Third-Party Funding Of Arbitrations In India – Risks & Liabilities

Introduction

The recent judgement pronounced by the Delhi High Court in the case of Tomorrow Sales Agency Private Limited v. SBS Holdings, Inc. and Ors.¹, is being hailed as a favorable step towards third party funding of arbitration in India. This article discusses the concept of third-party funding for arbitration proceedings and why it is considered as a progressive measure for the arbitration regime.

Third party funding is a practice where a party unrelated to the dispute would extend financial support to one of the disputing parties (generally, the claimants). This support lent by the funding party is usually motivated by monetary gains or sometimes even by the cause for which the parties to the dispute stand. The monetary support provided by the funding parties is usually an investment that they make and as returns of their investment, they would receive a share in the award, if favorable to the party they had funded. The third-party funders are usually