Third-party funding has been slow to take off in Asia, with the exception of New Zealand and Australia, where it is on the increase. Australia is in fact a market leader for third-party funding.

Fears that such funding might run foul of the doctrines of champerty and maintenance in common law jurisdictions such as Hong Kong (Unruh v Seeberger (2007) 10 HKCFAR 31) and Singapore (Otech Pakistan Pvt Ltd v Clough Engineering Ltd [2007] 1 SLR 989) have discouraged experiment. Civil law jurisdictions such as China and Japan do not have these prohibitive doctrines. Nonetheless, third party funding has not yet gained much of a foothold in these countries, where the growth in arbitration is a relatively recent phenomenon. After years of deliberating, Singapore and Hong Kong are introducing legislation to set up a permissive framework for third party legislation in the same year. The law in Singapore came into effect on 1 March 2017. In Hong Kong, the Arbitration and Mediation Legislation (Third Party Funding) (Amendment) Bill 2016 is making its way before the Legislative Council (“HK Bill”). For brevity, I will take the HK Bill as the Hong Kong position for now.

Both expressly permit third-party funding for arbitration only. In Singapore, the Civil Law Act was amended to permit third-party funding in respect of international arbitrations as defined under the International Arbitration Act. Only it is further stipulated that third-party funding may only be provided by funders whose principal business is funding claims and who have sufficient access to funds. Both countries allow funding to cover court and mediation proceedings related to the arbitration proceedings.

Both countries supplement the legislative framework with “soft laws”, in the form of codes of conduct. In Singapore, there are three independent bodies covering different stakeholders. The Singapore Institute ofArbitrators’ draft Guidelines for Third Party Funders have been released for public consultation. The Law Society of Singapore will issue a Guidance Note for Lawyers and the Singapore International Arbitration Centre has have a Practice Note on Arbitrator Conduct in Cases Involving External Funding. The HK Bill provides that a body authorized by the Secretary of Justice shall draw up a code of practice with which third-party funders are expected to comply. These codes of practice are not reinforced by legislative sanctions for now but, naturally, the authorities will be monitoring the degree of compliance with ethical and practice guidelines to see if firmer measures are warranted.

These new frameworks are welcome in bringing funding to the two leading arbitration seats in Asia, in line with other major arbitration jurisdictions where it is already permitted.

This article is authored by Chan Leng Sun, Global Head of Arbitration and Head of Dispute Resolution at Baker & McKenzie Wong & Leow.