From transparency to prohibition: UNCITRAL WGIII considers options to regulate third-party funding

In June 2021, the tribunal in Infinito Gold v. Costa Rica found Costa Rica liable for a breach of fair and equitable treatment but rejected the investor’s request for roughly USD 100 million and awarded no damages.[1] This case, which also involved allegations of corruption by the investor, may have been successful on liability but reflects a weak claim on causation and damages.

This outcome from that early phase extractive industry project is similar to patterns and outcomes in some other ISDS disputes. In South American Silver v. Bolivia, the tribunal found that the claimant mining company had acted wrongfully in its engagement with local Indigenous communities, threatening critics and inflaming tensions and violence. Though the tribunal agreed with the investor that the host state violated the applicable treaty, the tribunal awarded the investor only a fraction of its claimed damages—less than USD 20 million out of the roughly USD 300 million sought.[2] In Cortec Mining v. Kenya, the tribunal rejected the investors’ claim for over USD 2 billion based on the absence of adequate environmental authorizations for the mining project.[3] That case also involved allegations of corruption on the part of the investor. In Churchill Mining and Planet Mining v. Indonesia, the tribunal similarly dismissed the investors’ claims for over USD 1 billion based on concerns about fraudulent conduct in the operation and expansion of the investment.[4]

These cases all raise questions about the “quality” of investors and investments invoking investment treaties. And they are all ISDS cases in the extractive industries in which the investors’ claims either proved wildly inflated and/or were being pursued by investor claimants that allegedly engaged in substandard, if not illegal, activities far from the conduct expected of good corporate citizens.

Notably, all of these claimants, and their problematic claims, were financed by third-party funders.

These cases weaken narratives that third-party funding (TPF) is a tool for enabling access to justice by deserving companies wrongfully harmed by opportunistic host state conduct; they raise doubts about assertions that funders do robust due diligence on investors and their cases; and they align with allegations that TPF is enabling and driving marginal, speculative, and high-stakes claims that, even when unsuccessful, are still costly to respondent host states.[5]

It is against this background that UNCITRAL’s Working Group III (WGIII) is pursuing reform of TPF, tasking the Secretariat with preparing draft language to address different issues and concerns delegates had raised, many of which were based on their own experiences with funded claims. As we discuss below, the Secretariat’s draft regulatory provisions are now out and open for comment until September 15, 2021.

The process

States participating in UNCITRAL’s WGIII are proposing to regulate the funding of ISDS claims, with many particularly focused on regulation of for-profit, commercial funding of claims against states. Some, such as Argentina, the Dominican Republic, Honduras, India, Indonesia, Kenya, Morocco, Nigeria, South Africa, Uruguay, and Vietnam, have called for or supported further analysis of fully restricting for-profit commercial funding of ISDS claims. Others favour a lighter touch. For instance, the United Kingdom—which is home to a strong arbitration industry, a number of ISDS funders, and outward investors that are relatively frequent users of ISDS and TPF—appears not to share the more profound concerns regarding TPF. Instead, it seems to favour a more narrow focus on increased transparency and has stressed the importance of consulting the funding industry in developing any regulations.[6]

At the WGIII session in October 2019, delegates instructed the Secretariat to prepare sample text reflecting possible regulatory solutions to address identified concerns. In line with those instructions, the Secretariat has now provided “Draft Provisions on Third-Party Funding” (the “Draft”). After September 15, 2021, when the period for comments on the Draft concludes, next steps presumably include a process of reviewing and incorporating input received and making time on WGIII’s agenda to discuss the revised draft provisions. But it is unclear how exactly that process will be managed.

For instance, it is uncertain when the topic of TPF reform will again be addressed in WGIII itself. WGIII currently anticipates its work proceeding into 2026.[7] It divides its formal sessions and informal “intersessional” meetings along eight main groups, including a catch-all “ISDS Procedural Rules Reform” pillar encompassing such diverse topics as damages, claims for reflective loss, parallel proceedings, counterclaims, dismissal of frivolous claims, and exhaustion of local remedies. TPF is presumably integrated within this catch-all category, but it is unclear how much formal and/or informal time will be spent on the topic, reviewing and debating the different options reflected (or not) in the Draft or its revision.

