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Third-Party Funding in International Commercial Arbitration: Legal Aspects

Student: Igor Yashin

Supervisor: Natalia Yerpyleva

Faculty: Faculty of Law

Educational Programme: Private International Law (Master)

Year of Graduation: 2021

The dissertation is devoted to the legal aspects of third-party funding (TPF) in international commercial arbitration. The author examines the approaches to the definition of this institution, its historical development, practical and ethical aspects of using TPF, the current regulation in national legislative acts and in acts of non-state regulation. A comparison is made with similar legal institutions. The rights and obligations of the parties under the TPF agreement are analyzed, as well as the content of this agreement. The main aspects of the due diligence procedure at the pre-contractual stage of concluding a TPF agreement are outlined. The reasons for a possible conflict of interest when using TPF and ways to overcome it are analyzed. The importance of TPF availability for the application of interim measures in the form of security for costs when considering cases in international arbitration is analyzed. It is concluded that, despite the similarity of TPF with other legal institutions (in particular, the success fee, insurance, etc.), TPF is a special type of investment for which it is advisable to apply special regulation. The states that are most actively developing the regulatory framework in the TPF area (at the level of state legislation and at the level of self-regulatory organizations) are Great Britain, Hong Kong, Singapore. The main issues to be settled by the parties under the TPF agreement are: the purposes for which funding is allocated; the grounds and amount of payments to the investor in the event of a favorable outcome of the case; issues related to the confidentiality and exclusivity of relations between counterparties; the grounds and procedure for terminating funding; limits of sponsor influence over the sponsored party decisions in the proceedings. It is concluded that it is necessary to voluntarily disclose the fact of TPF involvement prior to the commencement of arbitration in order to prevent a conflict of interest. It is noted that when the arbitrators decide on the application of interim measures in the form of security for costs, the fact of attracting TPF by one of the parties is insufficient.

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