Third-party funding is a recent yet rapidly growing phenomenon in investment arbitration. While it enables investors lacking funds to pursue remedies against States, it exposes States to greater risk of inability to recover arbitration costs. Against this background, this article examines the legal principles on security for costs and, contrary to the view of several tribunals and commentators, it argues that in cases involving third-party funding and the funding agreement does not cover

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... al adverse costs, there is a presumption in favour of ordering security for costs. However, as revealed in recent decisions in Herzig, the current legal framework on security for costs, which is predicated on the bilateral investor–State relationship, is ill-suited to regulate the tripartite relationship involving third-party funders. Unfortunately, the discussions on Investor–State dispute settlement reform and the current proposal by the International Centre for Settlement of Investment Disputes (ICSID) on the ICSID Rules amendment have largely overlooked this problem. Thus, this article urges policy-makers to develop new rules to regulate the tripartite relationship involving third-party funders.