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Chinese Court Affirms Legality of Third-Party Funding in Arbitration

Mon, 20 Feb 2023
Categories: China Legal Trends

In November 2022, Beijing Fourth Intermediate People’s Court issued a ruling in a foreign-related judicial review of arbitration case involving third-party funding, where the legality of third-party funding in arbitration was confirmed.

Lawyers of Beijing Jingtian & Gongcheng Law Firm acted as the agents of the creditor of the awards. They disclosed the case information on the firm’s social media.

This case concerns two arbitral awards issued by the China International Economic and Trade Arbitration Commission (“CIETAC”).

The debtor of the awards first applied to the enforcement court, the Wuxi Intermediate People’s Court for non-enforcement of the arbitral awards. One of the grounds was that the two arbitral awards involved third-party funding in arbitration. Wuxi Intermediate People’s Court held that the third-party funding in arbitration did not violate relevant laws, regulations and arbitration rules, and therefore rendered a ruling of dismissal.

Thereafter, the debtor of the awards continued to apply for setting aside the two arbitral awards to Beijing Fourth Intermediate People’s Court. Beijing Fourth Intermediate People’s Court held that:

  1. Prevailing Chinese law does not prohibit third-party funding institutions from supporting the parties in arbitration. If a party’s choice of third-party funding does not violate laws and does not affect the fairness of the arbitration award, that choice shall be respected. The arbitral tribunal had reviewed the legality of the third-party funding and exercised its power to arbitrate.
  2. There are currently no relevant regulations in China on the information disclosure of third-party funding. The claimant in this case voluntarily stated the existence of third-party funding and publicly disclosed the fact in the arbitration proceedings. This ensures the arbitral tribunal and the parties have the right to know and exercise their rights based on the disclosed information.
  3. Current arbitration rules do not prohibit a third-party funding institution from funding a party to participate in an arbitration. Therefore, the establishment of a funding relationship between a third-party funding institution and a party does not violate the confidentiality rules of the arbitration.

 

 

Cover Photo by JuniperPhoton on Unsplash

Contributors: CJO Staff Contributors Team

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