Asia opens up for third party funding of arbitration

16th June 2017

Yesterday, the legislature of Hong Kong adopted long-awaited legislation expressly allowing for third-party funding of arbitration and mediation in the territory for the first time.

Singapore and Hong Kong – the two leading arbitral seats in the Asian region – have now both made moves to remove restrictions on third party funding for arbitration and to open up their international arbitration markets as a result.

These moves are designed to enhance the competitiveness of both jurisdictions as desirable locations for international dispute resolution.

Among other things, the amendments to the Hong Kong arbitration ordinance introduce a code of practice for funders, who will be required to report annually on their compliance with the code. While details of the code are still under development, it is expected to include provisions relating to disclosure, confidentiality and privilege. Similarly in Singapore, the legislation introduces the concept of a “qualifying third party funder” and certain conditions will need to be met in order for the funding to be legitimate. These moves show that these jurisdictions are allowing third party funding to operate subject to conditions set by legislation- a move which LCM welcomes.

As Asia’s business sectors continue to grow it is expected that demand for legal services, particularly dispute resolution services, will increase.

LCM Finance – one of the first litigation finance firms in the Australian and global market with close to twenty years’ experience – is moving directly to support these initiatives by recruiting a dedicated Investment Manager, Jonathan Barnett whose primary focus will be in the provision of third party funding in international arbitration matters particularly in the jurisdictions of Singapore and Hong Kong. Jonathan brings a rich experience in international arbitration and multi-jurisdictional litigation to his role. Prior to joining LCM, he worked as Asia-Pacific Counsel for the ICC International Court of Arbitration, and as a Researcher with the United Nations Commission on International Trade Law (UNCITRAL).

Jonathan believes the use of third party funding will continue to grow in the area of international arbitration.

“Lack of liquidity is not the only driver of a decision to seek third party funding,” he said. “Increasingly we are seeing corporates engage third party funders for reasons of convenience, cost effectiveness and risk sharing.”

The Managing Director of LCM, Patrick Moloney, believes that Jonathan’s international arbitration experience is a major point of difference for his business.

“It is essential for claimants and their legal teams to work with a funder who has direct experience of the type of claim being presented for funding and its jurisdiction. Jonathan brings that specific international arbitration experience and expertise in Asia, Europe and the UK to LCM.”

The next steps should see these changes in Asia extend beyond international arbitration into other commercial matters as the adoption of third party funding increases exponentially both in this region and globally.

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