Impact of Third-Party Funding on the Quality and Quantity of Investment Claims

This chapter analyses the impact of Third-Party Funding on the quality and quantity of claims in the investor-state dispute settlement system. The facilitation of access for those who are financially distressed or are unwilling to incur the risk of pursuing an investment claim through their own capital may have systemic implications, such as an increase in investment claims and the encouragement of frivolous or speculative cases. The chapter examines these issues and finds that Third-Party Funding, which can mitigate or eliminate the risk of bringing a claim, is likely to result in more investment claims. Regarding the quality of the cases pursued by the funder, the analysis highlights a tension. Although funders frequently point to their selectiveness and due diligence to claim that they assume a gatekeeping role, the eagerness of funders to take risks in order to acquire high rewards, accompanied by the increased capability to mitigate this risk and increased competition, may instead incentivise speculative claims. Several cases illustrate how profit-driven motivations of funders can override legal merit. The chapter also scrutinises the access to justice narrative adopted by funders, examining whether this narrative holds in the investment arbitration context.