Chapter 3 A historical framework
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Chapter 3 tracks the origin and development of the champerty doctrine in different jurisdictions and the United States by analyzing the American judicial approach to TPF. It identifies the reasons for relaxing the champerty doctrine on TPF. This relaxation was essentially associated with funders’ noncontrol of the funded party or the proceeding. Otherwise, the champerty doctrine does still apply in the U.S., so far as there is no clear legislation repealing it. This historical argument establishes the philosophical framework of TPF from a judicial perspective. American courts that have relaxed the application of maintenance and champerty doctrines to TPF arrangements required a passive role of the funder throughout the proceedings. Where it seems that the funder has a substantial control over the proceeding, courts deem to invalidate the funding agreements. As Chapter 3 reveals, courts seem to still consider the application of the champerty doctrine where there is a fear of control of the litigation by a nonparty funder. American courts have moved away from the original strict formulations of the champerty doctrine where the reasons justifying such strict formulations do not exist. The American courts’ approach is a reflection of what this book seeks to prove, i.e., to uphold the litigant’s fulsome control over the claim even when a third party assumes a financial stake in the claim outcome. Beyond litigation, Chapter 3 argues that the doctrine of champerty may extend to disputes conducted in international arbitration. It establishes a nexus between the arbitration agreement and the funding agreement where the information travelling between the funding parties may allow for a disproportionate influence by the funder over the proceedings. It may invite the application of the champerty doctrine, and hence invalidate the funding agreement. Unlike the prevailing scholarly views, Chapter 3 argues that the invalidity of the funding agreement could necessarily impact the produced arbitral award. As a result, any regulatory treatment of TPAF should take into consideration the pitfalls of the funder’s potential control over the proceeding.

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