Third-Party Funding in Türkiye and the CIArb 2025 Guidelines

Third-party funding in arbitration refers to the financing of a party’s legal costs and arbitration expenses by a third party unrelated to the dispute, in return for a share of the receivable to be obtained as a result of the dispute. While this model facilitates access to justice for claimants with limited financial resources, it has also given rise to certain debates on arbitration procedure. Arbitral institutions and national legislatures now expressly regulate third-party funding in their rules and legislation.

This study examines third-party funding from the perspective of arbitrations seated in Türkiye and Turkish parties. In this context, it assesses:

• the conceptual framework of third-party funding in arbitration,
• the legal bases and limits of third-party funding under Turkish law and Turkish arbitration practice,
• the structure, core principles, and practical significance of the Guideline on Third-Party Funding (the “CIArb Guideline”) published in 2025 by the Chartered Institute of Arbitrators (“CIArb”), and
• the economic and procedural background to the existing and potential demand for third-party funding in Türkiye.

The analysis is conducted within the framework of Turkish legislation, institutional arbitration rules, the CIArb Guideline, and sources of comparative law.

Third-party funding, which in the past had a more limited field of application, has become increasingly widespread in international arbitration practice in recent years and has evolved into a more visible and institutionalised financing instrument. This development is driven by the growing complexity of disputes and the parties’ need to manage litigation risks more effectively. In this context, third-party funding has evolved beyond a mere financing tool and has taken the form of a professional investment model structured around the economic rationality of claims and their risk profile.

Before making an investment decision, the third-party funder conducts a comprehensive assessment focusing on the substance and value of the claim. The funder’s return is typically determined either as a specified percentage of the amount awarded or as a specified multiple of the amount funded. This arrangement enables claimants to pursue their claims without bearing the cost burden, while transferring the financial risk to the third-party funder.

Arbitral tribunals, arbitral institutions, and judicial fora are increasingly addressing the impact of third-party funding on issues such as disclosure, conflicts of interest, confidentiality, and the recovery of costs. For example, Article 14 of the ICSID Arbitration Rules (2022) requires the disclosure of any third-party funding arrangement at an early stage of the proceedings, including the name and address of the third-party funder. Article 11(7) of the ICC Arbitration Rules (2021) likewise requires prompt notification of any third party with an economic interest in the outcome of the arbitration. Certain jurisdictions, such as Nigeria and Malaysia, have also recently expressly recognised or regulated third-party funding through amendments to their arbitration legislation.

Under Turkish law, there is no specific statute or secondary legislation that directly regulates or prohibits third-party funding. The Turkish International Arbitration Act No. 4686 and the Turkish Code of Civil Procedure No. 6100 governing the domestic arbitration regime do not contain any provisions addressing third-party funding.

Instead, matters relating to third-party funding are subject to the general principles of contract law, in particular the principle of freedom of contract as set out in the Turkish Code of Obligations. In the absence of any provision to the contrary, parties are free to structure funding agreements by their own free will. Such agreements must comply with the general provisions and validity requirements applicable to contracts under Turkish law.

The principal arbitral institutions operating in Türkiye and their arbitration rules likewise do not contain any specific provisions on third-party funding. Indeed, the rules of leading domestic arbitral institutions, such as the Istanbul Arbitration Centre (ISTAC) and the Istanbul Chamber of Commerce Arbitration and Mediation Center (ITOTAM), do not include any provisions addressing this issue.

Pursuant to Article 164 of the Turkish Attorneyship Act No. 1136, attorney fee agreements may not stipulate that a portion of the property or rights other than the monetary claim forming the subject matter of the dispute shall vest in the attorney in kind. By contrast, the same provision permits success-based fee arrangements, allowing the attorney’s fee to be determined by reference to the monetary claim or award, provided that it does not exceed the statutory upper limit of 25 per cent. A third-party funder, on the other hand, is not subject to the Turkish Attorneyship Act, as it does not act in the capacity of the client’s attorney.

