Third-Party Funding in Arbitration: Transparency, Independence and Strategy

By Raquel Assis, Investment Manager at Loopa Finance

Introduction

Third-party funding has become an established feature of both international and domestic arbitration. As its use has grown, so has the debate over how much information about funding arrangements should be disclosed, and to whom. The question is not confined to arbitration. On 30 September 2026, the Delaware Superior Court amended its Civil Rule 26(b) to permit discovery of the existence of a litigation funding agreement, the identity of its parties and the aspects of the litigation that the funder has the right to control, while protecting the agreement itself and its contents.^[1]

In arbitration, the debate has largely matured. The leading institutional rules now require the existence of funding and the identity of the funder to be disclosed, while the terms of the funding agreement remain confidential unless the tribunal orders otherwise. This article argues that this approach is sound, but that it can only be applied consistently if three separate concerns are kept apart: (i) transparency, (ii) the independence of the tribunal and (iii) the strategic consequences of disclosure for the parties.

The article is structured accordingly. Sections 1 to 3 examine each of these concerns in turn. Section 4 considers recent developments in Brazil, where arbitral institutions, the courts and the legislature are addressing the same questions. Section 5 draws these strands together and proposes a tiered approach to disclosure.

1. Transparency: an emerging consensus

The first concern is transparency, and it is here that the most significant progress has been made. Over the past decade, disclosure of funding has moved from a recommendation to an obligation under most leading arbitral rules.

Article 11(7) of the ICC Arbitration Rules 2021 requires each party to inform the Secretariat, the tribunal and the other parties of the existence and identity of any non-party that has entered into an arrangement to fund its claims or defences.^[2] Rule 14 of the ICSID Arbitration Rules 2022 goes further. It requires the funded party to disclose the funder’s name and address and, where the funder is a legal entity, the names of the persons and entities that own and control it.^[3] Neither set of rules requires production of the funding agreement itself, although an ICSID tribunal may order disclosure of further information about the agreement and the funder.^[4]

Brazilian arbitral institutions followed the same path, without any statutory requirement to do so. The Centre for Arbitration and Mediation of the Brazil-Canada Chamber of Commerce (CAM-CCBC) first addressed the matter in Administrative Resolution 18/2016, which recommended that parties disclose funding at the earliest opportunity.^[5] The CIESP/FIESP and CAMARB chambers adopted similar provisions in 2019 and 2020.^[6] The CAM-CCBC subsequently turned the recommendation into an obligation in its 2022 Arbitration Rules,^[7] and in 2024 the B3 Market Arbitration Chamber (CAM-B3) also made disclosure of funding mandatory.^[8]

The distinction between the existence of funding and its terms reflects the purpose that disclosure is intended to serve. Arbitrators need to know who is funding a party in order to identify potential conflicts of interest.

The terms of the agreement, by contrast, include the funder’s return, its termination rights and the scope of any cover for adverse costs. That information has little bearing on the arbitrators’ independence, but it is of considerable value to an opposing party seeking to assess the claimant’s financial position. It is also commercially sensitive, since it may reveal the funder’s own assessment of the claim and the way in which the investment was priced.

2. Independence: why the funder’s identity matters

If transparency defines what must be disclosed, the second concern, independence, explains why that disclosure is necessary. The 2024 revision of the IBA Guidelines on Conflicts of Interest in International Arbitration provides the most useful framework in this respect.^[9]

Since 2014, the Guidelines have recognised that a funder, as the holder of a direct economic interest in the award, may be considered the equivalent of the party it funds.^[10] The 2024 revision refines that position.

