{"id":283180,"date":"2024-10-09T11:00:00","date_gmt":"2024-10-09T09:00:00","guid":{"rendered":"https:\/\/dailyjus.com\/?p=283180"},"modified":"2024-10-08T18:59:49","modified_gmt":"2024-10-08T16:59:49","slug":"the-award-of-third-party-funding-costs-to-a-successful-party-in-international-arbitration","status":"publish","type":"post","link":"https:\/\/dailyjus.com\/index.php\/2024\/10\/09\/the-award-of-third-party-funding-costs-to-a-successful-party-in-international-arbitration\/","title":{"rendered":"The Award of Third-Party Funding Costs to a Successful Party in International Arbitration"},"content":{"rendered":"\n

Evaluating the Court\u2019s Approach in Tenke Fungurume Mining SA v. Katanga Contracting Services SAS [2021] EWHC 3301 (Comm).<\/strong><\/span><\/h1>\n\n\n\n
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THE AUTHORS<\/strong>:
Joseph Siyaidon<\/strong>, Team Lead at Stren & Blan Partners<\/strong><\/a> 
Stanley Umezuruike<\/strong>,  Associate at Stren & Blan Partners<\/strong><\/a> 
Ebube Okorji<\/strong>, Associate at Stren & Blan Partners<\/strong><\/a> <\/p>\n\n\n\n

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Introduction<\/strong><\/strong><\/h2>\n\n\n\n

Third-Party Funding (\u201cTPF\u201d) has gained significant traction in international arbitration, providing a financial mechanism that allows parties to transform their claims that would have been a huge financial burden to pursue into a financial asset. In principle, TPF is an arrangement where an independent, commercial funder (Individual or Legal Person), without prior connection to a dispute between the parties, provides a party with full or partial funding (i.e. <\/em>of legal fees and expenses) for arbitration proceedings in exchange for a portion or the full amount recovered by that party after the determination of the arbitration dispute. TPF is increasingly common in high-stakes and complex disputes where costs can be substantial. The costs for third-party funding are often included in an arbitration award. In Nigeria, third-party funding is recognized under section 67 of the Arbitration and Mediation Act, 2023 (\u201cthe AMA\u201d). <\/strong>This legislative acknowledgment represents a significant step in aligning Nigeria with other leading jurisdictions that have embraced third-party funding as a vital tool in promoting access to justice in international arbitration. The right of a party to get reimbursement of the cost incurred to obtain TPF in arbitration was emphasized in the case of KCS v. TFM<\/em>, Final Award, 26 August 2021<\/a>. This case highlights the importance of TPF agreements in arbitration and the legal issues that may arise about the prevailing party\u2019s right to reimbursement of costs incurred to obtain TPF in the arbitration. In this case, KCS secured a shareholder loan, described as a “litigation funder agreement,” to finance its arbitration against TFM. TFM challenged various aspects of the tribunal\u2019s final award, including the recovery of funding costs and procedural decisions. This article evaluates the Court\u2019s approach to awarding TPF costs and highlights the import of the decision to Arbitration.<\/p>\n\n\n\n

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Facts of the Case<\/strong><\/h3>\n\n\n\n

TFM v. KCS<\/em><\/a> involved a dispute between two Companies over two contracts related to a mine in the Democratic Republic of the Congo<\/a> (DRC). TFM had engaged KCS for services under a Tailing Services Agreement and a Scats Agreement. Both contracts contained arbitration clauses governed by English law, with the arbitration seated in London under ICC Rules<\/a>. In January 2020, KCS initiated arbitration against TFM, seeking approximately USD 13.666 million. The proceedings were later consolidated. The COVID-19 pandemic significantly affected the arbitration, with TFM requesting adjournments due to travel restrictions and the illness of their leading counsel. However, the arbitral tribunal, composed of Mr. Charles Kaplan<\/a>, Mr. Jeffrey Gruder QC<\/a>, and Dr. Achille Ngwanza<\/a>, denied these requests and proceeded with the hearing in March 2021. During the proceedings, KCS revealed it had secured a shareholder loan, described as a “litigation funder agreement,” to finance the arbitration from the funder \u2013 Logos Agvet Limited (\u201cLogos\u201d or \u201cthe Funder\u201d). <\/strong>TFM sought to cross-examine witnesses on this, but the Tribunal denied the request and instead ordered disclosure of certain documents. In August 2021, the Tribunal ruled in favour of KCS, awarding them all claimed amounts, dismissing TFM\u2019s counterclaims, and ordering TFM to pay KCS\u2019s legal and expert costs of USD 1.4 million, along with USD 1.7 million for litigation funding fees, plus compound interest. TFM later challenged the award in Court as well as the awarded litigation fund.<\/p>\n\n\n\n

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Action at the English High Court Challenging the Final Award<\/strong><\/h3>\n\n\n\n

Pursuant to section 68 of the Arbitration Act 1996, TFM challenged the final award of the Tribunal at the High Court of Justice of England and Wales on several grounds. One of the grounds of TFM\u2019s challenge was that the Arbitral Tribunal was wrong to have awarded KCS the sum of USD 1.7 million as reimbursement of the costs KCS incurred to obtain litigation funding to pursue its claims in the arbitration. The arguments canvassed by the parties in respect of the ground and the KCS v. TFM,<\/em> <\/strong>Judgment of the High Court of Justice of England and Wales [2021] EWHC 3301, 07 December 2021<\/a> <\/strong>on this ground is examined below.<\/p>\n\n\n\n

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Arguments on the issue of Litigation Funding<\/strong><\/h4>\n\n\n\n

TFM challenged the award of costs of litigation funding on two basis, which are: the refusal of the Tribunal to cross-examine KCS\u2019 witness on the loan funding agreement and that the Tribunal acted more than its powers to award costs under section 68(2)(b) of the Arbitration Act, 1996 (\u201cthe AA\u2019\u201d).<\/strong> The ground on the TPF litigation funding arguments basis will be examined summarily below:<\/p>\n\n\n\n