Within this framework, party autonomy is recognised as prevailing unless limited by law. The absence of a specific regulation does not, in itself, give rise to illegality. Accordingly, in both domestic and international arbitrations seated in Türkiye, third-party funding may be considered permissible, provided that it remains within the scope of the general rules and validity requirements applicable to contracts, unless and until a contrary judicial decision is rendered or an explicit statutory regulation is introduced by the legislature.

The CIArb published the Guideline on Third-Party Funding in International Arbitration in September 2025. This advisory instrument sets out best practices in a systematic manner and provides a comprehensive roadmap for third-party funding in arbitration.

The CIArb Guideline sets out 18 principles addressing the commercial operation of funding arrangements and their procedural effects in arbitration. Rather than introducing binding rules, it provides parties, counsel, arbitrators, and arbitral institutions with general standards and practical guidance on the handling of issues relating to third-party funding. The significance of the CIArb Guideline lies in its function as a reference point that promotes uniformity in the field of third-party funding. The Guideline brings together norms shaped through case law, institutional rules, and prior works such as the 2018 ICCA – Queen Mary Task Force Report in the form of an accessible and systematic set of principles. This is of particular importance for jurisdictions such as Türkiye, which do not have dedicated legislation regulating third-party funding.

In this context, the CIArb Guideline addresses a wide range of critical issues that frequently arise in practice in relation to third-party funding and offers practical solutions for each. Some of these principles may be summarised as follows:

A. Disclosure and Arbitrators’ Impartiality & Independence

At the core of the CIArb Guideline lies a duty of disclosure. Accordingly, funded parties are required to disclose, without delay, the existence of any third-party funding and the identity of the third-party funder to the arbitral tribunal, the opposing party, and the relevant arbitral institution. The purpose of this obligation is to enable arbitrators to identify potential conflicts of interest at an early stage. In this respect, disclosure is directly linked to the protection of arbitrators’ independence and impartiality.

The CIArb Guideline therefore reflects the approach that has now become mandatory under the rules of many leading arbitral institutions, such as ICSID, the ICC, and the HKIAC, and that has been adopted in practice by arbitral tribunals. Indeed, in Muhammet Çap & Sehil İnşaat Endüstri ve Ticaret Ltd. Şti. v. Turkmenistan before ICSID, the arbitral tribunal ordered the claimants to disclose their third-party funders in order to assess potential conflicts of interest and to address applications for security for costs. This approach focuses on the disclosure of information considered necessary to ensure procedural balance and transparency. In this context, while the existence of the funding and the identity of the third-party funder are disclosed, due regard is paid to preserving the confidentiality of the commercial terms of the funding arrangement.

In addition to potential conflicts of interest between arbitrators and third-party funders, the CIArb Guideline draws attention to the fact that relationships between third-party funders and counsel or the parties may also give rise to concerns regarding impartiality. The CIArb Guideline supports the approach adopted in the updated 2024 IBA Guidelines on Conflicts of Interest. Under this approach, the third-party funder is treated as having a status parallel to that of the parties for the purposes of conflicts of interest analysis. Within this framework, the fundamental principle is transparency. By disclosing the identity of the third-party funder, stakeholders involved in the arbitration process are able to identify potential hidden conflicts of interest at an early stage, thereby preventing any detriment to the legitimacy of the arbitration.

B. Management of the Proceedings and Settlement

One of the principal concerns frequently raised in practice is that the involvement of an external third-party funder in a dispute may result in the proceedings effectively coming under the influence of the funder. This concern materialises in situations such as the steering of litigation strategy or the restriction of settlement possibilities with a view to securing a higher award. The CIArb Guideline expressly provides that, within the framework of third-party funding, the funder should not exercise control over the merits of the dispute or the conduct of the proceedings. In particular, it emphasises that matters such as case strategy, procedural decisions, settlement, or withdrawal must be determined exclusively by the party and its counsel.

