Litigation Funding Industry Facing Opposition in Asia|Legal Finance Journal

The Legal Finance Journal - July 2

Recently read on The Legal Finance Journal website, those working to bring litigation funding to the forefront of the legal industry within the Asian continent are facing difficulties due to spillovers from days of British imperialism.

In the landmark Cyberworks Audio Video Technology Ltd. decision in 2010, a lower Hong Kong court upheld the legality of a liquidating company’s assigning to a third-party funder a share of any proceeds from legal proceedings to collect debts, in exchange for funding for that litigation. It was the first decision in Hong Kong explicitly recognizing assignments by liquidating companies or bankruptcy trustees as a legal exception to maintenance and champerty laws.

The next year, another Hong Kong decision ruling upheld a U.S. bankruptcy trustee’s assignment of debts owed to Hong Kong companies, and the right to sue to collect those debts, to a litigation funder who would share in the proceeds.

Unlike the Cyberworks case, which was grounded in assignment of assets under corporate law, the later decision was based on the argument that firms in liquidation may lack the funds to pursue legitimate debt claims, so the availability of litigation funding works to expand access to justice. Litigation funders would no doubt welcome rulings by higher courts, clarifying any limits to champerty and maintenance laws, or perhaps expanding them.

While Hong Kong is already a world center for arbitration, it’s somewhat unclear whether third-party funding will be allowed in arbitration proceedings. Hong Kong’s Law Reform Commission is studying whether reforms are needed to clarify that issue. Industry advocates, including Fulbrook Capital Management founder and chair Selvyn Seidel, argue that abolishing champerty and maintenance laws would add to Hong Kong’s global cachet for arbitration cases.

Singapore, another Asian arbitration center, also currently bars third-party funding in both arbitration and litigation (legal contingency fees are also illegal), but case law there has created an exception when the third-party funder has a legitimate commercial interest in the dispute. Singapore’s government has also announced it’s studying whether its champerty law should be amended or ended; a favorable decision could expand the presence of third-party litigation funders.

Visit here to read more.

Litigation Funding Industry Facing Opposition in Asia|Legal Finance Journal