It is also unclear whether the comments received will all be made public. When the Secretariat does not make comments it receives public, it is impossible to know how different delegations and other commenters reacted to different aspects of a proposal. This lack of transparency also obscures whether and to what extent comments of different stakeholders are meaningfully addressed. The legitimacy of the drafting process calls for clarity on who is asking for what—and the extent to which suggestions received, and from whom, are incorporated. But it is not yet known whether and with whom that information will be shared.

The Columbia Center on Sustainable Investment (CCSI), along with the International Institute for Sustainable Development (IISD) and the International Institute for Environment and Development (IIED), are among those who submitted comments and annotated suggestions to the Draft and have posted our joint submission on our respective websites.[8] Additionally, funders on their own behalf, and through a recently created industry association, have submitted and posted comments critiquing the WGIII process and reform proposals, and advocating against any kind of significant reform.[9] Given the stakes for states, funders, and others, it is likely that many more submissions have been or will be made.

The substance

The Draft sets forth a menu of options and suggested language to implement them. The options range from disclosure requirements to a complete prohibition on use of all forms of TPF. The draft also discusses options for enforcement and sanctions.

Disclosure model

The “disclosure model” (Draft Provision 7), contemplates requiring funded parties to reveal (at least to the tribunal and the disputing parties, and potentially to the public) the existence and identity of funders, which could require not only the legal funding vehicle but its beneficial owner. It also contemplates requiring disclosure of the funding agreement itself, or certain terms thereof. It then provides a list of items that the tribunal may require the funded party to disclose, some of which may have also been covered by disclosure of the funding agreement.

Disclosure is proposed as a stand-alone model or one that would be combined with some of the regulation models also proposed. Notably, partial disclosure is the model that ICSID appears to favour in its proposed rule revisions. While disclosure of the existence and identity of funders can allow actors to better identify actual or perceived conflicts of interests, it would not change the ways in which TPF is used, or address its impacts on cases or the system more broadly. For many delegations, disclosure is a necessary start, but does not fully address concerns about the role or effects of TPF on ISDS claims, outcomes, or incentives.

Regulation models

In addition to TPF disclosure, there are four general regulatory approaches outlined in the Draft: two approaches to limiting the use of TPF and two sets of exceptions to those limits.

The first proposed regulatory model, the “prohibition model” (Draft Provision 2), provides several avenues by which states could aim to prohibit all forms of TPF. In addition to restricting private investment in cases and award proceeds, this approach, as drafted, would also bar grants from non-profit organizations, contingency fee arrangements with counsel, and possibly certain types of loans or insurance.

A second regulatory model, the “restriction list model” (Draft Provision 5) proposes to allow TPF as a general matter but restrict certain forms of funding, such as funding provided “on a non-recourse basis in exchange for a success fee and other forms of monetary remuneration or reimbursement wholly or partially dependent on the outcome of a proceeding or portfolio of proceedings.” This approach seeks to address particular concerns about for-profit investments in damages claims against governments, concerns that allowing such financing introduces a new stakeholder into the ISDS equation with its own interests in—and ability to advocate for—broad interpretations of jurisdictional provisions and substantive obligations, and liberal approaches to damages. Concerns about giving such funders a permanent place in the ISDS system are not similarly raised by other forms of TPF, including funding for states, contingency fee agreements based on legal services performed, and non-profit funding. While disclosure of those other forms of TPF may be warranted so as to protect against conflicts of interest or other reasons, those forms of TPF would not be prevented.[10]

As between the two approaches—a broad prohibition and a more tailored restriction—it is not clear that there were many supporters in WGIII for the broad prohibition model. Thus, it seems that the key issues will not be whether to opt for the prohibition or the restriction model, but where, in a regulation model, to draw the line between what is and is not allowed.[11]

The Draft also contemplates two approaches whereby TPF would be generally disallowed but then makes exceptions for funding in certain circumstances or for certain kinds of claimants. Either or both of these two exceptions could be combined with a broad prohibition on TPF or the more targeted restriction model. Each exception, however, raises questions and challenges.

