Hong Kong and Singapore embrace third-party funding for arbitration in battle with London

Singapore: predicted growth in arbitrations

Both Hong Kong and Singapore have moved to clarify the use of third-party funding in arbitration as the market continues to expand.

The Hong Kong Arbitration and Mediation Legislation (Third Party Funding) (Amendment) Bill 2016 has been published to clarify that third-party funding is not prohibited by the common law doctrines of maintenance and champerty.

Meanwhile, the first edition of the Singapore International Arbitration Centre’s investment arbitration rules, in force from 1 January, enables the tribunal to order the disclosure of third-party funding arrangements, and to take such arrangements into account when apportioning costs. The Hong Kong rules make disclosure part of the process, although do not link funding to costs.

Steven Friel, chief executive of London-based Woodsford Litigation Funding, said Woodsford was looking forward to expanding into the two jurisdictions. “We foresee huge growth in third party funding of Hong Kong and Singapore-seated international arbitrations.”

He continued: “It is clear that each of Hong Kong and Singapore is in a rush to embrace third-party funding. The risk for those jurisdictions of failing to do so is that they might lose their positions as leading centres for international arbitration. Their competitors in places like London, Sydney and New York are gaining ground through the use of third party funding as a valid access to justice tool.

“The case of Essar v Norscot, where the English High Court upheld an ICC tribunal’s decision to order a losing defendant to pay the winning defendant’s funding costs, shows that third-party funding is now an established part of the law and practice of international arbitration.”

In Essar last October, the High Court ruled that a defendant whose conduct forced the claimant to seek third-party funding – from Woodsford – to take its case to arbitration, had to pay the £2m owed to the funder following the claim’s success.

Mr Friel said he was relaxed about disclosure of a funder’s involvement because it sends “a strong message that the claimant has financial backing to bring the case to trial”.

However, from the claimant’s perspective, he said “we are concerned that rules providing for disclosure of third-party funding arrangements will lead to mischief-making from defendants, who might seek to cause satellite disputes relating to funding.

“In England, for example in the case of Wall v RBS [2016] EWHC 2460, we have already seen issues relating to disclosure of third-party funding become a distraction from the core issues in dispute. Such a development would be unfortunate in international arbitration.”

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