Are Third-Party Funding Costs Recoverable In Arbitration?

Co-authored by Edward Fallas

According to the N.Y. Times, dispute resolution funding was at least a $10 billion industry in 2018 and is expected to continue growing. Funders are expanding beyond their wide acceptance in IP litigation into new markets like international arbitration and complex commercial litigation. For instance, a recent study by funder Burford Capital found that 36% of U.S. law firms polled in 2017 said they used outside funding compared with only 3% in 2013. Funders are also underwriting case portfolios to hedge the risks of individual matters.

This rapid growth is giving rise to novel issues regarding privilege, conflicts of interest, and costs. This post will focus on a particular cost issue — specifically, the recoverability of third-party funding costs in arbitration proceedings. (We will address other pertinent issues in future posts.)