40 Asian Legal Business | December 2024 percent of a claim, but there’s little societal support to offset these costs,” he explains. “Third-party funding bridges the gap between investment demand and access to justice.” Similarly, Fu Tong, co-founder of Houzhu Capital, saw firsthand the need for such support. As a former general counsel for a leading Chinese corporation, she often dealt with high-potential cases that her company hesitated to pursue due to budget constraints. In 2022, she and several legal professionals launched Houzhu Capital, intending to address this gap in the market. Global third-party funders are also increasingly present in Asia. Omni Bridgeway (OBL), a listed Australian funding firm, expanded into Hong Kong and Singapore shortly after the regulatory green light. “Since Hong Kong has opened the doors to allow third-party funding in the context of arbitrations, we have seen an uptick in China-related cases being funded by third-party funders. This was initially in respect of arbitrations seated in Hong Kong and Singapore, but has also extended to disputes seated in mainland PRC,” says Chee Chong Lau, OBL’s Singapore-based investment manager. Fu notes that Houzhu quickly began to focus on cross-border dispute resolution, reflecting the growing demand among Chinese clients. With China’s emphasis on outbound economic China Report Mediation (Third Party Funding) (Amendment) Ordinance, legalising third-party funding in specific dispute resolution contexts. Third-party funding involves a third party unrelated to a litigant providing financial backing for a dispute. If the case is won, the funder receives a portion of the award; if lost, the funder incurs no obligation from the litigant. While the concept was gaining traction in Hong Kong and Singapore, the market for third-party funding in China was only beginning to take shape. In 2016, Zhang Zhi, founder of DS Legal Capital in Qianhai, Shenzhen, encountered the concept at an international conference. Fascinated by its potential, he and his team explored ways to adapt third-party funding within China’s legal framework, launching DS Legal Capital in 2017 and promoting the practice through a Legal Capital Summit. For Zhang, third-party funding addresses a critical issue in China: the high cost of litigation. “Litigation costs— including attorney fees, court fees, and expert fees—often account for 10 to 15 When capital meets law Third-party litigation funding is gaining momentum in China. Chinese firms are adapting the concept to meet local needs, particularly in complex cross-border disputes and international arbitrations. By Hu Yangxiaoxiao The concept of third-party litigation funding entered Asia’s legal market in 2017, which was marked by regulatory developments in Hong Kong and Singapore. In March of that year, Singapore passed the Civil Law (Amendment) Act, which permitted third-party funding in certain cases. Just a few months later, Hong Kong followed with the Arbitration and • Third-party funding emerged in China in 2016 and has since been integrated into arbitration clauses by several institutions. • High litigation costs and the difficulties of crossborder claims are key challenges that third-party funding aims to address.
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