INTERNATIONAL ARBITRATION 1/3LY
SIMON I do, but I have a question for Ruth. In Singapore, using the Otech Pakistan Pvt v Clough Engineering case in 2007 1 as an example, our understanding is that there has been quite entrenched resistance to the concept. In that case, the Court of Appeal in 2007 found that “it would be artificial to differentiate between litigation and arbitration proceedings and say that champerty applies to one because it is conducted in a public forum and not to the other because it is conducted in private”. On the other hand, in Hong Kong, the Law Reform Sub-committee currently recommends that third-party funding should be permitted in arbitration taking place in Hong Kong. Why do you think Singapore may move more quickly than Hong Kong? RUTH It’s possibly a combination of things. When the Otech Pakistan Pvt Ltd v Clough Engineering Ltd decision was made, funding was even less developed than it is now. It’s a fairly nascent industry and funding only comes up in relatively few cases compared to the overall number of cases that go on. But the understanding of what funding is and how it works has evolved significantly since 2007. This is coupled with the desire of Singapore to position itself as a hub for dispute resolution, which has also evolved since 2007. The combination of both factors have possibly led to an evolution in decision making regarding champerty, and the outcome might be different to what it was in 2007. In addition, with funding being used in jurisdictions like Australia and more recently the UK, there is more information available to demonstrate that the fears associated with allowing funding aren’t really going to materialise in the way I think they suspected. SAPNA I do share your view and I feel it is inevitable in some sense - it’s really a question of when. I also share your view that Singapore really likes to be a market leader and they can put in place regulation, quite quickly, if they want to. 20 years ago, champerty was a dirty word in England too, but over that time things have evolved and institutions like Harbour have paved the way and really tried to be very transparent and engage with the community. I feel we have a long way to go in Singapore in a much shorter time and I am just not sure how quickly they are going to be able to reach the same stage of not thinking that there is something quite sinister about third-party funding.
I definitely feel that, as you say, things have changed a lot in the last few years, and people are more open to the idea but there is still this hesitance and champerty is felt to be intrinsically bad. That is my gut instinct. RUTH I agree. I think one of the reasons for that is that generally the cases that come up in the public sphere, that deal with maintenance and champerty, tend to be the very worst examples, often cases of lawyers really exploiting and taking advantage of their clients. However, that’s not the same realm as cases being considered by commercial funders like Harbour; where there are generally sophisticated companies and advisers involved, so there is simply not the same dynamic. Harbour is not looking to fund consumer type cases; we are looking at very large commercial cases. It will take time for people to understand that.
Different funders will focus on cases of different types, sizes and jurisdictions. We focus on large commercial claims with a value of GBP 10 million or above. There are other funders who focus on cases with a smaller claim value, but we found that they don’t work for us, or the claimant, economically. Another advantage of Harbour’s model is that we have capital immediately available for investment. Other funders may act more like brokers, such that it is only when they hear of a good case they then try to find money to fund it. If they can’t find the money it may delay or stall the process altogether. The availability of Harbour’s funds is a differential and means we can respond quickly in terms of our decision making. A further advantage of Harbour’s model is that we spend the capital we have in a way that gives claimants comfort that they will have funding available throughout the life of their claim. We do this by ring-fencing within our funds the money that we agree to fund. We don’t leverage our capital; we only spend the money once. Other funders might leverage the monies they have, which can leave claimants in a more precarious position. SIMON How does ring-fencing actually work? Do you make a note to the accounts and actually set aside the budgeted fees of forward costs? RUTH Effectively, if we complete our due diligence on a case inquiry and it is the recommendation from the investment committee that we fund, we will agree a detailed budget with the firm who is acting on the case. Whether it’s arbitration or litigation, you can get a pretty good idea of the basic skeleton and add some extras for contingencies. This means that at the point we enter into the funding agreement, we have a specific budget agreed along with the total amount of funding to be provided. We ear mark the money for the budget of that particular case within the fund. One of the goals we have at Harbour is to decrease the differential between anticipated budget and what is actually spent. This foreseeability is useful for everyone involved, including the claimant and their lawyers, as well as the funder.
FUNDING THE CLAIM: HOW DO FUNDERS DIFFER?
SAPNA I hadn’t appreciated that there were so many litigation funders around with different focus areas and different ways of funding. How does your business differ from other providers in the market and what are the benefits of the various types of funders? RUTH There are lots of different models that funders use. Some are publicly listed; some are backed by high net worth individuals whilst others have particular lines of credit available to them. Harbour is different again, we have closed end funds, with the capital raised available for investment. One of the benefits of this model, and not being listed, is that we don’t have an eye on our share price all the time which can affect the manner and the speed with which we make decisions.
1 Otech Pakistan Pvt Ltd v Clough Engineering Ltd [2007] 1 SLR 989
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