Trending Now
Commercial

Litigation Finance and China’s Belt and Road Initiative

By John Freund |

By Mauritius Nagelmueller

China is building a multi-trillion dollar trade and infrastructure network – a new silk road – and the legal world is preparing for the disputes that will inevitably arise. What is the Belt and Road Initiative all about, and what impact will it have on litigation finance?

Being one of the largest infrastructure and investment projects in history, the Belt and Road Initiative (BRI)[1] will alter the global economy and define China’s role in it. The initiative covers 65% of the world’s population in more than 68 countries, and 40% of the global GDP. An anticipated overall investment of USD 4-8 trillion will connect China with the rest of Asia, Europe and Africa, through six main geographic corridors and a Maritime Silk Road. China’s position is that BRI will improve the infrastructure along the route, providing a network of highways, railways, ports, energy and development projects for trade and cultural exchange. Chinese state-owned banks, the Asian Infrastructure Investment Bank (formed in 2015, but already encompassing 84 approved member states, and with a capital of USD 100 billion – half of the World Bank’s capital), the Silk Road Fund, and investors from the private sector are providing the necessary financing. About USD 1 trillion has already been invested.

It seems likely that BRI, if successful, will shift more economic and political power to China. Major concerns surround the environmental impact of the vast project, uncertainties regarding the exact parameters and how much local economies will actually benefit. Security risks along the Belt remain constant. Some even fear a new Chinese “empire”. It remains to be seen which of these fears are justified, but it is interesting to note that China’s president Xi Jinping, who unveiled BRI in 2013 and made the initiative a central tenet of his foreign policy agenda, will likely remain in power, as the Communist Party of China just announced plans to abolish the two-term limit on the presidency.

To predict that legal disputes will arise under BRI is to state the obvious, and the legal community in Asia and beyond is preparing accordingly. Jurisdictions are already competing for recognition as the prime venue for BRI related proceedings. In an effort to provide wide-ranging dispute resolution services, China plans to establish an international commercial court in Xi’an for disputes surrounding the land-based transport corridors, another in Shenzhen for the maritime route, and a central court headquartered in Beijing. All three bodies will provide arbitration and mediation services. China’s neighbors share its expectations regarding dispute resolution. In 2017, Hong Kong and Singapore permitted litigation finance in international arbitration, and the legalization for state court procedures may soon follow. Hong Kong passed its law shortly after a BRI Forum in Beijing, and partly also to strengthen its position as a go-to center for BRI related disputes, particularly for the maritime and construction fields. Arbitration institutions around the world, including the ICC (International Chamber of Commerce), SIAC (Singapore), and HKIAC (Hong Kong), encourage the adoption of their rules in BRI deals, and Malaysia’s KLRCA and Seoul’s KCAB are preparing accordingly. Chinese and Singaporean mediation centers (CCOIC and SIMC) have plans to cooperate for BRI related mediation proceedings, while Hong Kong is developing an online arbitration and mediation tool specialized on the initiative. Chinese officials have even publicly floated the concept of an innovative hybrid method combining aspects of arbitration and mediation, with courts playing a central role as well.

Many legislators view litigation finance as a vital component in their jurisdiction’s status as a prime dispute resolution center, and litigation finance firms are aggressively seizing on the new opportunities presented. Select funders have already opened offices in Asia, others will soon follow, or plan to be involved from abroad. Entities who plan to invest along the Belt, including many Chinese companies, will not only face complex regulatory challenges, but also disputes with foreign governments, possibly in multiple jurisdictions. In addition to first-rate legal advice, parties will sometimes require external financing to pursue their claims under BRI. Both investors and law firms will utilize the benefits of litigation finance, and seek tailored financing solutions for their cases arising under BRI related projects. This will include single cases, as well as multiple disputes from investments being bundled into portfolios of claims.

BRI will have a significant impact on litigation finance in the coming years, as a host of challenges and new opportunities present themselves. As has occurred previously, litigation finance will support meritorious claims which could not be brought without the assistance of external financing, help businesses and law firms diversify and boost their portfolios without increasing risk, and continue to promote access to justice. Litigation finance will benefit from this unprecedented trade and infrastructure initiative. It has already become part of the legal world, and it will soon be part of BRI.

[1] Originally called One Belt and One Road Initiative.

 

Mauritius Nagelmueller has been involved in the litigation finance industry for more than 10 years.

Commercial

View All
Case Developments Commercial

Litigation Funding Support Ensures Law Firm Can Continue MoD Lariam Claims

By Harry Moran |

A frequent talking point among claimant law firms and litigation funders is the use of delaying and prolonging tactics by defendants, hoping to continually increase the financial cost of bringing a case until it is no longer viable to do so. However, as a recent example demonstrates once again, third-party litigation funding provides a significant weapon in the claimant’s arsenal when it comes to combating this type of strategy.