The Explanation to General Standard 6(b) now distinguishes between funders that have a direct economic interest in the case, funders that exercise a controlling influence on a party and funders that influence the conduct of the proceedings, including the selection of arbitrators, and states that these distinctions may be relevant when deciding whether a funder should be treated as bearing the identity of the party.^[11] General Standard 7(a), in turn, requires each party to inform the arbitrators and the institution of any relationship between an arbitrator and an entity providing funding for the arbitration.^[12]

The practical effect is that the assessment no longer depends only on whether a funder is present, but also on what the funder is able to do. A funder that finances costs without any say in the conduct of the case occupies a different position from one that holds rights to approve a settlement, appoint counsel or influence the nomination of arbitrators.

This distinction matters because professional funders are repeat participants in the arbitral market. They finance numerous cases, frequently before a limited pool of arbitrators and alongside the same law firms. Relationships may therefore arise that would not exist with an ordinary party. For example, an arbitrator may have acted as counsel in another case financed by the same funder or may sit on the funder’s advisory board. Such relationships cannot be identified unless the funder’s identity is known. Disclosure of identity is, accordingly, a precondition for any meaningful assessment of independence.

The consequences of non-disclosure are particularly significant in Brazil. Article 14, paragraph 1, of the Brazilian Arbitration Act requires prospective arbitrators to disclose, before accepting their appointment, any fact that gives rise to justified doubt as to their impartiality and independence.^[13] Brazilian courts apply this duty strictly. In 2026, the Third Panel of the Superior Court of Justice (STJ) upheld, in at least two cases, judgments annulling arbitral awards because an arbitrator had failed to disclose relevant relationships.^[14] The standard of disclosure has also been brought before the Federal Supreme Court, where a political party asked the Court in 2023 to establish binding criteria for the arbitrator’s duty of disclosure.^[15]

In this context, an undisclosed relationship between an arbitrator and a funder may later be used to challenge the award, potentially at the enforcement stage. It follows that early disclosure of the funder’s identity primarily protects the funded party and the funder themselves, since it preserves the validity of the award in which both have invested.

3. Strategy: the consequences of disclosure

While disclosure of identity protects the integrity of the proceedings, disclosure of further information has direct strategic consequences for the parties. This third concern explains why the terms of funding should not be disclosed by default. The decisions in this area point to a consistent principle: the existence of funding is a relevant factor, but it is not sufficient on its own to justify adverse procedural measures against the funded party.

The clearest example concerns applications for security for costs. In RSM Production Corporation v. Saint Lucia, the tribunal ordered the claimant to provide a bank guarantee of US$750,000 as security for the respondent’s costs, which was the first such order by an ICSID tribunal.^[16] The decisive factor was the claimant’s conduct: it had a history of failing to pay costs awarded against it in earlier proceedings. The presence of a funder aggravated that concern, because nothing indicated that the funder would assume responsibility for an adverse costs award.

The tribunal in Eskosol S.p.A. in liquidazione v. Italian Republic reached the opposite result on different facts. Although the claimant was in liquidation and was funded by a third party, the funder had arranged after-the-event (ATE) insurance covering up to €1 million of the respondents’ costs. The tribunal held that security was neither necessary nor urgent and rejected Italy’s request.^[17]

Rule 53 of the ICSID Arbitration Rules 2022 now reflects this balance. It directs tribunals to consider the party’s ability and willingness to comply with an adverse costs decision, the effect of security on its ability to pursue the claim and the conduct of the parties, and to consider the existence of third-party funding as part of that assessment.^[18]

Read together, these decisions show that funding is neither a ground for security nor irrelevant to it. What matters is whether an adverse costs award would be paid. For funders and claimants, the practical implication is that adequate cover for adverse costs, whether provided by the funder or through ATE insurance, is the most effective response to an application for security.

