Companies, both in the UK and internationally, often opt for commercial arbitration as an alternative to costly litigation and court proceedings when resolving disputes. Arbitration offers confidentiality, specialist decision-makers and enforceability across many common law jurisdictions. However, despite its advantages, arbitration can still involve substantial legal costs, creating financial pressure for businesses pursuing or defending claims.

To successfully navigate arbitration, parties must have sufficient resources to fund proceedings regardless of the outcome. In many cases, businesses either lack the capital to pursue a claim or prefer not to tie up working capital in lengthy litigation and arbitration. This is where litigation funding and insurance solutions play a critical role in improving access to justice.

Annecto Legal assists companies by providing access to tailored funding and insurance solutions, helping to remove uncertainty around legal fees, protect balance sheets and ensure disputes can be pursued on their merits rather than financial capability.

What is commercial arbitration?

Commercial arbitration is a private dispute resolution process conducted outside the courts. A neutral arbitrator, or tribunal, is appointed – often with specialist industry or legal expertise – to hear evidence and submissions before delivering an arbitration award.

Arbitration may be mandatory under a contract or entered into voluntarily after a dispute arises. In most cases, the award is legally binding, with limited rights of appeal, and can be enforced through national courts, including the High Court in England and Wales.

Arbitration is particularly popular for complex, technical and cross-border disputes, including investment treaty claims and international commercial disputes.

The Arbitration Act 1996

In England, Wales and Northern Ireland, arbitration is governed by the Arbitration Act 1996, which provides a modern and flexible framework for resolving disputes. The Act:

• Recognises and enforces arbitration agreements
• Sets out procedures for appointing arbitrators
• Governs the conduct of arbitral awards
• Limits court intervention and appeals
• Regulates the form and enforcement of arbitral awards
• Provides mechanisms for interim relief and enforcement

The Act aligns with international standards and supports the United Kingdom’s position as a leading centre for funding in international commercial arbitration.

Funding arbitration and legal costs

While arbitration is often promoted as cost-effective, arbitration costs – including tribunal fees, expert evidence, venue costs and solicitors’ fees – can be significant. As a result, third party in arbitration has become increasingly common.

Third-party funding (TPF) – TPF involves a third party funder financing some or all of the claimant’s legal and arbitration costs. Funding is typically provided on a non-recourse basis, meaning repayment is only made if the case succeeds. 

Under these third party funding arrangements, the funder receives a share of the proceeds recovered under the arbitration award. This is agreed in advance through a funding agreement. If the claim fails, the funder absorbs the loss, protecting the funded party from financial exposure.

Third party funding allows businesses to pursue claims without diverting capital or exposing themselves to significant downside risk.

After-the-Event insurance (ATE insurance) – ATE insurance provides protection against adverse costs, covering the opposing party’s legal costs if a case is unsuccessful. It can also be used to provide security for costs, a common requirement in arbitration proceedings.

ATE insurance may cover:

• Opponent’s legal costs
• Security for costs orders
• Cross-undertakings for damages
• Certain own disbursements

ATE insurance can be used alongside third party funding or as a standalone solution where businesses are self-funding or using alternative fee arrangements with their law firms.

Benefits of arbitration funding and insurance

Using party funding in arbitration and insurance offers several strategic advantages:

Risk management – Funding and ATE insurance shift the financial risk away from the business, protecting against both own costs and adverse costs exposure.

Improved access to justice – Businesses that might otherwise abandon valid claims can proceed with confidence, ensuring disputes are resolved on their merits.

Cash flow preservation – Funding allows companies to avoid paying substantial legal fees upfront, freeing capital for operational needs.

Stronger negotiating position – A funded party is often better placed to resist early, undervalued settlement offers.

Cost discipline – Professional funders carefully assess claims and budgets, encouraging proportionality and efficiency in legal spend.

Confidentiality – Funding arrangements are typically private, maintaining discretion around financial and strategic matters.

How can Annecto Legal assist?

Annecto Legal provides access to a wide network of litigation and arbitration funders and insurers in the UK and internationally. We help clients identify the most appropriate litigation funding or arbitration funding solution and assist with structuring and negotiating the right funding agreement.

Securing arbitration funding is not always simple, so having a partner that understands the concerns of financiers that can assist in how your case is presented, as well as negotiate the correct deal for you is crucial.

Get in touch with a member of our team to find out which arbitration funding method is the right funding choice for you.

Call us today 0800 612 6587, or our director, Mark Beaumont, can be contacted by email mark.beaumont@annectolegal.co.uk.