Enforcing A Funded Award In An Anti-Funding Environment

This article was first published in Global Arbitration Review.

For third-party funders and those who use funding, the enforceability of their awards is a key concern. Ben Knowles, the London-based co-chair of international arbitration at Clyde & Co, and senior associate Paul Baker consider whether enforcement of an award could be challenged in a jurisdiction that does not permit funding on the public policy ground that the award creditor was funded.

The Irish Supreme Court decision in Persona Digital Telephony v Minister for Public Enterprise in 2015 reminds us that in some jurisdictions third-party funding of arbitration is not sanctioned and falls foul of the torts of champerty and maintenance.

Maintenance is where an unconnected third party assists in maintaining litigation, for example by providing financial assistance. Champerty is a form of maintenance, where a third-party pays some or all of the litigation costs in return for a share of the proceeds.

Leading arbitral jurisdictions permit third-party funding for arbitration, with Singapore and Hong Kong recently joining their ranks. Whether Ireland follows suit is yet to be seen but the winds globally appear to be blowing in the funders' favour.

This leads to the question: would the courts of a jurisdiction where arbitration funding is not permitted in national law enforce an arbitral award made in another jurisdiction where the award creditor had received third-party funding to conduct the case?

Take for example an award made in London for £10 million damages plus £1 million costs where any costs award plus the first 20 per cent of the damages award was to be paid to the funder. Would this award be enforced by the Irish courts or other courts where litigation or arbitration funding is still prohibited under the funding agreement?

Would the courts refuse to enforce the £1 million costs award but enforce the damages award? Or would they refuse to enforce the entirety of the award as the first 20% of any enforced damages would be paid to the funder?

This article looks at the scope for refusal of enforcement on public policy grounds under the New York Convention, with reference to a 2015 International Bar Association report on that considered refusal of enforcement on public policy grounds.

It will then look at three key jurisdictions - Singapore, Hong Kong and Canada - to see whether the courts have grappled with this question and, if so, how. Of these three, only Canada now maintains the torts of champerty and maintenance and regards funding as illegal.

Enforcement under the New York Convention

In countries that are signatories to the New York Convention, enforcement of an award made in another signatory state shall not be refused except on certain specific grounds including that recognition or enforcement of the award would be contrary to the public policy of the country where recognition or enforcement is sought.

Public policy is not defined in the New York Convention nor is it usually in national laws (the laws of the United Arab Emirates and Australia are two notable exceptions). It is recognised, furthermore, that its meaning differs between jurisdictions.

In 2015, the IBA...