| Abstract [eng] |
The phenomenon of litigation funding is not new – it can be seen since the ancient times, however, has not been applicable for a long time in both civil and continental law countries. As society matures, attitudes to judicial and alternative dispute resolution have also changed. There is a tremendous breakthrough in the third-party funding in the international arbitration, therefore, the most problematic issues of this institute are analyzed. The purpose of this master thesis is to reveal the influence of the third-party funding in the arbitration on the management of conflicts of interest and the obligation to disclose the fact of funding, the reimbursement of arbitration costs and their security and to submit proposals to the Lithuanian legislator on the possible regulation of the third-party funding in arbitration in order to ensure an effective arbitration process. Taking into account the fact that the funder of arbitration proceedings is neither a party to the arbitration agreement, nor a party to the arbitration proceedings, there is a lack of legal certainty on whether the participation of such subject may cause conflict of interest, and whether the legal costs, success fee, and expenses related to the funding may be reimbursed by the losing party. Moreover, the natural question arises whether the arbitrators have the right to oblige the third-party funder to directly reimburse the costs of the losing party or to order a security for costs. After analysis of foreign law, arbitration rules of permanent arbitration bodies, doctrine, case law and arbitration practice, it was concluded that in the context of institute of third-party funding in the arbitration, the conflicts of interest between the third-party funders and the arbitrators may arise, and in order to avoid this, it is necessary to disclose the fact of the third-party funding to the parties and arbitrators. Likewise, the arbitrators, who have a discretionary power over the allocation of arbitration costs shall award legal costs to the losing party if the funded party is obliged by the funding agreement to reimburse the legal costs to the third-party funder. Financing costs incurred by the third-party funder may be awarded if they meet the necessity and reasonableness requirements. The success fee from the losing party shall not be awarded, whereas such costs do not meet the above-mentioned requirements. Furthermore, the mere fact of third-party funding is not and cannot be a sufficient ground to award the security for costs of opposing party, since the arbitrators must also take into consideration other circumstances such as: the terms of the funding agreement, merits of the claim, prospects of success of the dispute, the financial capacity of the funded party and its alteration since the moment of entering into the arbitration agreement. |
