Comparative Analysis Of Third-Party Funding In Arbitration In India And Other Countries
- IJLLR Journal
- May 14
- 2 min read
Shashank, LL.M., School of Law Justice & Governance, Gautam Buddha University, Greater Noida, U.P.
Mr. Sagar, Assistant Professor, School of Law Justice & Governance, Gautam Buddha University, Greater Noida, U.P.
ABSTRACT
3rd Party Funding (TPF) in arbitration has become a notable trend in international arbitration, especially in the field of commercial and investment arbitration. It is a scheme in which a third party financing the legal expenses of one party (but not directly involved in the dispute) receives a proportion of the compensation or settlement received. Arbitration proceedings have become more expensive and costlier and an increasing number of people are seeking third-party funding to ensure access to justice, as well as for financially weaker parties to pursue legitimate claims.
This paper compares Indian law and regulations with other jurisdictions of the world on third party funding in Arbitration. Particular focus of the research is on the concept, nature and development of third party funding and the analysis of its increasing importance in domestic and international arbitration. It also examines the benefits of TPF including greater access to justice, risk management, commercial efficiency and considers, critically, the potential drawbacks of ethical issues, confidentiality, conflicts of interest and over commercialisation of disputes.
The study makes a comparative analysis of the legal position of third party funding in jurisdictions that have different levels of recognition and regulation of third party funding, including the United Kingdom, Singapore, Hong Kong, Australia and the United States. These countries have taken different positions on disclosure requirements, the liability of the funders, and ethical protections. The research also assesses the impact of these international practices on the evolution of arbitration law and funding worldwide.
In this context, the study examines the issue of lack of a comprehensive statutory framework for the regulation of third party funding in arbitration in India. Indian courts have accepted the validity of funding agreements provided they do not fall afoul of public policy; however, there remains some ambiguity about regulation, disclosure and enforceability. The research explores the judicial judgments, recommendations of the Law Commission and recent trends in Indian arbitration jurisprudence on TPF, giving it a critical perspective.
The study also underscores the need for a balanced regulatory framework in India which would facilitate third-party funding, but would be transparent, fair and abuse-proof. It contends that a well-managed regime of TPFs can bolster the role of India as an emerging global hub of arbitration by boosting investors' confidence and access to dispute resolution.
The study concludes that third-party financing of arbitration has significant advantages, but good regulation is needed to resolve ethical and procedural issues. Comparative knowledge about international practices can help India build a robust system of law that can keep in check commerce while maintaining the principles of fairness, transparency and justice in arbitration proceedings.
Keywords: Arbitration, Dispute Resolution, International Commercial Arbitration, Investor Protection, Third-Party Funding (TPF)