One of the possible exceptions, which is reflected in Draft Provision 3, would permit funding to support investors who would otherwise lack “access to justice.” Setting aside the practical questions of how this condition would be assessed (e.g., who has the burden of proof and what is the standard, what is the relevance of cost and accessibility of other dispute fora and remedies, and are there any prohibitions on asset-stripping or use of special-purpose vehicles), it is crucial to question the underlying premise that access to ISDS can be characterized as an access to justice issue. Most stakeholders, including domestic investors, must pursue other remedies to secure redress for any alleged harm, including but not limited to domestic courts. The fact that in such circumstances legal claimants are not able to access ISDS does not mean that they lack access to justice. The equation of access to ISDS with access to justice is a largely incomplete and misleading one. While it is essential to ensure that those whose rights have been violated have access to justice to protect those rights, ISDS is not a prerequisite to access to justice, and it is not clear that using TPF to support ISDS in this context is the correct or appropriate approach.[12]

The other possible exception, which is reflected in Draft Provision 4, suggests that TPF could be permitted for investors who can establish compliance with certain, as yet unidentified, sustainable development provisions or objectives. As with the “access to justice” model, this approach raises a number of conceptual and practical issues. There are, for instance, concerns that funding itself introduces or drives distortions in the ISDS system in a way that undermines sustainable development objectives.[13] These distortions will exist irrespective of whether the underlying investment project aligns with sustainable development aims. Additionally, from a practical perspective, the standards and processes for determining whether any investment project is “sustainable” would need to be designed and implemented with great care. Presumably, the standard for sustainability would also need to be set at a high bar because the implication is that investors who do not meet the standard for TPF could still bring claims (albeit without TPF). Thus, any such standard for TPF would need to be beyond the rather porous approaches that have been used in investment law to date to determine the “legality” of investments and their “contributions to economic development in the host state.”

Overall, we consider that (1) the restriction model reflected in Draft Provision 5, (2) along with public disclosure requirements for other forms of TPF, and (3) without either the “access to justice” or “sustainable development” exceptions, is the combination best able among the options presented to address, and avoid, case-specific and systemic concerns about funding in ISDS.

Sanctions and enforcement

Finally, possible sanctions are set forth for consideration (Draft Provision 6, and part of Draft Provision 7). The current list provided in the Draft, coupled with the discretion given to tribunals to select (or not) from among them, is poised to be an ineffective deterrent to funders’ and claimants’ attempts to circumvent funding restrictions. While this list was apparently curated from existing approaches to TPF regulation, the wide-ranging concerns identified by WGIII demand a more comprehensive and extensive approach to punishing those who circumvent (or try to circumvent) the rules. These could include (1) requirements that the tribunal dismiss (or annul) a claim (or award) in certain egregious circumstances; (2) rules requiring claimant (and its counsel) to certify that the claim (and) or legal counsel is not benefiting from TPF; (3) mandatory suspension of proceedings for a set period of time so that any deficiencies (particularly related to transparency or certification) can be remedied; and (4) instructions on cost and expense orders in cases of regulatory violations. In all cases, the rules should be clear under what circumstances a tribunal should have discretion, and when a sanction is mandatory.[14]


As Infinito Gold, Cortec Mining, South American Silver, and Churchill and Planet Mining illustrate, third-party funders are supporting marginal claims against states, seeking inflated amounts, and contributing to the dynamic whereby states are forced to engage in high-stakes arbitration. While some of these weak but costly claims may be brought without TPF, the existence of TPF can make them more likely. TPF reduces the risk to claimants of pursuing cases, and funders also have their own interests, separate and potentially conflicting with funded investors’ aims, to push cases and seek and recover high damage claims.

In this context, states are contemplating action, and funders are pushing back. The UNCITRAL Secretariat has produced options ranging from disclosure to prohibition and is providing stakeholders with an opportunity to weigh in on which path to follow. How the work on this issue unfolds, procedurally and substantively, is a key test for the UNCITRAL process more broadly.


