Third-party funding (TPF) has become a central feature in many high-value commercial arbitrations. However, TPF raises complexities for legal practitioners, clients, and arbitral tribunals alike. In response to this increasingly nuanced landscape, the Chartered Institute of Arbitrators (Ciarb) has issued its 2025 Guideline on Third-Party Funding in Arbitration – a comprehensive document aiming to clarify the functioning and consequences of TPF in arbitral proceedings.

An accessible guide: Structure and purpose

The Guideline is split into two main parts:

• The first part (“The funding process”) offers a practical overview of the mechanics of third-party funding, reviewing how funding agreements are evaluated (including the due diligence which precedes the funding) and negotiated, the main types of funding products available, and the usual commercial terms seen in practice.
• The second part (“Arbitration involving a funded party”) addresses procedural and case management considerations, such as disclosure requirements, conflicts of interest (including the hurdles for arbitral institutions), the treatment of security for costs, and the recoverability of funding costs.

Ciarb explicitly positions the Guideline as a general overview. Practitioners are cautioned that individual cases will turn on the specific rules of the arbitral seat, the applicable arbitration rules, and the relevant national legislation.

Access to justice and transparency: A dual mandate

A key theme is that TPF serves a dual function: The Guideline recognises that TPF has potentially enhanced access to justice while also acknowledging that funding relationships introduce new challenges, such as the need for increased transparency and the effective management of funder-party-lawyer dynamics.

The Guideline states that the mere presence of a third-party funder is not, of itself, indicative of either the merits of the underlying claim or the financial standing of the funded party. Arbitrators are recommended not to make adverse presumptions about a funded party’s solvency or the prospects of their case based solely on the existence of funding.

Distinct from litigation: Costs and recoverability

The Guideline highlights a notable distinction between arbitration and litigation: arbitral tribunals may, in appropriate circumstances, award the costs of third-party funding to the successful party. This contrasts with many court systems, where recovery of such costs is not routinely permitted. The Ciarb text refers to key case law – such as Essar Oilfield Services Ltd v Norscot Rig Management Pvt Ltd – recognising a tribunal’s discretion to award TPF costs. Tribunals have indeed, in practice, included TPF costs in their awards to avoid reducing the recoverable proceeds available to a funded party.

The practicalities of managing funding arrangements

The first part of the Guideline demystifies funding processes, encompassing:

• Due diligence and assessment: Guidance is provided on the process for seeking and securing funding, including the information typically reviewed by funders (e.g., merits, quantum, enforceability).
• Typical arrangements: Common provisions found in litigation funding agreements (LFAs) are explained, covering control of proceedings, reporting obligations, and levels of funder involvement.
• After-the-Event (ATE) insurance: The guideline explains how ATE insurance can be paired with TPF, allowing parties to hedge adverse costs risk. Clauses such as the Anti-Avoidance Endorsement (AAE) are also discussed.

Implications for disclosure, conflicts, and security for costs

The second part targets those case management issues that arise from funding, with Ciarb advocating a pragmatic but principled approach. The core recommendations include:

• Disclosure: Parties and their advisers must closely review any applicable disclosure obligations regarding the existence and details of TPF, which may be mandated by institutional rules, the law of the seat (lex arbitri), or even professional conduct requirements.
• Conflicts of interest: The guideline invites careful consideration of relationships between funders, parties, arbitrators, and institutions, to manage potential conflicts and maintain the integrity of the arbitral process.
• Security for costs: Ciarb encourages tribunals considering security for costs to take a flexible, case-by-case approach – assessing, among other factors, the claimant’s ability to pay, the strength of the claim, and the overall fairness of requiring security. The presence of TPF should not alone trigger an order for security, nor should access to arbitration be unduly restricted.

Dynamic and evolving area: Compliance is key

Ciarb’s document emphasises that TPF is a dynamic field undergoing regular change. Participants to proceedings need to remain alert to ongoing legislative, regulatory, and institutional developments affecting third-party funding, both at the arbitral seat and in relevant national courts and comply with applicable disclosure and transparency requirements.

Conclusion: Best practice and a way forward

The new Ciarb guideline is a practical, and accessible starting point for engaging with third-party funding in arbitration. As TPF grows in prominence and sophistication, the potential benefits of establishing, where possible, common standards, and practices, increase. The Guideline offers a notable attempt to do this.

Click here to view the Guideline.