Right-hand shape
“Emergency Arbitrator” is a rapid response system for urgent measures
The spread of specialized litigation financing companies with a fee agreement
Assistant Professor of Commercial Law at the College of Law at the University of Bahrain, Dr. Manal Al-Sayed said that financing third parties for an arbitration case in exchange for a share of the proceeds has witnessed gradual acceptance in recent years, especially in disputes in general and arbitration in particular. Specialized litigation financing companies have emerged in exchange for obtaining a percentage of the amount awarded if the case is won. This led to amending the rules and including controls for financing third parties in the rules of international and regional arbitration institutions and the Bahrain Chamber for Dispute Resolution.
This came in a lecture I presented as part of a series of legal highlights lectures organized by the Legislation and Legal Opinion Authority entitled “New Principles in International Arbitration,” in which I highlighted pivotal developments related to third-party financing of arbitration claims (TPF) and the emergency arbitrator system, and the controversy over the jurisdiction of the International Center for the Settlement of Investment Disputes (ICSID) to consider the claims of sovereign bondholders.
She introduced Dr. Manal financing third parties for an arbitration case is the intervention of a person foreign to the dispute to provide financial or non-financial support to one of the parties in exchange for a share of the proceeds if the case is won, noting that it was banned in the thirteenth century, and was accompanied by criminal penalties, with the aim of reducing malicious claims and preserving the integrity of the judicial process, as well as fears of distorting the facts or withholding evidence, tampering with witnesses, and prolonging the duration of litigation. Controlling the settlement process to finance maximum gains has witnessed gradual acceptance in recent years.
Companies specializing in finance
The main reasons for this transformation were attributed to the decline in historical considerations of prohibiting financing, the development of legal and regulatory systems, enhancing access to justice and reducing financial risks to the plaintiff, in addition to the development of financing as a professional work carried out by large, specialized companies to select and evaluate cases.
She said key funders include specialist litigation finance firms, such as Burford and Omni Bridgeway, which assess the strength of arguments and provide strategic advice, institutional investors, high-net-worth individuals, and lawyers with a fee agreement based on success rate.
She explained that this trend led to amending the rules, as controls for financing others were included in the arbitration rules of international and regional institutions, such as the rules of the Bahrain Chamber for Dispute Settlement (2022), the International Center for Settlement of Investment Disputes (ICSID) (2022), and the International Chamber of Commerce (2021).
She said: “The issue of mandatory disclosure of the presence of third-party financing and the identity of the financier is one of the most controversial and important issues that have resulted from the spread of financing, and this disclosure is considered vital to enable arbitrators to identify potential conflicts of interest, as the financier himself may be a party to previous or existing disputes, or he may have a previous relationship with one of the arbitrators or lawyers, which may affect the neutrality and independence of the arbitration panel.”
Emergency arbitrator
In the same context, I defined the “emergency arbitrator” system, which came in quick response to urgent measures, as it is considered a prominent milestone in modern arbitration rules, as he is appointed temporarily and urgently by the arbitration institution, at the request of one of the parties, and before the formation of the main arbitration body.
She said that his role is to consider urgent requests and issue precautionary or temporary measures to preserve the rights of the parties and prevent imminent harm, and his powers are limited to these measures, and he does not have the authority to decide the subject of the dispute or direct executive authority, and the rule is that the emergency arbitrator should not be among the members of the main arbitration panel to ensure its impartiality and avoid forming a preliminary opinion or potential conflict of interest.
Regarding the advantages of the “emergency arbitrator” system, Dr. confirmed. Manal believes that it provides speed, ensures the availability of expertise and competence, and maintains confidentiality. She said that many regional and international institutions have adopted it, including: the Bahrain Chamber for Dispute Resolution (BCDR), the Dubai International Arbitration Centre, the Saudi Center for Commercial Arbitration, the International Chamber of Commerce, and others.
Dr. touched on Manal Al-Sayed referred to sovereign bond lawsuits and the right of the holders of those bonds to resort to international arbitration, noting that the International Center for the Settlement of Investment Disputes ruled in 2011 that it had jurisdiction to hear class-action lawsuits, and considered that the purchase of sovereign bonds by individuals acquires the status of an investment necessary for the Center’s jurisdiction. He stressed that this decision aims to encourage investment and is consistent with the objectives of the Center’s agreement.
Regarding the impact of this decision on the economic policies of countries in restructuring their debts, Dr. indicated. Manal said that he raised questions about the extent of investor protection versus the public interest, and the amendments to the Center’s rules for the year 2022 included provisions to merge and coordinate arbitration procedures arising from similar facts, foundations, or interconnected parties.
