In depth
Third-party funding (TPF) in international arbitration has emerged as a transformative mechanism, enabling parties to pursue legitimate claims without bearing the full cost of proceedings and hedge their financial risk and we have seen the rapid expansion of third-party funders globally. While jurisdictions like Singapore have embraced and regulated TPF in international arbitration to enhance their attractiveness as arbitration hubs, South Africa remains in a more formative stage of development.
Globally, leading arbitral institutions have also responded to the rise of TPF with evolving regulatory frameworks. In 2017, the Singapore International Arbitration Centre (SIAC) issued a practice note "On Arbitrator Conduct in Cases Involving External Funding", setting out the standards of practice and conduct to be observed by arbitrators where TFP is permitted. Further, the 2025 SIAC Rules prescribe requirements for TPF, including disclosure requirements and tribunal powers. The International Court of Arbitration of the International Chamber of Commerce (ICC) has taken a similarly proactive stance by requiring disclosure of third-party funding arrangements under its Arbitration Rules.
These institutional developments reflect a broader trend toward the normalisation and regulation of TPF in international arbitration. This article explores the current state of TPF in South Africa, contrasts it with Singapore's mature framework, and draws lessons from both jurisdictions and leading institutions that could inform South Africa's regulatory evolution.
Understanding Third-Party Funding and related innovations
TPF involves an external entity financing a party's legal costs in exchange for a return on their investment if the claim is successful (for example, a share of the proceeds or multiple of their outlay). This model is relevant in international arbitration, particularly in investment treaty arbitration, where costs can be prohibitive. TPF can democratise access to justice, but it also raises concerns about transparency, conflicts of interest, and control over proceedings.
We pause to note that the TPF landscape is no longer confined to single-case funding. Funders are increasingly deploying sophisticated financial instruments, including:
- Portfolio Funding: Where a funder backs a suite of cases for a law firm or corporate client, spreading risk and enhancing returns.
- Award Monetisation and Sale: A nascent but growing market involves the sale of arbitral awards—especially those against sovereigns—to third parties at a discount. This allows claimants to realise immediate value while transferring enforcement risk.
- Non-Recourse Financing: Funders provide capital with no obligation of repayment unless the case succeeds, often in exchange for a significant share of the recovery. This model is particularly attractive in investor-state disputes, where enforcement can be protracted and politically sensitive.
These innovations reflect a broader trend of financialisaton in dispute resolution, positioning arbitration as not just a legal process but an asset class in its own right.
The Evolving Role of After-the-Event Insurance in Arbitration
Closely intertwined with third-party funding is the growing market for After-the-Event (ATE) insurance. ATE insurance is typically procured after a dispute has arisen and serves to protect claimants from adverse cost orders if they lose the case. This form of insurance has become a critical risk mitigation tool, particularly in jurisdictions that follow the "loser pays" principle.
The global ATE insurance market is projected to grow from USD 1.1 billion in 2023 to over USD 2.2 billion by 2032, driven by rising litigation costs and the increasing complexity of commercial disputes.1 Importantly, many third-party funders now require claimants to secure ATE insurance as a condition for funding, creating a symbiotic relationship between the two mechanisms. This trend is particularly relevant for South Africa, where the adoption of ATE insurance could enhance the viability of TPF and provide additional comfort to funders operating in a still-maturing legal environment.
South Africa's Approach to Third-Party Funding
South Africa's regulatory framework for third-party funding in arbitration is still developing, but significant progress has been made through institutional rules and case law. The Arbitration Foundation of Southern Africa (AFSA) has taken a proactive step by incorporating TPF into its International Arbitration Rules, which came into effect on 1 June 2021. Article 27 of these rules explicitly permits third-party funding and defines a funder as any non-party who provides financial support in return for a share of the proceeds. Importantly, the rules require parties to disclose the existence and identity of any third-party funder to the arbitral tribunal, the opposing party, and the AFSA Secretariat. This institutional framework aligns with international best practices and enhances procedural transparency in arbitration proceedings seated in South Africa.
In addition to institutional rules, South African courts have played a critical role in shaping the legal landscape for TPF. In the landmark case of PriceWaterhouseCoopers Inc. v National Potato Co-operative Ltd, the Supreme Court of Appeal held that third-party funding is not contrary to public policy, provided it is entered into in good faith, is fair, and supports access to justice. This decision laid the groundwork for the legal acceptance of TPF in South Africa. In De Bruyn v Steinhoff International Holdings NV, the High Court emphasised that TPF must be necessary to enable access to justice and must not be used for ulterior motives or to abuse the legal process. The court also cautioned against overcompensating funders or allowing them to exert undue control over the litigation.
Despite these developments, South Africa does not yet have specific legislation that governs third-party funding in arbitration. The Contingency Fees Act 66 of 1997 regulates fee arrangements between legal practitioners and their clients but does not extend to third-party funders. Similarly, the International Arbitration Act 15 of 2017, which incorporates the UNCITRAL Model Law, provides a supportive framework for international arbitration but does not explicitly address TPF. This legislative gap creates a degree of uncertainty for funders and parties alike, potentially limiting South Africa's attractiveness as a seat for international arbitration.
Singapore's Regulatory Framework: A Model of Clarity
Singapore has established itself as a global leader in arbitration by enacting a clear and comprehensive legal framework for TPF. The Civil Law (Amendment) Act 2017 legalised third-party funding for categories of prescribed disputes, including international arbitration,2 and the accompanying Civil Law (Third-Party Funding) Regulations set out detailed requirements for funders. Additionally, Singapore's legal profession rules were amended to ensure that lawyers comply with ethical standards when dealing with third-party funders. These regulations define eligibility criteria, such as financial standing, and mandate the disclosure of funding arrangements to ensure transparency.
SIAC has also updated its rules to allow arbitral tribunals to consider TPF arrangements when making decisions on costs. These reforms have significantly enhanced Singapore's reputation as a transparent and investor-friendly arbitration hub, attracting parties from around the world.
Lessons for South Africa
South Africa can draw several important lessons from Singapore's experience. First, enacting legislation that explicitly permits and regulates third-party funding in international arbitration would provide much-needed legal certainty and encourage greater participation by international funders. Second, mandating the disclosure of TPF arrangements would enhance transparency and procedural fairness, helping to prevent conflicts of interest and undue influence. Third, establishing financial and ethical criteria for funders would protect the integrity of the arbitration process. Finally, providing guidance and training for judges and arbitrators on TPF-related issues would ensure consistent and fair outcomes across cases.
South Africa has made commendable progress in recognising and regulating third-party funding through institutional rules and judicial precedent. However, the absence of dedicated legislation leaves room for uncertainty. By learning from Singapore's structured and transparent approach, South Africa can further strengthen its arbitration framework, promote access to justice, and enhance its appeal as a venue for international dispute resolution.
1 DataIntelo. (2024). After The Event (ATE) Insurance Market Report: Global Forecast from 2025 to 2023. https://dataintelo.com/report/after-the-event-ate-insurance-market
2 The categories were extended in 2021 with the Civil Law (Third-Party Funding) (Amendment) Regulations 2021 to include domestic arbitration proceedings and connected court proceedings, certain Singapore International Commercial Court proceedings and related mediation proceedings.