A second strategic question is whether a successful claimant may recover the cost of funding from the respondent. In Essar Oilfields Services Ltd v. Norscot Rig Management Pvt Ltd, the English High Court upheld an award ordering the respondent to pay approximately £1.94 million in funding costs as “other costs” under section 59(1)(c) of the Arbitration Act 1996.^[19] The arbitrator had found that the respondent’s own conduct had left the claimant no option but to obtain third-party funding. Such awards remain exceptional. In its 2025 review of litigation funding in England and Wales, the Civil Justice Council recommended that funding costs be recoverable in court proceedings only in exceptional circumstances.^[20]

4. The Brazilian approach

Recent developments in Brazil show how these three concerns can be reconciled in practice. In REsp 2.171.569/SP, the Third Panel of the STJ held that third-party funding is compatible with Brazilian law and does not affect the standing of a funded minority shareholder. The Court also held that the mere existence of a funder does not, by itself, require disclosure of the funding agreement or its terms, and that a defendant alleging abuse arising from the funder’s influence bears the burden of proving it.^[21]

Although the decision arose in court proceedings, its reasoning applies equally to arbitration. It treats funding as a neutral means of enabling a claim, rather than as a ground for suspicion, and it requires any request for further disclosure to be justified by concrete evidence.

The legislative framework may also change. Bill No. 4,384/2025, presented to the Chamber of Deputies on 2 September 2025, would establish an express legal basis for third-party funding, covering both the funding of costs and the assignment of litigation rights.^[22] According to commentators, the bill would prohibit funders from directing litigation strategy, require funding agreements to be in writing, and allow regulators to set requirements on capital and governance.^[23] If such requirements are applied proportionately, they could strengthen the market; if they are applied too broadly, they could restrict access to funding.

5. A tiered approach to disclosure

The analysis above suggests that disclosure should be organised according to its purpose, with each level of information subject to a different threshold.

The first level concerns the identity of the funder, including its ultimate owners and controllers. This information should be disclosed automatically and at the outset of the proceedings, because it is necessary for the assessment of independence and protects the validity of the award.

The second level concerns the funder’s influence over the proceedings. Disclosure at this level should be limited to the provisions governing control of the case, such as rights relating to settlement, the choice of counsel and the appointment of arbitrators. It should be made upon a reasoned request or an order of the tribunal, since its purpose is to allow the tribunal to apply the test set out in the IBA Guidelines. The Delaware rule adopts essentially the same position, permitting discovery of the aspects of the litigation that the funder controls while protecting the rest of the agreement.

The third level concerns the economic terms of the funding arrangement. These should be disclosed only where there is concrete evidence of exceptional circumstances, such as a genuine risk that an adverse costs award will not be paid. Even then, disclosure should be made to the tribunal under appropriate confidentiality protections.

This structure also clarifies who benefits from each level of disclosure. The first level protects the award and, consequently, the funded party and its funder. The second and third levels primarily serve the opposing party, which is why they should be justified on a case-by-case basis.

Conclusion

Third-party funding no longer needs to justify its place in arbitration. The remaining task is to calibrate the rules that govern it. That calibration depends on distinguishing between transparency, which defines what must be disclosed; independence, which explains why the funder’s identity is essential; and strategy, which explains why the terms of funding deserve protection.

Disclosure of the funder’s identity is the price of an enforceable award and should be automatic. Disclosure of the terms of the funding arrangement should remain the exception, justified by concrete evidence. Brazilian arbitral institutions, courts and legislators are moving towards precisely this balance, and their experience offers a useful reference for other jurisdictions addressing the same questions.

^[1] Delaware Superior Court Civil Rule 26(b)(3), as amended by order of 30 September 2026. See B. M. Rostocki and N. R. Rodriguez, “Delaware Superior Court Adopts Rule Permitting Limited Discovery of Litigation-Funding Agreements”, Reed Smith Viewpoints, 5 October 2026, https://www.reedsmith.com/our-insights/blogs/viewpoints/102o42q/delaware-superior-court-adopts-rule-permitting-limited-discovery-of-litigation-fu/.

^[2] ICC Arbitration Rules 2021, art. 11(7): “In order to assist prospective arbitrators and arbitrators in complying with their duties under Articles 11(2) and 11(3), each party must promptly inform the Secretariat, the arbitral tribunal and the other parties, of the existence and identity of any non-party which has entered into an arrangement for the funding of claims or defences and under which it has an economic interest in the outcome of the arbitration.”

