The Chartered Institute of Arbitrators (CIArb) has released its Guideline on Third-Party Funding (2025) (the CIArb Guideline or Guideline). The Guideline is structured to support parties, counsel, arbitrators, and institutions in understanding the funding process and managing its procedural implications. We summarise the key aspects of the Guideline below.
The CIArb Guideline provides practical guidance on third-party funding (TPF) in arbitration. The Guideline is divided into two constituent parts:
- Understanding the Funding Process: This part explains how TPF works, the types of funding products available, and the commercial terms typically involved.
- Case Management Implications: This part looks at arbitrations involving a funded party and outlines how TPF affects arbitration procedures, including disclosure obligations, conflicts of interest, security for costs applications and cost recovery.
Understanding the Funding Process
The first section states that there are essentially four steps in the funding process: (i) preliminary discussions on a no-names basis, (ii) indicative terms, (iii) due diligence on the claim and (iv) approval, offer and litigation funding agreement (LFA).
Economics and Pricing
The Guideline outlines the key factors assessed by funders when determining pricing, which include recovery risk, duration of the dispute and likelihood of settlement. The two most common pricing models are:
- Percentage-Based: Funders receive a share of the award based on an agreed percentage.
- Multiple-Based: Funders receive a multiple of their investment. It should be clear whether this includes or excludes a return of capital.
The Guideline also recognises that hybrid models may combine both structures, although these are rare.
Advantages and Disadvantages of TPF
The Guideline considers the broad range of advantages and disadvantages that TPF offers to the funded party and advises that suitability must be assessed on a case-by-case basis.
Key advantages include:
- Access to justice: Third-party funding helps claimants pursue legal action they otherwise could not afford.
- Risk transfer: It shifts the financial burden and litigation risk from the claimant to the funder.
- Strategic support: Funders often provide valuable insights, rigour in budgeting, and their backing can enhance the credibility of the claim.
- Customisation: Funding arrangements can be tailored to suit the specific needs of the business or case. They can be available at any stage of a matter.
Additional advantages noted are that funders can assume the risk of adverse costs, funding may serve as a risk management tool, and funders can offer second opinions regarding the merits of cases.
Disadvantages identified by the Guideline include:
- Slow approvals: The funding process can be time-consuming due to extensive due diligence.
- High cost: Funders typically charge significant fees or claim a large share of any recovery.
- Level of funder intervention: There is a risk that some funders may try to influence litigation strategy or settlement decisions.
- Conflict potential: Disagreements may arise between funders and claimants over case management or settlement terms.
Due Diligence and Choosing a Funder
The Guideline advises that parties assess a funder's financial stability and ability to meet its obligations. Transparency is essential; funded parties are encouraged to understand the funder's ownership structure and decision-making processes. It is also important to evaluate the funder's track record and responsiveness.
The Guideline recommends confirming how the funder manages conflicts of interest and whether they comply with relevant regulations. Parties should clarify the funder's role in the case, especially regarding settlement decisions. This helps avoid misunderstandings and aligns the funding arrangement with the party's legal strategy.
The funder will itself carry out due diligence on the claim. It will need information on the realistic value of the claim, enforcement and recoverability, merits of the case, the parties and the legal team involved.
Types of Funding Arrangements
Funding arrangements are usually contained in LFAs. The Guideline outlines various funding models:
- Single-case funding: Financing is provided for one specific dispute or claim.
- Portfolio funding: A group of cases is funded under a single facility, spreading risk across multiple claims.
- Appeal and enforcement funding: Support is offered for post-award stages like appeals or enforcement actions.
- Awards monetisation: Converts a successful award into immediate cash flow before enforcement.
- Adverse Costs Risks and Awards: Additional funding support to cover the adverse costs risk on failure of a funded party's case.
- Law firm finance: Funders provide capital directly to law firms to support multiple cases or operations.
- Loans: Traditional debt financing is used to cover legal costs, often with interest and repayment terms.
The Guideline goes on to consider common terms found in typical LFAs. In addition to the core financial terms, it recommends that parties pay attention to covenants, representations and warranties, control, budget, distribution of proceedings, termination and the dispute resolution provision.
Case Management Implications
The second part of the Guideline considers the impact of TPF on the arbitration process, including the level of involvement of the funder. It states that most funders take a relatively "hands-off" approach but receive regular updates on how the case is progressing and require notification of any material developments. This requirement is usually contained in the LFA.
Disclosure, Conflicts of Interest and Confidentiality
The Guideline provides that early disclosure of the existence of TPF, and of the identity of the funder, can avoid or mitigate the risk of a potential conflict of interest adversely affecting the progression of the proceedings. Further, the confidentiality of a TPF arrangement may conflict with the funded party's disclosure obligations – this will need to be considered upfront, ideally when drafting any non-disclosure agreement (NDA), to ensure reconciliation. In general, the early disclosure of funding arrangements is recommended to avoid conflicts and ensure transparency.
Non-party advance on costs
Institutions are generally reluctant to accept cost payments from non-parties, especially if the party is linked to a sanctioned entity, and such payments by funders usually require disclosure of the funding relationship to all parties, the tribunal and any applicable institution.
Security for Costs and Cost Recovery
Tribunals may order security for costs if there is a risk the claimant cannot meet adverse cost liabilities. The Guideline warns that the presence of third-party funding alone would not necessarily justify such an order, as tribunals consider multiple factors, of which funding is only one. The Guideline also summarises some relevant case law on the recovery of TPF costs, including the established English judgment in Essar (see our blog post here). The Guideline concludes that funding costs may be recoverable if "the funded party can demonstrate to the tribunal that both the necessity of resorting to TPF and the amount of those funding costs are reasonable under the circumstances, and where the recovery of such costs comes within the scope of the tribunal's discretion as a matter of the law of the seat, or under the applicable institutional rules".
Case Management and Settlement
The Guideline is clear that funders typically monitor progress but do not control proceedings. The purpose of the LFA is to define clearly the roles of the parties, reporting obligations, scope of work and/or expenses which impact the budget. The LFA should also include express terms regarding potential settlement of the dispute and provide a dispute resolution forum.
Comment
TPF is increasingly common in arbitration, and the CIArb Guideline offers early practical guidance on its process and procedural impact. It is important to note that the availability of TPF varies by jurisdiction and that each jurisdiction and arbitral institution may have different rules. When considering TPF, it is important to seek professional advice on the rules that are likely to apply to your matter.
HSF Kramer partner Kathryn Sanger, based in Hong Kong, was a member of the Guideline's Drafting Committee. The firm also commented on the published consultation.
The authors would like to thank Samuel Barker for their contribution to this post.
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.