Within this framework, the CIArb Guideline recommends that parties expressly regulate in their funding agreements how strategic disagreements are to be resolved. In particular, with respect to settlement offers, it is recommended that disputes that may arise between the third-party funder and the funded party be resolved through an impartial assessment by referring the matter to an independent mediator or expert. In practice, well-structured funding agreements often include provisions requiring the third-party funder’s consent to settlement up to a certain stage. In addition, they may provide for mechanisms allowing the funder’s interest to be bought out, or for the appointment of an independent expert to break any “deadlock” between the parties in the settlement process, where the third-party funder unreasonably refuses a reasonable settlement offer.

C. Confidentiality of the Proceedings and Legal Professional Privilege

The sharing of information with a third-party funder and the introduction of a new actor into the arbitration may give rise to various concerns regarding the confidentiality of the proceedings and the protection of legal professional privilege. The CIArb Guideline addresses this issue directly and confirms that, where the process is conducted in a procedurally proper manner, engaging with a third-party funder does not undermine confidentiality or legal professional privilege. In this context, the CIArb Guideline recommends the use of confidentiality agreements that also cover the third-party funder.

For example, the HKIAC Rules expressly permit the sharing of confidential information to the extent necessary for the purpose of obtaining third-party funding and provide that such disclosure may not be construed as a waiver of, or prejudice to, confidentiality. In a similar vein, the CIArb Guideline emphasises that, subject to appropriate confidentiality arrangements, a party’s disclosure of documents or case information to a third-party funder should not amount to a waiver of legal professional privilege.

D. Costs and Security for Costs

Another issue addressed by the CIArb Guideline from a practical perspective concerns the implications of third-party funding for the allocation of costs and applications for security for costs. According to the CIArb Guideline, the fact that a claimant benefits from third-party funding does not, in itself, justify an order requiring the claimant to provide security for the respondent’s costs. Arbitral tribunals should not treat the mere existence of third-party funding as evidence that the claimant lacks the ability to pay or is acting in bad faith. Instead, the CIArb Guideline recommends that arbitral tribunals focus on concrete and persuasive indications that the claimant would be unable or unwilling to comply with a potential adverse costs order.

In addition, the CIArb Guideline notes that After the Event insurance is among the tools that may be utilised. In this context, a funded party may obtain such insurance to cover adverse costs, and this may constitute a factor to be considered in the assessment of an application for security for costs.

The CIArb Guideline is of particular importance for jurisdictions such as Türkiye, where there is no explicit statutory regulation governing third-party funding. The CIArb Guideline offers Turkish practitioners and arbitrators a best-practice framework that may be voluntarily adopted. Accordingly, an arbitral tribunal sitting in a dispute seated in Türkiye may draw on the disclosure principles set out in the CIArb Guideline when assessing whether a funded party should be required to disclose its third-party funder. Similarly, Turkish parties entering into third-party funding arrangements may rely on the CIArb Guideline as a practical checklist when negotiating the terms of their funding agreements.

Within this framework, the CIArb Guideline may serve as a guiding reference in Turkish arbitration practice. In particular, the recommendations set out in the CIArb Guideline concerning disclosure, conflicts of interest, and party conduct may reduce the risks that may be encountered at the stage of setting aside or enforcement of an arbitral award.

In addition, by virtue of its status as a widely recognised and respected international reference, the CIArb Guideline contributes to the conduct of arbitrations involving third-party funding and seated in Türkiye in a manner consistent with global standards.

Third-party funding is neither prohibited in arbitrations seated in Türkiye nor alien to the Turkish arbitration framework; rather, it constitutes an applicable model within the current practice. When applied within the boundaries of general principles and the limits of freedom of contract, it constitutes a modern financing tool that facilitates access to arbitration and alleviates structural imbalances between the parties. As the interaction between arbitration practice and third-party funding continues to deepen, close attention to emerging case law and potential legislative developments will remain essential. In the meantime, practitioners and parties may rely on comparative law materials, institutional arbitration rules, and non-binding guidance instruments to structure and manage issues arising from third-party funding in a legally sound and procedurally balanced manner.