Third-party funding in Asia: Arrived, and Set to Thrive

Marla Decker

Third-party funding in Asia: Arrived, and Set to Thrive

The demand for third party funding in international arbitration is growing globally, perhaps most noticeably in Asia, and Lake Whillans expects to meet that demand with additional investments in the region.  Awareness of and use of third party funding in Asia has increased in part because, as reported last year, Hong Kong and Singapore legalized the use of third party funding for international arbitrations seated there as part of each country’s effort to establish itself as the premier seat for arbitration in the region.  Since then, both countries have taken steps to implement the enabling legislation, and we asked Nicholas Lingard, Joaquin P. Terceño, Daniel Allen, Emily Stennett and Sophie Ryan of Freshfields Bruckhaus Deringer’s international arbitration practice in Asia to provide an update on third party funding in Asia:

Over the last few years, third‑party funding has become a hot topic in Asia. As we previously reported, in 2017, the two leading arbitral seats in Asia, Singapore and Hong Kong, enacted legislation that opened the door to third‑party funding of arbitration proceedings. As well as fundamentally changing the legal framework in those jurisdictions, these developments made third‑party funding a major talking point across Asia. In this article, we reflect on the current landscape for third‑party funding in the region.

Singapore: up-and-running

With effect from March 1, 2017, Singapore passed an amendment to its Civil Law Act (and associated regulations and amendments to the professional conduct rules for lawyers in Singapore) to allow for third‑party funding of international arbitrations.

Under the new Singapore framework, third‑party funding contracts with a qualifying third‑party funder (in short, a professional funder) are not illegal or contrary to public policy as long as they relate to a permitted category of dispute resolution proceedings. For now, that category is limited to international arbitration and related court or mediation proceedings while third‑party funding of domestic arbitrations remains prohibited in Singapore. This position is in contrast to the position under the new Hong Kong third‑party funding legislation discussed below.

As we previously reported, at the time the amendments were introduced, Senior Minister Indranee Rajah, SC indicated that there was a possibility the framework would be expanded to other categories of dispute resolution proceedings. However, to date, no further indication as to whether and when this might happen has been given, and public calls for expansion of the scope of the legislation have not been particularly widespread. That said, one obvious candidate for inclusion in the list of dispute resolution categories for which third‑party funding is permitted is international commercial litigation in the Singapore courts and, in particular, the Singapore International Commercial Court (SICC). Similar to international arbitration, users of the SICC tend to be well‑advised, sophisticated parties, who might well be attracted to the jurisdiction by the availability of non‑recourse funding options. It will be interesting to see whether, as the SICC itself becomes more established, its users come to demand the availability of third‑party funding.

Although Singapore’s third-party funding framework is still nascent, and we are aware of only a small number of publicly-reported funded cases in Singapore to date, the legislative amendments were a welcome development for arbitration in Singapore. The new framework has received a warm reception from practitioners, funders and potential disputing parties alike, and undoubtedly reinforces Singapore’s status as a leading arbitration seat globally.

Hong Kong: primed and ready

Within a few months of the entry into force of Singapore’s new third‑party funding framework, in June 2017, the Legislative Council of Hong Kong passed the Arbitration and Mediation Legislation (Third Party Funding) (Amendment) Ordinance. The Ordinance was gazetted on June 23, 2017, but only partially entered into force: the sections lifting the prohibition on third‑party funding are not yet operational.

On December 7, 2018, the Secretary for Justice issued a Code of Practice for Third Party Funding of Arbitration (following a public consultation that closed at the end of October), and concurrently published a notice in the Gazette providing that the sections of the Ordinance relating to third‑party funding will enter into force on February 1, 2019.

Once it enters into force, the new legislation will permit third‑party funding in arbitration cases (both international and domestic) seated in Hong Kong, as well as in related proceedings including ancillary court proceedings both in and outside Hong Kong.

Presumably in anticipation of this development, the new Administered Arbitration Rules of the Hong Kong International Arbitration Centre (the HKIAC Rules) entered into force on November 1, 2018. The HKIAC Rules introduce various amendments to bring their provisions—last updated in 2013—in line with the latest developments in arbitration practice, including with respect to third‑party funding.

As discussed below, the updated HKIAC Rules address three of the key issues arising in funded arbitration proceedings, namely disclosure, confidentiality and costs.

Disclosure of funding arrangements

Whether or not disclosure of funding arrangements should be made mandatory in arbitration proceedings has been the subject of some debate. A tension exists between, on the one hand, parties’ general preference to keep their financing arrangements private, often coupled with fears that a revelation of funding might lead to a (perhaps false) impression that the funded party is impecunious, and the imposition of an order for security for costs; and, on the other hand, concerns over potential conflicts of interest (eg, if an arbitrator has an interest in a funder that is involved in proceedings they are hearing) going uncovered if disclosure is not made to all parties. Recent surveys suggest that the balance of opinion is largely in favor of at least some limited disclosure.

Consistent with the terms of the Ordinance, new Article 44 of the HKIAC Rules provides that a funded party is under a continuing obligation to disclose to each party to the arbitration, the tribunal (or emergency arbitrator, as applicable) and HKIAC: (i) the fact that a funding agreement has been made; and (ii) the identity of the third-party funder.

Similar disclosures already were required in connection with funded arbitration proceedings in Singapore, but there the obligation is placed on the legal representative of the funded party, rather than the party themselves, pursuant to amendments to the professional conduct rules for lawyers in Singapore that entered into force in March 2017.


The HKIAC Rules expressly provide for an exception in the case of third‑party funding to the general rule (under Article 45.1) that information relating to the arbitration proceedings or any award (or a decision made pursuant to the emergency arbitration procedure) made in the arbitration is confidential. Under Article 45.3(e), a funded party or its representative is allowed to disclose such information for the purposes of obtaining funding or to its existing funder.

The HKIAC Rules do not provide further details on the limits or conditions of such disclosure, nor do they address issues around potential waiver of privilege. However, under the newly issued Code of Practice, a funder will be required to observe the confidentiality and privilege of all information and documentation relating to the arbitration and the subject of the funding agreement to the extent that Hong Kong law, or other applicable law, permits.


Finally, Article 34.4 of the HKIAC Rules expressly allows an arbitral tribunal to take into account any third‑party funding arrangement in fixing and apportioning the costs of an arbitration. An equivalent provision is found in the Singapore International Arbitration Centre’s new Investment Arbitration Rules (SIAC IA Rules), which came into force on January 1, 2017. Neither the HKIAC Rules nor the SIAC IA Rules offer guidance as to how such arrangements might impact cost allocation, so it will be interesting to see how these provisions are used in practice.

Elsewhere in Asia: watch this space

The flurry of activity in relation to third‑party arbitration funding in Singapore and Hong Kong has placed the issue firmly on the agenda, at least among the arbitration community, in other Asian arbitration centers such as Seoul and Tokyo. Indeed, third‑party funding was the subject of considerable discussion at the Seoul ADR Festival in early November, and it has become a popular topic of conversation with Korean and Japanese clients. In both of the Republic of Korea and Japan, there is no legislation or other law expressly permitting or prohibiting third‑party funding, making it something of a “grey area”. However, it already is well‑known in both markets that big-name companies are making use of funding in proceedings elsewhere. Unsurprisingly, then, calls for clarifying legislation are increasing in both of those jurisdictions as Seoul and Tokyo seek to develop and expand their appeal as arbitral seats.

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