Much has recently been written on the issue of security for costs in the wake of the decision rendered by an investment treaty tribunal and the assenting and dissenting opinions issues by the co-arbitrators.
The decision itself, cannot be overly criticised, even for a third party funder whose industry has found itself at the heart of an overly dramatised controversy. Security for costs may serve a perfectly valid purpose whether a funder is involved or not. Sometimes, in particular circumstances, notably when a claimant is notorious for his numerous investment treaty claims and his refusal to pay for adverse costs when he loses, it may indeed be appropriate to award security for costs. However, this remains an exceptional situation.
What is surprising is that from exceptional circumstances, general principles regarding security for costs when a third party funder is involved be enunciated. Surely each case is different and the concerns that the claimant may spur at the outset of a case as to its willingness and potential to pay for adverse costs vary drastically from case to case.
I suggest that a couple of facts be considered before any conclusions are drawn on the topic:
Imposing systematic and unremunerated security for costs when a funder, bank loan, or mortgage are needed by the other 50% of claimants, will inevitably hinder the access to justice for many potentially deserving claimants. It is noteworthy to be reminded that investment treaty dispute resolution mechanisms were designed to protect those that needed protection, the investors, not the contracting states. In numerous occasions, investors have found themselves in dire financial positions precisely because of the acts of the host state, had their assets seized and confiscated by those host states. The proposition that these investors should systematically be asked to pay security for costs if they have managed to obtain third party financial support to pursue redress is ironic.
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