contracts in these situations would not be "contrary to public policy or otherwise illegal".17Lawyers will be able to recommend third party funders and negotiate funding agreements provided they themselves do not receive any direct financial benefit.
The legal significance of such reform should not be under-estimated. Funded parties would normally face certain risks if they were to arbitrate at a seat where third party funding is illegal. As well as potential criminal sanctions, the funded party may be sued in tort. The funded party may also be denied the assistance of the courts. Even if the funded party is successful in obtaining an award, the award may be set aside at the seat of arbitration, on the ground that it is offensive to public policy. In practice, the risk of an unenforceable funding agreement is sufficient to stall the development of the market for would-be funders.
By publishing its draft legislation, Singapore may appear to have leap frogged ahead of Hong Kong for now, but not for long. Hong Kong's Law Reform Commission issued its consultation paper on third party funding for arbitration in October last year and the consultation period ended in February. Draft Hong Kong legislation is expected at the end of this year.
The future – the devil in the details
These are welcome, albeit long anticipated, developments for international arbitration in Asia. Nothing, however, has changed for now. Change is coming, but the nature of that change is not yet clear. Last year saw major funds launch pioneer offices in Hong Kong. We can expect the same in Singapore. However, we do not yet know how third party funding will be regulated in either jurisdiction. For example, Singapore is expected to impose a duty to disclose the existence and identity of a third party funder, which is in line with the preference of the majority of respondents to White & Case and QMUL's 2015 survey.18 On the other hand, while Singapore is alive to the "light touch" approach to regulation adopted elsewhere, it remains to be seen how light its touch will be.
Currently, the law is holding the market back. When this barrier is released, we will see how fast the market gains momentum. However, this much is certain: neither jurisdiction is going to permit a flood.
Endnotes
1. Lord Denning in Re Trepca Mines Ltd (No.2) [1963] Ch. 199 at [220]. 2. Ribeiro PJ in Unruh v Seeberger [2007] 2 HKLRD 414 at [101]. 3. Lord Neuberger, 'From Barretry, Maintenance and Champerty to Litigation Funding', 2013, para. 48. 4. The Law Reform Commission of Hong Kong, 'Class Actions', 2012. 5. Menon CJ, 'Some Cautionary Notes for an Age of Opportunity', 2013. 6. See, e.g., Re Co A [2015] HKEC 2089 (approving a funding agreement between liquidators in a compulsory liquidation and a Cayman incorporated closed-end fund, where the funding agreement was solely an investment for the funder). Hong Kong's permitted exceptions also include where third parties have a legitimate interest in the outcome of the case or where "access to justice considerations" apply, but both only with the court's approval. 7. Unruh v Seeberger [2007] 2 HKLRD 414. 8. Otech Pakistan Pvt Ltd v Clough Engineering Ltd and another [2006] SGCA 26. 9. Re Vanguard Energy Pte Ltd [2015] SGHC 156. 10. 2015 International Arbitration Survey: Improvements and Innovations in International Arbitration conducted by Queen Mary University of London in partnership with White & Case. 11. See also White & Case partner Matthew Secomb's Insight, 'The Ascent of Asia: How the East is gaining on the West in international arbitration'.