Third-Party Funding In Arbitration: Practical Q&A For Litigants Seeking Funding

1. Why would I consider TPF?

There are two main reasons why litigants turn to TPF.

First, TPF offers access to justice: it allows parties without the financial means to afford legal representation. This was the original purpose of TPF and remains a key reason why it is sought.

Second, TPF helps manage risk and costs. Because TPF is generally non-recourse (meaning that if the case is lost the funder receives nothing and the funded party owes nothing), the financial risk shifts away from the claimant. Legal costs no longer need to be booked on the balance sheet, which is why TPF is increasingly used by large corporations looking to optimize expenditures or allocate resources toward other priorities.

2. What types of disputes can be funded?

Funders are primarily interested in commercial and investment disputes of a certain value.

There is no general threshold, but many funders expect claims to be worth several million dollars. Some funders fund large cases only, while others may be keener on considering smaller matters if they can be bundled together in a portfolio arrangement.

Both claimant and counterclaimant cases can be funded, provided there is a claim or counterclaim that represents an asset from which the funder can be repaid.

3. How and when should I set up a TPF arrangement? (Guideline, §1)

The funding process typically unfolds in four stages: (i) a confidential, no-name preliminary discussion to test interest, (ii) a term sheet outlining the key commercial parameters, (iii) detailed due diligence of the case, and (iv) final approval by the funder and execution of a funding agreement. In practice, this can take several weeks or even months, depending on the complexity of the case and the quality of the materials provided.

Engaging funders early is therefore crucial, especially where limitation periods are approaching or where the litigant cannot carry the case alone while waiting for funding.

4. What pricing models do funders use, and how much do they charge? (Guideline, §2)

Funders generally calculate their return either as a multiple of the capital invested or as a percentage of any recovery, and in some cases as a combination of both. Typical returns range from 2 to 3 times the invested capital, or between 20% and 40% of the damages obtained. Most funders seek to ensure that the funded party retains the majority of the proceeds. As a rule of thumb, they often expect the legal budget to represent no more than one-tenth of the claim's value.

In practice, pricing is highly sensitive to risk. Higher-value claims (particularly those likely to resolve swiftly or through settlement) tend to attract more competitive terms. Conversely, claims involving complex or numerous legal issues, lengthy proceedings, or limited chances of successful enforcement require higher returns for the funder.

Litigants seeking funding should also be aware that pricing may vary not only between funders but also between funding models. For example, portfolio funding (see question 6) often allows for lower pricing because risk is spread across multiple cases.

5. What information will a funder need to evaluate my case? (Guideline, §6)

Funders conduct extensive due diligence. They typically assess three core aspects: the legal merits (strength of arguments and supporting evidence), the quantum of damages (value of the claim and methodology used), and the enforcement prospects (whether the opposing party has attachable assets located in a State where enforcement is not overly cumbersome). The analysis is different when the funding request concerns only the enforcement stage: rather than focusing on legal merits and quantum, funders will concentrate on recoverability, including the location, liquidity, and accessibility of the debtor's assets (see question 9).

Litigants seeking funding should be prepared to provide key documents:

• a draft submission or at least a note explaining the factual background of the case as well as its strengths and weaknesses;
• relevant evidence;
• a detailed and realistic budget;
• a procedural timeline; and
• information on the finances of the opposing party and their assets.

6. Can I fund multiple claims at the same time? (Guideline, §6)

Yes. Under a portfolio funding arrangement, a single funder finances a bundle of cases, typically brought by the same company or where the same law firms act as counsel. This allows the funder to diversify risk across several matters. A successful outcome in one case can offset losses in another, a mechanism known as cross-collateralization. For litigants, this diversification often translates into more attractive pricing than would be available on a case-by-case basis.

Portfolio funding can also open the door to financing for smaller or less straightforward claims that might not meet a funder's investment criteria if they are taken individually. Portfolio funding may also take the form of an open-ended facility, with some funders extending coverage to both current and future disputes

In rare cases, portfolio funding may even extend to pure defense cases (where the funded party acts as respondent and has no counterclaims), where they are bundled together with other cases that are the ones giving the funder a return.

7. What types of funding agreements are used, and what is ATE insurance? (Guideline, §7)

The most common arrangement is a single-case funding agreement, under which the funder pays the costs of one arbitration in exchange for a share of the recovery. These agreements are always non-recourse: if the case is lost, the funded party owes nothing.

In recent years, however, other structures have become increasingly common. Portfolio funding allows one funder to finance several cases at once. Funding may also extend to later stages of the dispute, such as appeals or enforcement, or even take the form of award monetization, where the funder advances part of the award value to provide immediate liquidity pending collection.

These arrangements are set out in what is commonly referred to as a Litigation Funding Agreement (LFA). Typical provisions include: the scope of funding (which costs are covered), the overall funding limit, reporting requirements, events that may allow the funder to terminate, and the mechanism by which recoveries are distributed. Although all LFAs share the same structure if the funded party loses (meaning the funder recovers nothing), the detailed terms are highly case-specific and subject to negotiation.

