Third party funding is gaining in popularity.
Usually the cost of financing legal fees is not recoverable because any uplift payable to a funder is neither a "cost" nor a reflection of "damage" suffered; it is instead the result of a contractual bargain between the funder and litigant. However, in Essar Oilfied Services Ltd v Norscot Rig Management Pvt Ltd [2016] EWHC (Comm) 2361, it was held that those potentially substantial costs may be recoverable in arbitrations. Another issue is the exposure of third party funders to adverse costs orders. Generally speaking, an arbitral tribunal has no power to make a costs order against a third party funder because the tribunal's jurisdiction extends only to the parties to the arbitration. This can be contrasted with English court proceedings where judges are empowered to make costs orders against non-parties where a non-party is not merely funding the proceedings but also substantially controls or benefits from them.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
