The International Centre for the Settlement of Investment Disputes (“ICSID”) released its Proposals for Amendments to the ICSID Rules. One change in particular, Proposed Rule 21, will certainly spark much debate because it creates a new duty to disclose third-party funding.
In a synopsis document describing the rationale behind the proposed amendments, ICSID explains that Rule 21 creates an obligation to disclose the existence and source of any third party funding. The obligation is ongoing and the apparent purpose is so that “[the named funder] will be provided to potential arbitrators prior to appointment to avoid inadvertent conflicts of interest.”
ICSID appears to be most concerned about the effect of Third Party Funding on the integrity of the tribunal, as evidenced by embedding Rule 21 in Chapter III of the Arbitration Rules (which deals with the Constitution of the Tribunal).
ICSID Definition of Third Party Funding
The drafted rule defines Third Party Funding broadly and would probably include basic insurance arrangments.
Disclosure of Third-party Funding
(1) “Third-party funding” is the provision of funds or other material support for the pursuit or defense of a proceeding, by a natural or juridical person that is not a party to the dispute (“third-party funder”), to a party to the proceeding, an affiliate of that party, or a law firm representing that party. Such funds or material support may be provided:
(a) through a donation or grant; or
(b) in return for a premium or in exchange for remuneration or reimbursement wholly or partially dependent on the outcome of the proceeding.
New Disclosure Requirements
Parties (typically claimants) would now have an ongoing duty to disclose its funding arrangments. If it has arranged funding prior to submitting its Request for arbitration, it must inform the ICSID Secretariat “immediately upon registration.”
(2) A party shall file a written notice disclosing that it has third-party funding and the name of the third-party funder. Such notice shall be sent to the Secretariat immediately upon registration of the Request for arbitration, or upon concluding a third-party funding arrangement after registration.
(3) Each party shall have a continuing obligation to disclose any changes to the information referred to in paragraph (2) occurring after the initial disclosure, including termination of the funding arrangement.
The Background Behind the ICSID Amendments
These proposed amendments started in October 2016 when the ICSID Secretariat announced its intention to amend its Rules. The Secretariat then released a list of topics for possible consideration and then accepted comments from the public on that list. Those comments then became the foundation for the Proposed Amendments listed above.