Brooke Guven is a senior researcher at the Columbia Center on Sustainable Investment.

Lise Johnson is head of investment law and policy at the Columbia Center on Sustainable Investment.

Suzy Nikièma is IISD’s Lead, Sustainable Investment for the Economic Law and Policy Program (ELP).

Daniel Uribe is the lead programme officer at the South Centre.


[1] ICSID Case No. ARB/14/5, Award, 3 June 2021.

[2] PCA Case No. 2013-15, Award, 22 November 2018.

[3] ICSID Case No. ARB/15/29, Award, 22 October 2018.

[4] ICSID Case Nos. ARB/12/14 and 12/40, Award, 6 December 2018.

[5] In Cortec Mining, the respondent had to bear half of its legal costs in the underlying arbitration, and another USD 1 million due to a subsequent annulment proceeding. See Charlotin, D. (2021, May 9). Revealed: ICSID ad hoc committee in Cortec v. Kenya opines that supplementary decision mechanism is the proper remedy for infra petita awards and dismisses bid to annul finding that investment treaties contain an implicit legality requirement. IA Reporter In Infinito Gold and South American Silver, Costa Rica and Bolivia, respectively, had to each bear millions of dollars in defense costs; in Churchill Mining and Planet Mining, even though the claimant had to cover the majority of Indonesia’s legal fees and expenses, that still left the country with millions it had to pay itself. See Hepburn, J. (2019, December 9). Analysis: Unreasonable ‘willful blindness’ as to business partner’s fraudulent misconduct stymies mining claim in Indonesia. IA Reporter.

[6] States’ oral submissions on this topic were made during the 37th and 38th Sessions of WGIII. Recordings of the sessions are available at

[7] A basic overview of the WGIII’s work and timeline is available at

[8] IISD, IIED, & CCSI. (2021). Submission on third-party funding., and See also IISD, CCSI, & IIED. (2019). Draft text providing for transparency and prohibiting certain forms of third-party funding in investor-state dispute settlement.

[9] Woodsford Litigation Funding Limited has submitted comments stating that it “respectfully disagrees with the Working Group’s belief that further regulation of third-party funding is necessary.” The International Legal Finance Association believes that any “prohibition or restriction of legal finance would weaken the rule of law, create a significant gap between the express goals of the U.N. and UNCITRAL and the achievement of these goals, and fly in the face of strong support for third-party funding by the corporations that are in a position to build the infrastructure and make the other direct investments needed by many States.”  In ILFA’s submission, it notes that it “stands ready to assist the Secretariat, and to that end, will shortly seek permission to become an Observer to the UNCITRAL WGIII.” See For a broader discussion of the financialization of TPF in ISDS and the role of the funding industry, see generally Dafe, F. & Williams, Z. (2020). Banking on courts: financialization and the rise of third-party funding in investment arbitration. Review of International Political Economy.

[10] IISD, CCSI, & IIED, supra note 8.

[11] The line could be drawn in the definition of TPF used, or with respect to the scope of application of certain regulations. Thus, there could be a broad definition of TPF, and disclosure requirements for all forms of funding falling within that definition, but more targeted regulation of and restrictions on a narrower subset of TPF.  For more on the policy implications raised by different forms of funding, see, e.g., IISD, CCSI, & IIED, supra note 8; Guven, B. & Johnson, L. (2019). The policy implications of third-party funding of investor-state dispute settlement.

[12] Other approaches to ensuring access to justice include efforts to support and strengthen domestic courts. There are also questions about whether TPF in ISDS adequately protects claimants’ interests. Disputes between claimants in funded cases and their counsel and funders indicate there are tensions. See, e.g., Bohmer, L. (2021, June 15). After Vietnam pays hefty UNCITRAL BIT award, investor-claimant files suit against his lawyers accusing them of collusion with third-party funder to take greater share of winnings. IA Reporter.

[13] In Guven & Johnson (supra note 11), the authors consider systemic policy implications that TPF may be introducing into the ISDS system.

[14] Section 4 of the CCSI/IISD/IIED submission (2019) sets forth a more comprehensive and robust list of sanctions for consideration (n 8).