Third‑party Funding in Danish Arbitration (2026): What Companies Need to Know

Third-party funding arbitration Denmark is moving from a niche financing option to a mainstream strategic tool for companies weighing whether to bring or defend a cross-border claim. In 2026, Danish corporates face rising arbitration costs, intensified institutional scrutiny of funding disclosure, and growing interest from courts in how funded claims affect security for costs and enforcement. For in-house counsel and commercial directors, the practical questions are no longer theoretical: can we accept outside capital for this dispute, what must we disclose, and how does funding reshape our settlement and enforcement calculus? This guide answers those questions with Denmark-specific, practitioner-led detail, drawing on the Danish Arbitration Act (Voldgiftsloven), Danish court practice and international arbitration norms.

It is designed to help you decide whether to accept, propose or respond to funding, and how to manage the risks that follow.

Executive summary and key takeaways

Third-party funding allows an unconnected financier to pay a party’s legal costs in exchange for an agreed share of any recovery, usually on a non-recourse basis. For Danish companies, it can convert a large, uncertain cost liability into off-balance-sheet risk, unlock claims that would otherwise be left unpursued, and signal confidence to the opposing side. It also introduces new complexities around disclosure, control over the case, and the possibility that a respondent will apply for security for costs.

The three quick actions below frame the rest of this guide:

• Pre-dispute. Build funding into your dispute-resolution strategy early; run diligence on funders, model budget scenarios, and draft arbitration clauses that anticipate disclosure and security-for-costs questions.
• During arbitration. Plan a disclosure strategy for the tribunal and counterparty, protect privilege and confidentiality in the funding agreement, and prepare to respond to any security-for-costs application.
• Enforcement. Confirm how the funder’s share interacts with the award proceeds and how settlement consent and assignment clauses will operate if the award must be enforced across borders.

Used deliberately, third-party funding arbitration Denmark strategy can improve a company’s negotiating position. Used carelessly, it can expose the funded party to disclosure disputes, cost security demands, and friction over who controls settlement. The sections that follow address each issue in turn.

1. Background and legal framework for third-party funding arbitration Denmark

Denmark is widely regarded as an arbitration-friendly jurisdiction whose arbitration regime is based on the UNCITRAL Model Law on International Commercial Arbitration. The Danish Arbitration Act (Voldgiftsloven, Act No. 553 of 24 June 2005) governs arbitrations seated in Denmark and sets out the framework for the tribunal’s powers, court assistance and the recognition and enforcement of awards. Critically for financing decisions, the Act does not expressly prohibit a party from obtaining outside funding for its claim or defence.

1.1 What is third-party funding?

Third-party funding is an arrangement under which a professional funder, with no prior connection to the dispute, agrees to pay some or all of a party’s legal and arbitration costs. In return, the funder receives a defined return if the case succeeds, typically a multiple of the capital deployed or a percentage of the recovery, or a combination of the two. The defining features are:

• Non-recourse structure. In most arrangements, if the funded party loses, it owes the funder nothing. The funder bears the downside risk.
• Return on success. The funder’s commercial reward is contingent on and proportionate to the outcome, which aligns incentives but also gives the funder a financial stake in the claim.
• Separation from the merits. The funder is not a party to the arbitration and, in a well-drafted arrangement, does not control the conduct of the case, although it will monitor progress and may hold settlement-consent rights.

Funding can be arranged for a single case or across a portfolio of claims, and it can be combined with insurance products. The models are compared in detail in the next section. The common thread is that third-party funding Denmark arrangements shift cost risk away from the company’s balance sheet while introducing a new stakeholder whose interests must be managed.

1.2 Applicable law and the arbitration-court interface

Where an arbitration is seated in Denmark, the Danish Arbitration Act (Voldgiftsloven) supplies the procedural backbone, and the Danish courts act in a supporting and supervisory role. This interface matters for funded parties because several funding-related issues, interim measures, assistance with evidence, challenges to awards and enforcement, can draw in the Danish courts even though the dispute itself is decided by the tribunal.

Two distinctions are important. First, the law governing the funding agreement is usually a matter of contract and may differ from the law of the seat; companies should specify the governing law and dispute-resolution mechanism for the funding contract itself. Second, the arbitral rules chosen by the parties, whether an institutional set or ad hoc under the Model Law framework, will shape how disclosure of a funder and any security-for-costs application are handled by the tribunal. When planning arbitration funding Denmark strategy, map these layers at the outset so that the seat, the applicable rules and the funding contract work together rather than against each other.

