Unlike common law systems, civil law jurisdictions do not have doctrines like maintenance and champerty. Consequently, third-party funding in civil law jurisdictions is governed by specific laws or regulations in each jurisdiction, or in some cases, may not be regulated at all.
In China, there are no specific prohibitions or regulations governing TPF and judicial commentary on the subject is still limited and sometimes conflicting. Previously, contingency fee arrangements were allowed, where Chinese lawyers could charge up to 30% of the case proceeds (Article 13, Measures for the Administration of Lawyers' Service Charges 2006). However, in December 2021, the inter-ministerial Opinions on Further Regulating Lawyers' Fees (“<span class="news-text_medium">Opinions</span>”) introduced a new progressive cap on contingency fees, ranging from 18% to 6% depending on the case proceeds (Article 3(6)).
In 2017, the China International Economic and Trade Arbitration Commission (“<span class="news-text_medium">CIETAC</span>”) introduced the International Investment Arbitration Rules, which expressly address TPF. Article 27 requires a funded party to disclose the funding agreement, including details such as the name and address of the third-party funder, to the other party, the tribunal and the arbitral institution. The tribunal has the authority to compel such disclosure and may take it into account when determining arbitration costs. Although CIETAC’s rules regulate TPF for international investment arbitration, they are governed by public international law, not Chinese domestic law.
In 2024, the CIETAC Arbitration Rules introduced new provisions requiring disclosure of the funding agreement and the financial interest of the third-party funder. However, CIETAC rules apply only when chosen by the parties and do not suggest that Chinese law governs TPF. Recent PRC court discussions on TPF in arbitration remain cautious and the courts are still hesitant to embrace TPF in civil litigation.
In Japan, the TPF industry is emerging, but uncertainty remains regarding its legality for litigation or arbitration. The common law doctrines of champerty and maintenance do not apply in Japan and there is no explicit prohibition on TPF. However, there are uncertainties surrounding the assignment of claims, which may be seen as creating a trust and thus prohibited, as well as the rule that only licensed attorneys can provide legal services or act as intermediaries in legal proceedings. In practice, these issues are unlikely to cause significant problems, as TPF cases typically do not involve claim assignments and funders do not generally seek to control the conduct of claims. Given the growth of TPF in Japan, judicial guidance or legislative reform may be needed to clarify the legal position.
South Korea currently has no specific laws or regulations either prohibiting or regulating TPF in arbitration or litigation. To date, there have been no major court cases in South Korea addressing TPF. However, the Korean Supreme Court Judgment (2019Ma6990) on 24 April 2020 ruled that third parties could pay attorney's fees on behalf of the losing party, which could stimulate further discussions on TPF and potentially lead to a clearer legal framework in the future.
