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Sweify TPF Access To Justice
Sweify TPF Access To Justice
To the extent that arbitration may be affected in subtle, if unpredictable, ways by the cost
restraints, the prerogative to finance the arbitration claim through a third party is generally
reinforced by the traditional theory of access to justice. 1 Access to justice is a traditional norm of
international law. 2 It finds roots in the states’ treatment of aliens in maintaining them a viable
access to national justice systems. Access to justice commonly refers to “injury consisting of, or
resulting from, denial of access to courts, or denial of procedural fairness and due process in
relation to judicial proceedings, whether criminal or civil.” 3 The persisting curtailment of the right
to access to justice through arbitration due to the prohibitive costs is intolerable.
Disproportionate costs between the parties may impact even a well-funded party in deciding
whether to pursue a valid claim or maintain a valid defense and may generate unjust outcomes. 4
In that sense, Third Party Funding (TPF) is said generally to respond to the access to justice. 5
Although TPF was principally introduced as a necessary tool for financially incapable
parties, it has now been characterized more by a choice rather than a necessity. While parties
who may be able to pay the arbitration costs may choose not to, 12 others may be willing to pay
but unable to. Given this procedural hurdle, TPF would promote the funded party’s survival in its
war against the better funded party. 13 This procedural hurdle may in itself hamstring the
adjudication of “good cases.” 14 Courts have favored that theory by moving away from limiting
litigation funding in favor of increasing access to justice. Courts no longer allow the inherent
inequity of citizens’ financial means to curtail their abilities to vindicate their legal rights. 15 Some
courts have even declined some legal defenses in order not to threaten free access to courts. 16
The traditional view of enabling financially incapable parties to pursue their litigation
rights through TPF is no longer peculiar given the advent of a new pattern of parties who pursue
claims with as little impact on their cash flows. 17 TPF has become, therefore, a tool of enabling
parties who are unable or unwilling to pursue their claims which should result in more
meritorious claims brought by either party. Despite the demurrers’ views that TPF for non-
impecunious claimants, unlike impecunious ones, is not serving “access to justice” as that term
is commonly used, 18 TPF is still a tool of “access to justice” that is not necessarily relevant to just
the cost-benefit analysis. In either way, TPF is a critical financial assistance tool for both kinds of
parties to secure an effective remedy through arbitration. Limiting TPF, as an access to justice
tool, to the financially incapable parties may overestimate the reality behind introducing that
tool. On the one hand, treating TPF as an enabling tool for those who only need funding should
undermine the other funding options that may be available to those parties and overestimate
the role of TPF as the only available tool in the box for those parties. On the other hand, limiting
the use of TPF to only financially incapable parties may indirectly view TPF as a necessary tool
that arbitration cannot function without.
Conclusion
A proper use of TPF can therefore pave the way for an effective application of access to
justice theory and level the playing field. It would preserve the arbitration status as a forum of
justice for all parties. The efficiency of the justice system is of considerable public interest.
Arbitration is still viewed as part of the civil justice system and hence, it should be viewed as
promoting the traditional goals of the civil justice system. Otherwise, arbitration may turn into
an inefficient process that undermines the ultimate purpose of this system i.e., justice.
Mohamed Sweify, Esq. is a bilingual dual qualified attorney in civil and common law jurisdictions. The author is a
New York based attorney and also a Doctoral Candidate (S.J.D.) at Fordham University School of Law, a Teaching
Fellow of US Legal System and ADR Practices and a Lecturer of Islamic Law at Fordham Law School. The author
welcomes comments on this paper at msweify@fordham.edu.
1
See, e.g., Tara Santosuosso and Randall Scarlett, Third-Party Funding in Investment Arbitration: Misappropriation
of Access to Justice Rhetoric by Global Speculative Finance, L. & JUSTICE IN THE AMERICAS (2018),
https://lawdigitalcommons.bc.edu/ljawps/8. Others argue against this theory include Frank J. Garcia, The Case
Against Third-Party Funding in Investment Arbitration (July 30, 2018), https://www.iisd.org/itn/2018/07/30/the-case-
against-third-party-funding-in-investment-arbitration-frank-garcia/.
2
Francesco Francioni, Access to Justice, Denial of Justice and International Investment Law, 20 EUR. J. INT’L L. 729,
730-31 (2009) (discussing the standards of justice that emanated first to aliens and their economic interests under
customary international law and delivering justice to them).