1.3 International guidance and 2026 trends

Because Danish law tracks the UNCITRAL Model Law, international developments are directly relevant to how tribunals seated in Denmark are likely to approach funding. Across the leading institutions and in UNCITRAL’s work on arbitration, the clear trend is towards greater transparency: tribunals increasingly expect parties to disclose the existence of a funder and the funder’s identity, principally so that arbitrators can check for conflicts of interest. Institutional rules revised in recent years have moved in this direction, and industry observers expect Danish practice to continue aligning with these norms.

The practical effect for 2026 is twofold. Disclosure of a funder’s identity is becoming a more routine procedural step, and respondents are more alert to the possibility that a claimant is funded, which in turn feeds demand for security for costs. Companies pursuing third-party funding arbitration Denmark strategies should assume that the fact of funding may become known and plan accordingly, rather than relying on secrecy.

2. Funding models and contractual mechanics

Not all funding is the same. The commercial terms, the degree of funder involvement, the cost of success and the legal risks vary significantly between models. Choosing the right structure is one of the most consequential decisions in any arbitration funding Denmark exercise, because it determines how much of any recovery the company keeps and how much influence the funder has over the case.

2.1 Single-case non-recourse funding

The most common model for corporates is single-case, non-recourse funding. The funder assesses one specific claim, agrees to meet defined costs, and takes a return only if the case succeeds. This model suits companies with a single high-value claim and a strong merits case. The trade-off is price: because the funder concentrates risk on one outcome, the return it requires is typically higher than under a diversified arrangement.

2.2 Portfolio non-recourse funding

Portfolio funding spreads capital across several of a company’s claims. Because the funder’s risk is diversified, the cost of funding per claim is usually lower, and the company gains flexibility in deploying capital across its disputes. Portfolio arrangements suit companies or in-house teams managing multiple matters, but they require more complex drafting around how returns are calculated across the portfolio and how cross-collateralisation operates.

2.3 ATE and insurance hybrids

After-the-event (ATE) insurance and related products can be layered onto a funded claim to cover specific exposures, most importantly, the risk of an adverse costs order or the cost of providing security for costs. Such products are more developed in some markets than others, and availability in a Danish-seated matter should be confirmed with the relevant insurer. Insurance hybrids reduce the funded party’s residual risk and can strengthen its position when resisting a security-for-costs application, because the respondent’s concern about recoverability of costs is addressed by the policy. The cost is an additional premium, and the terms of the policy must be carefully aligned with the funding agreement.

2.4 Key commercial terms

Across every model, a handful of commercial terms determine the real value and risk of the arrangement:

• Return. The funder’s reward, a multiple of capital, a percentage of recovery, or a hybrid, directly reduces the company’s net recovery.
• Control. Well-structured agreements preserve the funded party’s control over strategy and settlement; the funder monitors but does not direct the case.
• Settlement consent. Many funders negotiate a right to be consulted on, or to approve, settlement. The scope of this right affects how freely the company can resolve the dispute.
• Termination. The circumstances in which the funder can withdraw, for example, if the merits deteriorate, must be understood before signing.

The comparison shows why most corporates favour non-recourse structures for genuine risk transfer, reserving loan-style funding for situations where cash-flow timing, not risk, is the issue. Selecting among these models is the foundation of any sound third-party funding Denmark plan.

3. Disclosure, confidentiality and privilege in Danish arbitration

Disclosure is the issue that most frequently catches funded parties off guard. The questions are practical: must the existence of the funding agreement be revealed, must the funder be named, and can the terms of the agreement itself be kept confidential? Getting the disclosure strategy right protects privilege, avoids tactical surprises and reduces the risk of a disclosure dispute derailing the arbitration.

3.1 Arbitral rules and institutional approaches to funder disclosure

The direction of travel in international arbitration is towards disclosure of the fact of funding and the funder’s identity, primarily to enable arbitrators to run conflict checks. This is a conflicts-and-integrity measure rather than a licence to interrogate the commercial terms of the funding. A number of modern institutional rules now require a party to notify the tribunal and the other side of a funder’s existence and identity, and tribunals seated in Denmark, operating within the UNCITRAL Model Law tradition, may well expect the same, depending on the rules the parties have chosen.

Importantly, funder disclosure arbitration obligations generally extend only to identity and existence; the detailed financial terms usually remain confidential unless a specific issue, such as a security-for-costs application, makes them relevant.

