Resolution Of Conflict Of Interest In Third-party Funded Arbitration

Under the background of the increasing integration of the global economic development,the cost of the parties to initiate international arbitration has increased significantly.The high cost has brought some difficulties for the parties to claim their rights.At this time,a new way of investment-“Third-party funding”,has emerged in the field of international arbitration,and has been rapidly industrialized.Third-party funding is also known as "TPF," in which the outsider provides material assistance to the parties and receives some of the funds from the winning proceeds in return.This type of investment often occurs in cases where the circumstances are complex,the cycle is longer and the costs of arbitration are high,bearing the burden of costs for parties who are in financial distress or have liquidity difficulties,and help them to file claims that they would not have been able to afford.This concept first originated in Australia,and then developed in common law countries.In recent years,the number of cases funded by third parties has increased,showing a rapid development trend.TPF has flourished in international arbitration for the following reasons: firstly,funders help individuals file claims that they cannot afford,increasing the likelihood that the parties will be able to appeal their claims.Many companies that are insolvent or wish to have sufficient cash flows to maintain normal business during arbitration proceedings are also willing to seek TPF to sharerisks with the funders,which creating the commercial needs.Secondly,TPF enables a new participant to participate informally in the arbitration process and gain substantial commercial benefits from it,thus giving rise to a large margin of profit and prompting many investors to flock to this field.Moreover,the involvement of TPF actually contributes to the resolution of cases.Generally speaking,if there is a wide gap in economic strength between the parties concerned,the stronger party may make use of the restricted economic position of the other party to strategically delay the settlement of the case.If the economically constrained party is supported by external funds,the economic capacity of both will be balanced,thereby reducing the occurrence of inequality.Thus it can be seen that the role of TPF in arbitration proceedings cannot be ignored,its existence is necessary.However,it is undeniable that,as a new thing in the practice of international arbitration,TPF has brought a lot of challenges to international arbitration.How to deal with these challenges and regulate the phenomena caused by them has become an urgent problem to be solved.This paper analyzes the most prominent problem in third-party funded arbitration-conflict of interest.TPF’ Participation often makes the relationship more complex,which brings challenges to the impartiality and independence of arbitration.And compared with the conflict of interest in the past,this kind of relationship has a higher concealment and greater economic relevance,which will increase the likelihood of potential conflicts of interest.If the arbitrator has some connection with the third party funder,their participation may have a negative impact on the process and outcome of the case as a whole.The settlement of conflicts of interest based on disclosure,which is conducive to the resolution of conflicts of interest.In order to resolve this problem,it is necessary to ensure that arbitrators and the parties are aware of the existence of TPF.To date,the details of the existence and participation of TPF in the vast majority of arbitration cases remain unclear.In the absence of prior disclosure,third-party funders can obtain direct economic benefits in the outcome of the claim and exert control over the proceedings,without being accountable to anyone,including the disputing parties.This will directly lead to doubts about the transparency of the arbitration and its independence and impartiality cannot be guaranteed.Thus it can be seen that the establishment of pre-disclosure system is an effective way to solve the problem.However,in the current practice,there are no consistently applicable disclosure rules,and the standards and practices adopted by the main arbitration institutions are different.In addition,there are still some problems in the current arbitration rules,such as the provisions of disclosure obligations are too broad and vague,the subject of disclosure is too narrow and so on.Therefore,for the benefit of all participants,it is necessary to establish a corresponding disclosure system to clarify the disclosure obligations of the parties,so that it can be under a certain degree of transparency.Based on the above phenomena,this paper analyzes the causes of the conflict of interest and the specific performance of the conflict of interest,and further leads to the solution,that is,the establishment of the disclosure system.Through the analysis of the current cases and arbitration rules,this paper sums up the specific practice of the disclosure of TPF at present,and puts forward some suggestions for the establishment of the system.In order to provide relevant ideas for the resolution of conflicts of interest.This paper is divided into three chapters,which makes a specific analysis of the conflict of interest in the practice of TPF,and focuses on the establishment of disclosure system.The first chapter starts with the concept,historical development and evaluation of TPF,mainly clarifies the concept and nature of TPF,and puts forward a narrow definition.On this basis,this paper makes a specific analysis of the advantages and disadvantages of TPF,and discusses its impact and development trend in the future.The second chapter starts with discussion of the fairness and justice in the arbitration procedure,and emphasizes that both of them are the basis for arbitration.It also clarifies the specific requirements of the independence and impartiality of arbitrators and the intervention of TPF may bring harm to them.The third chapter is based on the establishment of disclosure system,and analyzes the feasibility and framework of establishing TPF disclosure system at present.It includes disclosure subject,time,object,scope and so on,in order to form an effectivemechanism to reduce the risk of conflict of interest.Finally,it provides relevant ideas for our country to establish and improve the disclosure system in this respect,and puts forward that the existing arbitration system should be revised on the basis of the characteristics of domestic law and arbitration practice.TPF should be clearly included in the scope of supervision,which will increase the competitiveness of China’s arbitration system.