An article in The Law Society Gazette covers ongoing developments in the group action being brought against the Ministry of Defence over claims that its prescription of Lariam, an anti-malarial drug, caused harmful side effects to armed forces personnel. The law firm leading these claims, Hilary Meredith Solicitors, has denied reporting that it is facing bankruptcy due to the large costs involved in the case, and told the Gazette that its financial backing is secure.

In a statement to the Gazette, the law firm stated that its “bank and litigation funders have confirmed their ongoing financial support”, which will allow the law firm to continue with the Lariam cases without fear of bankruptcy. Hilary Meredith Solicitors admitted that whilst it had been necessary “to borrow millions of pounds to fund this David and Goliath type action”, the law firm’s financial footing was secure with the support of outside lenders.

The identity of the litigation funder supporting Hilary Meredith Solicitors is not specified by the law firm’s statement or the Gazette’s reporting.

The firm also confirmed that with 10 lead cases scheduled for trial at the High Court next year, they are now “close” to agreeing a settlement with the MoD. The Gazette also cites its reporting from last year, which revealed that the MoD had spent £20 million on its legal budget to defend against the claims brought between 2021 and 2022.

Commercial Regulatory Issues

Three Amendments to the Litigation Funding Bill Discussed at Committee Stage

By Harry Moran |

As the Litigation Funding Agreements (Enforceability) Bill is subject to a line by line examination during the committee stage today, we can analyse the amendments that have been put forward by members of the House of Lords. Of the three amendments that were discussed during the committee stage, two were put forward by Lord Stewart of Direlton and one by Lord Marks of Henley-on-Thames.

Both of Lord Stewart’s amendments deal with the section of the bill that provides a definition of a litigation funding agreement.

The first of Lord Stewart’s amendments calls for the following line to be inserted at the end of the Clause 1, page 1, line 14: “(ia) where the litigant is a litigant in person, expenses incurred by that litigant, or”. In his explanatory statement, Lord Stewart said that this language “ensures that the definition of litigation funding agreements includes agreements under which a funder agrees to fund expenses incurred by a litigant in person.” 

The second of Lord Stewart’s amendments relates to Clause 1, page 1, line 16, which would take the following sentence: “the payment of costs that the litigant may be required to pay to another person by virtue of a costs order”, and would now be followed by: “, an arbitration award or a settlement agreement”. Lord Stewart explained that this would ensure that the bill’s definition of an LFA would also include “agreements under which a funder agrees to pay costs relating to litigation that arise by virtue of an arbitration award or a settlement agreement, as well as by virtue of a costs order.”

Lord Marks’ “probing amendment” would follow Clause 1 and would be titled “Review: enforceability of litigation funding agreements”. The language of the amendment requires the Lord Chancellor to “establish an independent review of the impact of provisions in this Act” and lays out the scope of such a review. This would include a review of safeguards for claimants, regulation of third-party funding, funders’ returns, and alternatives to LFAs. The amendment dictates that the review must be completed by 31 August 2025, and that the Lord Chancellor must then provide a response before Parliament within three months of receiving the review.

The full text of the amendments can be read here.

The current version of the bill can be read here.

LFJ will be providing a summary of the committee stage hearing once the Hansard transcript is available.

Announcements Commercial People Moves

Carpentum Capital Launches Aurigon Litigation Risk Consulting (LRC)

By John Freund |

The team around former Carpentum Capital has launched AURIGON LITIGATION RISK CONSULTING (LRC), a litigation funding intermediary based in Switzerland with a special focus on Latin America. 

Founder and Managing Director Dr. Detlef A. Huber comments: ”AURIGON LRC is combining two worlds, litigation finance and insurance. Both areas are increasingly overlapping. Insurers offer ever more litigation risk transfer products and funders recur to insurance to hedge their risks. Hence complexity and advisory requirements are increasing, especially in still developing markets like Latin America. With our team of lawyers and former re/insurance executives trained in Latin America, the US, UK and Europe we are perfectly suited to advice our clients in any stage of the funding process or in related insurance matters. Our goal is to become the preferred partner for litigation and arbitration funding projects out of Latin American jurisdictions and I am looking forward to this new adventure.”

ABOUT AURIGON

AURIGON Advisors Ltd. is operating as re/insurance consultancy since 2011 with a special focus on dispute resolution and auditing. With AURIGON LRC an intermediary for litigation funding has been launched servicing our clients out of Argentina, Chile, Brazil and Switzerland in Spanish, English, Portuguese and German. With our experience setting up the first Swiss litigation fund dedicated to Latin America (founded 2018), and in the insurance advisory area (since 2011), we are bringing together knowledge of processes and mindsets of the funding and the insurance world. 

Read More