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Transcript of Third party funding in international arbitration –
Third Party Funding in International Arbitration –
how to protect the integrity of the proceeding?
Dr. Anton G. Maurer, LL.M.
CMS Hasche Sigle
Stuttgart, Germany
Tel: +49 172 7333696
Preserve the INTEGRITY and LEGITIMACY of the
international arbitration proceeding
Ensure IMPARTIALITY and INDEPENDANCE of the
arbitrator
Protect the FINALITY of an award against challenges
TPF and Conflict of Interest Dr. Anton G. Maurer, LL.M. 15.09.2015 2
Main Principles
A. Claimant has Third Party Funding (TPF); in a different
arbitration, one of the arbitrators represents a claimant
with TPF from the same company;
B. Claimant has TPF; a partner from the same office of one
of the arbitrators represents a claimant with TPF from the
same company;
TPF and Conflict of Interest Dr. Anton G. Maurer, LL.M. 07.09.2015 3
Situations (1)
C. Claimant has TPF; a partner of one of the arbitrators
from the same law firm but another domestic office
represents a claimant with TPF from the same company;
D. Claimant has TPF; a partner of one of the arbitrators
from the same law firm but a foreign office represents a
claimant with TPF from the same company;
TPF and Conflict of Interest Dr. Anton G. Maurer, LL.M. 07.09.2015 4
Situations (2)
E. Claimant has TPF; in a different arbitration proceeding,
one of the arbitrators is respondent's counsel against a
claimant with TPF from the same company;
F. Claimant has TPF; a partner of the arbitrator regularly
advises the third party funder.
G. Arbitrator was two or more times appointed by different
claimants who are financed with TPF from the same
company.
TPF and Conflict of Interest Dr. Anton G. Maurer, LL.M. 07.09.2015 5
Situations (3)
Non-recourse financing
30 – 50 % of awarded amount, but at least 3-4 times of
amount funded
Reporting obligations, often consent required for
stipulated items
Termination right for TPF
TPF and Conflict of Interest Dr. Anton G. Maurer, LL.M. 07.09.2015 6
Basic Characteristics of Third Party Funding
When is an arbitrator's impartiality or independence
questionable?
What has an arbitrator/ a claimant to disclose?
Which of the situations may cause "justifiable doubts"
regarding the impartiality or independence of an
arbitrator?
TPF and Conflict of Interest Dr. Anton G. Maurer, LL.M. 07.09.2015 7
Issue:
1. Lex arbitri
2. Applicable arbitration rules
3. Law, where award shall be enforced
4. IBA Guidelines on Conflicts of Interest in International
Arbitration (2014)
TPF and Conflict of Interest Dr. Anton G. Maurer, LL.M. 07.09.2015 8
Which standards apply?
Section 14 (1) Arbitration Act 2005 of Malaysia:
"A person who is approached in connection with that
person's possible appointment as an arbitrator shall
disclose any circumstances likely to give rise to
justifiable doubts as to that person's impartiality or
independence."
similar: UNCITRAL Model Law (Art. 12 (1)), Art. 7 ICDR
International Arbitration Rules
Applied objectively (reasonable third person test)
TPF and Conflict of Interest Dr. Anton G. Maurer, LL.M. 07.09.2015 9
Standards vary (1)
Art. 11.2 ICC Rules 2012:
"… Prospective arbitrator … shall disclose … any facts
and circumstances which might be of such a nature as to
call into question the arbitrator's independence in the
eyes of the parties …"
Art. 5.4 (i) LCIA Rules 2014:
"… circumstances … which are likely to give rise in the
mind of any party to any justifiable doubts …"
Art. 14 (2) SCC Arbitration Rules 2010, and Rule 10.4 SIAC
Rules 2013:
"…which may give rise to justifiable doubts …"
TPF and Conflict of Interest Dr. Anton G. Maurer, LL.M. 07.09.2015 10
Standards vary (2)
Part I (General Standards):
(2) (c): "Doubts are justifiable if a reasonable third person …
would reach the conclusion that there is a likelihood
that the arbitrator may be influenced by factors other
than the merits of the case …"
(3) (a): "If facts or circumstances exist that may in the eyes of
the parties give rise to doubts …arbitrator shall
disclose …"
TPF and Conflict of Interest Dr. Anton G. Maurer, LL.M. 07.09.2015 11
IBA Guidelines on Conflict of Interest in
International Arbitration 2014
Part I (General Standards)
(6) (a) "The arbitrator is in principle considered to bear the
identity of his or her law firm …"
Explanation:
The growing size of law firms should be taken into account.
