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Robert Rothkopf speaks about allocation of third party funding costs in international arbitration at ICC YAF Conference in Zurich on 30 June 2017.

On 30 June 2017, Robert Rothkopf spoke at an ICC international arbitration conference in Zurich, hosted by Wenger & Vieli AG, that focused on cost allocation in international arbitration and its interplay with third party funding.

Robert’s presentation covered the recent case of Essar v Norscott in the UK which confirmed that arbitrators have the power to allocate third party funding costs to the losing party (namely, the premium or success fee payable by a funded party to a funder).

Robert provided Balance Legal Capital’s view that cost allocation decisions should be primarily driven by a consideration of party conduct during the dispute and the “English Rule” that costs should follow the event – “Arbitrators should use their cost allocation powers to penalise dilatory or bad faith conduct which ultimately drives up costs and slows down the arbitration process.”

Robert also outlined (i) the extent to which disclosure of funding should be made to opponents and tribunals; (ii) the fact that tribunals lack the jurisdiction to make costs orders against third party funders as they are not a party to the arbitration agreement; and (iii) the difficulties with defining a “third party funder” given that it is essentially a provider of corporate finance, the way a bank might loan to a company whose main asset is a litigation claim. Security for costs was briefly considered and it was acknowledged that the mere presence of third party funding was insufficient to form the basis for a security for costs order against a claimant, the real test being that the respondent would have to show that there had been a material change of circumstances of the claimant since the arbitration agreement had first been entered into.