THE MONETIZATION OF INVESTMENT CLAIMS PROMISES AND PITFALLS OF THIRD-PARTY FUNDING IN INVESTOR-STATE ARBITRATION

This article explores the economic and legal drivers of third-party funding (TPF) and explains the development stages of a major funder with the aim of improving the regulation of such an innovative financing method. This article explains the reasons for this emerging market and clarifies the key legal problems from different aspects. To do so, the article uses Burford Capital, one of the major third-party funders, as an empirical case study to show how the company developed and how it addresses (or not) actual and potential legal problems in its agreements. The Article further explains that TPF arrangements raise cutting-edge legal questions, some aspects of which have been only partly addressed by recent arbitral tribunals. Most of the TPF related legal issues, on the other hand, have been left unaddressed which creates uncertainty for the extent to which the international system can accommodate the monetization of investment claims. The challenges have such a systemic importance that the United Nations Commission on International Trade Law (UNCITRAL) only started working on TPF in 2019 to investigate the new legal problems TPF raises. Fundamentally, this Article offers the first comprehensive roadmap for tribunals and policy makers to address all key legal problems efficiently with the objective to enable TPF to facilitate and increase the monetization of investment claims without jeopardizing the stability and fairness of the actual system.