Marc J. Goldstein Arbitrator & Mediator NYC
October 03, 2017

Funder, Thy Name Is …

I learned from reading the draft ICCA-Queen Mary Report on third-party funding in international arbitration a significant industry fact that perhaps is already well-known to many of you: that prominent third-party funders now engage prominent international arbitrators to work with (or perhaps indeed for) them to assist in the screening of cases for potential investment. I did not find in the draft report, however, any specific discussion of how this development in the market might affect the arbitration community’s views on the precise contours of disclosure of third party funding in international arbitration, now that a consensus appears to have evolved that there should be some form of disclosure at the beginning of a case for the purpose of allowing arbitrators to check for conflicts and make any appropriate disclosures.

Under one of the two alternative formulations of a disclosure protocol that are set forth in the ICCA-Queen Mary draft, a funded party would have a duty to disclose the existence of the funding agreement and the identity of the funder to the other party, the Tribunal and the institution that is administering the case. Under the second alternative, an arbitral tribunal would have discretion to require a party to disclose the existence of a funding arrangement and the identity of the funder.

The concern addressed in this Commentary is that disclosure of the identity of the funder to the Tribunal comes at a price: The Tribunal may form preliminary impressions about the merits of the case based on the fact that an identified funder has (or has not) decided to provide funding for a party. I suggest that this risk may be avoided by a disclosure protocol that shields the arbitrators from knowledge of the identity of the funder, albeit also at a cost — that arbitrators in law firms may need to search more broadly for funding relationships and disclose the relationships more broadly to the administering institution in order to effectuate an “identity-blind” conflict check.

Major third-party funders are understood to have constructed their businesses upon a model analogous to that of a venture capital firm.  Having raised capital from investors on the premise of their ability to generate very attractive rates of return in comparison to investments of comparable risk, the third-party funders then seek to optimize the risk-reward ratio and projected rate of return, doing so by a process of intensive evaluation of the law, facts, predilections of the arbitrators if they have already been selected, and any other factors in the environment of the case that bear upon the likelihood of a favorable award (or settlement) and its satisfaction (voluntarily or through enforcement) and the expected costs. Already staffed with skilled lawyers to make such assessments, certain well-capitalized funders in the high-value sector of dispute funding market have taken their due diligence strategies to an arguably higher level of refinement and predictability by adding renowned arbitrators to their case assessment teams. There can be little doubt that the funders seek to give assurance to potential investors that their selection of cases for investment is exceptionally rigorous. Further, it cannot have been overlooked by the funders, as funding disclosure regimes begin to be implemented in key arbitration markets (such as Hong Kong and Singapore), that if disclosure of the identity of the funder is required, the funder in order to make a favorable impression on the Tribunal that will receive the disclosure should have branded itself as an impeccable selector of meritorious cases.

This phenomenon creates a disquieting prospect. If disclosure of the identity of the funder to the Tribunal is made mandatory and automatic under applicable arbitration law or provider rules, just imagine how this might play out — after conflict issues are resolved — when the arbitrators first convene to discuss the case at the pleading/preliminary conference stage.  “Claimant is backed by one of the really first-rate funders, and they are exceptionally selective, and they use Arbitrator X (who is on their “Investment Advisory Board”) as the team leader to vet all their big cases. So we can have confidence that Claimant has quite a strong case here.” Or maybe the prudent arbitrator will not say this — but only think it.

Now suppose instead that the funder is a new entrant in the field, or is expanding to international arbitration from its established business of funding auto accident cases in the US domestic market. The spoken or unspoken reaction of the arbitrator might be “We have to have some concerns about the merit of this case. Chances are this funder is involved because the case was turned down by the better-established players.”  Also, knowing the identity of the funder might cause the Tribunal to draw inferences about the funder’s ongoing involvement in the legal strategy and tactics. A first-tier funder might be assumed to exert substantial and continuous influence, a new player perhaps not as much. Many arbitrators will insist that they are immune from such influences and will in all events decide the case strictly on the basis of the evidence and the law. But when we spend so much time worrying about so-called “unconscious bias,” can we afford to look away from this very real source of potential influence on the arbitrator’s judgment?

So it seems fair to ask whether a mandatory disclosure scheme for provider rules might be designed to mitigate this concern. Could the rule for instance require disclosure in the first instance of the identity of the funder only to the administrating institution, with the understanding that the identity of the funder will not be revealed to the arbitrators unless this becomes necessary for a determination of whether an arbitrator needs to make a disclosure? Perhaps the rule could also impose upon the party a duty to disclose its funder’s known relationships with the arbitrators. But on the basis that such disclosure might not be complete – as the funder may not fully disclose to the funded party – the administrator could then call upon the arbitrator to disclose her (or her firm’s) relationships with any funder in the funder category of the identified funder. If this disclosure reveals no relationship with the party’s identified funder, the administrator would either so advise the parties, or from the absence of a communication and confirmation of the arbitrators’ nominations it would be assumed that no arbitrator relationship with the funder exists that could be relevant to the arbitrator’s impartiality and independence.

