Ethical and Procedural Challenges of Third-Party Funding in International Arbitration

Abstract

The increasing commercialization of international arbitration has given rise to the widespread use of third-party funding (TPF), fundamentally altering the dynamics of arbitral proceedings. Third-party funding enables an external, non-party financier to support arbitration costs in exchange for a share of the proceeds, thereby enhancing access to justice for financially constrained claimants and promoting risk allocation in high-value disputes. However, the growing involvement of profit-oriented funders has generated complex ethical and procedural challenges that threaten the core principles of international arbitration. This study critically examines the ethical and procedural implications of third-party funding in international arbitration. It analyses the impact of TPF on party autonomy, confidentiality, and the professional responsibilities of counsel and arbitrators, with particular emphasis on conflicts of interest and tribunal independence. The study further evaluates procedural issues arising from third-party funding, including security for costs, transparency, and disclosure obligations. Through a doctrinal and comparative analysis of institutional rules and soft law instruments—particularly those of the ICC, SIAC, and UNCITRAL the research highlights the fragmented and inconsistent regulatory landscape governing third-party funding. The paper argues that while third-party funding serves as an important mechanism for facilitating access to justice, its unregulated expansion risks undermining the legitimacy and integrity of the arbitral process. It concludes by emphasizing the need for harmonized ethical and procedural norms that balance commercial realities with the foundational values of arbitration, including fairness, neutrality, and procedural equality.