An Evaluation of Third-Party Funding in Commercial Arbitration

Abstract

Arbitration as a dispute resolution mechanism aims to advance
access to justice in accordance with Goal 16 of the United
Nations Substantiable Development Goals (SDGs). One key
issue in arbitration law and practice is the role of third-party
funders in fundraising for the arbitration or even litigation
process. Third Party Funding (TPF) has grown as a practice of
financial responsibility for litigation or arbitration by sponsors
that are not parties to a dispute, but whose interest is return for
their investment. Such an arrangement may cover major
litigation or arbitration costs, as well as other miscellaneous
costs. The practice contradicts well established legal principles
such as privity of contract and/or complements party
autonomy, but the enormous advantages it offers, such as faster
access to justice and investment opportunities cannot be
ignored. Whilst the concept has developed in advanced
countries it is yet to take shape in developing nations like
Nigeria. The methodology deployed is doctrinal with primary
and secondary sources being the content of Statutes, Bills and Case law. Online sources were also relied upon for secondary
sources. The study found that TPF will assist in higher
fundraising for litigation and arbitration, that it applies mainly
to claimants and will increase access to justice. It is
recommended that funds be made available to Defendants too
and that developing countries should embrace the practice.