Ignacio Arriagada, <\/strong>Senior associate at Clyde & Co<\/strong><\/a>
Sofia Nievas,<\/strong> Associate at Clyde & Co<\/strong><\/a><\/p>\n\n\n\n
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Clyde & Co<\/a>\u2019s Young Arbitration Group provides a unique insight into\u00a0international arbitration\u00a0issues through the lens of young international arbitration practitioners working across different jurisdictions. <\/em>In this series with Daily Jus<\/a><\/em><\/em>, Clyde & Co examines notable arbitral developments from around the world<\/strong>, offering a jurisdiction-by-jurisdiction analysis of key cases, legislative reforms, and emerging trends that shaped international arbitration over the past year.<\/em><\/p>\n\n\n\n Third-party funding<\/a> (\u201cTPF<\/strong>\u201d), the financing of litigation or arbitration by an entity that is not a party to the dispute, has shifted from a niche financing tool into a mainstream feature of global dispute resolution. Latin America, traditionally more cautious, is now witnessing a rapid increase in funded litigation and arbitration, driven by growing claim values and expanding collective redress mechanisms.<\/p>\n\n\n\n Despite the diversity of legal systems, Latin America is gradually developing a recognisable regional approach to litigation funding, one shaped less by statute than by arbitral norms, professional ethics, and market forces. This article focusses on the current state of TPF in the region, and in Chile<\/a> more specifically.<\/p>\n\n\n\n One of the most striking features of the Latin American legal landscape is the near-total absence of statutes that expressly regulate or restrict litigation funding. In the region\u2019s civil-law systems, funding agreements are typically understood as private contracts whose validity depends on general principles, such as consent, a lawful cause, and a licit object, rather than on any specific legislative framework (See<\/em>, \u2018Key considerations in funding international arbitrations that involve Latin America\u2019, Global Arbitration Review). Because Latin American legal systems never adopted the English doctrines of champerty and maintenance, third-party involvement in litigation does not carry the same historical stigma found in common-law jurisdictions. As a result, TPF is generally permissible unless it contradicts public order or violates ethical obligations, particularly those concerning the independence of legal counsel.<\/p>\n\n\n\n This permissive environment, however, has not led to certainty about the actual effects of TPF in these jurisdictions. Without statutory rules addressing the contours of funding, questions arise about the enforceability of certain contract terms, the extent to which a funder may influence strategic decisions, and the information that funded parties must disclose to opposing parties, courts, or arbitral tribunals. In most jurisdictions, these issues are being shaped gradually through professional ethics rules and case-by-case assessments rather than through legislation.<\/p>\n\n\n\n Chile sits squarely within this regional evolution. Although the Chilean market for litigation funding remains comparatively young, the country presents the legal, economic, and institutional features<\/a> that typically precede rapid development: an active arbitration community, increased use of contingency-fee structures, interest from foreign funders, and an absence of prohibitive legislation. Chilean firms report growing interest in funding for complex claims<\/a> (construction, energy, mining, infrastructure) where expert heavy evidentiary work and protracted proceedings create up front burdens that TPF can alleviate. Additionally, currently two funders successfully operate locally (Loopa<\/em><\/a> (formerly Qanlex)<\/em> and Hakamana<\/em><\/a>).<\/p>\n\n\n\n Though it is not regulated in statute yet, there have been some recent developments with regards to the use of TPF in arbitration, particularly in the realm of conflicts of interest, as we will see below.<\/p>\n\n\n\n As academic and practitioner commentary has highlighted for more than a decade, Chilean law already contains concepts that can accommodate funding agreements, even without a specific statutory regime.