Alongside the LFA, litigants may choose to obtain After-the-Event (ATE) insurance. This protects the funded party from having to pay the opposing party's legal costs if the case is lost. ATE insurance is often used together with third-party funding: the funder covers the claimant's own costs, while the insurer covers the risk of an adverse costs order.

8. Do I need to disclose the funding to the arbitral tribunal or the opposing party? (Guideline, §11)

Disclosure obligations vary depending on the applicable arbitration rules, the law of the seat, and any relevant professional duties. Many institutions now require at least disclosure of the funder's identity to the tribunal for the purpose of conducting conflict checks (CIArb Guideline, Part II). For instance, Article 11(7) of the 2021 ICC Rules mandates any funded party to reveal the existence of a funding agreement and the identity of the funder. The 2024 HKIAC Administered Arbitration Rules (Article 44), the 2022 ICSID Arbitration Rules (Rule 14), the 2025 SIAC Arbitration Rules (Rule 38), the 2017 International Investment Arbitration Rules of the China International Economic and Trade Arbitration Commission (Article 27), as well as several recent European Union investment treaties, contain similar provisions. In such cases, disclosure should be made at an early stage to avoid challenges later in the proceedings.

The 2024 IBA Guidelines on Conflicts of Interest in International Arbitration also recommend that parties disclose the presence of a funder so that arbitrators can assess potential conflicts (General Standard 7 of the IBA Guidelines).

In many cases, the funded party will not have to disclose anything beyond the existence of funding and the funder's identity. However, some institutional rules require more. For instance, Article 22.1 of the 2022 Arbitration Rules of the Dubai International Arbitration Centre requires parties to disclose proactively whether the funder has committed to adverse cost liability. Article 27.2 of the 2017 International Investment Arbitration Rules of the China International Economic and Trade Arbitration Commission requires disclosure of the "nature" of the TPF arrangement.

Even in the absence of specific rules, some investor-state tribunals have ordered the disclosure of specific terms of the funding arrangement (see for instance: Muhammet Çap & Sehil v. Turkmenistan, ICSID Case No. ARB/12/6, Procedural Order No. 3, 12 June 2015, at 13; Bahgat v. Egypt (I), PCA Case No. 2012-07, Decision on Jurisdiction, 30 November 2017, at 63; Taheri v. UAE, ICSID Case No. ARB/21/19, Award, 28 November 2022, at 12). At least one ICSID tribunal went as far as to require the funded party to disclose the entire funding agreement, albeit only to the tribunal (Ballantine v. Dominican Republic, PCA Case No. 2016-17, Procedural Order No. 16, 2 October 2018, at 6). Rule 14(4) of the ICSID Arbitration Rules now provides that "[t]he Tribunal may order disclosure of further information regarding the funding agreement and the non-party providing funding [...]". This provision is broad and gives tribunals considerable discretion to require disclosure of details of the funding agreement.

Even where disclosure is not mandatory, parties may choose to inform the tribunal voluntarily. This should be done strategically. Opponents who learn of a funding arrangement may react by attempting to cast doubt on the funded party's financial standing and request security for costs. Their position often consists of arguing that third-party funding creates an imbalance, since LFAs rarely cover the opposing party's costs if the claim is lost. While tribunals often reject the idea that the existence of funding alone is sufficient to order security, litigants should anticipate this line of attack and prepare evidence of how adverse costs would be covered (for example through ATE insurance).

9. What level of confidentiality can I expect when sharing documents with funders?

Funders are typically specialized entities that routinely review sensitive case materials and are well accustomed to handling them under strict terms of confidentiality. In any case, before any information is shared, a non-disclosure agreement is typically signed, ensuring that documents cannot be used for any purpose other than evaluating the funding request.

10. What happens if the fees run over budget?

Funding arrangements are typically structured around a case budget agreed at the outset by the funded party, its counsel, and the funder. If actual costs exceed the budget, the funder is generally not obliged to increase its commitment. LFAs sometimes allow reallocations between budget phases or provide for a formal amendment mechanism, but many do not. As a result, when fees exceed the budget, the funded party may have to cover the excess costs, counsel may agree to reduce their fees, or the funder may extend its support.

The CIArb Guideline underscores the importance of preparing a realistic and detailed budget at the beginning of the process, with appropriate contingency intended to account for unforeseen developments (Guideline, §8.4.iii).

11. Does third-party funding include enforcement costs?

Winning an award does not automatically mean financial recovery. If the other party refuses to comply voluntarily, the winning party must initiate enforcement proceedings, which may involve litigation across multiple jurisdictions.

Some funding agreements cover enforcement as part of the original package, while others require a separate facility. Clarifying this point at the outset is essential.

Funders considering enforcement will assess different factors from those relevant at the merits stage: the liquidity of the award debtor's assets, whether those assets are located in a New York Convention jurisdiction, and the risk of parallel proceedings in multiple jurisdictions. In investment arbitration, the framework is slightly different: under the ICSID Convention Article 54, awards are enforceable in all contracting states as if they were final judgments of local courts, which may reduce the risk of resistance.

The CIArb's Guideline on TPF is available here: https://www.ciarb.org/media/sijpb14w/ciarb-guideline-on-third-party-funding-1.pdf