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Third Party Funding and ADR Institutions - What are your thoughts?

Last week, Arbitrator Michael Lampert wrote a Practical Law Arbitration Blog posting about third party funding and the obligation of the ADR institutions, see the following Link.

What should the institutions do, if anything, with respect to disclosures and third party funding?

Please provide your thoughts/comments below.

Comments (6)

For conflict purposes arbitrators always need to know who are the interested parties. This is even more important in mediation as you want all interested persons to be in the room -- not just the named parties. Not having the funder or the insurer in the room (or even the significant other in a personal action) makes settlement quite difficult.

Anonymous:

At the very least, disclosure should be mandatory at the risk of an automatic adverse Award or of potentially rendering the Award null and void.
Is this another step closer to litigation?
What’s next: Arbitration trolling?

Another way around this would be to mandate an arbitrarily low flat fee for arbitrators and counsels. Something like no more than $500 per day for all participants (arbs and counsels). That should resolve the matter!

Anonymous:

Well, arbitrators can't disclose conflicts they don't know about. While it is unlikely I would need to make a disclosure with respect to the funding entity, I can't know until I know the identity.

The problem starts with the initial question raised by one of the commentaries above. Does the party receiving the funding have the right to know if the obligation is sold/transferred? Barring such right,no one may be aware of the assignment, yet alone having to disclose any conflicts thereon.

In this world today of litigation funding, a conservative approach today would be to require disclosure of any third party funding source by the parties, including assurance that the party has the right to receive notice of sale of any interest in the funding, along with a continuing disclosure obligation to do same.

Steve Hochman :

Ideally, the arbitrator (or in the case of litigation, the judge) she did not know whether or not there is a third-party fund or because the job of the decider is to decide correctly based on the applicable law and the evidence. Whether a party is funding The arbitration or litigation with its own funds or is borrowing it from a relative or some other funder should be irrelevant to the decision maker. Assuming the parties have agreed to arbitration, the arbitration agreement (or rules of the arbitration provider) should specifically prohibit any party from disclosing the existence or identity of a third-party funder, or any other source of funds. As long as those facts are not disclosed to the arbitrator, there would be no need to determine whether there is any relationship between the arbitrator and the third-party funder.

Pierre de Ravel d'Esclapon:

Arbitration: I agree with Steve Hochman
Mediation: Paul Huck's point is valid.

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