apart from this however, there is a noticeable dearth in regulation surrounding third party funding despite Paris being an international arbitration hub and the prevalence of third-party funding within this circle.

Constructing the legal framework

However, before developing the required framework however, it is crucial to identify the potential frictions that third party funding may give rise to vis-à-vis the ethical obligations of a lawyer. As a member of the Paris Bar, a lawyer is required to, at all times respect certain fundamental duties towards the client. As is recognised in the Report, some of these may be jeopardised by the presence of a funder:

  • First, the duty of loyalty of a lawyer towards his/her client. Is there a modification in the nature of this duty even if, as a result of the funding, the lawyer no longer receives his/her fee from the client?
  • Second, the obligation of independence of a lawyer. How does the lawyer remain independent in a situation where he/she receives legal fees from the funder?
  • Third, how to address the heightened risk in conflicts of interest that may arise in case the funder and the party receiving funding, i.e. the client, disagree on the strategy that is to be adopted: to whom is the lawyer answerable?
  • Fourth, the duty of confidentiality or attorney-client privilege: How to uphold the obligation in the presence of the funder that requires knowledge and insight of the case and its chances of success?

The Report highlighted these four aspects as potentially problematic and sought to address these by way of recommendations to lawyers before incorporating them in its Resolution.

Recommendations and the Resolution

The Working Committee set out recommendations to overcome each of the challenges they identified and subsequently incorporated them into its Resolution.

Conflicts of interest: The Working Committee sought to delineate two distinct legal relations that come into play when an arbitration is funded: first between the client (the funded party) and the lawyer, and second between the funder and the funded party. It reiterates that the mere presence of the funder – regardless of whether the funding is directed towards the client or directly towards the lawyer – must not result in blurred lines between these distinct ties.

In theory, French law does not prohibit a lawyer receiving his/her fee from someone apart from the client, and so this element in and of itself does not allow for the funder to metamorphose into the client. The client therefore, remains primordial and it is in respect of the client alone that the lawyer must uphold his duties of loyalty, counsel and representation. Any steps that endanger these duties will likely result in the lawyer finding himself in the most predictable and yet drastic situation that is brought about by third party funding i.e., a conflict of interest between the funder and the financed party. Notably, if the lawyer has not taken care to maintain a perfect seal in communication, exchanges or dialogue between his relationship with the client and the relationship between the client and the funder, he may then be required to withdraw himself from the case.

In a similar vein, the Working Committee also advised a lawyer not to intervene on behalf of the funded party or the funder, in particular while these two are involved in negotiations in relation to the funding contract.

Confidentiality and privilege issues: Breach of confidentiality and attorney- client privilege not only expose a French lawyer to disciplinary action by the Bar Council, but also to potential criminal proceedings under French law.

To avoid this panoply of problems, a lawyer must take care to maintain a tight seal on the channels of communication – in that, he/she must avoid communicating directly with the funder in the absence of the client.

Duty of independence and disclosure: The Working Committee calls for lawyers to encourage their clients – from early in the game – to inform the tribunal that they are receiving funding. This is to pre-empt issues that may arise later, such as a subsequent discovery of the lack of independence of an arbitrator due to previous ties that he/she may have had with the funder, which might lead to eventual annulment proceedings. Hence, per the Working Committee, a little transparency from the get-go will go a long way in ensuring smooth conduct of the proceedings.

CARPA: This is an advantage inherent in the Paris Bar – the presence of escrow accounts (the CARPA) managed by the Bar to handle funds exchanged between lawyers and clients, and other parties involved. The Working Committee suggests that this unique feature of the Paris Bar can be used to increase transparency in the relations between the funder, the client and the lawyer, thereby allaying fears attached to such arrangements. Through the recommendations in the Report and in the Resolution, lawyers are encouraged to assist the client in grasping the modalities of funding and using the tools made available – such as the CARPA – in order to maintain transparency.


The Resolution was introduced at an event organised by the international arbitration committee of the Paris Bar on 27 April. The event also featured a debate between Jean-Yves Garaud, member of the Working Committee and Yasmin Mohammad, senior counsel at Vannin Capital on the disclosure of funding arrangements and the issues of confidentiality and privilege that arise.

As the funder, Vannin Capital extolled the merits of disclosure of funding arrangements stating that it helped guard against procedural incidents, late arbitrator challenges or potential annulment of awards, all of which are likely to negatively impact the investment made by the funder. At the same time, disclosure may not always be in the best interest of a claimant – or simply, certain claimants may not wish to make any such disclosures, because the disclosure of funding almost automatically leads to a security for costs request which, whether granted or not, increases the cost of the arbitration for the claimant.

Speaking on behalf of lawyers, Garaud conceded that a respondent would use all tools at its disposal to derail proceedings. And so, disclosure of funding at the outset therefore was preferable to avoid the late discovery of a conflict of interest with potentially dire consequences.

The conference saw some divergence in points of view regarding the duty of confidentiality and attorney client privilege.

As noted above, to uphold the duty of confidentiality and attorney-client privilege, the Resolution recommends that the client constantly be kept in the loop in correspondence with funders and that the client be present at all relevant discussion. From the point of view of Mohammad, this recommendation was impracticable and sought the French Bar to include a legislative exception to the rule – even if solely for arbitration – like the exception granted to the strict French rule that lawyers should not discuss testimony with witnesses before they take the stand. Garaud disagreed, arguing that simple, practical rules would enable smooth communications. He suggested that this rule could be complied with by requiring the funders themselves to be legally represented and that their communications with funded parties should be through lawyers.

Naturally, the test of practice will be the most relevant to determine what are the most appropriate solutions.

In any event, the Resolution has made some needed clarification for the community of Parisian lawyers and has significantly welcomed third-party funding in the Parisian landscape.


1 Paris launches arbitration week, GAR, 27 February 2017:

The authors wish to thank Asha Rajan, associate at Teynier Pic for her contribution to this article.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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