International arbitration
Whilst elsewhere in this guide we have provided details of the regime in individual jurisdictions, the rules for international arbitration are far more fluid and in this section we examine how funding options can be utilised in international arbitration matters.
1. Is third party funding permissible for international arbitration?
Yes, third-party funding is permissible for international arbitration in many jurisdictions. The permissibility of third-party funding varies by jurisdiction.
For example:
- Australia and England and Wales have embraced third-party funding moving away from traditional prohibitions based on doctrines like maintenance and champerty;
- Singapore and Hong Kong have recently enacted legislation specifically allowing third-party funding in international arbitration.
The increasing acceptance of third-party funding is driven by its potential to enhance access to justice, especially for parties who might otherwise lack the resources to pursue or defend claims.
2. Are lawyers able to work on a contingent basis in international arbitration and, if so, what, if any, are the restrictions?
Yes, lawyers can work on a contingent basis in international arbitration, but the permissibility and restrictions vary by jurisdiction and the specific arbitration rules in place.
For example:
Jurisdictional variations:
- England and Wales: Contingency fees, also known as “no win, no fee” arrangements, are generally permissible. However, they are subject to strict regulations to ensure fairness and transparency;
- United States: Contingency fees are widely accepted and commonly used in various types of legal proceedings, including arbitration;
- Singapore and Hong Kong: Both jurisdictions have recently allowed for conditional fee agreements (CFAs) and damages-based agreements (DBAs) in arbitration, subject to specific regulatory frameworks.
Arbitration rules:
- ICC Rules: The International Chamber of Commerce (ICC) does not explicitly prohibit contingency fee arrangements, but parties must disclose any third-party funding agreements, which can include contingency fee arrangements;
- LCIA Rules: The London Court of International Arbitration (LCIA) also requires disclosure of any funding arrangements that might affect the arbitration.
Ethical considerations:
- Lawyers must ensure that contingency fee arrangements do not compromise their professional independence or create conflicts of interest. This includes maintaining transparency with clients and the arbitral tribunal about the nature of the fee arrangement.
3. Can the court or tribunal order one party to pay the others legal costs in international arbitration (costs-shifting)?
Yes, courts or tribunals can order one party to pay the other party’s legal costs in international arbitration. The prevailing principle in international arbitration is that “costs follow the event,” meaning the losing party typically pays the successful party’s costs. This includes legal fees, arbitrator fees, and other related expenses. Some key points to consider are:
Arbitration rules:
- ICC Rules: The International Chamber of Commerce (ICC) allows tribunals to allocate costs as they see fit, often following the “costs follow the event” principle;
- LCIA Rules: The London Court of International Arbitration (LCIA) also supports costs-shifting, giving tribunals discretion to award costs based on the outcome of the case.
Jurisdictional practices:
- England and Wales: Under the Arbitration Act 1996, tribunals generally award costs on the principle that costs should follow the event, unless otherwise agreed by the parties;
- United States: While the US typically requires each party to bear its own costs, international arbitration often follows the “costs follow the event” principle.
Discretion and fairness:
- Tribunals have wide discretion in awarding costs and may consider factors such as the conduct of the parties, the complexity of the case, and the reasonableness of the costs incurred.
4. Is insurance available to protect against adverse outcomes in international arbitration?
Yes, insurance is available to protect against adverse outcomes in international arbitration. This type of insurance is known as After-the-Event (ATE) insurance and it helps cover the risk of having to pay the opposing party’s legal costs if you lose the arbitration.
Contact
Jonathan Leach Partner
Co-Head of International Arbitration
Meriam Nazih Al-Rashid Partner
Co-Head of International Arbitration
T: +1 212 287 7055
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