3.2 Danish courts’ approach in support and challenge proceedings

Where a funded arbitration spills into the Danish courts, for example, in proceedings to challenge or enforce an award, or to obtain interim measures, the question of what must be disclosed is governed by Danish procedural practice rather than the arbitral rules. The practitioner view is that a Danish court will focus on what is relevant to the matter before it; the mere fact of funding is unlikely to be material to the validity of an award, but it may become relevant where a party argues that funding bears on, for instance, a security-for-costs request or an allegation of conflict. Companies should treat court involvement as a distinct disclosure environment and prepare accordingly.

3.3 Drafting confidentiality and non-waiver clauses

The funding agreement should be drafted to withstand disclosure pressure without exposing privileged material. Key protections include:

• Confidentiality obligations. Bind the funder to keep case information and the terms of the agreement confidential, with narrowly defined carve-outs for disclosures required by a tribunal or court.
• Non-waiver provisions. State expressly that sharing information with the funder is not intended to waive any applicable professional secrecy or privilege, and structure communications to preserve that protection so far as Danish and any other applicable law allows.
• Common-interest framing. Where appropriate, document the shared interest between the funded party and the funder to support confidentiality arguments.

3.4 When to pre-empt disclosure

Given that the existence of funding is increasingly expected to be revealed, the tactical choice is often when and how to disclose, not whether. Proactive, early notification of the funder’s identity to the tribunal and counterparty removes the risk of a later challenge based on non-disclosure and allows conflict checks to be completed before the proceedings advance. The practitioner view is that early, controlled disclosure of identity, while keeping commercial terms confidential, is usually preferable to defending a disclosure fight mid-arbitration. A well-planned third-party funding arbitration Denmark disclosure strategy anticipates these steps before the first procedural order.

4. Security for costs, respondent remedies and Danish practice

For respondents facing a funded claimant, security for costs is the principal defensive tool. For funded claimants, resisting an unwarranted security application is a priority, because an order to post security can tie up capital and, in the worst case, stall a meritorious claim. Both sides need to understand the legal basis, the evidence required and the timing.

4.1 Legal basis and procedural step

Security for costs is a measure by which a tribunal or court can require a claimant to provide security, such as a bank guarantee or deposit, to cover the respondent’s recoverable costs if the claim fails. Within the UNCITRAL Model Law framework applied in Denmark, a tribunal’s power to order interim and conservatory measures may extend to security for costs in appropriate cases, subject to the applicable arbitral rules, and the Danish courts play a supporting role in interim relief and enforcement. The existence of third-party funding does not by itself justify an order; the applicant must generally show a real risk that any costs award would be unrecoverable.

The practitioner view is that the mere fact a claimant is funded is not decisive, tribunals look at the claimant’s own financial position and whether an adverse costs order could realistically be satisfied.

4.2 Evidence and tactical timing

A respondent seeking security for costs Denmark relief should assemble evidence going to the claimant’s ability to pay an adverse costs order, for example, indications of insolvency risk, lack of assets within reach, or an off-balance-sheet structure that would leave the respondent without recourse. Timing matters: an application made too early may be premature, while one made too late may be seen as tactical. For funded claimants, the strongest responses are to demonstrate solvency, to point to an ATE or insurance overlay that answers the recoverability concern, or to show that the funding arrangement itself supports payment of adverse costs where that is the case.

4.3 Enforcement and cross-border aspects

Because many funded arbitrations are cross-border, a respondent’s real concern is often whether a Danish or arbitral costs order can be enforced against assets abroad. This cross-border dimension strengthens a security-for-costs argument where the claimant’s assets sit outside easy enforcement reach. Conversely, a funded claimant can neutralise the argument by offering security in a form the respondent can readily realise, or by demonstrating that the funder or insurer stands behind the adverse-costs exposure. Mapping the enforcement landscape early is central to managing arbitration costs Denmark risk on both sides.

Quick procedural steps, application for security for costs:

1. Identify the correct forum, tribunal under the arbitral rules, or the Danish court for supporting relief.
2. Assemble evidence of the claimant’s inability to satisfy an adverse costs order.
3. Specify the amount and form of security sought (guarantee, deposit or equivalent).
4. File the application with supporting submissions at an appropriate procedural stage.
5. Prepare to respond to arguments on insurance overlay, solvency and proportionality.

5. Costs, settlement strategy and enforcement of funded awards

Funding changes more than who pays the bills. It reshapes the economics of the dispute, the dynamics of settlement and the mechanics of collecting on an award. Companies should model these effects before signing a funding agreement, not after.

