Third Party Funding in International Arbitration: A Critical Appraisal and Pragmatic Proposal,1Mohamed Sweify, Third Party Funding in International Arbitration: A Critical Appraisal & Pragmatic Proposal (2023).X1 presents an insightful and well-crafted analysis of third-party funding that skillfully analyzes some of the industry’s challenges.  The book explores what Sweify views as fundamental flaws of third-party funding—the risk of claim control by the funder and his perceived shift of arbitration from a forum for justice to a forum for funders’ profits.  Beginning with a discussion of the historical grounding of third-party funding in access to justice, the author posits that the purported shift of control from a party to the funder is fundamentally at odds with arbitration as a forum of justice.  Sweify is careful to underscore that his goal is not to call for the abandonment of third-party funding, but rather to reconceptualize it in a new framework in an effort to minimize claim control issues and protect the fundamental due process interests of funded parties.  Sweify’s work concludes with practical suggestions for such reform.

This book presents its arguments across six chapters, which are reviewed in sequence below.

Chapter one, entitled Mapping third party funding, provides a broad overview of the various forms of sources of financing available for legal disputes.  These options, summarized in detail by Sweify, include lawyers’ contingency fees, insurance, loans, and assignments.  The author also emphasizes that funding must not interfere with fair procedural process or trample on the rights of the funded party who should be treated fairly and equitably.

In Chapter two, which is called Abandoned promise, the author contends that third-party arbitration funding in its current form is imperfect and ripe for reform.  Sweify considers funding to be at odds with efficiency and fairness that are the hallmarks of arbitration.  Notwithstanding the author’s criticisms of funding, the chapter is well-balanced.  It underscores that the solution to challenges with funding is grounded in reform and not a blanket ban of funding.  In addition, Sweify compares arbitration funding to alternative forms of financing—attorney contingency, insurance, loans—and carefully illustrates why arbitration funding may be the superior choice depending on the circumstances.

Chapter three, A Historical Framework, examines the historical development of the premodern doctrines of maintenance and champerty through the lens of access to justice.  Champerty and maintenance prohibited the involvement of third parties in litigation, including for purposes of providing funding, when those third parties had no connection to the dispute otherwise.  Over time, various jurisdictions such as Australia, the United Kingdom, and the United States have relaxed prohibitions against champerty and maintenance which has allowed the third-party funding industry to flourish in those jurisdictions in particular.  Sweify provides a well-researched overview of champerty and maintenance in these jurisdictions.  He then proceeds to analyze the impact of these doctrines on arbitration in particular with respect to access to justice, efficiency and control of the arbitral proceedings, as well as challenges to the enforcement of awards.    

Chapter four, Asymmetric imbalances, presents a detailed analysis of disclosure of third-party funding in arbitration.  It then proceeds to assess how the disclosure of funding may impact the decision making of arbitrators at various stages of the arbitration—during the proceedings as well as before and after.  For example, Sweify discusses how knowledge about the existence of funding might sway an arbitrator’s views during the jurisdictional phase or when a party requests security for costs.  His analysis also includes a helpful review of how some courts have addressed funding when choosing to enforce (or not) an arbitral award. 

Chapter five, Regulation calculus, examines regulatory arguments surrounding third-party funding.  Sweify’s analysis is comprehensive.  First, he presents the arguments for a complete ban of third-party funding in arbitration.  He then examines the arguments in favor of funding with existing regulations.  Sweify then proceeds with a discussion of funding in the context of more comprehensive regulatory reform.  His ultimate conclusion is a helpful one—that regulatory reform of third-party funding should be led by arbitral institutions who are best placed to provide consistency.   

Finally, in Chapter six, Nurturing the promise, Sweify surveys different definitions of third-party funding.  His purpose in doing so is to set the groundwork for proposing his new regulatory framework that is centered around the essential role of arbitral institutions within the third-party funding industry.  Sweify acknowledges that his proposal for reform may not be immediately feasible, but stresses that the long-term goal is to arrive at a more “ideal arbitration funding paradigm.”

Third Party Funding in International Arbitration: A Critical Appraisal and Pragmatic Proposal provides its readers with substantially more than an overview of third-party funding.  Sweify’s work is an invaluable contribution towards an understanding of the challenges that funding poses to the normative goals of arbitration—access to justice, due process, and party control. 

The book’s insights depend, however, on accepting the author’s premise that the interests of an arbitral party and those of the funder are necessarily in tension, which in many instances is not the case.  Indeed, third-party funding can only grow as an industry and as a more widespread tool for access to justice, if users of third-party funding experience it as helpful to advancing their interests in a particular arbitral dispute, rather than experiencing it as a zero-sum competition between the funded party and the funder.  Sophisticated funders recognize the importance of alignment of interests between the funded party, counsel, and the funder and strive to achieve that with their investments.