By: GABRIEL ‘FEMI ADEWARA, MCArb and GREAT CHIDI EZEANYA, ACArb
“The future is already here – it is just not very evenly distributed yet’ – William Gibson (Renowned Science Fiction Writer)
INTRODUCTION
Third-Party Funding (TPF) occurs when someone not in the arbitration funds a party in that arbitration in exchange for an agreed fee/return from the damages obtainable. TPF is a contractual agreement between parties: client and funding party. But how diffused, worldwide, has the practice become?
Disrupting and normalizing seem to be TPF’s mission in arbitration. Given the bulldozer approach modern, TPF uses to demolish arguments around champerty to its advantage. Nevertheless, issues such as jurisdictional permission, disclosure requirements/matters of impropriety, Investment to Quantum Ratio Analysis (IQRA) by potential funders, cost recovery by the unsuccessful parties, etc, continue to dog TPF.
TPF IN PRACTICE
Conceptually, TPF helps small entities and companies seeking outsourced funding to pursue their claims. The practice is rising, with IQRA determining funders’ motivation/participation, because of the need to tradeoff costs with outcomes based on perceived rising costs in arbitration.
TPF is not a new concept, having long existed in litigation. Hitherto, it had been illegal in common law jurisdictions, including Nigeria, due to the doctrine of Champerty and Maintenance.
TPF’s mechanisms involve financing the legal fees and expenses incurred by the funded party in the arbitration. The financing can be delivered through various instruments like donation/grant, funder’s reimbursement made dependent on arbitration’s outcome, non-recourse-based funding such as traditional loans and (insurance) premium payment, etc.
However, the original form of TPF is still amorphous, as identified by the 2018 ICC-Queen Mary Task Force Report, which hung TPF’s concrete form on either relaxation or elimination of jurisdictional prohibitions.
TPF IN NIGERIAN ARBITRATION – TO BE OR NOT TO BE?
TPF is already bulldozing its way into Nigerian arbitration, with the 2019 Arbitration and Conciliation Bill, which potentially would at least indirectly robe TPF with some legal toga virilis being at the ‘final stages of the Nigerian legislative process.’ Though it is well appreciated that TPF started having its leeway in international arbitration due to huge costs being associated with the arbitration, nevertheless, so far, only Singapore and Hong Kong are said to have clear legislation on TPF. But with Covid-19’s impact on the global economy, TPF seems to be gaining more acceptability worldwide, Nigeria being in tow.
Nigerian jurisprudence is developing around opinions holding inhibitions placed on TPF by common law doctrines of Champerty and Maintenance as not extendable to arbitration because arbitration was outside litigation purview. And no case law or legislation outlaws TPF in arbitration. True, the Bill falls short of substantive approval, but following the principle which holds that whatever is not prohibited is lawful; TPF within arbitration can be deemed lawful in Nigeria, when the Bill becomes law. More so that the Bill establishes purpose in multiple provisions such as Articles 42(2)(g), 50(1) and 83, defining cost to include ‘costs of obtaining TPF’.
The draftsmen couldn’t have made all the fuss without intending to legalize TPF. But then, they went that far and still stopped short of hitting the nail on the head because despite the rigmarole, the Bill stalls pronouncing TPF legal. This casts a shadow of to be or not to be on TPF in Nigeria.
In conclusion, endowing TPF with Nigerian jurisdictional approval would be stepping in the right direction. TPF facilitates access to justice where otherwise restricted and may enhance Nigeria’s positioning for becoming an international arbitration seat of choice. For now, the Bill represents a relaxation rather than an elimination of prohibitions on TPF.
To deliberate further, and get more enlightened on this exciting topic, kindly click on the link below to register for the forthcoming 2021 NICArb Hybrid Annual Conference, themed: “Disruption and the New Normal in Arbitration/ADR in Africa: A Way Forward.”
https://forms.gle/eW4HUjPim74jbtvv8
Date: Thursday, 18 – Friday, 19 November 2021
Time: 10:00AM – 4:00PM
Venue: Eko Hotel and Suites/Whova Platform.
For advert bookings and Reservation, kindly contract Peace on 09087187408