<\/p>\n\n\n\n Chile\u2019s civil law tradition gives pride of place to the principle of \u201cautonom\u00eda de la voluntad\u201d <\/em>(freedom of contract). Under this principle, parties may enter funding agreements so long as they do not contravene public policy or mandatory rules. As a result, TPF is not prohibited in Chile; it remains a private contractual arrangement without specific statutory oversight in the Civil Code or procedural statutes, being as enforceable as any other private contract. The Chilean discussion has largely unfolded in scholarship rather than in jurisprudence (there is a notorious lack of notable court decisions addressing TPF head on), with authors analysing TPF\u2019s nature and effects against the background of Chilean contract law and related institutions.<\/p>\n\n\n\n One doctrinal anchor in Chile is the concept of cesi\u00f3n de derechos litigiosos<\/em>, a transfer of litigious rights regulated in article 1911 of the Civil Code. While the concept is initially useful, TPF is not a transfer of the claim; the funder typically does not acquire the underlying right<\/a> but finances the action and negotiates a contingent return. Chilean scholarship therefore treats TPF as a distinct contractual phenomenon, potentially an \u201cinnominated\u201d contract whose rules must be derived from general contract law and professional ethics constraints, rather than the specific regime on assignment of litigious rights.<\/p>\n\n\n\n As a result, Chilean law would initially permit the various types of funding arrangements commonly seen worldwide, such as single\u2011case and portfolio funding, claim\u2011monetization or working\u2011capital structures, and both non\u2011recourse and recourse financing.<\/p>\n\n\n\n It is important to note that Chile\u2019s legally\u2011mandated cap on interest rates (the \u201cinter\u00e9s m\u00e1ximo convencional<\/em>\u201d, established in Article 6\u00b0 of Law N\u00b0 18.010, which regulates monetary and credit operations) would not be applicable to non-recourse financing, because said cap limits the interests to be charged via a loan or a credit operation. A non-recourse financing agreement would not be classified as a loan under Chilean law because:<\/p>\n\n\n\n In addition, while cost\u2011shifting rules vary depending on the forum and type of case, civil courts and arbitral tribunals rarely award costs in sums that approximate the real expenses borne by the successful party.<\/p>\n\n\n\n As mentioned above, the arbitral arena has been the natural beachhead for TPF in Chile, with arbitral institutions leading the discussion on the ethics of funder participation and disclosure in order to prevent conflicts, mirroring global trends (like the ICCA QMUL recommendations or IBA Guidelines<\/a>).<\/p>\n\n\n\n In July of 2025 the Arbitration Chamber of the Santiago Chamber of Commerce (\u201cCAM Santiago<\/strong>\u201d), one of the most active arbitration centres in the region, published its new Ethics and Good Practices Code<\/em><\/a> (the \u201cNew CAM Ethics Code<\/strong>\u201d), which includes an express disclosure duty for arbitrators (Article 3\u00b0). Arbitrators now would have a continuous and broad duty of disclosure and must disclose any facts or circumstances involving the parties, their representatives, or their lawyers that could reasonably call into question their independence or impartiality, both before and throughout the proceedings. This obligation includes newly arising circumstances and expressly extends to situations in which a party is financed by a third party, which must also be disclosed once known.<\/p>\n\n\n\n Thus, the scope of the disclosure obligation of the New CAM Ethics Code is more limited to that of the IBA Guidelines on Conflicts of Interest in International Arbitration (2024)<\/a>, which encompasses the facts and circumstances of any natural or legal person that has a direct economic interest.<\/p>\n\n\n\n Another recurring concern is whether funders can influence litigation strategy, settlement decisions, or counsel selection. Chile\u2019s professional ethics regime requires lawyers to maintain independence and act in the client\u2019s best interests. According to the C\u00f3digo de \u00c9tica Profesional del Colegio de Abogados de Chile<\/em><\/a>, approved on April 18, 2011 and in force since August 1, 2011 (the \u201c2011 Professional Ethics Code<\/strong>\u201d), a lawyer must preserve their independence in order to provide impartial advice and proper representation, avoiding situations in which external pressures or conflicts of interest compromise their judgment (Article 6<\/em>). In parallel, the duty to safeguard the client\u2019s interests requires acting always in the client\u2019s best interest, prioritizing that interest over any other, including the lawyer\u2019s own, while respecting the client\u2019s autonomy and dignity, within the limits imposed by the law and professional ethics (Article 3<\/em>).