Granted this makes the conflict checking more difficult for the arbitrator, especially one who is affiliated with a large law firm. Conflict checking for funder relationships could not under this protocol be done through the law firm’s automated system without an entity name. But would arbitrators be able by other means to determine if their clients in pending or recent cases have used funding, or if a funder was a client of the firm? Would the challenge of defining “funder” for these purposes be adequately resolved if the administrator, based on the party’s disclosure, is able to inform the arbitrator of an adequate generic classification of funder involved?

The specific concerns discussed here about the downside of mandatory disclosure are not discussed in the Task Force draft. But there was division within the Task Force about whether to make disclosure of the identity of the funder mandatory, and the advocates of such mandatory disclosure believed, according to the draft, that this is necessary in order for arbitrators to conduct reasonable investigation for potential conflicts. I leave you with these questions, which have not been analyzed in the draft ICCA-Queen Mary Report, and with the notion that there is considerably more work to be done before the notion of mandatory disclosure of the identity of the funder becomes enshrined in the rules of major arbitration provider organizations.

2 Responses to “Funder, Thy Name Is …”

  1. Jim Daniels says:

    I now realise that you probably do not know me but, since I have posted comments, think you should be given some access to my background.
    Accordingly I attach a CV.
    I am not looking for work – I am busy enough.
    James Thomas Daniels

    200 Glentworth Street, London NW1 6AU, UK : ( – O1276 858 032, Mob 07931 759108

    Experience Overview

    Graduate metalliferous Mining Engineer with extensive Petroleum engineering experience in oilfield project management, 45+ years direct experience of drilling & production, pipeline operations, development of oil and gas fields, drilling rig construction and shipyard operations. Freeman of the City of London.
    International Arbitration Tribunal Chairman, Arbitrator and Expert witness for over 20 years.

    Commercial/Legal experience includes:

    Tribunal Chairman
    Succeeded Sir Brian Neill QC as Chairman of the Drilling rig ‘Maersk Vinlander’ LMAA Arbitration Tribunal with Michael Thomas CMG, QC and Ken Rokison QC as Tribunal members. Bare-boat charter, design and maintenance dispute. [$120 million]

    International Arbitrator

    Awards have always been made available within six weeks of the end of submissions/ hearings.

    • Appointed by LCIA to LCIA Arbitration numbers 97/X17, 8054, 8106, 9124, 0204, UN142750 and 142742.
    • Claimant appointee for a Caspian Sea dispute concerning time delays on an offshore construction project. Stephen Furst QC as Chair and Sir Robert Aikenhead appointed by Respondent.
    • Claimants appointee – UAE Offshore Platform & facilities – Mr Ken Rokison QC as the Respondent’s appointee, UNCITRAL rules. Professor John Uff CBE QC Chair [$280million]
    • Respondent appointed arbitrator – FPSO Construction & Design disputes. Chaired by Lord Dervaird – Professor John Murray QC. (Singapore law) LCIA rules. [$140 million]
    • Respondent appointed Arbitrator – Canadian environment issue – Mr Ken Rokison QC as the Claimant’s appointee, under the 1950 Arbitration Act. Sir Philip Otton PC Chair [£42m]
    • Claimant appointed Arbitrator – David Haigh QC (Calgary) as the Respondent’s appointee. Nigerian FPSO & pipeline dispute. UNCITRAL rules. Mr Richard Siberry QC Chair
    • Respondent appointed arbitrator on a $320 million construction project dispute in Qatar. Mr Tim Elliott QC as Chair. UNCITRAL rules.
    • Respondent appointee on a Far-Eastern yard semi-submersible drilling rig construction contract – LMAA. Mr Dominic Kendrick QC Claimant’s appointee.
    • Respondent appointed arbitrator concerning overpayment recovery on an Arabian Gulf offshore oil construction project. UNCITRAL Rules, Mr Michael Lee as Chair.
    • Claimant appointee (U.S. Chemical Co.) on a $220m breach of confidentiality dispute over proprietary processes in the manufacture of Terephthalic acid against a Chinese state entity. – SIAC rules. Prof. Lawrence Boo respondent’s appointee, Stephen Males QC Chair. 100 page Award available within ten (10) days of end of three week hearings.
    • Respondent appointed LMAA arbitrator on a Korean MODU construction project – Richard Fernyhough QC Chair.
    • Respondent appointee for a U.S. construction corporation on a tunnel construction dispute in Trinidad – ICC rules. Dr Robert Gaitskell QC co-arbitrator, Michael Tselentis QC SC as Chair
    • Claimant appointee for a $multi-million dispute concerning Oilfield facilities offshore Nigeria. Babajide O. Ogundipe Respondents appointee, Dr Robert Gaitskell QC as Chair. This is was a fixed 91 day arbitration from Tribunal constituted to award available.
    • Claimant appointed Arbitrator – South African FPSO and pipeline dispute, Sir Philip Otton PC as the Respondent’s appointee, South African law, Ad Hoc with 96 Act procedures. Mr Peter Chapman Chair

