Evolution, adaptation of third party funding of arbitrations

By Caroline Kenny QC
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This article focuses on new legislation introduced by Singapore and Hong Kong to allow third party funding of arbitrations. The legislation is an important step in bringing these popular arbitral jurisdictions in line with other jurisdictions including Australia, England, and the US.

By way of background, it is relevant to consider the reasons for the prohibition on third party funding. In common law jurisdictions, third party funding was prohibited because it was said to offend the medieval torts and crimes of maintenance and champerty.

CAROLINE KENNY QC
CAROLINE KENNY QC

Maintenance refers to an unconnected third party assisting to maintain litigation by providing financial assistance. Champerty is where a third party pays some or all of the costs associated with litigation in return for a share of the proceeds. The prohibition against funding arrangements was historically intended to prevent the abuse of judicial process by wealthy English noblemen who would associate themselves with fraudulent or vexatious claims, thereby strengthening the credibility of the claims, and in return receiving a share of the profits.

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Caroline Kenny QC is an arbitrator of Beijing Arbitration Commission/Beijing International Arbitration Centre (BAC/BIAC) and president of CIArb Australia branch. BAC/BIAC’s case manager, Gerard Lin, also contributed to the article.

The article is adapted from a speech by Kenny at a 2017 Hong Kong summit on commercial dispute resolution in China.

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