A Study On The Legal Issues Of Third-Party Funding Disclosure In International Investment Arbitration

Third-party funding was first established in common law countries through the maintenance and champerty rule of litigation,but has since been prohibited by judicial practice for a variety of reasons,and third-party funding agreements of the same nature have been The same nature of third-party funding agreements were often invalidated as contrary to public policy.However,with the development of the times,common law countries have successively removed the prohibition of maintenance and champerty from their criminal and tort statutes through amendments or case law.In the new post-crown era,third-party funding will become not only a means of “access to justice” but also a business strategy,given the unprecedented economic pressures and increasing cash flow pressures on companies.Investment arbitration differs from commercial arbitration and litigation in that one of the parties is a sovereign state,and the nature of the arbitration dispute is a public law act of state regulation of investors.The new ICSID Arbitration Rules,which came into force on July 1,2022,introduced the issue of third-party funding for the first time,and imposed an obligation on parties to disclose third-party funding,as well as to explicitly include third-party funding in the consideration of costs.The new ICSID Arbitration Rules introduce for the first time the issue of third-party funding and the obligation for parties to disclose third-party funding,and also explicitly factor third-party funding into the consideration of costs.Although this amendment to the arbitration rules provides new ideas on the disclosure obligations of third party funding in the field of investment arbitration,there is still much room for discussion on the nature of third party funding agreements,the legal status of third party funders,the determination of the scope of disclosure and the regulation of breaches of disclosure obligations.With the rapid development of China’s “The Belt and Road”,it is of great practical significance and importance for China’s enterprises and government to be better prepared to face third-party funding by understanding the current disclosure rules of international practice in the field of investment arbitration.Therefore,this paper will take the new ICSID Arbitration Rules as an entry point to analyze the problems that still exist in the current disclosure mechanism of third-party financing in international investment arbitration and propose corresponding solutions.The first chapter of this paper,as an overview section,focuses on the connotation and impact of third-party funding in investment arbitration and the necessity of disclosure rules.Considering the significant differences in the impacts and challenges brought by the intervention of third-party funding in the field of commercial arbitration and investment arbitration,a special analysis of the disclosure rules of third-party funding in the field of investment arbitration and reasonable measures are needed.Chapter 2 focuses on the theoretical aspects of the disclosure mechanism,namely,how to define the nature of third-party financing agreements and the legal status of third-party financiers in investment arbitration.Considering that the formulation of disclosure rules needs to clarify the purpose of regulation and the nature of the target of regulation,this chapter will specifically analyze the different views on the nature of third-party financing agreements and the legal status of third-party financiers in academia and practice,and take into account the special characteristics of the investment arbitration field,so as to make clearer the focus of setting up disclosure rules for third-party financing in investment arbitration.Chapter 3 focuses on the determination of the scope of disclosure in investment arbitration.As far as the current international arbitration rules are concerned,the discussion of the scope of disclosure mainly includes the existence of the fact of third-party financing,the disclosure of the identity of the third-party financier,the disclosure of the third-party financing agreement and other elements.This chapter will specifically take the six working group reports of the new ICSID Arbitration Rules as the sample of study,analyze the significance,pros and cons of disclosure specifically for each disclosure element,and compare the relevant meeting reports and proposals of UNCITRAL Working Group III simultaneously to propose corresponding strategies.Chapter 4 focuses on the analysis of regulatory measures for breach of disclosure obligations,including both procedural regulation and cost-shifting mechanisms.The procedural part includes the suspension of arbitration proceedings for breach of disclosure obligations and the stay or suspension of enforcement proceedings after the entry into force of the award.In the part of cost-shifting mechanism,the new ICSID Arbitration Rules provide for the transfer of costs and security for costs as examples,and summarize the reasonableness of the implementation of relevant measures in the light of previous ICSID cases.Chapter 5 consists of two parts,the first of which focuses on the shortcomings of the new ICSID Arbitration Rules and proposes relevant improvements.The second part analyzes the shortcomings of the current legislation and rules of arbitration institutions in China,at the same time,in the context of China’s “The Belt and Road”,make possible solutions or suggestions for China to protect its legitimate rights and interests in the future.