Third-party funding disclosure under the DIFC arbitration reforms: what GCs must now reveal

The reform package expected to reach the DIFC arbitration law introduces a formal duty to disclose third-party funding — a change that will force funded parties, and their funders, into the open earlier than many are used to.

Third-party funding has become routine in DIFC-seated arbitration, particularly for claimants pursuing large construction, banking and shareholder disputes where litigation budgets are a genuine constraint on access to justice. Until now, the DIFC Arbitration Law has said little about it directly, leaving disclosure to institutional rules, tribunal discretion, or nothing at all. The reform package moves that gap to the centre of the framework, aligning the DIFC with the direction already taken by the ICC, HKIAC, SIAC and, closer to home, the ADGM's own funding disclosure regime.

Why disclosure now matters

The driver is conflicts of interest, not transparency for its own sake. An arbitrator who has an undisclosed financial or professional relationship with a funder — as an adviser, panel member, or through a related fund — has a conflict that neither side may know to raise. Funding disclosure exists primarily to let the tribunal and the opposing party test independence and impartiality at the constitution stage, before an award is rendered and before a set-aside or enforcement challenge becomes the only remedy.

What is likely to require disclosure

Based on the direction of the reforms and the comparable regimes it mirrors, funded parties should expect an obligation to disclose, at a minimum:

• The existence of a funding arrangement in relation to the arbitration, whether by a commercial funder, an insurer providing after-the-event cover with a success fee, or an affiliated group entity funding on commercial terms.
• The identity of the funder — not necessarily the commercial terms of the funding agreement, which typically remain protected as privileged or commercially confidential.
• Any change in funding arrangements arising during the proceedings, including a change of funder or the termination of funding.

What is not generally required — under the comparable regimes the DIFC reforms are expected to track — is disclosure of the funder's assessment of the merits, the funding percentage, or the return waterfall. Tribunals have consistently drawn a line between disclosure sufficient to test independence and disclosure that would hand the other side a tactical advantage over case strategy or settlement appetite.

The obligation is not to disclose your war chest — it is to disclose who is standing behind it, so the tribunal's independence can be tested before, not after, the award.

Timing and the consequence of getting it wrong

The practical risk sits at the constitution stage. If disclosure is made only after the tribunal is appointed, and a conflict then surfaces, a party faces the unappealing choice between waiving the conflict — often under pressure, having already invested in the appointment — or restarting constitution at real cost in time and fees. The safer course, and the one the reforms are designed to incentivise, is disclosure with the request for arbitration or response, so that conflicts can be checked against proposed arbitrators before nomination.

Non-disclosure carries downstream consequences beyond the immediate proceeding. A party that conceals funding, and a resulting conflict later emerges, hands the losing side a due process argument on set-aside or at the enforcement stage — the kind of procedural irregularity argument that respondents increasingly run when the merits are against them. Costs exposure is the more immediate lever: tribunals have shown a growing willingness to take concealed or late-disclosed funding into account when allocating costs, particularly where security for costs applications were made without knowledge of the funding arrangement.

What general counsel should do now

For any GC currently funding, or considering funding, a DIFC-seated claim, the practical steps are straightforward: build disclosure into the funding agreement itself, so counsel is contractually required to notify the tribunal and opposing party at the point funding is entered into or the arbitration is commenced; audit existing funding arrangements in live DIFC arbitrations now, rather than waiting for the amendments to take formal effect; and brief any prospective arbitrator nominee on the funder's identity as part of the standard conflict check, rather than relying on the funder's own disclosure practice, which varies widely between commercial funders and insurers.

Key instruments: DIFC Arbitration Law No. 1 of 2008 (as amended); DIFC Courts Law No. 10 of 2004; comparable funding disclosure provisions under the ICC, HKIAC and SIAC rules, and the ADGM funding disclosure regime. This is general information, not legal advice.