Leveling the playing field: what is Third Party Funding and the disclosure of the Funding Agreement for the 33rd Vis Moot
Leveling the playing field: what is Third Party Funding and the disclosure of the Funding Agreement for the 33rd Vis Moot
Guilherme Lafayette Pires Ferreira[1][2]
The newly released case of the 33rd Vis Moot sheds light on a well-known, yet relatively unexplored, puzzle in international arbitration: the scope of disclosure of the Litigation Funding Agreement. By shifting the lex arbitri to the rules of the Singapore International Arbitration Centre (“SIAC”), issue “(b)” prompts teams to formulate arguments for the following question: should the Arbitral Tribunal order the disclosure of the agreements executed by the Claimant under the SIAC Rules 2016 or Rule 38.4 of the SIAC Rules 2025?
To achieve a comprehensive understanding, it is vital to establish some concepts that should be considered before any debate on the disclosure of Financing Agreements.
First, it is important to address the concept of Third-Party Funding (“TPF”). According to the definition by Lisa Bench Nieuwveld and Victoria Shannon Sahani[3], TPF is a financing method in which an entity that is not a party to the dispute funds the arbitration costs of one of the parties, under the promise of receiving a percentage of the economic benefit obtained. Bernardo Cremades and Antonias Dimolitsa also define it: “it’s a scheme where a party unconnected to a claim finances all or part of one parties’ arbitration costs, in most cases the claimant”.[4]
Second, it is crucial to identify the effects that the existence of a TPF may have over the dispute. For the merits of the proceedings there is no influence at all. The issue is sensitive, however, for the validity of the proceedings, because (a) the existence of TPF may affect the impartiality of the Arbitral Tribunal; and (b) the lack of funds by a party, which relied on funding to give the kick-off to the proceedings, may give rise to an order of Security for Costs.
In what concerns item (a) above, it’s evident that the parties’ trust has become a core principle of modern arbitration.[5] Thus, doctrine recognizes that the identity of interests between the financed party and the funder can generate conflicts of interest that are relevant for the validity of the procedure.[6]
This issue, however, can be easily resolved through good faith measures taken by the Claimant in disclosing the identity of the funder. According to the majority of international arbitration case law, this level of disclosure is already sufficient to remedy any potential nullity that could be raised from impartiality — in fact, it is usually considered the maximum level of disclosure required.
In EuroGas Inc. and Belmont Resources Inc. v. Slovakia,[7] an ICSID arbitration, the Arbitral Tribunal held that the disclosure of the identity of the funder would be sufficient to remedy any defect affecting the valid development of the proceedings.[8]
Regarding item (b), the issue is more complex. When there is suspicion, by the Respondent, of the Claimant’s ability to cover an adverse costs award, it is possible for the party to request Security for Costs. For Ali Yesilirmak, “[s]ecurity for costs may be defined as [m]oney, property, or a bond given to a court by a plaintiff or an appellant to secure the payment of court costs if that party losses”.[9]
It is an alternative designed to secure the arbitral tribunal and to mitigate the so-called “hit-and-run arbitration”,[10] in which the Claimant initiates proceedings but, upon losing, lacks the funds to reimburse the opposing party’s proceeding costs.[11]
The Legal Test established by Nadia Darwazeh and Adrien Leleu, known as the two-prong test, sets out criteria for a Security for Costs request. For that, Tribunal must ascertain whether “(i) the claimant appears unable or unwilling to satisfy any adverse costs award; and (ii) the claimant is relying on TPF to finance its claims”.[12] In other words, legal scholarship has introduced an objective requirement: the Respondent must prove its counterparty’s financial incapacity, or substantiate well-founded suspicions of bad faith.
To ascertain the financial capacity of the party to cover adverse costs award a Security for Costs request usually comes attached to a request for disclosure of the Funding Agreement, in order to identify the extent of the funding (and to determine whether the party will have the means to satisfy any eventual costs order).
International arbitration case law finds that a request for disclosure of the Funding Agreements must be accompanied by relevant motives for its presentation. In the RSM Production Corporation v. Saint Lucia[13] case, the request was simply based on the usage of assertions, such as “gambling” and “adventurers” that, without illustrating the substance of the disclosure, was dismissed by the Arbitral Tribunal.[14]
With these considerations in mind, the teams must identify, in issue “(b)” of the 33rd Vis Moot case: (i) whether the presentation of the Funding Agreement is necessary for the Arbitral Tribunal’s conflict check, or if merely indicating the identity of the funder is already sufficient; and (ii) whether the presentation of the financing agreement is materially relevant to support a request for Security for Costs, which would justify the application of Article 38.4 of the SIAC Rules or the 2016 Rules, in view of the legal test.
[1] Bachelor of Law at Universidade Federal do Rio de Janeiro (UFRJ). Attorney at FUX Advogados
[2] Special thanks to my brother, Ricardo Lafayette Pires Ferreira, bachelor law student at Pontifícia Universidade Católica – Rio de Janeiro, for translating this article.
