Article 38 of the SCC Rules: An Analysis of Security for Costs in TPF Arbitration

Abstract

THE RAPID DEVELOPMENT OF THE FUNDING MARKET 

As a means for businesses to finance legal claims, Third-Party Funding (TPF) has become an increasingly important procedural feature of international arbitration. The market is constantly growing and involves a variety of actors, as well as substantial assets. In Sweden (as of today), a viable internal TPF market does not seem to exist. There are no formalized legal or self-regulatory regimes regulating TPF and its impact on the arbitral procedure in Sweden. Despite this, TPF is of significant importance in the Swedish context. Sweden is commonly chosen as arbitral seat, and the Stockholm Chamber of Commerce (SCC) oversees international arbitrations on a continuous basis. Consequently, a noteworthy amount of international arbitrations involving TPF are seated in Sweden. While the reception of TPF was previously hostile and even in some respects fiercely sceptical, the contrary standpoint is now cementing itself as commonplace. The reasoning by the tribunal in Giovanni v. The Argentine Republic illustrates the pro-TPF wave in international arbitration. It reasoned that: ‘[TPF] is by now so well established both within many national jurisdictions and within international investment arbitration that it offers no grounds in itself for objection.’
This notwithstanding, TPF does, indeed, trigger a number of legal concerns relating to how the involvement of third-party funders affects arbitral procedure. One of the more pressing issues relates to the difficulties for the non-funded party to obtain reimbursement for costs.