    Counsel who have advocated before me in arbitrations
    David Allen, Claire Blanchard QC, Steward Boyd QC, Timothy Brenton QC, Steven Berry QC, Paul Buckingham, Adam Constable QC, Paul Darling QC, Stephen Dennison QC, Barbara Dohman QC, Sarah Hanaford QC, Sara Masters, Nigel Meeson QC, Christopher Moger QC, Finola O’Farrell QC, Hugo Page QC, Lionel Percy QC, Simon Rainey QC, Sudhanshu Swaroop, Marcus Taverner QC, Anthony Thompson SC, Michael Tselentis QC SC, Patrick Twigg QC, Richard Wilmot-Smith QC, Andrew White QC

    Expert Witness
    Appeared in Court once only;
    Normally after issuing my report the Parties settled.
    • Advising the Scottish Courts on a patent infringement claim concerning directionally drilled horizontal multi-lateral well completions. (Dundas & Wilson)
    • Advising the Scottish Courts on a Turnkey drilling contract dispute. (Ince & Co)
    • Advising the English Courts (Uzbek law) on an insurance claim resulting from blow-out & fire (Clyde & Co)
    • Advising the English courts on a ‘bad’ well in Georgia former USSR (Royds)
    • Advising an ICC Tribunal on a drilling project offshore Tanzania. (White & Case)
    • Advising an LCIA Tribunal on a drilling project offshore Tunisia (Finers Stephens Innocent)

    • Advising solicitors on insurance claims relating to blow-outs and consequent rig loss through fire. (Kennedy’s & Clyde & Co.)

    Devil’s Advocate
    • Investigating & advising the main board of a FTSE 100 company on the weaknesses of a £200million claim on a new build semi-sub drilling rig. (Ashursts).
    • Advising of potential ‘show stoppers’ on a £70+ million claim on a new build drillship. (Clyde)

    Oil & gas engineering assignments with Daniels Drilling Company include:

    Construction Manager
    Seconded from a major European shipyard to advise on construction of the world’s most powerful semi-submersible drilling rig. 270,000 metres of piping installed on board plus 150,000 metres instrument piping.

    Project Director (Contractor)
    The North Sea’s first EPIC subsea oil production development of multiple horizontal wells producing to a sub-sea manifold. Corrosion resistant alloy [CRA] austenitic steel piping was the major piping element. Approved weld procedure took 38 hours for an 8” diam pipe weld

    Chief Engineer (Oil Co.)
    Responsible for the development and subsequent production to pipeline spec for direct delivery to a nearby coastal refinery, of a gas field and a 35% H2S oilfield (with 10% CO2) from four offshore platforms in an environmentally sensitive tourist area – First oilfield in the country. Joint Venture co-ordination among partners. Piping on the platforms and in the wells had to resist Hydrogen embrittlement and CO2 corrosion.

    Drilling Manager (Drilling Contractor)
    Managing the world’s most powerful drillship in Viet Nam at the height of the refugee crisis for a six well exploration programme. Completed the programme months ahead of schedule.

    Drilling Advisor (Construction)
    Provided, a major European shipyard, Construction expertise on the upgrade and refurbishment of two semi-submersible rigs. The Yard’s “Drilling construction Expert”.

    Shore base Mgr. (Oil Co.)
    All facets of supporting an offshore exploration project. A ‘one-man band’ responsible for warehouse, flights, boats and drilling. Complimented by Government authorities for certification compliance.

    Superintendent (Oil Co.)
    Responsible for a three-rig offshore development & exploration programme in the Southern North Sea.

    Consultant Engineer (Oil Co.)
    Development of a joint venture North Sea sub-sea oilfield having multilateral wells producing to an FPSO.

    Area Manager (Oil Co.)
    Responsible for all production operations and exploration activities in Bolivia, Trinidad, Kazakhstan, Southern North Sea and Indonesia.

    Drilling supervisor (Various Oil Co’s.)
    Drilling exploration & development wells in various European countries, both on and offshore.

