Panel:“ Funding the Fight: The Role of Litigation Funding in International Restructurings”
Summary by Pulkit Deora – NextGen Class XV
This session explored the rise of third-party litigation funding in cross-border insolvencies, regulatory and ethical considerations, and its overall impact on estate value. The panel was moderated by Hon. Robert Mark( USA), and featured Prof. Charles Booth( University of Hawaii), Scott Butler( Australia), and Yuri Sugano( Japan). The discussion highlighted how different jurisdictions handle litigation funding legally, practically, and culturally.
Australia abolished the crimes of champerty, maintenance, and barratry( the repeated funding of claims) between the 1950s and 1970s. While public policy challenges remain, courts have determined that litigation funding is not contrary to policy because liquidators have the power to sell or assign assets. The largest litigation funder in Australia is actually the government, through the Fair Entitlements Guarantee( FEG) scheme. The government pays employee entitlements upfront, steps in as a creditor, and then funds the liquidator to bring claims to recover those funds. The FEG will sometimes even fund claims for academic pursuit to test the system and fulfil long-term objectives, even if the costs might outweigh the claim.
Contingency fees are generally prohibited, with the exception of class actions in the state of Victoria. Lawyers will more often charge a portion of their fee upfront and the rest upon success. In litigation, the loser generally pays 60-70 % of the costs. Consequently, funders will typically purchase After the Event( ATE)
insurance as part of their funding package to use as security for costs.
Practically all litigation funding agreements require court approval. Allocating a portion of future recoveries is viewed as a disposition of estate property, and liquidators must seek approval whenever an asset disposal falls outside the ordinary course of business.
In contrast to Australia, champerty and maintenance are still considered a tort and a crime in Hong Kong. However, there is a statutory exception for arbitration and mediation. While funding is currently not permitted in insolvency directly( though uplifts capped at 50 % are allowed in arbitration), a 2007 case invoked common interest, access to justice, and insolvency regarding funding. Subsequent judgments in 2009 added a requirement to seek court approval. Due to conflicting judgments seeking formal approval remains a highly recommended practice.
Singapore has mirrored Hong Kong ' s loosening of restrictions. In 2015, the Singapore High Court confirmed that selling the fruits of a cause of action falls within a liquidator ' s powers and does not offend the doctrines of maintenance and champerty.
For smaller jurisdictions like Hong Kong and Singapore, debtors ' assets are usually located abroad, often hidden in offshore structures. This makes funding highly problematic for proceedings concerning the adjudication of claims, as the true difficulty lies in the cross-border enforcement of the decrees, rather than obtaining the decree itself.
Japan faces strong cultural pressures against litigation and funding. Culturally, there is an
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