183 ARBITRATION LAW Definitions Draft Provision 1 provides definitions of key terminology, such as TPF, funder and funded party.6 The definitions are drafted in a broad manner. TPF includes indirect funding, where a funding agreement is concluded by an affiliate or a representative of a disputing party. It also covers both financial and non-financial support, commercial financing and, as well, forms of non-profit funding. Scope The UNCITRAL aims to block potential claims to be raised by funders due to loss or damage they suffer while funding an investment dispute against a host state. In this manner, Draft Provision 8 draws the scope of covered “investor” and “investment,” and clearly excludes TPF from this scope. Accordingly, neither shall TPF be construed as an “investment,” nor may the funder be an “investor” as per the applicable treaty. Regulation Models Draft Provisions 2 to 5 set forth regulation models aiming to raise integrity and avoid abuse in the ISDS proceedings. Prohibition Models Draft Provision 2 offers four options to implement a prohibition against TPF. Options vary from a general prohibition to a denial of benefits clause. Should any of these options be included into investment treaties, claims filed through a funder may be rejected, and tribunals may declare jurisdiction to hear the claim. The prohibition models fail to respect claimants’ right to access justice, and disregard the financial burden many claimants face in treaty-based arbitrations. Instead, the prohibition models appear to excessively back host states’ concerns over frivolous claims filed in bad faith and/or for political purposes. 6 TPF is defined as “‘Third-party funder’ is any natural or legal person who is not a party to the proceeding but enters into an agreement to provide, or otherwise provides funding for the proceeding.”
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