An ICSID Tribunal ordered RSM, an investor company from United
States which admitted that it had received funding from a third
party, to post a guarantee of US$750,000 to ensure that it could
pay Respondent Saint Lucia's legal costs if it was ordered to
do so at the end of the arbitration proceedings. The same tribunal
had previously obligated RSM in the same proceedings to pay
all of the advances towards the administrative costs of the
arbitration which is traditionally split evenly between the two
This provisional award also received significant attention given
its potential impact on ongoing investor-state claims that are
being supported by third party funders. From a state's
perspective, this award clearly illustrates the tribunals'
concern that a claimant may not comply with a costs award rendered
against it, since, in the absence of security or guarantees being
offered, it is doubtful whether the third party will assume
responsibility for honoring such an award.
In his assenting opinion, Gavan Griffith QC emphasized that the
funder, as a stranger to BIT entitlement, should remain at the same
real risk level for costs as the nominal claimant. In his opinion
he expressed that "the integrity of the BIT regimes is apt to
be recalibrated in the case of a third party funder, related or
unrelated, to mandate that its real exposure to costs orders which
may go one way to it on success should flow the other direction on
failure". This language is particularly curious because in a
2011 opinion on the same issue as to whether an allegedly
impecunious claimant being funded by a third-party should post a
security for costs, Mr. Griffith had noted that "the tribunal
does not regard [the possibility that a respondent might not be
able to recover its costs given that a third-party funder would not
be bound on any award on costs in its favor] of such third-party
funding as a relevant factor to improve the position of the
Respondent on this costs application" and denied the
Respondent's request for security for costs. See,
Bozbey Insaat Sanayi ve Ticaret Ltd. Sti. and Omer Faruk Bozbey
v. Government of Turkmenistan, PCA Case No. 2011-2. The views
expressed by Mr. Griffith in RSM are diametrically opposed
to those he articulated in Bozbey merely three years ago. It
will be interesting to see how Griffith justifies this complete
change in direction in his thinking on the issue—i.e. whether
the facts of RSM were significantly different from that of Bozbey
or that Griffith's views on funding evolved in these last three
years. At any rate, this should also serve notice to disputing
parties that in this relatively new and unchartered area of as
third-party funding, parties should be even more careful about
selecting arbitrators as the arbitrators' opinions on this
issue may be have shifted or evolved significantly in a relatively
short period of time, as it seemingly is the case with
By using the language "Only in an Imaginary
Wonderland" Judge Edward W. Nottingham, appointed by the
claimant, took a different approach from the other two members of
the tribunal. In his dissenting opinion, Nottingham stated: "
The general concerns about third-party funding and security for
costs can and should be addressed by the Administrative Council in
its rule-making capacity, if there is a problem that needs to be
dealt with". Nottingham also wrote that an individual tribunal
should not be using general language of unlimited elasticity to
accomplish the result, which the tribunal regarded as
Given the fact that third-party funding is increasing in the
investment arbitration practice, RSM v St.Lucia, might
create a big question mark for funders in the market. While the
issue of security for costs is generally not considered as an
element of both risk and potential cost payment by third-party
funders, RSM decision might create a paradigm shift in the
way funders think about this issue.
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