The Vietnam International Arbitration Centre (VIAC) has introduced its 2026 Arbitration Rules, effective for arbitrations commenced on or after July 1, 2026. Among the updates, the rules now address third-party funding (TPF) for the first time-a practice that has long been standard in international arbitration but was previously unregulated in Vietnam. This change signals VIAC’s alignment with global norms and indicates that funded cases are expected to become part of its caseload.
TPF is not a new concept, but it remains relatively new in Vietnam’s arbitration context. Internationally, it has evolved from a niche financing tool into a mainstream method for claimants—particularly those with strong cases but limited capital—to pursue disputes. The 2026 Rules mark VIAC’s first formal recognition of TPF, requiring funded parties to disclose their funding agreements and the identity of their funders (Article 16.7). This mirrors the approach of leading arbitral institutions like the ICC, SIAC, and HKIAC, which have gradually incorporated TPF provisions to ensure transparency and mitigate conflicts of interest.
How Funding Works
At its core, TPF involves a non-party (the funder) advancing costs, legal fees, arbitration expenses, expert retainers, in exchange for a share of any recovery. Unlike a loan, funding is typically non-recourse: if the case is lost, the funder bears the full loss. In return, the funder’s return is structured as either a percentage of the award or a multiple of the advanced amount, whichever is higher. This makes funders function more like investors in the case’s outcome than traditional lenders.
The mechanism operates in stages. First, the funder conducts due diligence on the claim’s merits, enforceability, and budget. If approved, the parties agree on terms, including the funder’s return, decision-making rights (such as settlement authority), and termination conditions. During proceedings, the funder may monitor progress and release funds in tranches, while the funded party retains control over strategy. If successful, proceeds are distributed according to a priority “waterfall”, typically repaying the funder first before the claimant receives any balance.
However, TPF is not without risks. The cost of funding can erode recoveries significantly. In Essar v Norscot (2016), a funder advanced £647,000 and was entitled to the greater of 300% of the advance or 35% of the award, ultimately securing over £1.94 million in costs from a £1.94 million award. For claimants, this means net recovery after funding must be carefully calculated. Additionally, funders may seek control over proceedings, potentially clashing with the funded party’s autonomy or counsel’s duties. Conflicts of interest also arise if arbitrators have ties to funders, which disclosure rules aim to prevent.
Disclosure Requirements
The 2026 Rules adopt a disclosure-only approach, requiring funded parties to reveal the existence of funding and the funder’s identity in their Request for Arbitration or Statement of Defence (Articles 7.2(h) and 9.2(e)). The tribunal may then demand further details from the funding agreement if needed (Article 16.7). This approach aligns with the ICC and SIAC models, focusing on transparency to enable conflict checks without overregulating the funding relationship itself.
Vietnam‘s legal framework does not yet recognize TPF explicitly, leaving its validity to general contract law under the Civil Code. The 2026 Rules do not create a legal basis for TPF but address it procedurally for the first time. This cautious step reflects Vietnam’s early-stage market, where the primary concern is ensuring arbitrators can assess potential conflicts-without imposing burdens that might deter funders before the practice matures.
Key questions remain unresolved. For instance, the rules do not define what constitutes a “TPF agreement,” leaving unclear whether contingency fees, after-the-event insurance, or portfolio funding fall under the disclosure obligation. Nor do they address whether the funder’s return can be recovered as part of arbitration costs, or how non-disclosure might be sanctioned. These gaps will likely be filled through case law, tribunal directions, or future rule amendments, as VIAC observes how TPF operates in practice.
Procedural Complexities Ahead
The 2026 Rules also do not link TPF to security-for-costs applications, a critical concern for respondents facing undercapitalized claimants. Without express guidance, tribunals may rely on broader principles of fairness to address such risks. Similarly, the rules do not explicitly permit funders to access case documents, requiring funded parties to seek tribunal approval or the other party’s consent to share materials, adding a layer of procedural complexity.
VIAC’s move reflects a broader trend in Asia, where jurisdictions like Singapore, Hong Kong, and Malaysia have recently legalized or clarified TPF. Singapore abolished common law prohibitions (maintenance and champerty) in 2017, while Malaysia’s 2024 Arbitration Act introduced licensing requirements for funders and mandatory disclosures. These frameworks demonstrate that procedural rules and legislative clarity are complementary: institutions can ensure transparency in individual cases, but only legislation can address enforceability, funder qualifications, and conflicts with professional conduct rules.
