Legal finance has been used in Asia for over a decade in the context of insolvency, but the awareness of its use among the legal community and the appreciation of its value for insolvency practitioners have grown considerably following the introduction of the third-party arbitration funding framework in Singapore and Hong Kong.
Courts in both jurisdictions have in recent years clarified and expanded the scope of legal financing arrangements for insolvency practitioners. Given the courts’ increased willingness to facilitate external finance, it is essential for practitioners to understand its current status in these two jurisdictions, the practical considerations of financing in the insolvency context and what lies ahead for legal finance in Asia.
Both Singapore and Hong Kong recently passed legislation establishing a framework for legal finance and its various products to be used in association with international arbitration matters. The framework in Singapore was given effect through amendments in 2017 to the Civil Law Act; the Hong Kong funding arrangement introduced by the Arbitration and Mediation Legislation (Third Party Funding) (Amendment) Ordinance 2017 was implemented in February 2019. The introduction of these arbitration frameworks has since led to a renewed interest in the development of the legal finance industry, not only in insolvency in Hong Kong and Singapore, but also more broadly across other Asian jurisdictions.