Nigeria: Third-Party Funding In International Arbitration: Disclosure Obligation As An Antidote To Conflicts Of Interest In Third-Party Funding Arrangements

INTRODUCTION

The escalating costs associated with international arbitration have emerged as a significant concern, given their potential to reach exorbitant levels. These increasing costs have transformed into a formidable obstacle for the parties involved, fueling concerns that arbitration may only be accessible to "deep-pocket" entities or individuals, thereby potentially denying meritorious claims access to justice due to financial impediments. These increasing costs associated with international arbitration have compelled parties to seek external financial assistance.

Third-party funding ("TPF") as an example of external financial assistance has emerged as a very recent and rapidly trending approach to financing international arbitral proceedings, swiftly becoming one of the most discussed and debated topics in the field. TPF originally existed in litigation in various forms and in several jurisdictions, however, it has witnessed exponential growth in international arbitration over the years. Entities, corporations, and individuals have come to view TPF as a convenient substitute for self-financing disputes. For some parties to arbitral proceedings, TPF is not a discretionary choice but a compelling necessity, while others opt for TPF as a means to safeguard their financial resources while ventilating their claims before an arbitral tribunal. Essentially, the concept of TPF raises numerous legal concerns, some of which are whether the funded party is obligated to disclose the existence of TPF, the identity of the funder, the terms of the TPF agreement, and the timeframe for such disclosure. This article seeks to analyze the concept of TPF, the legal issues associated with TPF, and the disclosure obligation under relevant regulations.

The Concept of Third-Party Funding

Third-party funding ("TPF") has multifarious definitions owing to the difficulties associated with defining the concept. These difficulties may be attributed to the fact that economic interests in a dispute may take many shapes and sizes. In analyzing these difficulties, W. Park and C. Roger enunciated that "economic interests in a party or a dispute can come in many shapes and sizes. Arrangements may be structured as debt instruments, equity instruments, risk-avoidance instruments, or as full transfers of the underlying claims. Some agreements...

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