A Third-Party Funding (hereinafter “TPF”)1 is a third party of the arbitration procedure, with no previous interest in the claim, who “funds” or provides economic support for parties under an arbitration proceeding with an interest in the result of the claim. Not-for-profit TPF (hereinafter “NFP-TPF”) represent a new and evolved way of arbitration financing, where the “interest” is not economic as the reason for financing the case is associated with the values or issued involving the dispute, without receiving any profit.2 Even NFP-TPF has been considered as donations and not as a real TPF,3 these kind of funding bodies complies with all the element of a common TPF and only the element “profit” is observed differently.
II. The concept of interest
The element “interest” is the one that allows to distinguish between a TPF and a NFP-TPF. The NFP-TPF will not be entitled to receive an economic benefit and its interest in the claim is based on their commitment with the topic involved in the proceeding. As an example, the TPF definition included in the text of the CETA4 refers directly to the element “donation” to describe the not-for-profit interest of the funder.5
The absence of a direct not-for-profit interest do not mean that the aim of the funder will not represent at the end an economic benefit. As for example when the funding activity is carried out with the aim of obtaining a ruling that will constitute in the future an important legal precedent, an aspect that requires to be analysed case by case6 to finally consider if we are in front of a real NFP-TPF or not.
III. Not-for-profit third-party funding purposes
The purposes of NFP-TPF could vary and the professionalization of this type of funding is a reality. The Philip Morris Uruguay case (hereinafter “PMI case”) is relevant as the respondent was funded by a NFP-TPF,8 called The Anti-Tobacco Trade Litigation Fund” created by the Bloomberg Philanthropies and Bill and Melinda Gates Foundation, committed with the fight against Tobacco consumption. This case involved a powerful multinational company and the costs of an arbitration were high for the economy of a country. A decision in this case could suppose enormous implications to the Tobacco industry worldwide, in a moment when tobacco bans were spreading massively. This importance was considered by the funder when deciding to support Uruguay.
IV. Conflict of interests and security for costs
Two important elements that the presence of a TPF could affect are conflict of interest and security for costs.8 However, in cases of NFP-TPF, the issue of conflict must be addressed in a different way because the conflict could be based on some values that could affect the arbitrator itself and his or her commitment with the activity of the funder. For example, in the case of Tobacco claims, if in the past the arbitrator had cancer produced by Tobacco consumption or is committed with the fight against Tobacco consumption, any of such circumstances could affect his or her independence and impartiality.
Though, the mere absence of profit does not necessarily mean that there are no conflict of interest issues or aspects that need to be considered regarding security for costs. In this sense, the conclusions in relation with conflict of interest and the obligation of disclosure regarding “commons” TPF will also apply to NFP-TPF. For those reasons, the disclosure of NFP-TPF is an aspect that must be considered, and it will probable contribute to avoid situations of conflicts and to assess aspects of security for costs.9 The professionalization of the activity of NFP-TPF is an important step, an undisclosed presence as in the PMI case is a clear example that NFP-TPF will be less reluctant to undisclose their existence.
V. The future of not-for-profit third-party funding
Brabandere, E., and Lepeltak, J., Third-Party Funding in International Investment Arbitration, ICSID Review- Foreign Investment Law Journal, 2012, pp. 379–398.
Nieuwveld, L. B., and Sahani, V. S., Third-Party Funding in International Arbitration, 2nd ed., 2017.
Rogers, C., Ethics in International Arbitration, 2014.
Sahani, V. S., Revealing Not-for-Profit Third-Party Funders in Investment Arbitration, Investment Claims, 2017.