Trending Now
  • An LFJ Conversation with Ian Coleman, Insurance & Funding Broker, Commercial and General
Commercial

Litigation Finance and China’s Belt and Road Initiative

March 1, 2018

Litigation Finance and China’s Belt and Road Initiative

By Mauritius Nagelmueller China is building a multi-trillion dollar trade and infrastructure network – a new silk road – and the legal world is preparing for the disputes that will inevitably arise. What is the Belt and Road Initiative all about, and what impact will it have on litigation finance? Being one of the largest infrastructure and investment projects in history, the Belt and Road Initiative (BRI)[1] will alter the global economy and define China’s role in it. The initiative covers 65% of the world’s population in more than 68 countries, and 40% of the global GDP. An anticipated overall investment of USD 4-8 trillion will connect China with the rest of Asia, Europe and Africa, through six main geographic corridors and a Maritime Silk Road. China’s position is that BRI will improve the infrastructure along the route, providing a network of highways, railways, ports, energy and development projects for trade and cultural exchange. Chinese state-owned banks, the Asian Infrastructure Investment Bank (formed in 2015, but already encompassing 84 approved member states, and with a capital of USD 100 billion – half of the World Bank’s capital), the Silk Road Fund, and investors from the private sector are providing the necessary financing. About USD 1 trillion has already been invested. It seems likely that BRI, if successful, will shift more economic and political power to China. Major concerns surround the environmental impact of the vast project, uncertainties regarding the exact parameters and how much local economies will actually benefit. Security risks along the Belt remain constant. Some even fear a new Chinese “empire”. It remains to be seen which of these fears are justified, but it is interesting to note that China’s president Xi Jinping, who unveiled BRI in 2013 and made the initiative a central tenet of his foreign policy agenda, will likely remain in power, as the Communist Party of China just announced plans to abolish the two-term limit on the presidency. To predict that legal disputes will arise under BRI is to state the obvious, and the legal community in Asia and beyond is preparing accordingly. Jurisdictions are already competing for recognition as the prime venue for BRI related proceedings. In an effort to provide wide-ranging dispute resolution services, China plans to establish an international commercial court in Xi’an for disputes surrounding the land-based transport corridors, another in Shenzhen for the maritime route, and a central court headquartered in Beijing. All three bodies will provide arbitration and mediation services. China’s neighbors share its expectations regarding dispute resolution. In 2017, Hong Kong and Singapore permitted litigation finance in international arbitration, and the legalization for state court procedures may soon follow. Hong Kong passed its law shortly after a BRI Forum in Beijing, and partly also to strengthen its position as a go-to center for BRI related disputes, particularly for the maritime and construction fields. Arbitration institutions around the world, including the ICC (International Chamber of Commerce), SIAC (Singapore), and HKIAC (Hong Kong), encourage the adoption of their rules in BRI deals, and Malaysia’s KLRCA and Seoul’s KCAB are preparing accordingly. Chinese and Singaporean mediation centers (CCOIC and SIMC) have plans to cooperate for BRI related mediation proceedings, while Hong Kong is developing an online arbitration and mediation tool specialized on the initiative. Chinese officials have even publicly floated the concept of an innovative hybrid method combining aspects of arbitration and mediation, with courts playing a central role as well. Many legislators view litigation finance as a vital component in their jurisdiction’s status as a prime dispute resolution center, and litigation finance firms are aggressively seizing on the new opportunities presented. Select funders have already opened offices in Asia, others will soon follow, or plan to be involved from abroad. Entities who plan to invest along the Belt, including many Chinese companies, will not only face complex regulatory challenges, but also disputes with foreign governments, possibly in multiple jurisdictions. In addition to first-rate legal advice, parties will sometimes require external financing to pursue their claims under BRI. Both investors and law firms will utilize the benefits of litigation finance, and seek tailored financing solutions for their cases arising under BRI related projects. This will include single cases, as well as multiple disputes from investments being bundled into portfolios of claims. BRI will have a significant impact on litigation finance in the coming years, as a host of challenges and new opportunities present themselves. As has occurred previously, litigation finance will support meritorious claims which could not be brought without the assistance of external financing, help businesses and law firms diversify and boost their portfolios without increasing risk, and continue to promote access to justice. Litigation finance will benefit from this unprecedented trade and infrastructure initiative. It has already become part of the legal world, and it will soon be part of BRI. [1] Originally called One Belt and One Road Initiative.   Mauritius Nagelmueller has been involved in the litigation finance industry for more than 10 years.