^[3] ICSID Arbitration Rules 2022, r. 14(1): “A party shall file a written notice disclosing the name and address of any non-party from which the party, directly or indirectly, has received funds for the pursuit or defense of the proceeding through a donation or grant, or in return for remuneration dependent on the outcome of the proceeding (‘third-party funding’). If the non-party providing funding is a juridical person, the notice shall include the names of the persons and entities that own and control that juridical person.”

^[4] ICSID Arbitration Rules 2022, r. 14(4). See also “New ICSID Arbitration Rules: A Further Step in the Regulation of Third-Party Funding”, Kluwer Arbitration Blog, https://legalblogs.wolterskluwer.com/arbitration-blog/new-icsid-arbitration-rules-a-further-step-in-the-regulation-of-third-party-funding/.

^[5] CAM-CCBC, Administrative Resolution No. 18/2016, art. 4, https://ccbc.org.br/cam-ccbc-centro-arbitragem-mediacao/resolucao-de-disputas/resolucoes-administrativas/ra-18-2016-financiamento-de-terceiros-em-arbitragens-cam-ccbc/.

^[6] CIESP/FIESP Chamber, Resolution No. 6/2019; CAMARB, Administrative Resolution No. 14/2020. See Machado Meyer Advogados, “O financiamento de litígios por terceiros no Brasil”, https://www.machadomeyer.com.br/pt/inteligencia-juridica/publicacoes-ij/inteligencia-juridica-contencioso/o-financiamento-de-litigios-por-terceiros-no-brasil.

^[7] CAM-CCBC Arbitration Rules 2022, art. 9.6 (parties “shall disclose the existence of third-party funding at the earliest possible opportunity”). See Yarshell Advogados, “Primeiras impressões sobre o novo Regulamento de Arbitragem do CAM-CCBC”, https://yarshell.com.br/publicacoes/primeiras-impressoes-sobre-o-novo-regulamento-de-arbitragem-do-cam-ccbc/.

^[8] CAM-B3, Resolution No. 02/2024. See Demarest Advogados, “Câmara do Mercado divulga quatro novas resoluções sobre processos arbitrais”, 24 January 2024, https://www.demarest.com.br/en/camara-do-mercado-divulga-quatro-novas-resolucoes-sobre-processos-arbitrais/.

^[9] IBA Guidelines on Conflicts of Interest in International Arbitration (approved by the IBA Council on 25 May 2024), https://www.ibanet.org/document?id=Guidelines-on-Conflicts-of-Interest-in-International-Arbitration-2024.

^[10] IBA Guidelines on Conflicts of Interest in International Arbitration (2014), Explanation to General Standard 6(b). See Herbert Smith Freehills, “Publication of new IBA Guidelines on Conflict of Interests in International Arbitration: the key changes”, December 2014, https://www.hsfkramer.com/notes/arbitration/2014-12/publication-of-new-iba-guidelines-on-conflict-of-interests-in-international-arbitration-the-key-changes.

^[11] IBA Guidelines (2024), Explanation to General Standard 6(b): “Third-party funders and insurers may have a direct economic interest in the prosecution or defence of the case in dispute, a controlling influence on a party to the arbitration, or influence over the conduct of proceedings, including the selection of arbitrators. These distinctions may be relevant when considering whether such entities should be considered to bear the identity of a party.”

^[12] IBA Guidelines (2024), General Standard 7(a) and Explanation.

