India's Prospects on Third Party Funding in Arbitration: Cross Jurisdictional Approach & Recommended Policy Framework.
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Third-party funding, as a concept, affords a win-win situation, principally for the disputants on one hand, especially favouring the under-privileged party from the perspective of access to justice and providing an opportunity for effective representation against a well-funded party; and on the other hand, for the investors, by offering relatively safer and favourable returns for their regulated funding of the arbitration process. The exponential rise in the litigation and arbitration claims being financed by third-party financiers has brought about perhaps the most influential trend in the civil justice system. The successful models in Singapore and Hong Kong are an inspiration for instituting regulatory measures in the Indian context. Consequently, a need is felt to institute a strong regulatory framework to safeguard the infallible image and reputation of the Indian judicial system against the potential abuse by the unscrupulous third-party financiers who fund a dispute purely with financial profit in mind. In effect, the regulatory mechanism on the subject calls for concrete rules on third-party funding from outside the country, the reinforcement of public policy objectives, and the integrity of the judicial system. While forging conducive conditions in the Indian context, the regulatory framework must be initially customized to the Indian environment to stabilize the system. Later, with evolution of the system with time, there is a definite requirement to adapt to global benchmarks to unequivocally pave way for third-party funding mechanism as an effective method to benefit the Indian citizens and also India’s global reputation as a prominent seat and venue for international arbitration. In this significant backdrop, this paper seeks to analyze the regulatory regime adopted by established jurisdictions, the prevailing challenges, and recommend a plausible policy framework on India’s position on third-party funding in arbitration.
‘Third Party should be encouraged as it empowers parties who can’t afford the procedures but have a right to justice’ – Mark Bravin