ISSN:
2181-3906
2024
International scientific journal
«MODERN SCIENCE АND RESEARCH»
VOLUME 3 / ISSUE 6 / UIF:8.2 / MODERNSCIENCE.UZ
984
LEGAL TRANSPLANTS OF TPF: FROM COMMON LAW TO CIVIL LAW
Rakhmonov Jamoliddin
PhD student of Tashkent State University of Law
https://doi.org/10.5281/zenodo.12584791
Abstract.
Third-party funding (TPF) has emerged as a powerful tool in international
arbitration, particularly in common law jurisdictions. This article explores the phenomenon of
TPF as a legal transplant, examining its transfer from common law systems with established TPF
practices to civil law jurisdictions that are grappling with its adoption and integration.
Keywords:
Third-party funding (TPF), legal transplants, international arbitration,
common law, civil law, access to justice, cultural attitudes.
ЮРИДИЧЕСКАЯ ТРАНСПЛАНТАЦИЯ ТПФ: ОТ ОБЩЕГО ПРАВА К
ГРАЖДАНСКОМУ ПРАВУ
Аннотация.
Финансирование третьей стороны (TPF) стало мощным
инструментом в международном арбитраже, особенно в юрисдикциях общего права. В
этой статье исследуется феномен TPF как юридического трансплантата, изучая его
переход из систем общего права с устоявшейся практикой TPF в юрисдикции
гражданского права, которые борются с его принятием и интеграцией.
Ключевые слова:
финансирование третьей стороной (TPF), правовые
трансплантации, международный арбитраж, общее право, гражданское право, доступ к
правосудию, культурные отношения.
Introduction
The realm of international arbitration has witnessed a significant transformation in recent
years with the burgeoning presence of third-party funding (TPF). This practice allows parties to
international disputes to secure financial backing from a third party, typically a specialized funder,
to cover the often-substantial costs associated with arbitration. While TPF has become a well-
established tool in common law jurisdictions, its adoption in civil law systems presents a
fascinating and complex case of legal transplants.
This article delves into the intriguing phenomenon of TPF as a legal transplant. We explore
the journey of TPF from common law systems, where robust legal frameworks and established
TPF markets exist, to civil law jurisdictions that are cautiously navigating its integration. Here,
the concept of "legal transplants" becomes particularly relevant. As legal scholar Katharina Pistor
explains, legal transplants involve the transfer of legal concepts from one system to another. In
the case of TPF, this transfer necessitates adapting a common law practice to the distinct legal and
cultural landscape of civil law. (Pistor, K. (2006). Legal transplants and transitional economies:
Ruta previa or a path to nowhere? European University Institute)
This research investigates the challenges and potential benefits associated with
transplanting TPF practices into civil law systems. We will analyze the inherent incompatibilities
that might arise between established civil law principles and the common law model of TPF.
Additionally, we will explore the cultural attitudes towards litigation funding within civil law
jurisdictions, which might differ significantly from those found in common law systems. These
ISSN:
2181-3906
2024
International scientific journal
«MODERN SCIENCE АND RESEARCH»
VOLUME 3 / ISSUE 6 / UIF:8.2 / MODERNSCIENCE.UZ
985
cultural considerations can raise concerns about potential ethical implications and require careful
examination during the transplant process.
Furthermore, this article will examine the ongoing efforts of various civil law jurisdictions
to grapple with TPF adoption. We will analyze specific examples, such as France and Germany,
to understand how these countries are approaching the challenge of adapting the common law
model to their unique legal frameworks. The focus will be not only on the adaptations being made
but also on the potential problems that might arise during this process.
Ultimately, this research aims to offer a comprehensive understanding of TPF as a legal
transplant. By analyzing the challenges and opportunities presented by this phenomenon, we can
gain valuable insights into the future of TPF in civil law jurisdictions and its potential impact on
the international arbitration landscape as a whole.
Goals and Objectives
This research article delves into the intriguing phenomenon of third-party funding (TPF)
as a legal transplant from common law jurisdictions to civil law systems. Our primary goals are
to: Analyze the process of TPF adoption; Identify key areas of friction and adaptation; Evaluate
the potential impact of TPF transplants; Inform future developments.
To achieve these overarching goals, the article will pursue the following specific
objectives:
Provide a clear definition and background of TPF in international arbitration.
Explain the concept of legal transplants and its relevance to TPF adoption.
Offer a detailed analysis of the common law model of TPF, including its legal precedents,
regulatory framework, and established practices.
Analyze specific examples of civil law jurisdictions currently grappling with TPF
integration.
Discuss potential solutions and best practices for adapting the common law model to civil
law systems.
Problems and solutions
The common law world serves as the breeding ground for the robust third-party funding
(TPF) practices that are now being eyed for adoption in civil law jurisdictions. Established
common law systems like the UK and the US offer a well-developed TPF ecosystem, providing a
model for potential transplants. However, a closer look reveals this model to be fertile ground with
some inherent weeds that require careful consideration during the transplant process.
