It was about time that the lending business met the “usually costly” arbitration proceedings. Even though arbitration is still considered to be a more cost- and time-efficient method of solving disputes compared to local courts, there is no question that it is still one of the most expensive ways of settling disputes. As a result, when the time comes, it is not unusual for parties to be reluctant to initiate arbitration proceedings due to the cost aspect. Recently, this has given rise to the concept of “third party funding” (“TPF”), which in summary means the extension of financial support by a complete third party in favor of one of the arbitrating parties in order to enable such party to pursue its claims or defend itself against claims raised by its counterparty. This of course is not done on a pro-bono basis and involves a certain level of financial gain expectation on the part of the third-party funder as well. In this article we will discuss the concept of TPF and the agreements executed under this concept. The Concept and its Regulation Although TPF is a considerably new concept, certain institutions have already acknowledged its existence and have given it a definition. For instance, the Comprehensive and Economic Trade Agreement (“CETA”)1 has defined third party funding as “any funding provided by a natural or legal person who is not a party to the dispute but who enters into an agreement with a disputing party in order to finance part or all of the cost of the proceedings either through a donation or grant, or in return for remuneration dependent on the outcome of the dispute” (Article 8.1, Section A). The Transatlantic Trade and Investment Partnership (“TTIP”) also defines TPF in line with CETA. Although there is no single harmonized definition of TPF, in light of these regulations, the concept can be described as an “outside entity to finance legal representation,” which could be a bank, hedge fund, insurance company, or any other entity or individual2 funding a case as an investment. As of this writing, Turkish legislation is silent on the issue, and neither the Turkish Code of Civil Procedure nor the Turkish International Arbitration Law includes a definition for TPF. This does not mean that the concept of TPF cannot be used in Turkey; we believe that it indeed can, to the extent that the lending relationship is in compliance with the financial legislation in Turkey. There is however currently no clear guidance under the dispute resolution or lending related legislation in Turkey regarding the lending arrangement tied to the outcome of an arbitration proceeding. Benefits of TPF From the funders’ perspective, currently comprised of a pool of ten serious dedicated funders globally, TPF is seen as an ideal investment tool in that dispute resolution proceedings are an area which remains unaffected by unpredictable market conditions,3 allowing investors to diversify their portfolio. Third Party Funders (“TPFR”) usually base their risk assessment on the following criteria before setting the terms of financial support: (i) The jurisdiction in which the claim is sought, looking at the specific procedural laws (e.g., disclosure of the evidence, etc.) and the approach of the jurisdiction towards TPF (whether it is inhospitable or not); (ii) the amount of time likely to be spent on the claim and the projected amount of legal costs; (iii) the size of the monetary claim; (iv) the probability of success (70% or higher is desirable); (v) enforceability of the award; and (vi) other factors such as harmony between the client, its counsel, and the TPFR.