Case Study: International Arbitration

Securing an ICSID Award Against a Sovereign State with Legal Finance

How litigation funding enabled an energy investor to pursue and win a multi-year international arbitration against a sovereign state for expropriation.

Audley Capital Advisory Team

International Arbitration Specialists | Case Study Series

Expert-reviewed content

What Happened in This Investor-State Arbitration?

A global energy investor's infrastructure assets were effectively expropriated by a host state through discriminatory regulatory changes violating a bilateral investment treaty. Litigation funding covered the multi-million dollar arbitration costs, enabling the investor to pursue a successful ICSID claim.

A global energy investor (the Claimant) operating in an emerging economy saw its valuable infrastructure assets effectively expropriated by the Host State through targeted, discriminatory regulatory changes that violated a Bilateral Investment Treaty (BIT).

The Claimant had a valid claim under ICSID (International Centre for Settlement of Investment Disputes) rules, but the estimated legal costs for a decade-long arbitration were projected to exceed $15 million.

What Made This Arbitration So Challenging?

Prolonged Timeline

Arbitration was the only viable remedy, but the costs were too high for the Claimant to carry while simultaneously managing the financial fallout of the expropriation.

High Stakes Complexity

The dispute was extremely high-stakes, requiring dozens of expert witnesses and prolonged proceedings over multiple years.

How Did Litigation Funding Transfer Sovereign Risk?

Given the high cost and long duration, the Claimant secured funding through a specialist international arbitration funder.

The Funding Model and Risk Management:

Full Cost Coverage

Full coverage of all legal fees, Tribunal costs, and expert fees throughout the multi-year proceeding.

Sovereign Risk Assessment

The funder's involvement was critical in assessing and absorbing the inherent sovereign risk—including geopolitical risk analysis and historical payment compliance data.

Enforcement Planning

The funder ensured the Claimant had sufficient capital to pursue complex annulment and enforcement proceedings if required after the award was issued.

The Strategic Outcome: Successful Enforcement

The arbitration proceeded for five years. The funder's backing ensured the Claimant could retain top-tier counsel and expert economists without ever having to compromise due to lack of capital.

Funder as a Strategic Ally

The funder's independent validation of the claim's merits signaled to the Host State that the claim was robust and would be pursued to conclusion. This credibility was instrumental in the proceedings.

The Successful Award

The final ICSID Tribunal issued a substantial award in favor of the Claimant, including damages and a large portion of the legal costs. The Host State, facing global reputational risk and mounting interest, complied with the award following initial enforcement measures.

Financial Results for the Investor

This case exemplifies how funding facilitates access to justice in the most challenging environments. By transferring the financial burden, the investor was able to leverage their legal rights under the BIT without paralyzing their core business.

The non-recourse nature meant that the colossal costs of a 5-year dispute were borne by the financial partner, not the victim of the expropriation.

5 Years

Arbitration Duration

Capital at Risk by Claimant

100%

Award Compliance

For detailed regulatory and contractual information on legal finance, return to: The Complete Guide to Litigation Funding.

Frequently Asked Questions

Can litigation funding be used for claims against sovereign states?

Yes, litigation funding is commonly used for investor-state arbitration under ICSID and other frameworks. Funders assess sovereign risk, including the state's history of complying with arbitral awards and payment track record.

What is ICSID arbitration?

ICSID (International Centre for Settlement of Investment Disputes) is a World Bank institution that provides facilities for arbitration of investment disputes between states and foreign investors under Bilateral Investment Treaties (BITs).

How do funders assess sovereign risk?

Funders conduct geopolitical risk analysis, review historical payment compliance data, assess the state's assets subject to enforcement, and evaluate the strength of the underlying treaty protections.

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