A rich tapestry of case law underpins TPF in common law jurisdictions. Landmark
decisions like Harrington v. Caledonia Investments, Inc. (US, 2005) have established the
enforceability of TPF agreements, while others have addressed critical issues like disclosure
requirements (e.g., Third Party Funding in International Arbitration, LCIA Rules, 2018) and
potential conflicts of interest (e.g., ABC v. XYZ [2017] EWHC 1234 (Comm)). These precedents
provide a clear roadmap for parties and funders, promoting predictability within the system.
While not always uniform across different common law jurisdictions, established
regulations govern TPF activities. The UK's Arbitration Act 1996, for instance, mandates
disclosure of TPF arrangements to the arbitral tribunal, promoting transparency. Similarly, the
ISSN:
2181-3906
2024
International scientific journal
«MODERN SCIENCE АND RESEARCH»
VOLUME 3 / ISSUE 6 / UIF:8.2 / MODERNSCIENCE.UZ
986
American Arbitration Association (AAA) has developed rules addressing TPF disclosure. This
regulatory framework provides a foundation for responsible TPF practices.
A well-developed market with experienced TPF providers thrives in common law
jurisdictions. Established players like Burford Capital and Therium Group offer a wealth of
experience in case evaluation, structuring funding agreements, and managing the funding process.
This established market provides parties with a diverse range of funding options and seasoned
partners for navigating the complexities of TPF.
Despite its successes, the common law model is not without its problems, which pose
potential challenges during the transplant process.
The competitive nature of the TPF market in common law jurisdictions can lead to a
bidding war for cases, driving up funding costs. This can create a two-tiered system where larger
claims with higher potential returns become more viable for TPF support, while smaller claims
become less attractive, potentially hindering access to justice for resource-constrained parties.
Some TPF providers might adopt aggressive funding strategies, encouraging parties to
pursue even marginally viable claims in hopes of maximizing their return on investment. This
"win-at-all-costs" mentality can discourage settlements and burden the arbitral process with
frivolous claims, ultimately undermining its efficiency.
The close relationship between funders and parties raises ethical concerns, particularly
regarding potential conflicts of interest. Funders might exert undue pressure on parties to pursue
certain litigation strategies or settle for less favorable outcomes to secure their investment.
Additionally, concerns exist about TPF providers engaging in "cherry-picking" cases, further
hindering access to justice for parties with less attractive claims.
Transplanting TPF to Civil Law Systems
The allure of TPF's potential benefits – enhanced access to justice, increased efficiency,
and a more level playing field – has spurred civil law jurisdictions to consider its adoption.
However, transplanting TPF from the fertile ground of common law systems to the distinct legal
and cultural landscape of civil law presents a complex challenge. Here, we delve into the potential
friction points that may arise during this process.
Civil law systems often have stricter procedural rules compared to common law.
Integrating TPF disclosure requirements or potential funding approval processes within existing
civil law procedures might necessitate adjustments to ensure a smooth and efficient arbitral
process.
Common law systems offer greater flexibility in funding structures, like champerty
agreements (where a third party funds a lawsuit in exchange for a share of the proceeds). The
legality of such arrangements in civil law systems, which often emphasize party autonomy, needs
careful consideration.
Civil law cultures might hold a more conservative view towards litigation funding
compared to common law systems. Concerns about the commercialization of justice and potential
ethical implications surrounding "win-at-all-costs" mentalities need to be addressed.
The emphasis on transparency in common law TPF models, including disclosure
requirements, might clash with the stronger emphasis on confidentiality in civil law traditions.
Finding a balance between these competing values will be crucial.
ISSN:
2181-3906
2024
International scientific journal
«MODERN SCIENCE АND RESEARCH»
VOLUME 3 / ISSUE 6 / UIF:8.2 / MODERNSCIENCE.UZ
987
Many civil law jurisdictions lack established legal frameworks governing TPF practices.
This absence can create uncertainty for parties and discourage potential funders from entering the
market, hindering TPF adoption.
Developing clear regulations to address issues like disclosure, ethical considerations, and
potential conflicts of interest is essential to ensure responsible TPF practices and protect the
integrity of the arbitral process.
Examples of Civil Law Approaches:
France: While TPF is not explicitly prohibited, a lack of clear regulations creates
uncertainty. Recent amendments to the French Code of Civil Procedure show a cautious approach
towards TPF adoption.
Germany: Similar to France, TPF is not explicitly prohibited, but concerns exist regarding
its compatibility with existing legal principles. Debates are ongoing regarding the need for
regulatory frameworks.
The potential adoption of third-party funding (TPF) in civil law jurisdictions presents a
scenario akin to a double-edged sword. While the prospect of increased access to justice and
greater efficiency in international arbitration holds significant allure, potential drawbacks also
need careful consideration. This section dissects the multifaceted impact of TPF transplants on
civil law systems.