Commercial

View All
Commercial Legal Innovation

Startup Founder Touts Data-Driven Funding Model

By John Freund |

A litigation funding startup founder is making the case that technology, disciplined underwriting, and alignment with law firms will define the next phase of growth in the funding industry.

In Part II of its interview series, Above the Law spotlights the founder’s views on building a differentiated funding platform in an increasingly competitive market. The discussion centers on how newer entrants can compete with established players by leveraging data analytics, focusing on select case types, and maintaining tight operational controls. Rather than pursuing volume for its own sake, the founder emphasizes a strategy built around rigorous case selection and long-term partnerships with law firms.

A key theme in the interview is the importance of underwriting discipline. The founder notes that not all meritorious cases make good investments, underscoring the need to evaluate damages models, collectability, and litigation timelines with precision. Technology plays a central role in that process, with analytics tools helping to assess risk factors and identify patterns across similar claims. This approach, the founder argues, allows the company to move efficiently while avoiding the pitfalls of overly aggressive capital deployment.

The interview also touches on market education. Despite litigation finance’s growing acceptance, misconceptions persist among lawyers and corporate stakeholders. The founder suggests that transparency around pricing, control, and alignment of interests remains critical to winning trust—particularly among firms that may be considering funding for the first time.

Commercial

AI Reshapes Mass Torts With Cost-Saving Promise

By John Freund |

Artificial intelligence is rapidly moving from a back-office efficiency tool to a central driver of strategy in mass tort litigation, with significant implications for plaintiff firms, defense counsel, and the litigation funding community.

An article in Bloomberg Law explores how AI-powered tools are transforming the economics of large-scale product liability and personal injury cases. From claimant intake and medical record review to document analysis and settlement modeling, AI platforms are enabling law firms to process vast amounts of data at a fraction of the traditional cost and time. In mass torts—where tens of thousands of claims can hinge on nuanced medical and factual distinctions—these efficiencies are particularly valuable.

According to the report, firms are deploying AI to automate the review of medical records, identify injury patterns, and categorize claimants more quickly. This not only reduces overhead, but also enhances early case assessment, helping firms determine which claims warrant full investment. On the defense side, corporate legal teams are leveraging similar technologies to assess exposure and streamline discovery. The result is a technological arms race in high-volume litigation.

While some observers raise concerns about accuracy, oversight, and ethical guardrails, proponents argue that AI can reduce administrative waste and free attorneys to focus on higher-value legal analysis. Vendors servicing the mass tort bar are also positioning AI as a way to increase access to justice by lowering the cost of bringing claims that might otherwise be economically unviable.

Commercial Regulatory Issues

Senate Bill Targets Litigation Funding Transparency With Non-Profit Exemption

By John Freund |

U.S. lawmakers are seeking to impose new transparency requirements on third-party litigation financing in major lawsuits, while carving out protections for nonprofit legal organizations that receive funding to provide free legal services.

An article in Reuters reports that a group of Senate Republicans led by Judiciary Committee Chair Chuck Grassley has introduced the Litigation Funding Transparency Act. The bill would require disclosure of third-party financing in class actions and mass tort litigation, a narrower scope than past proposals aimed at all civil cases. Importantly for the legal funding market, the legislation includes an exemption for nonprofit legal groups funded by U.S. donors that provide pro bono representation, protecting those organizations from having to disclose their backers.

Supporters of the measure frame it as a move toward greater openness about who is financing high-stakes litigation, arguing that visibility into funding sources is essential to ensure fairness and guard against undue influence. The bill would also bar third-party funders from influencing litigation strategy, settlement negotiations, or accessing confidential documents. However, critics—including the International Legal Finance Association, an industry body—contend that imposing disclosure rules could chill litigation finance and potentially limit access to justice for plaintiffs who rely on third-party capital to pursue claims. Conservative advocacy groups have also weighed in against the bill, fearing that disclosure mandates could expose donors to political scrutiny despite the nonprofit carveout.

The bill’s introduction builds on a history of legislative efforts by Grassley to regulate litigation funding transparency, though previous versions have stalled in the House amid bipartisan opposition.

For the legal funding industry, this legislation raises crucial questions about regulatory risk and disclosure expectations in the U.S. If enacted, the bill could reshape how funders participate in large-scale litigation and how transparency requirements are balanced against concerns over client privacy, fundraising, and the broader access-to-justice mission.