China - Part II Country Report - Handbook on Third-Party Funding in International Arbitration
Originally from Handbook on Third-Party Funding in International Arbitration
1.1. TPF Regime in China
For the purposes of this report, references to China (or “PRC”) do not include Hong Kong. Hong Kong has its own distinct legal framework based on the English common law system, and its rules on champerty and maintenance currently prohibit TPF except in some limited circumstances.
1.1.1. Is TPF commonly used in your Jurisdiction? If yes, since when (is it a new trend or a well-established practice)?
TPF is not common practice in China, despite the fact that it is not specifically prohibited by any provision of PRC law. One commentator noted that one reason for the absence of TPF is the relatively low cost of arbitration fees and legal fees in the PRC compared to other jurisdictions. Others have noted that the Chinese disputes market is relatively young, with many Chinese companies new to arbitration, let alone the concept of TPF.
1.1.2. Please shortly describe the TPF market in your Jurisdiction.
a) Is it dominated by local or international Funders, which type of Funders are active, which cases get typically funded?
b) Is there any source on Funders (like the overview published by the German Bar)?
In the last two years, however, with the growing popularity of this topic in Asia (particularly in Hong Kong and Singapore), a number of private funds have set up within the jurisdiction with the aim of providing TPF in Chinese litigation and arbitration cases. While there is currently little public information on these funds and their activities, their presence does suggest that TPF will attract increasing attention within the jurisdiction. It remains to be seen how the authorities may seek to regulate the practice in the coming years.
In addition, there is also “funding” by a third party in court cases in certain other circumstances, for example when Chinese courts accept guarantees or cash posted by security or insurance companies on behalf of a party applying for an asset preservation measure. This practice has largely developed due to the fact that in some cases the amount of security ordered by the court to be posted can be as high as 100% of the amount sought to be preserved (although recently the Chinese courts have tended to lower the amount of security required).