Research On The Issue Of Cost-bearing In Third-party Funding In International Commercial Arbitration

As the costs of international commercial arbitration have risen,more and more parties are seeking third-party funding to apply for arbitration.In recent years,as a new method in international commercial arbitration,third-party funding has developed rapidly.However,with the third-party funding coming,the arbitral tribunal encountered unprecedented challenges in making award of costs.When the funded party is successful,the arbitral tribunal has to decide whether the costs of funding should be recoverable.Unlike traditional costs of the arbitration and other costs,the nature and scope of the costs of third-party funding are more ambiguous,including “the costs of incurred third-party funding” and “success fees”.In addition,the arbitral tribunal needs to consider more relevant factors when apportioning the costs of third-party funding,and even consider the content of the funding agreement and the misconduct of the respondent.When the funded party is lost,the arbitral tribunal has to address a number of issues,too.The funded party may not be able to recover the reasonable costs of the arbitration respondent due to lack of funds,and since the funder is not the party of the arbitration procedure,the arbitral tribunal would lack jurisdiction to issue a costs order against a third-party funder,thus causing the respondent to suffer loss.The above situation is also known as the funder's "hit-and-run" strategy.Security for costs is a way to prevent the “hit-and-run” strategy.The arbitral tribunal can exercise the “indirect jurisdiction” of the funder by ordering the funder to provide security for costs,thereby maintaining the interests of the arbitration respondent.However,the relationship between the existence of third-party funding and the arbitral tribunal's order of security for costs is still controversial in practice.The thesis analyzes the above-mentioned cost issues caused by third-party funding in international commercial arbitration from the perspective of jurisprudence,as well as extraterritorial legislation,arbitration rules and cases.Whether it is the costs issues when the funder is successful or the cost issues when the funder loses,it is necessary to follow the contractual nature of arbitration and the value of fairness and benefit.The exercise of discretion by the arbitral tribunal cannot break the basic principles and values of international commercial arbitration.At present,third-party funding has emerged in the latest legislation and arbitration rules promulgated internationally.Some of the legislative and arbitration rules include third-party funding as a reference factor for cost order,while others directly regulate third-party funding cost order in their provisions.With the increase of third-party funding arbitration cases,the handling of the cost order issues under the third-party funding is also very valuable in practice,so the thesis analyzes some typical cases.Third-party funding arbitration is still in its infancy in China.At present,there are few legislative or arbitration rules on third-party funding in the field of international commercial arbitration in China.Therefore,I recommend that third-party funding should be included in the arbitration rules in the relevant provisions of the allocation of costs,and at the same time reserve discretionary space for the arbitral tribunal,for example,“The Tribunal may take into account any third-party funding arrangements in apportioning the costs of the arbitration.” The arbitral tribunal shall include the third-party subsidy as a reference factor for the application for the evaluation of the security for costs,and avoid the unnecessary delay and cost of the arbitration procedure caused by the security for costs while avoiding the inability of the arbitration applicant to obtain the cost compensation when winning the case.The arbitration rules shall clarify the obligations of the funded party to disclose information,including the form and object of disclosure,the scope of disclosure and the time of disclosure.The disclosure of information can be used as the basis for the arbitral tribunal's cost awards and ordering security for costs.Finally,no matter whether we resolve the issue through the amendment of the arbitration rules or the discretion of the arbitral tribunal,we must firmly follow the principle of fairness in international commercial arbitration.Third-party funding can continue to thrive only if the outcome of the awards is fair.