INTERNATIONAL ARBITRATION 1/3LY
S IMON 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 forumand not to the other because it is conducted in private”. On the other hand, in Hong Kong, the LawReform Sub-committee currently recommends that third-party funding should be permitted in arbitration taking place in Hong Kong. Why do you think Singaporemaymovemore quickly than Hong Kong? RUTH It’s possibly a combination of things. When the Otech Pakistan Pvt Ltd v Clough Engineering Ltd decisionwasmade, 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 coupledwith 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 outcomemight be different to what it was in 2007. In addition, with funding being used in jurisdictions like Australia andmore recently the UK, there ismore information available to demonstrate that the fears associatedwith allowing funding aren’t really going to materialise in the way I think they suspected. S APNA I do share your viewand 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 amarket leader and they can put in place regulation, quite quickly, if theywant to. 20 years ago, champertywas a dirtyword 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 amuch 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 fewyears, and people aremore open to the idea but there is still this hesitance and champerty is felt to be intrinsically bad. That ismy 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 withmaintenance and champerty, tend to be the veryworst 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. S APNA I hadn’t appreciated that there were somany litigation funders aroundwith different focus areas and different ways of funding. Howdoes your business differ fromother providers in themarket andwhat 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 thismodel, and not being listed, is that we don’t have an eye on our share price all the time which can affect themanner and the speedwithwhichwemake decisions. F UND ING T HE C L A IM: HOW DO F UNDER S D I F F ER?
Different funders will focus on cases of different types, sizes and jurisdictions. We focus on large commercial claims with a value of GBP 10million or above. There are other funders who focus on cases with a smaller claimvalue, but we found that they don’t work for us, or the claimant, economically. Another advantage of Harbour’smodel is that we have capital immediately available for investment. Other fundersmay act more like brokers, such that it is onlywhen they hear of a good case they then try to findmoney to fund it. If they can’t find themoney it may delay or stall the process altogether. The availability of Harbour’s funds is a differential andmeans we can respond quickly in terms of our decisionmaking. A further advantage of Harbour’smodel is that we spend the capital we have in away that gives claimants comfort that theywill have funding available throughout the life of their claim. We do this by ring-fencing within our funds themoney that we agree to fund. We don’t leverage our capital; we only spend the money once. Other fundersmight leverage themonies they have, which can leave claimants in amore precarious position. S IMON Howdoes ring-fencing actuallywork? Do youmake 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 firmwho 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. Thismeans 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 themoney 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 andwhat is actually spent. This foreseeability is useful for everyone involved, including the claimant and their lawyers, as well as the funder.
1 Otech Pakistan Pvt Ltd v Clough Engineering Ltd [2007] 1 SLR 989
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