[3] NIEUWVELD, Lisa Bench e SAHANI, Victoria Shannon. Third-Party Funding in International Arbitration, 2ª edição. Kluwer Law International, 2017
[4] CREMADES, Bernardo; DIMOLITSA, Antonias. Dossiers – ICC. Paris, 2013. p. 5
[5] UZEDA, Carolina. A função criativa do princípio da boa-fé processual: o dever de revelação do juiz. In: Arbitragem e direito processual. Coord. Luiz Guilherme Marinoni, Cristina Bichels Leitão. São Paulo: Thomson Reuters Brasil, 2021 e DERAINS, Yves; MONTANS, Ana Paula. “Os Princípios da Lealdade, Celeridade e Confidencialidade Codificados pelo Novo Decreto Francês de Arbitragem”. Revista Brasileira de Arbitragem, v. 32
[6] TRITTMANN, Rolf; OHLROGGE, Leonardo. Disclosure of Third-Party Funding in International Arbitration. Revista de Arbitragem e Mediação, São Paulo, v. 80, p. 93–111, jan./mar. 2024; RUSZ, Jennifer A. Full disclosure? Conflicts of interest arising from third-party funding in international commercial arbitration. The Georgetown Law Journal, Washington, D.C., v. 101, p. 1649, 2013; FERRO, Marcelo Roberto. O Financiamento de Arbitragens por Terceiro e a Independência do Árbitro in_ MONTEIRO DE CASTRO, Rodrigo Rocha. Direito Empresarial e outros Estudos de Direito em Homenagem ao Professor José Alexandre Tavares Guerreiro. São Paulo: Quartier Latin, 2013 e YASRHELL, Flávio Luiz; AUILO, Rafael Stefanini. Breves apontamentos sobre o financiamento de litígios por terceiros para empresas em crise, p. 245-266. In_ PEREIRA, Guilherme Stoguti J. Litigation Finance e Special Situations. São Paulo: Thomson Reuters Brasil, 2023
[7] The EuroGas Inc. and Belmont Resources Inc. v. Slovak Republic (ICSID Case No. ARB/14/14) case concerns an investment dispute submitted to the International Centre for Settlement of Investment Disputes (ICSID) involving two foreign companies — EuroGas Inc. (United States) and Belmont Resources Inc. (Canada) — and the Slovak Republic. The core subject of the dispute was the alleged expropriation of mining rights over the Gemerská Poloma talc deposit, one of the largest in the world, located in Slovakia. The Claimants argued that the revocation of the mining rights held by the company Rozmin S.R.O., in which they were shareholders, amounted to expropriation and a breach of the standards of protection set forth in the applicable investment treaties (the U.S.–Slovakia BIT and the Canada–Slovakia BIT).
[8] See also Muhammet Çap & Sehil Inşaat Endustri ve Ticaret Ltd Sti v. Turkmenistan, South American Silver v. Bolivia e Philip Morris v. Uruguay
[9] YESILIRMAK, Ali. Provisional Measures in International Commercial Arbitration, Kluwer Law International, 2005, p. 214). See also: GILL, Judith; HODGSON, Matthew. Costs awards: who pays? Global Arbitration Review, v. 10, n. 4, p. 4, 2015 and REDFERN, Alan; O’LEARY, Sam. “Why It Is Time for International Arbitration to Embrace Security for Costs”. Arbitration International, vol. 32, nº 3, 2016, p. 409.
[10] This practice is strongly rejected by international doctrine: “[C]laimants (omissis) who take advantage of the court system should demonstrate their willingness (or at least not demonstrate unwillingness) to comply with the court’s decision on costs. The system is undermined if a claimant can use it for his benefit, but escape liability if he does not succeed on his claim” (KRON, Michael. Access to Justice: Security for Costs, proposed new rules, a Consultation Paper 2 [Lord’s Chancellor’s Office, 1997]). Disponível em: www.dca.gov.uk/consult1997.htm. Acesso em: 05 dez. 2025
[11] According to the ICC’s “Decisions on Costs in International Arbitration” report, proceeding costs that may be reibursed by the unsuccessful party can also insclude “lawyer’s fees and expenses related to witness and expert evidence, and other costs incurred” (ICC COMISSION REPORT. Decisions on costs in international arbitration. In: ICC Dispute Resolution Bulletin, 2015, Issue 2, p. 3)
[12] DARWAZEH, Nadia; LELEU, Adrien. Disclosure and security for costs or how to address imbalances created by third-party funding. Journal of International Arbitration, v. 33, n. 2, p. 125-150, 2016.
[13] RSM Production Corporation v. Saint Lucia (ICSID Case No. ARB/12/10) is a landmark investor-State arbitration that has shaped the jurisprudence on security for costs, abuse of process, and the procedural powers of ICSID tribunals. The dispute arose from an agreement granting RSM exclusive oil exploration rights off Saint Lucia’s coast, which became embroiled in boundary disputes and allegations of force majeure. RSM claimed the agreement remained in force and sought damages, while Saint Lucia argued expiration or unenforceability
[14] In a similar situation, see S&T Oil Equipment & Machinery Ltd v. Romania
