International commercial arbitration is the mechanism or method of resolving commercial disputes between parties arising out of commercial contracts or transactions driven internationally and that allows parties to avoid the national courts. This mechanism has always been promoted as one of the substitute methods of dispute resolution, providing parties with many conveniences over litigation.
In recent time, it has been established that lower costs are no longer one of such advantages because this process has become increasingly expensive. There are several examples in recent times where a potential claimant, having agreed to arbitration earlier, did not have enough funds to contain all the costs of the arbitration process.
In these sorts of cases, it is feasible to search for a third party to cover the expensive arbitration proceedings. Third-party funding is an emergent attribute and vital legal phenomena. In general, a third-party funder covers the cost of the legal proceedings in arbitration, partly or entirely, in return for the ultimately recovered amount.
If the party gets an adverse award, then the third-party will lose the fund. In most cases, third-party funding is used in complex cases where a large amount of money is involved. Third-party funders are always selective about investing their funds, and they scrutinize all the risk factors. The prospective claimant may not have the financial resources to pay the cost; therefore, the third-party funder may become the only way to get access to justice.
Unfortunately, the legislation of most countries is silent regarding third-party funding in the commercial arbitration process. However, the English and Australian courts had acknowledged the legitimacy of third-party funding agreements about a decade ago.
In the case of Arkin v Borchard Lines Ltd(2005), the Court of Appeal of England recognized commercial funders as groups who "...provide help to those seeking access to justice which they could not otherwise afford.” In 2006, the Australian High Court in the case of Campbell's Cash and Carry Pty Ltd v Fostif Pty Ltd(2006), recognized the legitimacy of funding arrangements and clearly stated that, third-party funding is not an abuse of process contrary to public policy.
Therefore, the United Kingdom and Australia have established third-party funding features in their arbitration regulation. In England and Wales, third-party funding is not subject to formal regulation. They follow self-regulation in the form of a code of practice. Australia is occasionally tagged as “the most fund-friendly jurisdiction in the universe” because of its number of highly expert funders, well-informed courts, and somewhat lenient regulation regarding arbitration.
Recently, Singapore passed amendments to its Civil Law Act to facilitate and regulate third-party funding in the arbitration process. Hong Kong also recognized third-party funding through the “Arbitration and Mediation Legislation (Third Party Funding) (Amendment) Ordinance 2017.”
Both countries amended their law as they have the desire to enhance their position and flexibility as a global seat for international commercial arbitration. It would be very reasonable to say that the regional competition has helped urge newness and advancements in arbitration proceedings in Singapore and Hong Kong.
In Asia, commercial transaction, trade, and business sectors are growing day by day, and the requirement of legal services regarding dispute resolution are also escalating. Singapore and Hong Kong are in the prominent position to take over the market of the arbitration proceedings as they have met all the requirements. They have all the tools and facilities to attract the attention of the arbitration parties and funders.
The economy of Bangladesh has been proliferating over the past few years, and foreign investment is also increasing. Therefore, the expansion of the economy is the reason why the third-party funders will offer their attention to our commercial arbitration proceedings. It will be an excellent opportunity for Bangladesh to be converted into a premier dispute resolution hub of choice in this region.
Bangladesh is a contracting state of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) and signed and ratified the Convention on the Settlement of Investment Dispute (ICSID Convention). Bangladesh also enacted the Arbitration Act in 2001, and the whole Act is based on the UNCITRAL Model Law.
Therefore, Bangladesh is well prepared to take the challenges of the arbitration process; however, deficiencies of some features like third-party funding create rigidity. The hindrance of the regulation could generate discouragement in the mind of the investors or funders.
Amendment of the Arbitration Act 2001 is required in order to put some prominent features which have already been adopted by other competitive countries. Third-party funding is one of the features that will facilitate Bangladesh to develop as a seat of arbitration where funders from different nationalities will feel comfortable to invest in commercial arbitration.
Moreover, if the government takes these sensible approaches, in that case, Bangladesh will be promoted as one of the flourishing seats of arbitration in this region.
Fahad Bin Siddique is an Associate Lawyer, Siddique Law Assign, Dhaka.