<\/p>\n\n\n\n Funding agreements must therefore avoid excessive control rights that would compromise the attorney client relationship. It is advisable for practitioners to also have clear boundaries around settlement authority, expert selection, and case strategy allocating economic oversight to the funder while preserving decision making primacy for client and counsel.<\/p>\n\n\n\n We must note that the legal status of the 2011 Professional Ethics Code as a universally applicable standard for lawyers remains controversial, as it has been sustained that it is only an internal regulatory instrument applicable only to those lawyers affiliated with the Chilean Bar Association (Colegio de Abogados AG<\/em>).<\/p>\n\n\n\n In relation to the sharing of the underlying case documents Chilean law protects attorney client communications, but whether funder shared materials retain privilege can depend on context and doctrine. Chile recognizes comprehensive protection for legal communications and documents on the basis of attorney-client privilege (secreto profesional<\/em>) (article 360, No. 1 of the Code of Civil Procedure and article 303 of the Code of Criminal Procedure) and the duty of confidentiality (deber de confidencialidad<\/em>) (article 7 of the 2011 Professional Ethics Code of 2011). Additionally, conduct that infringes the duties set out in the 2011 Professional Ethics Code, and its previous versions, may also trigger criminal liability (Articles 231 and 247 of the Criminal Code, applicable respectively to lawyers in general and to public officials, penalizes the intentional disclosure of confidential information when it results in harm to a client\u2019s interests).<\/p>\n\n\n\n Practitioners therefore must implement disciplined information governance and use NDAs, limited purpose information flows, and carefully structured common interest frameworks to shield sensitive content during due diligence and throughout the life of the case, to avoid any breaches of privilege and confidentiality.<\/p>\n\n\n\n As TPF evolves from a novelty into an established feature of dispute resolution in Latin America, Chile finds itself at a pivotal moment. Although the current legal framework permits the use of TPF and its adoption has already begun, significant unresolved issues remain before the practice can operate in line with international standards. These include questions surrounding conflicts of interest, disclosure obligations, the funder\u2019s role in decision\u2011making, the duties owed by counsel to both the client and the funder, and how to navigate situations in which the funder\u2019s interests diverge from those of the funded party.<\/p>\n\n\n\n In the absence of regulatory guidance, practitioners must address these matters proactively when structuring funding agreements, ensuring a comprehensive assessment of the Chilean legal system to avoid unintended breaches or ethical pitfalls.<\/p>\n\n\n\n ABOUT THE AUTHORS<\/strong><\/p>\n\n\n\n Ignacio Arriagada <\/strong>is a senior associate based in Clyde & Co<\/strong><\/a>\u2019s Santiago office. He is a qualified solicitor in Chile specializing on litigation before Chilean Courts and arbitration. He has experience representing clients from a variety of industries, including insurance, aviation, healthcare, and construction, in complex dispute matters.<\/p>\n\n\n\nThe Landscape in Latin America<\/strong><\/h2>\n\n\n\n
Chile\u2019s Legal Framework<\/strong><\/h2>\n\n\n\n
Permissibility, Autonom\u00eda de la Voluntad <\/em>and Practice on the Ground<\/strong><\/h3>\n\n\n\n
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Ethical, Procedural, and Governance Questions<\/strong><\/h3>\n\n\n\n
Conflicts of Interest<\/strong><\/h4>\n\n\n\n
Independence of Counsel and Client Autonomy<\/strong><\/h4>\n\n\n\n
Privilege and Confidentiality<\/strong><\/h4>\n\n\n\n
Conclusion<\/strong><\/h2>\n\n\n\n
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