    Consultant (Oil Co.)
    Completion and production activities deepwater offshore Brazil. Working from semi-subs completing deep water oil-wells with novel applications including employing sucker rods from a floating rig.
    Offshore Rigs worked on since 1976 include the following:
    Venture 1, Dixilyn Field 96, Zephyr 1, Offshore Mercury, JFP 1, Dan King, Transocean rig 4, Transocean rig 6, Maersk Endeavour, Treasure Saga, Zapata Lexington, Neddrill 2, Neddrill 3, Neddrill Trigon, Neddrill 4, Penrod 58, Zephyr 2, Penrod 84, Sedco 135 D, Sedco H, Sedco 702, Sedco 706, Sante Fe Galaxy 4, Dixilyn Field 97, Henry Goodrich, Nordskjald, Zapata Scotian, West Venture, Treasure Hunter, Wodeco 4, Forex Neptune, Nordraug, Bideford Dolphin, Venture 2, Ocean Alliance, Zapata Nordic, Borgny Dolphin, Ocean Odyssey, Pentagone 91, Treasure Seeker, Ocean Rig 1 (Erik Raude), and Ocean Rig 2.

    Construction of Drilling Rigs

    I was involved in the construction of the following rigs: Ekofisk 1, 2, 3, 4; Ocean Traveller; Treasure Hunter; Borgny Dolphin; Eric Raude; Treasure Seeker; Polar Pioneer; N A P C #1; Ocean Alliance; Henry Goodrich; Ocean Rig 2; Maersk Giant

    Shipyards in which I have worked (not employed by) on offshore construction include:

    Verolme Botlek, Rotterdam, Holland – McNulty Offshore, England – Hitatchi, Japan – UIE, France – Scott Lithgow, Scotland – Friede Goldman, Mississippi USA – Ibestad, Norway – Keppel Fels, Singapore – Blohm & Voss, Hamburg, Germany – Swan Hunter, England – Harland & Wolf, N. Ireland – Meyerwerft, Germany – Teesside Docks, England – Elgin Brown & Hamer, Durban, South Africa.

    Experience prior to Daniels Drilling Company
    1971-1976 PHILLIPS PETROLEUM – Joined at the start of the Ekofisk development. Did the preliminary design work for the North Sea’s first oilfield. Had complete responsibility for the West Ekofisk ‘D’ platform and facilities from initial design to construction. Responsible for the design of all the Ekofisk wells which were directionally drilled from five platforms to extend over a mile away from each platform.
    Chaired partner meetings on Joint Ventures. Secretary of the UKOOA safety sub committee; which committee was assigned to co-ordinate with the DTI and DoE during the development of much of the current offshore legislation. Secretary of the UKOOA clean seas oil spill contingency planning group, which developed the oil spill contingency plans still in use today, and member of the UKOOA pipelines sub-committee.

    Promoted to District Engineer, solely responsible for all engineering activities on exploration ventures in Norway; Company and/or Country representative on many European technical committees to establish guidelines and rules in the early days of the North Sea; particularly relating to cross border migration of oil spills, and common rules for customs, shipments and pipelines.

    Transferred to Bartlesville (Corporate HQ) and promoted to Chief Engineer for the Latin America-Asia division responsible for all production, tanker loading schedules, oil export terminal selection and construction, drilling operations in the divisional region, representing the Company at partner and Government meetings. Invited to join the API crude blending committee.

    1969-1971 CONOCO – Resident engineer responsible for the design of the North Viking gas field production and processing facilities.

    1966-1969 AMOSEAS (50%/50% Chevron/Texaco) Senior staff engineer for the Nafoora expansion project in Libya. Had ten rigs to supervise, often alone. Production increase from 44,000 BOPD to 450,000 BOPD.

    Production Engineer for the Beda field, Libya, a one hundred plus well field using sucker rod and Reda pumps to produce 45,000 BOPD at extremely high water cuts.

    Prior to the above I was a Metalliferous Mining Engineer working in many different types of mine including Longwall, Sub Level Block Caving, Cut & Fill, Shrinkage and Open stopes.

    Mines worked include the following:

    Sherritt Gordon Mines Lynn Lake, Manitoba, Canada – Nickel, Cobalt, Copper, Gold
    Williamthorpe, Derbyshire – Coal
    Bramley Vale Drift, Derbyshire – Coal
    Geevor & Levant, Cornwall – Tin
    Greenvale, Queensland, Australia – Nickel


    Graduate of the Camborne School of Metalliferous Mining – ACSM (1966)
    Member Institution of Mining and Metallurgy 1967,
    Chartered Engineer (C. Eng) 1972.
    UK Register of Expert Witnesses 1992.
    Member of the European Users Council of the London Court of International Arbitration LCIA (1998)
    Shareholder of the International Dispute Resolution Centre, London IDRC (1999)
    Member of the Society of Construction Law (1997-2011)
    Member of the Institute of Materials, Minerals and Mining
    Granted the Freedom of the City of London (2005)
    Charity commission examiner (2007 – 2010)

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