DENMARK Law and Practice Contributed by: Johannes Grove Nielsen, Jakob Lentz, Anne Buhl Bjelke and Daniel Myhre Engell, Bech-Bruun Law Firm P/S
6. Third-Party Funding 6.1 Prevalence of Third-Party Funding Permissibility of Funding of Investor–State Claims Danish law does not prohibit third-party funding (TPF) of arbitration, and the DAA contains no restriction on funding arrangements. Under Article 20 (4) of the DIA Rules 2021, a party must “immediately inform” the tribunal, the other par- ties and the DIA of the identity of any third party that has entered into a funding arrangement or otherwise has an economic interest in the outcome. In investor–state cases under the ICSID system, TPF is likewise permitted and expressly regulated by ICSID Arbitration Rule 14 (2022), which requires disclosure of the funder’s name and address (this is relevant as Denmark is an ICSID Contracting State). Prevalence of Funding Funding is available in Denmark-seated arbitrations (and in ICSID cases), but there is no evidence that TPF is prevalent in Danish investor–state disputes, largely because Denmark’s treaty-ISDS docket is very small (one known case discontinued and one pending – see 1.3 Prevalence of Investor–State Arbitration ). For example, the pending Klesch Group Holdings Ltd, Klesch Refining Denmark A/S and Kalundborg Refin - ery A/S v Kingdom of Denmark (ICSID ARB/23/48) has public procedural orders but no public record confirming the presence of TPF; the tribunal instead adopted a transparency schedule without disclosing any funder. 6.2 Third-Party Funding Case Law As mentioned in 6.1 Prevalence of Third-Party Fund- ing , TPF is lawful and unregulated in Denmark; it has become established in practice and is used occasion- ally in both litigation and (non-public) arbitration. Of publicly known cases, albeit non-arbitration, in a Supreme Court ruling of 23 March 2017 (U 2017.1815 H), the Supreme Court upheld an arrangement follow- ing which a creditor financed an insolvency estate’s avoidance claim in return for 50% of any recovery, essentially accepting an external funding-type agree- ment in civil litigation. This ruling is frequently cited
as prominent evidence that TPF-style arrangements are not, per se, inconsistent with Danish law, neither in litigation nor in arbitration (although the case was litigation). In Danish case law related to management liability, practice shows frequent use of TPF in substantial cas- es, including the infamous OW Bunker case, in which the potential management liability claims of the estate of OW Bunker could not be financed due to assets being pledged. TPF was used as a measure to ensure that the case could proceed at all. The arrangement is often cited as the first of its kind in Denmark, illustrat- ing TPF’s “access to justice” role in insolvency-driven claims and why more liability cases are arising follow- ing the acceptance of such funding. The Danske Bank shareholder action bringing claims related to the alleged disclosure failures around the Estonian branch is reportedly backed by litigation funding institutions to a large degree. This shows that global funders actively operate in the Danish market and use TPF structures to mobilise large, co-ordinated investor claims. Because arbitral proceedings (including those seated in Denmark) are typically confidential, reported arbitra- tion case law related to TPF is sparse, but it can be concluded that TPF is commonly used in arbitration in Denmark as well. 6.3 Disclosure and Security for Costs Danish Arbitration Act The DAA does not contain any provisions on TPF, nor does it impose any duty of disclosure. It also pro- vides no specific guidance on how tribunals should treat funding in relation to applications for security for costs. DIA Rules Require Disclosure Under the DIA Rules 2021, a party must immediately inform the tribunal, the other parties and the DIA of the identity of any third party that has entered into a funding arrangement in relation to the case or that has an economic interest in its outcome (Article 20 (4)). International soft law is commonly relied on in Den- mark; the IBA Guidelines on Conflicts of Interest treat
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