Third-party funding of disputes is emerging out of the shadows in Asia, as providers begin to set up shop in the region

In the world of litigation funding, Asia has been something of a slowcoach, well off the pace compared to places like the U.S. and Europe. The region is certainly miles behind Australia, which is one of the most developed jurisdictions in this regard. The twin hubs of Singapore and Hong Kong, both common law jurisdictions, recognise the doctrines of champerty and maintenance, which discourage involvement or investment in litigation by unrelated parties. In other Asian jurisdictions that do not follow common law, the issue exists in a grey area, without any specific guidance as to whether the mechanism is permitted.

This has led to the extremely slow (indeed, close to nonexistent) take-up of litigation funding, which allows people to have their legal costs covered, sometimes in the form of cash advances, by a thirdparty provider. If the litigant is successful, the money is repaid as a percentage of the settlement; if the case is unsuccessful, the funder bears the costs.

But there are signs that Asia is gradually catching up. In Singapore, the High Court’s decision last July in the Vanguard Energy case has confirmed that litigation funding may, in the context of insolvency and under the appropriate circumstances, be permitted. Singapore is also home to Teras Group, a litigation-funding provider that claims to be the first of its kind to focus its business in Asia. In Hong Kong, where the 2010 Cyberworks decision paved the way for third-party litigation funding in the context of claims by insolvent companies, the UK’s Harbour Litigation Funding has recently opened an office. Ruth Stackpool-Moore, director of litigation funding at Harbour, describes the potential in Asia as “huge.” The firm, which has already funded 15 cases in the region, including two cases in Hong Kong, follows Australia-listed IMF Bentham, which opened in the SAR earlier this year.

Asia would do well to come up to speed on litigation funding. Third-party funding of disputes allows companies to pursue justice without worrying about costs. “A lot of companies lose revenue because while they might have a good claim, they choose not to pursue it because they either don’t want to place the cost-risk on their balance sheet, or because they want to use that money in other ways,” says Stackpool-Moore. And for Singapore and Hong Kong, which are jousting to become Asia’s premier arbitration centre, allowing litigation funding could provide a critical edge. “Various centres are competing to market themselves as having the most advantageous features for dispute resolution,” she says. “I think that one thing that is increasingly being considered is this idea of third-party funding, and more and more companies are likely to look at it as a determining factor.”