31 Asian Legal Business | November 2024 Multiple challenges Despite promising opportunities, the sector faces some major hurdles in China. Zhang points out that China’s civil law allows third-party funding under the principle that “anything not explicitly prohibited is allowed,” creating no legal barriers for funders. Over the past seven years, Chinese courts and arbitration institutions have generally been receptive, with many institutions now including thirdparty funding clauses in their arbitration agreements. However, challenges remain. One is the long duration of litigation in China. “As a form of venture investment, third-party funding is sensitive to investment cycles,” Zhang explains. “Initially, we set an investment cycle of three years for each case, but with delays, especially due to the pandemic, cases often take five to eight years to reach enforcement.” Another challenge involves the behavior of funded clients. DS has encountered cases where clients failed to distribute recovered funds as agreed. This issue is influenced by various factors, including economic cycles, corporate ethics, and the absence of escrow accounts for enforcement collections in China. Houzhu has observed similar challenges. To manage these risks, Houzhu incorporates client credibility into its evaluation process, with Fu noting that only five percent of cases assessed are approved for funding. Houzhu often sets up escrow accounts in cross-border disputes, reducing enforcement risks, while establishing repayment terms during early negotiations for domestic cases. A further challenge is educating clients on the value of third-party funding, especially as Chinese firms face increasingly complex, cross-jurisdictional disputes. “Companies need a full strategy for complex, multi-party cases across different legal systems,” Fu observes, adding that Houzhu is working to raise awareness of the specialized resources and expertise third-party funders can bring to the table. Future development Looking forward, third-party funders are optimistic about China’s potential market. DS, for example, has adjusted its strategy to reduce its investment ratio to around ten percent and to invest in a broader array of cases across China, focusing on large, multi-case series, staying true to their mission of “bringing justice through capital.” Fu notes that Houzhu’s cases primarily involve international investment disputes, overseas debt recovery, and foreign equity conflicts. Economic changes have fueled disputes in these areas, driving rapid growth at Houzhu. “Third-party funding emerged in the 1990s in Europe and the United States, and even today there are fewer than one hundred funders worldwide, six of which are publicly listed,” Fu says. “This market in China is still in its infancy but has tremendous promise.” Lau from OBL agrees: “China being one of the largest economies in the world will always be important market for any business, including third party funders,” he notes. “Furthermore, to the extent that many Chinese parties now do so much business all around the world, it is inevitable that disputes might arise and third party funding then becomes a compelling option for Chinese parties to help manage the risks and costs of pursuing their claims,” he adds. 第三方诉讼资助概念自2017年进入亚洲法律市 场实践，标志性事件是香港、新加坡相关规则的设 立。2017年3月，新加坡首先通过《2017年新加坡 民法（修订）法案》，规定允许使用第三方资助及其 范围；随后的6月，香港颁布《2017年仲裁及调解法例 （第三者资助）（修订）条例》，也宣告了第三方资助 在部分争议解决程序中的合法性。 根据上海对外经贸大学唐琼琼的一篇文章，第 三方资助的定义是纠纷解决案件当事方以外的第 三人向一方当事人提供经费支持，待被资助人赢得 案件后，资助人按照约定获取判决或裁决应得金额 的一部分；如果未能赢得案件，其无需向第三方支 付费用。 这一新概念在亚洲落地的同时，中国的相关研 究和实践也在萌芽之中。 2016年，张志在一次国际会议中听到第三方资 助的概念，“觉得非常有趣，这是律师服务行业伴随 经济社会发展演变形成的一种变革”。他和团队开始 对中国法下的第三方资助展开研究，并在深圳前海 Dispute Resolution “Third-party funding addresses a critical issue in China: the high cost of litigation. It bridges the gap between investment demand and access to justice.” — Zhang Zhi, DS Legal Capital “在中国市场做第三方资助解决的最大痛点在于诉讼 成本较为高昂、大量中小企业及个人无力寻求司法正 义。第三方资助是很好的平台，链接了资本投资诉求和 社会司法需求。” — 张志，鼎颂
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