Draft Text Providing for Transparency and Prohibiting Certain Forms of Third-Party Funding in ISDS

In the context of WGIII, several states have called for international regulation and some referred to a possible ban on third-party funding. However, questions have been raised as to how an international policy instrument could be structured in effective ways, in relation to a transnational industry that presents high degrees of complexity and sophistication. To support WGIII’s deliberations, this submission contributes draft text to illustrate one possible way these calls for regulation could be given effect in technical terms. While drafted in a form that could provide the basis for discussions about a possible multilateral treaty, the text could also be tailored for use in arbitration rules, in domestic laws, or via a multilateral instrument to amend existing international investment agreements.

The draft text rests on the following main elements:

• A broad definition of third-party funding;
• Disclosure requirements applicable to all third-party funding;
• A prohibition of non-recourse, outcome-contingent third-party funding;
• Enforcement mechanisms.

States may have different objectives in regulating third-party funding in ISDS, and the draft language could be tailored accordingly.