Need to balance the interest of a party to nominate an
arbitrator of its choice and the importance of maintaining
confidence in impartiality and independance.
TPF and Conflict of Interest Dr. Anton G. Maurer, LL.M. 07.09.2015 12
IBA Guidelines on Conflict of Interest in
International Arbitration 2014
Part I (General Standards)
6) (b) "… any … person having a controlling influence on
the legal entity, or a direct economic interest in … the
award … may be considered to bear the identity of
such party."
Explanation:
Each situation should be assessed individually. Third party
funders may have a direct economic interest in the award ,
and as such may be considered to be the equivalent of the
party.
TPF and Conflict of Interest Dr. Anton G. Maurer, LL.M. 07.09.2015 13
IBA Guidelines on Conflict of Interest in
International Arbitration 2014
Part I (General Standards)
(7) (a) A party shall inform an arbitrator … of any relationship,
direct or indirect, between the arbitrator and the party …
or between the arbitrator and any person with a direct
economic interest. The party shall do so on its own
initiative at the earliest opportunity.
Explanation:
The parties' duty of disclosure has been extended … to any
entities having a direct economic interest in the award … such as…
providing funding for the arbitration (TPF). The parties have a duty
to disclose available information … that might affect the
arbitrators impartiality and independence.
TPF and Conflict of Interest Dr. Anton G. Maurer, LL.M. 07.09.2015 14
IBA Guidelines on Conflict of Interest in
International Arbitration 2014
Part I (General Standards)
(7) (d) An arbitrator is under a duty to make reasonable
enquiries to identify any conflict of interest. … Failure
to disclose is not excused by lack of knowledge, if the
arbitrator does not perform such reasonable enquiries.
TPF and Conflict of Interest Dr. Anton G. Maurer, LL.M. 07.09.2015 15
IBA Guidelines on Conflict of Interest in
International Arbitration 2014
Guidance as to which situations constitute conflict of interests:
4 categories:
Non-Waivable Red List (objective conflict of interest)
Waivable Red List (serious conflict, but can be cured by
express unanimous consent of all parties)
Orange List (may, in the eyes of the parties, give rise to
doubts; arbitrator has a duty to disclose)
Green List
TPF and Conflict of Interest Dr. Anton G. Maurer, LL.M. 07.09.2015 16
IBA Guidelines on Conflict of Interest in
International Arbitration 2014
Non-Waivable Red List:
1.4 … arbitrator or his law firm regularly advise third
party funder, and derives significant income
therefrom.
TPF and Conflict of Interest Dr. Anton G. Maurer, LL.M. 07.09.2015 17
Conflict of Interest
Part II: Practical Application of Standards
Waivable Red List:
2.3.1 Arbitrator currently represents or advises one of the
parties.
2.3.6 Arbitrator's law firm currently has a significant
commercial relationship with one of the parties.
2.3.7 Arbitrator regularly advises one of the parties but
neither he or she or the law firm derives a significant
financial income therefrom.
TPF and Conflict of Interest Dr. Anton G. Maurer, LL.M. 07.09.2015 18
Conflict of Interest
Part II: Practical Application of Standards
Orange List:
3.1.1 Arbitrator has, within the past three years, served as
counsel for one of the parties … in an unrelated matter,
but have no ongoing relationship.
3.1.2 Arbitrator has, within the past three years, served as
counsel against one of the parties … in an unrelated
matter
TPF and Conflict of Interest Dr. Anton G. Maurer, LL.M. 07.09.2015 19
Conflict of Interest
Part II: Practical Application of Standards
Orange List:
3.1.3 Arbitrator has, within the past three years, been
appointed as arbitrator on two or more occasions by
one of the parties
3.2.1 Arbitrator's law firm is currently rendering services to
one of the parties … without creating a significant
commercal relationship and without the involvement of
the arbitrator.
TPF and Conflict of Interest Dr. Anton G. Maurer, LL.M. 07.09.2015 20
Conflict of Interest
Part II: Practical Application of Standards
Conclusion:
All 7 cases may fall either under the
Non-Waivable Red List (F), or
Waivable Red List (A, B, C, D, F), or
Orange List (A, B, C, D, E, G).
Proper Solution: Obligation to disclose TPF
TPF and Conflict of Interest Dr. Anton G. Maurer, LL.M. 07.09.2015 21
TPF and Conflict of Interest
CMS Hasche Sigle is one of the leading commercial law firms. More than 600 lawyers serve their clients in eight
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