5.1 Cost shifting and indemnities

Danish and international arbitration practice generally allows the tribunal to allocate costs, often following the event, so a losing party may be ordered to pay a share of the winner’s costs. Funding affects this picture in two ways. First, the funder meets the funded party’s own costs, removing immediate cash-flow pressure. Second, the treatment of any adverse costs order depends on the funding agreement and any insurance: some arrangements cover adverse costs, others do not, and ATE insurance is commonly used to fill that gap. Companies should confirm precisely who bears an adverse costs award before committing to litigate, because a non-recourse funding deal does not automatically indemnify the funded party against the other side’s costs.

5.2 Settlement consent and funder rights

Settlement is where funder and funded party interests can diverge. A funder with a settlement-consent right may resist a settlement the company would accept, or push to settle where the company would prefer to continue. The best protection is clear drafting at the outset: define whether the funder has a consultation right or an approval right, set objective parameters for reasonable settlement, and build in a dispute-resolution mechanism for deadlock. The practitioner view is that companies should preserve the maximum practicable control over settlement, treating any funder approval right as a carefully bounded exception rather than an open veto.

5.3 Enforcement of awards and funder claims against proceeds

When a funded claimant wins, the award proceeds must be distributed between the company and the funder according to the agreement. Two practical issues arise. First, the mechanics of payment, whether proceeds flow through an escrow or directly, should be agreed so that the funder’s share is honoured without disputes. Second, enforcement of the underlying award may require court proceedings, potentially across borders, and the funding agreement should address how enforcement costs are met and how the funder’s entitlement ranks against the recovery. Cross-border enforcement of a Danish-seated award will commonly rely on the New York Convention, to which Denmark is a party.

A funding agreement’s provisions on assignment and the funder’s claim against proceeds are contractual rights that will be given effect in distribution, so they must be drafted with enforcement in mind. Properly structured, these clauses make the enforcement phase of a third-party funding arbitration Denmark matter predictable rather than contentious.

6. Practical steps: negotiating funding agreements and pre-dispute planning

The groundwork laid before a dispute escalates determines how much value a company extracts from funding. A disciplined, checklist-driven approach reduces cost, preserves control and avoids the disclosure and cost-security pitfalls described above.

• Run diligence on the funder. Assess the funder’s capital adequacy, track record, regulatory standing and ability to meet commitments through to enforcement.
• Negotiate control and settlement terms. Preserve your control over strategy and bound any settlement-consent right with clear, objective parameters.
• Protect confidentiality and privilege. Include confidentiality obligations, non-waiver language and tightly drafted disclosure carve-outs.
• Plan the insurance overlay. Consider ATE or security cover to address adverse-costs exposure and to resist security-for-costs applications, confirming availability for a Danish-seated matter.
• Address assignment and termination. Define when the funder may withdraw and how its entitlement survives termination or settlement.
• Budget realistically. Model the net recovery after the funder’s return across best, base and downside scenarios.

For detailed drafting support, see the cluster resources on drafting funding disclosure clauses and on negotiating third-party funding agreements, which expand each of these points into clause-level guidance for Danish companies.

Conclusion and next steps

Third-party funding arbitration Denmark has become a practical lever for companies managing cost risk in cross-border disputes, but it rewards preparation and punishes improvisation. Danish law does not prohibit funding, tribunals increasingly expect disclosure of a funder’s identity, and respondents are more willing to test funded claimants with security-for-costs applications. The companies that benefit most are those that integrate funding into their dispute strategy early, choose the right funding model, and draft agreements that protect control, confidentiality and settlement freedom while addressing adverse-costs and enforcement risk.

Five immediate next steps for Danish companies:

1. Map your current and anticipated disputes and identify which are candidates for funding.
2. Run diligence on prospective funders and shortlist those with proven capital and track record.
3. Build disclosure and security-for-costs scenarios into your pre-dispute planning.
4. Negotiate control, settlement-consent and confidentiality terms before signing any funding agreement.
5. Confirm how adverse costs, insurance overlay and award proceeds will be handled at the enforcement stage.

For companies weighing a third-party funding arbitration Denmark decision in 2026, early, informed advice is the difference between a financing arrangement that strengthens your position and one that complicates it. You can explore relevant practitioners through the Global Law Experts directory and the regional arbitration and dispute resolution listings below.

Further reading in this cluster includes guidance on drafting funding disclosure clauses and on negotiating third-party funding agreements for Danish companies.

Sources

1. Retsinformation (Official Danish legal information portal)
2. Danish Courts (Domstol.dk)
3. Danish Bar and Law Society (Advokatsamfundet)
4. UNCITRAL, Model Law on International Commercial Arbitration (1985, as amended 2006)
5. UNCITRAL, New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958)
6. University of Copenhagen, Faculty of Law