Are there rules or restrictions on third-party funders in your country?

International Arbitration

Austria Small Flag Austria

As far as lawyers are concerned, Austrian law prohibits the conclusion of quota litis agreements, ie to accept a percentage of the amount awarded in the proceedings. Subject to very strict limitations, lawyers are permitted to act on the basis of a contingency fee. First, the fee may not correspond to a proportion of the amount awarded. Second, the fee must be reasonably in proportion to the efforts of the lawyer and shall not exceed the remuneration provided for in the Lawyer’s Tariff Act by far. Hence, contingency fees are most uncommon.

Regarding conventional litigation/arbitration funding by third parties, the law is not clear as the validity of such agreements has not been subject to a decision of the Supreme Court. Although some scholars argue that the rules on quota litis described above may apply to third party funders, it can well be argued that as long as the funder provides no legal services, has no influence on the strategy of the proceedings and no involvement in the case, funding is generally permissible in Austria.

France Small Flag France

In France, there are no provisions that preclude third-party funders. The issue of whether or not third-party funding agreements are valid under French law was raised before the French courts in Société Foris A.G. v S.A. Veolia Proprieté. In this case, the Tribunal de grande instance enforced a third-party funding agreement (See Société Foris A.G. v S.A. Veolia Proprieté (anciennement dénommée S.A. Onyx), RG No. 05/01038, Court of Appeal of Versailles, 12e Ch. Sect. 2, June 1, 2006).

Portugal Small Flag Portugal

There are no rules on such matters.

Romania Small Flag Romania

There are no rules or restrictions in relation to third-party funders. Litigation funding by a third party is not officially provided for within the Civil Procedure Code. Therefore, third-party funding of the proceedings is permitted, being no provision interdicting such procedure. The third-party funding will be governed by the agreement concluded between the funder and the beneficiary. However, third-party funding is not frequently used in Romania.

Sweden Small Flag Sweden

Swedish law does not restrict third-party funding.

UAE Small Flag UAE

There are no specific rules or restrictions on third-party funding in the UAE. Third-party funding remains in its infancy in the UAE, although there is growing interest from third-party funders in the UAE.

Switzerland Small Flag Switzerland

In principle, there are no rules or restrictions on third-party funders in Switzerland. The Swiss Federal Tribunal has expressly confirmed that third party funding is, as a rule, admissible. However, certain limitations on influencing the client-attorney relationship will need to be respected by third party funders.

New Zealand Small Flag New Zealand

Litigation funding is now permitted in New Zealand. See, for example, Waterhouse v Contractors Bonding Ltd [2013] NZSC 89. There is currently no regulation of third party funding by legislation. The non-funded party bears the burden of raising any concerns before a court will scrutinise a funding agreement. This might be, for example, where the non-funded party applies for security for costs, or where a third party costs order against the funder or a stay on the grounds that the funding amounts to an abuse of process.

In the Waterhouse case, the Supreme Court provided guidance for the Courts on third party funding, which may guide arbitrators in New Zealand dealing with disputes governed by New Zealand law:

  • There should be disclosure, as soon as proceedings are issued, of the identity and location of any litigation funder and whether the funder is subject to the jurisdiction of the New Zealand courts. The funder does not need to provide the other party to the litigation with an indemnity for its costs.
  • Funding agreements themselves may be relevant to an application for security for costs or third party costs, or where a stay is sought on grounds of abuse of process.
  • If the other party brings a stay application, the funded party may be compelled to disclose the funding agreement.
  • In order to defeat an abuse of process argument, it will remain important to draft litigation funding agreements carefully to avoid effecting a bare assignment. The distinction is between a true funding agreement for an engaged plaintiff and a wholesale transfer of rights with the plaintiff remaining only a figurehead.

Malaysia Small Flag Malaysia

There are no express statutory prohibitions on third party funding in arbitration and litigation in Malaysia, though, such a fee arrangement may be the subject of judicial scrutiny under the common law rules of champerty and maintenance. However, there is presently no judicial guidance regarding the validity of third-party-funded claims in Malaysia.

Malaysia is perceptive and has been noticeably receptive of international trends in arbitration. The Malaysian legal community has been keeping abreast with the current international discourse and reforms on third party funding and is considering the importation of such ideas into the jurisdiction. This is an area to be observed in the next few years.

United States Small Flag United States

None exist beyond the rules applicable in all legal proceedings, such as ethical rules restricting the scope of permissible contingency-fee arrangements between U.S. attorneys and their clients.

Singapore Small Flag Singapore

Yes, third-party funding is currently prohibited in Singapore, via application of the common law doctrines of maintenance and champerty. As discussed above, there is a proposed legislation to legalise and regulate third-party funding for international arbitration.

Brazil Small Flag Brazil

There is no specific provision on third-party funding in national laws on arbitration, but are being created guidelines and also new provisions in institutional rules (rules of arbitration chambers) on the subject. The main point of attention of arbitral institutions regards to the need for disclosure of funding to the arbitral court and the other parties to the arbitration proceedings. By assuming the costs of the arbitration, the financier shall be interested in the procedure, which may affect the impartiality and independence of arbitrators. For this reason, organizations such as the ICC (International Chamber of Commerce) and the International Bar Association (IBA) currently require the identification of funding in order to avoid any conflict of interests between him and the members of the arbitral court, ensuring transparency in the procedure. Following the international trend, the Arbitration and Mediation Center of the Chamber of Commerce Brazil-Canada (CAM-CCBC) recently issued Administrative Resolution nº 18/2016, which in addition to conceptualize the mechanism of "third party funding ", also recommends that the parties inform about their existence "at the earliest opportunity". The guidelines and rules created by Brazilian arbitral bodies have proven sufficient to prevent bad practice on using such third-party funding mechanism, not requiring any legislative amendment in this regard.

Canada Small Flag Canada

There are laws against maintenance and champerty, which may apply to funding arbitrations; however, third-party funding for arbitration (and litigation) is increasing in frequency in Canada and has been approved in several court cases, subject to certain imposed conditions. Some commentators have raised concerns, but there are currently no specific governing regulations.

Panama Small Flag Panama

In Panama there are no rules or restrictions on third-party funders.

Spain Small Flag Spain

The are no rules, and third party funding is not yet properly developed.

Turkey Small Flag Turkey

No specific regulation or restriction concerning third-party funding in arbitration is regulated under Turkish law.

Germany Small Flag Germany

No. Thirdparty funding is frequently discussed also in Germany, but currently rather perceived as a topic of little relevance. Existing German law would be able to handle the typical thirdparty scenarios.

Italy Small Flag Italy

There are no rules under Italian law governing third-party funders.

United Kingdom Small Flag United Kingdom

No, except where they are in breach of the torts of Champerty and/or Maintenance.

Ireland Small Flag Ireland

Under Irish law, the common law principles of maintenance and champerty preclude funders without a legitimate interest from proceedings. The Irish High Court in April 2016 confirmed that professional third party litigation funding remains prohibited however this decision is under appeal to the Supreme Court, which appeal is likely to be determined during 2017.

Poland Small Flag Poland

There are no rules in Poland concerning third-party funders, and at least so far no common practice regarding third-party funding has been observed.

Updated: February 6, 2017