REGULATION OF THIRD PARTY FUNDING OF ARBITRATION IN INDIA: THE ROAD NOT TAKEN

Abstract

Third party funding [“TPF”] has become a necessary evil in the face of excessively high costs involved in both international and domestic arbitrations. Historically, TPF in litigation has been deemed to be illegal in most common-law jurisdictions owing to the application of the archaic doctrines of maintenance and champerty. Arbitration hubs such as Singapore and Hong Kong have recently implemented regulatory frameworks to recognise and accept TPF in arbitration and have abolished these archaic doctrines. A regulation of this funding mechanism promotes access to justice and allows meritorious claimants to advance their claims, despite the furore over its ethical, economic, and legal considerations. Through this article, the authors have sought to explore the benefits and the associated risks that are involved in TPF, while referring to the existing regulatory regimes across jurisdictions. This is done with the objective of examining the need for a regulatory framework in India as the lack of prohibition of this funding mechanism makes India a lucrative market for TPF. The Indian market may still be exposed to significant risks due to the lack of a regulation. Legislating on this vacuum in law could assist India in becoming the arbitration hub that it envisages itself to be.