Menu Search through site content What are you looking for?
Menu

Coverage challenges via arbitration in Asia will increase

  • Market Insight 04 January 2023 04 January 2023
  • Americas, Asia Pacific, UK & Europe

  • Insurance 2023 - the year ahead

2023 will see growth in the number of coverage disputes – in Hong Kong, contingency fees will be made available and Singapore will see new regulations bed in

In Hong Kong, champerty and maintenance remain criminal offences – that is, funding litigation to share in the damages awarded. However, in part to increase “access to justice”, third-party funding for arbitration cases is permitted since February 2019; and contingency fee arrangements between HK lawyers and their clients in arbitrations is permissible since 16 December 2022, under the Outcome Related Fee Structures reform.

In Singapore, contracts involving champerty and maintenance continue to be contrary to public policy or are illegal, unless they fall under three permitted categories:

  • Third-party funding of proceedings for international arbitration and related court and mediation proceedings have been legalised since March 2017.
  • Third-party funding of proceedings in the Singapore International Commercial Court (“SICC”), domestic arbitration and related court (for domestic arbitration) and mediation proceedings have been legalised as of June 2021.
  • As of May 2022, lawyers based in Singapore may enter into conditional fee arrangements (e.g. “no win, no fee”) for international and domestic arbitration proceedings, certain proceedings in the SICC and related court and mediation proceedings.

Many Hong Kong and Singapore insurance policies – particularly for financial lines cover – use arbitration rather than litigation as dispute resolution mechanism. As a result, if the decision does not favour the insureds, they cannot challenge that outcome, but can seek third-party funding, or agree contingent fee arrangements with their lawyers.

These developments will reduce an insured’s cost of challenging insurer’s coverage determinations, which will lead in 2023 to a rise in coverage challenges in the insurance industry via arbitration.

View all our Insurance 2023 Predictions here

End

Stay up to date with Clyde & Co

Sign up to receive email updates straight to your inbox!