Security For Costs Without A Power To Order It: Third-Party Funding And The Structural Asymmetry Of Indian-Seated International Commercial Arbitration
Jaskiran Kaur, National Law Institute University, Bhopal
ABSTRACT
The Indian debate on third-party funding has settled into a familiar shape. Funding is lawful but unregulated; the Delhi High Court has held that a funder who never agreed to arbitrate cannot be made to pay a costs award; and the standard prescription is that India should mandate disclosure and make funders liable. This article argues that the prescription misidentifies the defect. The problem exposed by Tomorrow Sales Agency is not that the funder escaped liability, which on orthodox principles of consent it was bound to do, but that the respondent had no means of securing its costs against anyone at all, including the claimant. The Arbitration and Conciliation Act 1996 confers a comprehensive power to award costs at the end of a reference under Section 31A, and it confers a deposit mechanism under Section 38 that protects only the tribunal's own fees. It confers no express power, on the tribunal or on the court, to order a claimant to provide security for the respondent's costs. This is a drafting choice rather than an accident: where Article 17 of the UNCITRAL Model Law states an open- ended power to grant interim measures, Section 17 of the Indian Act substitutes an enumerated list in which security is available for the amount in dispute but not for costs. Funding does not create this gap; it industrialises it, because non-recourse structures make a judgment-proof claimant a rational commercial product rather than an accident of insolvency. The article compares the deliberate pairing of disclosure with security in England, Hong Kong, Singapore, the 2022 ICSID Rules and the 2025 SIAC Rules, and argues that India has imported neither half of that pair. It proposes an express security-for-costs power in Section 17 subject to Article 17A-style conditions, a disclosure duty owed by parties rather than only by arbitrators, a funding-aware factor in Section 31A(3), and an opt-in route by which a funder may submit to the tribunal's costs jurisdiction. It argues against reversing Tomorrow Sales Agency, which was correct.
Keywords: international commercial arbitration; third-party funding; security for costs; Section 17; Section 31A; Tomorrow Sales Agency; disclosure; UNCITRAL Model Law; arbitrator conflicts.
