Third-Party Founding on International Arbitration.
First of all, we have to give a definition of what the Third Party Founding is, in the legal background. The TPF (Third Party Founding) is a mechanism that permits a person usually, a legal person, foreign to the arbitration process get involve or interested in financing or face up the cost of a trial of a party which is involved on the arbitration process.
This mechanism is getting more useful and famous on countries of the common law rather than the legal practice of the civil law family ones. Although, civil law family systems have been figuring out how this mechanism works and if it can be implemented in each country.
Moreover, in countries which are common this kind of financial service and the usage of this mechanism. This situation creates a business opportunity for many institutions such us investing funds, banks and financial companies that don't want to mess up. These organizations get involved with the trials, arbitration process and legal background because they are pursuing a significant percentage of 20% to 50% of the amount of the award in each case. It is like a new way of gambling to understand better this figure.
For instance, financial companies also search and investigate every single risk on the process taking to account the facts of the case and then made the decision of invest or fund the process of the party. Depending on the study the enterprise made a decision is taken based on the ROI (Return Of Investment) or in Spanish TIR ( Tasa Interna de Retorno). Subsequently, the investor establishes a found contract with the party involved.
Eventually, this contract has many clauses such as: Privilege and confidentiality, exclusivity, settlement and report requirements. This mechanism has created a kind of uncertainty because of two clauses on this kind of agreement. The first one related to “privilege and confidentiality”. this kind of clauses imply that the parties of the contract, investor and the party exchange sensitive information which can be involved on the judicial or arbitration process. And the second one about “reporting requirements”, as we have said that the investor is interested on the profits of his investment. It has to establish some obligations to the party to know how the process is being developed.
To sum up, for academics, this mechanism concerns about conflicts of interest and also transparency on the arbitration process. Because theThird Party Founding can have additional interest for future business, beyond the benefits of the investment, on the arbitration tribunal's decision is defining.
A hypothetic example of this kind of situations could be an antitrust and competence case in which the Third Party Founding is an enterprise that has a special interest on the decision of the tribunal because the company has made anticompetitive activities on its business. And the tribunal is taking the decision of sentence the responsibility of the involved enterprise for a claim of damages. In fact, this kind of situations the interest of the TPF does not seem so evidently and it seems that is protected by a confidentiality clause that is detached from the arbitration process.
