Use of Third-Party Funding in International Commercial Arbitration Exhibit 5.21 No – I have not heard of it/do not understand its applications or how it works No – I understand its applications and how it works but have not used it Yes – I have used it 79% 92% 77% 14% 0% 17% 7% 8% 6% All Respondents Client Users External Counsels 5.34 Respondents were also asked about their use of third-party funding in international commercial arbitration. The majority of the respondents (79%) understand what third-party funding is but have not used it. Only 17% of External Counsels have used third-party funding and virtually none of the Client Users have had experience with the same. This shows that while several investment companies have emerged to finance disputes, third-party funding has not been widely used by parties to an arbitration. Point of Interest Third-party funding involves financial support from a funder – banks, hedge funds, or other entities that provide funding for profit – to facilitate arbitration proceedings. Newer instruments, such as the 2021 Canada Model Foreign Investment Promotion and Protection Agreement, European Union-Singapore Free Trade Agreement, and the new International Centre for Settlement of Investment Disputes (“ICSID”) Arbitration Rules, have included donations or grants as forms of third-party funding. Before a third-party funder steps in, the third-party funder would generally scrutinise and evaluate the claimant’s case before agreeing to fund it. Should a favourable decision be obtained, third-party funders receive a portion of the proceeds awarded. One of the advantages of employing third-party funding is the ability of parties to institute arbitration proceedings while shifting the financial risk to the funder, thus increasing access to dispute resolution proceedings that may otherwise have been out of the claimant’s reach. Third-party funding is now widely available and permitted across different jurisdictions. 5.35 The United Kingdom (“UK”) and Australia have long histories of allowing third-party funding in their jurisdictions. In 2005, the UK Court of Appeal held that third-party funders “provide help to those seeking access to justice which they could not otherwise afford”.6 A year later, the High Court of Australia upheld third-party funding agreements as well.7 In both the UK and Australia, third-party funding operates “with little regulation”.8 For instance, there is no requirement in both jurisdictions to disclose the existence of third-party funding agreements and the identity of funders in litigation or arbitration. Recently, Australia has required funders to hold an Australian Financial Services License.9 This is intended to make funders more transparent and more accountable.10 5.36 Singapore11 and Hong Kong12 changed their statutes in 2017 to permit third-party funding in international arbitration. Compared to the UK and Australia, Singapore and Hong Kong put in place a framework to regulate third-party funding. Third-party funders in Singapore must also comply with the Civil Law (Third-Party Funding) Regulations 2017. Funders in Hong Kong, on the other hand, must observe the practices and standards found in the Code of Practice For Third Party Funding of Arbitration. It must be noted that, in both Singapore and Hong Kong, disclosure of the existence of a third-party funding agreement and the funder itself is mandatory. 6 Arkin v. Borchard Lines Ltd & Ors [2005] 1 WLR 3055. 7 Cambpells Cash and Carry Pty Ltd v. Fostif Pty Ltd (2006) 229 CLR 386. 8 Caroline Kenny, A Comparison of Singapore and Hong Kong’s Third-Party Funding Regimes to England and Australia, (2021), 87, Arbitration: The International Journal of Arbitration, Mediation and Dispute Management, Issue 2, pp. 170-190, available at https://kluwerlawonline.com/journalarticle/ Arbitration:+The+International+Journal+of+Arbitration,+Mediation+and+Dispute+Management/87.2/AMDM2021014 9 Corporations Amendment (Litigation Funding) Regulations 2020 (Cth). 10 Explanatory Statement, Corporations Amendment (Litigation Funding) Regulations 2020, Issued by authority of the Treasurer, available at http:// www5.austlii.edu.au/au/legis/cth/num_reg_es/cafr2020202000942551.html#:~:text=The%20purpose%20of%20the%20Corporations,managed%20 investment%20scheme%20(MIS)%20regime 11 Civil Law Act (Cap 43), ss. 5A, 5B. 12 Arbitration Ordinance (Cap 609), Part 10A. SIDRA INTERNATIONAL DISPUTE RESOLUTION SURVEY 28
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