How to pay to play the Construction Arbitration Game?

Old sins cast long shadows.

Two such shadows over international construction arbitration in Asia are the prohibitions against champerty and maintenance.

Maintainance is when you pay for someone else's arbitration without any good reason. Champerty is when you pay for someone else's arbitration for the worst possible reason - because you want to profit from it.

A lot of consultants and contractors find it surprising that they even face such restrictions when it comes to construction arbitrations. They're expecting what they see on TV, with lawyers offering 'no-win no fees' arrangements and taking a third of the damages if they're successful.

Perhaps because it's become so normal on our TV screens, the public policy objections to champerty and maintenance have also faded away, to be replaced by counter-arguments focusing on 'access to justice' and 'access to court'.

Law reform in Hong Kong in 2019 and Singapore in 2017 allowed third-party funding of arbitration in these major hubs for the first time.

The champerters of old have now incorporated, got private equity funding, set up specialist funds, built up expert claim evaluation panels, and rebranded as litigation funders.

Nowadays, third-party litigation funders are a well-established part of the arbitration marketplace. They can deliver excellent value to parties to an international construction arbitration. This includes reducing the financial risks of litigation, removing the need to carry these costs on the balance sheet, and how they help promote the equality of arms in dispute resolution.

Especially in construction claims, where there can be a portfolio of disputes, a litigation funder can provide a real edge in sustaining claims through to the end.

The law is still struggling to catch up to the change in the marketplace that this has started. So while third-party funding is relatively well established, conditional fees (including no-win no-fee arrangements) are still not always permitted.

In Singapore, it was only in May 2022 that conditional fee arrangements were allowed in arbitrations. For Hong Kong, law reform to allow this is still underway.

In many other Asian jurisdictions, funding still does not remain easily accessible as funders build familiarity and capacity in these markets.

A modern approach to construction arbitration will almost always investigate whether litigation funding can shift away the risks of litigation.

We are finally starting to leave behind the long shadows of some old-fashioned ideas.