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Regional focus: APAC

April 14, 2020
Quentin Pak & Matt Lee

There have been far reaching developments in both the growth and regulation of legal finance in Asia Pacific in 2019. The outlook for legal finance remains overwhelmingly positive as the industry matures and becomes increasingly prevalent—with new potential markets opening up in jurisdictions such as India and Korea.

2019 trends


In early 2019 the much anticipated ALRC report on Class Actions Litigation and Third-Party Funding was published. Its recommendations replicate the ongoing trend of professionalization of legal finance providers that is naturally occurring in the market. For instance, under the ALRC recommendations, legal finance providers must demonstrate their financial strength through annual auditing. This requirement speaks to the importance of providers’ demonstrated capital adequacy and will continue to reinforce the divide between market players who conduct their businesses as top tier financial services brands and lower tier providers.

In the latter part of 2019, the state of Victoria (VIC) announced plans to introduce damages based agreements (DBAs) for law firms. It is likely this will be voted on within the first six months of 2020. This would be a game changer for legal finance in Australia, as law firms are currently prohibited from charging contingency fees—excepting in certain instances where a small uplift is permissible. This would result in a market shift to something more comparable to the US legal finance model.

An additional development was the Australian High Court (HCA) finding, in two separate cases, that common fund orders were no longer permissible for open class actions.

This was a complete reversal of the previous legal position established by the 2016 decision in Money Max,[1] which allowed for all group members to pay a litigation funding commission from any settlement or judgment, not just those group members who had signed the original legal finance agreement. The rationale behind Money Max was to reduce barriers to legal finance and make finance more accessible in class actions.

In December 2019 the HCA determined in both Brewster v BMW Australia and Lenthall v Westpac Life Insurance that the Money Max precedent was no longer applicable. This resulted in a new level of uncertainty for legal finance providers, who will no longer be able to include a common fund order in their fee terms and will instead have to take on the burdensome process of book building.

One caveat to the new HCA position was the release of a practice note that may allow for a common fund order to be issued upon settlement. Until the point is clarified by an application for one of these orders and the inevitable subsequent challenge, there will remain a level of uncertainty.


Singapore’s new Insolvency, Restructuring and Dissolution Act (the Act) was passed by parliament on 1 October 2018 and came into force in early 2019. The Act provides a broader restructuring and company rehabilitation framework (in the direction of the US Chapter 11) for companies. It represents another important development that increases the appeal that Singapore has as a debt restructuring hub—a number of corporate rescue mechanisms have been enhanced, and the range of non-Singapore companies that can now avail themselves to the Singapore restructuring framework has also been broadened. In turn, we expect to see litigation finance being more widely used in Singapore.

Hong Kong

On 1 February 2019, the long-awaited Code of Practice for Third-Party Funding of Arbitration was implemented. The code provides a clear framework for third-party financing of international arbitrations seated in Hong Kong and sets out specific guidelines for funders operating there.

With the implementation of the new code, it is now permissible to use legal finance to offset costs relating to arbitrations seated in Hong Kong. This ensures that Hong Kong is in line with other leading international arbitration centers—such as Singapore—that have already recognized the business value of legal finance for managing the costs of dispute resolution. The framework complements the use of legal finance in bankruptcy matters, which have long been permissible in Hong Kong.


Singapore and Hong Kong are not the only Asian locations to experience a rise in the use of legal finance. The Indian market has proven to be increasingly receptive, particularly in the monetization of legal assets. Most remarkably, 2019 saw the use of legal finance technique being applied to corporate finance, with the widely reported transactions by Hindustan Construction Company and Patel Engineering in which portfolios of arbitration awards were monetized as a way to reduce debt and enhance access to working capital.

We anticipate this is only the beginning and expect India to become a market to watch in the future.

The year ahead


There exists an open question regarding multiplicity of class action proceedings with multiple common fund orders, where numerous class actions are commenced within a short period of time to bring claims on behalf of class members. One criticism relating to the practice is that it has led to “beauty parades” to determine which legal team might best lead the class action. We expect the question of whether duplicative class actions be allowed to continue to be examined further in 2020.

The state legislation in VIC around the permissibility of DBAs may have a knock-on effect for New South Wales (NSW). It will be likely that NSW will follow suit, so as not to confer a jurisdictional advantage for class actions to VIC. This will inevitably incite a larger question around whether that will spur Federal legislation to introduce a limited scope contingency fee model for class action proceedings, as recommended by the ALRC report.

Lastly, there is a consensus among esteemed Australian financial experts that the global economy is entering a recession cycle. Should their predictions come to pass, the legal finance market will see increased activity, with escalating demand for products like monetization and commercial litigation finance, rather than purely class actions-based financing.


The adoption of contingency fees in certain matters is being considered. This would create a positive impact on the legal finance industry. Law firms working on contingency risk enormous financial losses of many millions of dollars in costs for lawyers’ fees, case expenses and insurance against adverse costs. This renders legal finance an indispensable tool for such law firms to manage legal risk (and indeed has helped drive the market for legal finance in the US).


Another jurisdiction in which we expect to see significant growth is South Korea. Rising awareness of the industry and interest from Korean conglomerates, particularly for cross-border disputes, will drive market growth. In fact, many Korean corporates are already receiving support from third-party financiers in matters involving litigation in the US or UK.

Legal experts in Korea have identified a building momentum to formalize and implement third-party funding guidelines that would bring it in line with other Asian arbitration hubs such as Singapore and Hong Kong. We expect the growth of legal finance to play a crucial role in the development of arbitration in Korea and help realize its full potential as a center for multijurisdictional arbitration.


Exciting times lie ahead for legal finance in Asia and Australia. Regional expansion in new markets and the ongoing clarification of legal frameworks and practices governing the industry in Asia-Pacific make it more likely than ever that finance will become an integral part of the legal system.


[1] Money Max Int Pty Ltd (Trustee) v QBE Insurance Group Limited [2016] FCAFC 148; 245 FCR 191; 338 ALR 188