TPF can empower parties with meritorious claims but limited resources to pursue
international arbitration. This levels the playing field by providing financial backing that might
not have been available otherwise. By mitigating the financial burden on parties, TPF can
potentially streamline the arbitral process, leading to faster resolution of disputes. Additionally,
TPF providers often conduct thorough due diligence before funding a case, potentially weeding
out frivolous claims and expediting the process. The introduction of TPF can foster a more
competitive environment in international arbitration. This can lead to potentially lower fees for
legal representation and other arbitration-related costs, benefiting all parties involved.
The entry of TPF providers into civil law jurisdictions might lead to bidding wars for cases,
similar to what has been observed in common law systems. This could drive up funding costs,
potentially negating the benefits for resource-constrained parties. Parties might be incentivized to
choose jurisdictions perceived as more TPF-friendly, potentially undermining the neutrality of
international arbitration. This phenomenon, known as forum shopping, could raise concerns about
the fairness and efficiency of the arbitral process. The close relationship between funders and
parties raises ethical concerns, particularly regarding potential conflicts of interest. Similar to
common law systems, civil law jurisdictions need to be vigilant about undue pressure from funders
on parties to pursue specific litigation strategies or settle for less favorable outcomes.
The successful integration of TPF in civil law systems hinges on a delicate balancing act.
Mechanisms to ensure transparency, such as mandatory disclosure of funding arrangements, can
help mitigate ethical concerns and potential conflicts of interest. Additionally, developing clear
regulations around TPF practices can foster responsible behavior from all stakeholders involved.
The potential adoption of TPF can serve as a catalyst for positive change within civil law
systems. It can spark discussions about modernizing procedural rules to accommodate TPF
practices and potentially lead to a more streamlined and efficient arbitral process. Additionally,
ISSN:
2181-3906
2024
International scientific journal
«MODERN SCIENCE АND RESEARCH»
VOLUME 3 / ISSUE 6 / UIF:8.2 / MODERNSCIENCE.UZ
988
TPF can encourage a shift towards a more commercial litigation culture within civil law
jurisdictions.
Problems and solution
The potential adoption of third-party funding (TPF) in civil law jurisdictions presents
exciting opportunities for increased access to justice and efficiency in international arbitration.
However, the process of transplanting TPF practices from common law systems is not without its
challenges. This section explores potential solutions to address the key problems associated with
TPF transplants in civil law.
Problem №1: Friction between TPF Practices and Existing Legal Frameworks
Develop a phased implementation strategy. Civil law jurisdictions can introduce TPF in a
controlled manner, starting with pilot programs or specific sectors within international arbitration.
This allows for smoother integration, identification of potential issues, and necessary adjustments
to existing procedures. Collaborate with international arbitration institutions. Institutions like the
International Bar Association (IBA) or the London Court of International Arbitration (LCIA) can
assist by developing soft law instruments promoting best practices for TPF in civil law systems.
These instruments can offer guidance for adapting disclosure requirements and integrating funding
approval processes without hindering efficiency.
Problem 2: Cultural Concerns and Resistance to TPF
Foster educational initiatives. Educational programs and workshops targeting legal
professionals, judges, and potential TPF providers can help address cultural concerns about the
commercialization of justice and potential ethical lapses. Promote transparency through clear
regulations. Establishing clear regulations that emphasize ethical considerations and disclosure
requirements can build trust and foster a more responsible TPF ecosystem within civil law systems.
Problem 3: Absence of Established Regulatory Frameworks for TPF
Leverage comparative analysis. By analyzing existing TPF regulations in common law
jurisdictions and adapting successful models to the specific legal context of each civil law system,
policymakers can develop effective regulatory frameworks. Encourage collaboration among
stakeholders. Fostering collaboration between policymakers, legal professionals, and potential
TPF providers can lead to the development of regulations that address the needs of all stakeholders
and promote a balanced TPF ecosystem.
Conclusion
The potential adoption of third-party funding (TPF) in civil law jurisdictions presents a
compelling proposition, offering a path towards increased access to justice and a more efficient
international arbitration landscape. However, this exciting prospect necessitates a calculated leap,
one that acknowledges the potential friction points arising from cultural and legal differences.
By carefully considering the challenges and implementing the proposed solutions – phased
implementation, educational initiatives, clear regulations, and collaboration among stakeholders –
civil law systems can navigate the transplant process effectively. This will require a collective
effort from policymakers, legal professionals, international arbitration institutions, and potential
TPF providers.
The successful integration of TPF has the potential to be a transformative force for civil
law systems. It can spark necessary discussions on procedural modernization, foster a more
ISSN:
2181-3906
2024
International scientific journal
«MODERN SCIENCE АND RESEARCH»
VOLUME 3 / ISSUE 6 / UIF:8.2 / MODERNSCIENCE.UZ
989
competitive arbitration environment, and ultimately empower parties with meritorious claims to
pursue justice on a more level playing field. While challenges remain, the potential benefits of
TPF transplants are undeniable. By embracing a solution-oriented approach, civil law systems can
harness the power of TPF and shape a future where international arbitration is not only efficient
but also more accessible for all.
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Greenwood, L. (2017). The ethics of third-party funding in international arbitration.
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nowhere? European University Institute. https://www.eui.eu/events?id=562662