^[13] Brazilian Arbitration Act (Law No. 9,307/1996), art. 14, para. 1 (author’s translation): “Persons appointed to act as arbitrators have the duty to disclose, before accepting the appointment, any fact that gives rise to justified doubt as to their impartiality and independence.” The caput of art. 14 provides that persons who have, with the parties or with the dispute, any of the relationships that constitute grounds for the impediment or suspicion of judges are barred from acting as arbitrators, and are subject to the same duties and responsibilities as judges under the Code of Civil Procedure. Under para. 2, an arbitrator may be challenged only on grounds arising after the appointment, unless (a) the arbitrator was not appointed directly by the party or (b) the ground for challenge became known only after the appointment.

^[14] STJ, Third Panel, REsp No. 2,215,990/SP, Rapporteur Justice Moura Ribeiro (reported by Migalhas, 12 March 2026, https://www.migalhas.com.br/quentes/451723/stj-mantem-anulacao-de-arbitragem-por-falha-no-dever-de-revelacao); STJ, Third Panel, REsp No. 2,223,683/SP, Rapporteur Justice Daniela Teixeira (discussed in Conjur, 25 August 2026, https://conjur.com.br/2026-ago-25/stj-e-o-dever-de-revelacao-uma-proposta-a-comunidade-arbitral/).

^[15] STF, ADPF No. 1,050, Rapporteur Justice Alexandre de Moraes. See “Discussão sobre dever de informar dos árbitros chega ao STF”, Capital Aberto, May 2023, https://www.capitalaberto.com.br/legislacao-mercados/2023/05/arbitragem-discussao-sobre-dever-de-informar-dos-arbitros-chega-ao-stf.

^[16] RSM Production Corporation v. Saint Lucia, ICSID Case No. ARB/12/10, Decision on Saint Lucia’s Request for Security for Costs, 13 August 2014. See Government of Saint Lucia, “RSM to pay Saint Lucia’s legal costs, tribunal rules”, https://legalaffairs.govt.lc/news/rsm-to-pay-saint-lucias-legal-costs-tribunal-rules; “Security for Costs in ICSID Arbitration”, Kluwer Arbitration Blog, 10 February 2015, https://legalblogs.wolterskluwer.com/arbitration-blog/security-for-costs-in-icsid-arbitration/.

^[17] Eskosol S.p.A. in liquidazione v. Italian Republic, ICSID Case No. ARB/15/50, Procedural Order No. 3 (Decision on Respondent’s Request for Provisional Measures), 12 April 2017, paras 36–39, https://www.italaw.com/sites/default/files/case-documents/italaw8996.pdf.

^[18] ICSID Arbitration Rules 2022, r. 53.

^[19] Essar Oilfields Services Ltd v. Norscot Rig Management Pvt Ltd [2016] EWHC 2361 (Comm). See Gowling WLG, “High Court upholds recovery of third party funding”, 17 October 2016, https://gowlingwlg.com/insights-resources/articles/2016/high-court-upholds-recovery-of-third-party-funding/.

^[20] Civil Justice Council, Review of Litigation Funding: Final Report, 2 June 2025. See Herbert Smith Freehills Kramer, “Civil Justice Council’s final report on litigation funding recommends light-touch statutory regulation”, https://www.hsfkramer.com/notes/bankinglitigation/2025-04/civil-justice-councils-final-report-on-litigation-funding-recommends-light-touch-statutory-regulation.

^[21] REsp n. 2.171.569/SP, relator Ministro Humberto Martins, Terceira Turma, julgado em 27/10/2025, DJEN de 30/10/2025.

^[22] Bill No. 4,384/2025 (Chamber of Deputies), full text available at https://www.camara.leg.br/proposicoesWeb/prop_mostrarintegra?codteor=2993307&filename=Tramitacao-7-PL%204384/2025.

^[23] E. Moura, “Projeto de lei no Brasil colocaria o financiamento de litígios em base legal”, Revista Colunas da WebAdvocacy, vol. IV, no. 4, 2025, pp. 34–38, https://webadvocacy.com.br/wp-content/uploads/2026/01/Projeto-de-lei-no-Brasil-colocaria-o-financiamento-de-litigios-em-base-legal.pdf.