Third-Party Funders And Their Exposure To Adverse Costs Liabilities

The assenting opinion in RSM Production Corporation v. Saint Lucia, ICSID Case No. ARB/12/10¹ raises a highly emotive issue, relevant to the issue of third-party funding which continues its expansion in international arbitration claims.

This issue concerns the fact that in principle, tribunals currently lack the jurisdiction to issue a costs order against a third-party funder ("TPF"), because TPFs are not typically a party to the arbitration agreement, with no involvement in the underlying dispute between the parties in an arbitration. A TPF's involvement in the proceedings cannot readily be interpreted as consent to arbitrate, and litigation funding agreements are commonly designed to ensure that that the TPF cannot be construed as a party to an arbitration. Current research suggests that there have been no published arbitral awards ordering a TPF to pay adverse costs in international arbitration.