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Lessons learned from Hong Kong: The potential of third-party financing in Malaysia’s international arbitration landscape
Lessons learned from Hong Kong: The potential of third-party financing in Malaysia’s international arbitration landscape
Introduction
With the application of the Hong Kong Laws (Amendment) Ordinance on arbitration and mediation (third-party financing), it has been nearly two and a half years (Amendment) 2017, this article reflects on the issue of third-party financing (`TPF`) in international commercial arbitration.
Third-party financing
The International Commercial Arbitration Commission (`ICCA`) defines TPF as follows: “ A party provided by an entity that is not a party to the dispute, an affiliate of the party or a law firm representing the party, funds or other materials Support the funding of part or all of the costs of the procedure, either alone or as part of a specific scope of cases, and provides such support or funding in exchange for remuneration or compensation that depends wholly or in part on the outcome of the dispute, or through grants or in exchange for insurance premiums Compensation provided by the method of payment.”
The use of such financing arrangements in international commercial arbitration has increased significantly, especially in major arbitration venues, including but not limited to England and Wales, Hong Kong, Singapore, and Australia. In other words, the judicial bodies of many common law jurisdictions do not always accept the TPF when resolving disputes and obstruct such arrangements by enacting the principles of maintenance and litigation. Justice Steyn defined these doctrines as follows: "In modern parlance, alimony is the support of unprovoked litigation by strangers. Arguing is an aggravated form of maintenance. The characteristic of Champerty is to support outsiders' litigation in exchange for part of the procedure. "
Having said that, the above-mentioned positions and concerns regarding TPF’s dispute resolution and maintenance principles and litigation have recently been published in
Hong Kong’s Approach to TPF
On February 1, 2019, the Hong Kong Arbitration and Mediation Law (Third Party Financing) Regulations (Amendment) came into effect ("TPF Regulations"). The TPF Regulations stipulate for common law crimes, alimony, and solicitation of infringements, together with the third-party arbitration financing code of practice issued by the Minister of Justice on December 7, 20187 ("Business Code”), the TPF Regulations establish a modern framework for TPF in international arbitration. Importantly, it contains important safeguards designed to resolve issues that may arise at the TPF, especially concerning the integrity of the arbitration process.
The position of Malaysia
The principle of alimony and presentation is still very active in the field of dispute resolution in Malaysia, as well as the prohibition of the TPF agreement based on the above principles and the fairness of public policies on the risk of perversion or abuse. . For example, in the Malaysian High Court of Amal Bakti Sdn Bhd & Ors v. Milan Auto (M) Sdn Bhd & Ors, Hamid Sultan JC (as he did at the time) held that “the court will not accept a package of settlements or
Conclusion
The arbitration framework continues to evolve, laying the proper foundations for the application of the TPF system. By taking such steps, Malaysia will follow a trend in the context of international commercial arbitration of considering public policies from all angles, including recognition of modern commercial realities and solutions.
(This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, or Religion, Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being. Further, despite all efforts made to ensure the accuracy and correctness of the information published, White Code VIA Mediation and Arbitration Centre Foundation shall not be responsible for any errors caused due to human error or otherwise.)
- This article reflects on the issue of third-party financing (`TPF`) in international commercial arbitration.
- The characteristic of Champerty is to support outsiders' litigation in exchange for part of the procedure.
- The arbitration framework continues to evolve, laying the proper foundations for the application of the TPF system.