3
RESTATEMENT (THIRD) OF FOREIGN RELATIONS LAW § 711 (1987).
4
It has been held that “[m]anifest injustice in the sense of a lack of due process leading to an outcome which offends
a sense of judicial propriety is enough, even if one applies the [i]nterpretation according to its terms.” Loewen Group,
Inc. and Raymond L. Loewen v. United States, ICSID (NAFTA) No. ARB (AF)/98/3, Award, para 132 (June 26,
2003).
5
Legal practices and governing laws are fairly expected to progress in order to accommodate the new needs in the
legal field. That said, it is not inappropriate to reassess the ongoing need and respond to those needs without the long-
historical legal barriers to liberalize the legal regime and more likely increase the access to justice. See Pac. Gas &
Elec. Co. v. Bear Stearns & Co., 50 Cal. 3d 1118, 1136, 791 P.2d 587, 597 (1990) (“If any person who induced another
to bring a lawsuit involving a colorable claim could be liable in tort, free access to the courts could be choked off with
an assiduous search for unnamed parties”).
6
Christine Parker, JUST LAWYERS: REGULATION AND ACCESS TO JUSTICE (1999).
7
As per Burford annual report, more than two-thirds of companies (70%) chose to forgo the pursuit of meaningful,
meritorious claims because of the impact of legal expenses on the bottom line. See BURFORD ANNUAL REPORT, 10
(2018), https://www.burfordcapital.com/media/1526/bur-31172-annual-report-2018-web.pdf.
8
Courts find that funding in itself does not reflect the financial capabilities of the party Benitez v. Lopez, No. 17-CV-
3827-SJ-SJB, 2019 WL 1578167, at *1 (E.D.N.Y. Mar. 14, 2019) (“the financial backing of a litigation funder is as
irrelevant to credibility as the Plaintiff’s personal financial wealth, credit history, or indebtedness”).
9
David S. Abrams, Daniel L. Chen, A Market for Justice: A First Empirical Look at Third Party Litigation Funding,
15 U. PA. J. BUS. L. 1075, 1078 (2013).
10
Id.
11
Sir Jack I. H. Jacob, THE FABRIC OF ENGLISH CIVIL JUSTICE, 2 (1987).
12
Funders may be viewed as performing an “arbitral hit-and-run” which reflects the fact that funding has become a
choice not a necessity. Some of the world’s largest companies are regular users of outside financing; Burford created
a $45 million portfolio for a FTSE 20 company. From an accounting perspective, third party financing is used to move
risk off corporate balance sheets which may make it another form of corporate finance. See Christopher P.
Bogart, Third-party funding of international arbitration (Oct. 4, 2016),
https://www.burfordcapital.com/blog/international-arbitration-funding/.
13
Arbitration has become “wars of attrition in which the outcome may depend more upon which party is better
financed than upon the merits of the dispute.” Jack J. Coe, Jr., Pre-Hearing Techniques to Promote Speed and Cost-
Effectiveness-Some Thoughts Concerning Arbitral Process Design, 2 PEPP. DISP. RESOL. L.J. 53, 55 (2002). To name,
but few, other options to finance the claims of the parties: assignment of claims, success-based fees arrangements,
insurance contracts, loans, or corporate finance instruments.
14
As highlighted by the Hong Kong Law Reform Commission’s Secretary: “a party with a good case in law should
not be deprived of the financial support it needs to pursue that case by arbitration and associated proceedings under
the Arbitration Ordinance, and that these reforms are necessary to enhance Hong Kong’s competitive position as an
international arbitration centre.” HONG KONG LAW REFORM COMM. (“LRC”), REPORT ON THIRD PARTY FUNDING
FOR ARBITRATION (Oct. 12, 2016).
15
Eagle Mt. City v. Parsons Kinghorn & Harris, P.C., 2017 UT 31, P26, 408 P.3d 322, 329, 2017 Utah LEXIS 84,
*18, 840 Utah Adv. Rep. 27, 2017 WL 2483017.
16
In this case, plaintiff was trying to, through this lawsuit, enjoin defendant from further participation in the lawsuit
which was essentially seeking to abort the lawsuit by starving the litigant of funds. Pac. Gas, 791 P.2d 587.
17
These parties aim at taking off balance sheet the costs of the claim and turn it into source of profit. See Brooke
Guven and Lise Johnson, The Policy Implications of Third-Party Funding in Investor-State Dispute Settlement, CCSI
Working Paper 2019, 12 (May 2019).
18
Id. at 14.