The use of third-party funding in international arbitration is on the rise, and as its use grows more commonplace, parties are increasingly keen to understand the nuances of accessing funding in jurisdictions that do not have the same established practices as countries like Australia, the UK or US.
An LFJ Conversation with Michael Kelley, Partner, Parker Poe
The use of third-party funding in international arbitration is on the rise, and as its use grows more commonplace, parties are increasingly keen to understand the nuances of accessing funding in jurisdictions that do not have the same established practices as countries like Australia, the UK or US.
In a new article for the China Business Law Journal, Yang Xueyu and Mariana Zhong, partners at Hui Zhong Law Firm, examine the different third-party funding practices and relevant legislative frameworks across Asia.
Singapore has one of the most-established legal structures for legal funding, having permitted the use of third-party funding in international arbitration since 2017, and then widened this permission structure to include domestic arbitration matters in the Singapore International Commercial Court. However, the authors highlight that third-party funding is only permissible where the funder meets the required criteria of having at least 5 million SGD in paid-up share capital or managed assets.
Whilst Hong Kong does not allow the broader use of litigation funding, it does permit the use of third-party funding in both domestic and international arbitration proceedings, and in 2022, legalised “outcome-related fee structures” in order to offer parties a wider array of permissible fee arrangements. Importantly, Hong Kong has well-defined disclosure regulations, which require the existence of funding agreements to be disclosed, including the identity of the funder.
Finally, while mainland China does not have established legislation around third-party funding, there have been no indications that it is prohibited, and contingency fee agreements are also recognised as valid. Xueyu and Zhong do highlight that some of China’s arbitration bodies, such as CIETAC and BAC, have set out guidelines for third-party funding regarding investment arbitration that more closely align with international standards.
