Trending Now
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.
Secure Your Funding Below
Secure Your Funding Sidebar

Commercial

View All
Commercial Regulatory Issues

Merricks Calls for Ban on Secret Arbitrations in Funded Claims

By John Freund |

Walter Merricks, the class representative behind the landmark Mastercard case, has publicly criticized the use of confidential arbitration clauses in litigation funding agreements tied to collective proceedings.

According to Legal Futures, Merricks spoke at an event where he argued that such clauses can leave class representatives exposed and unsupported, particularly when disputes arise with funders. He emphasized that disagreements between funders and class representatives should be heard in open proceedings before the Competition Appeal Tribunal (CAT), not behind closed doors.

His comments come in the wake of the £200 million settlement in the Mastercard claim—significantly lower than the original £14 billion figure cited in early filings. During the settlement process, Merricks became the target of an arbitration initiated by his funder, Innsworth Capital. The arbitration named him personally, prompting Mastercard to offer an indemnity of up to £10 million to shield him from personal financial risk.

Merricks warned that the confidentiality of arbitration allows funders to exert undue pressure on class representatives, who often lack institutional backing or leverage. He called on the CAT to scrutinize and reject funding agreements that designate arbitration as the sole forum for dispute resolution. In his view, transparency and public accountability are vital in collective actions, especially when funders and claimants diverge on strategy or settlement terms.

His remarks highlight a growing debate in the legal funding industry over the proper governance of funder-representative relationships. If regulators move to curtail arbitration clauses, it could force funders to navigate public scrutiny and recalibrate their contractual protections in UK group litigation.

Commercial

Innsworth Backs £1 Billion Claim Against Rightmove

By John Freund |

Rightmove is facing a landmark £1 billion collective action in the UK Competition Appeal Tribunal, targeting the online property platform’s fee structure and alleged abuse of market dominance. The case is being brought on behalf of thousands of estate agents, who claim Rightmove’s listing fees were “excessive and unfair,” potentially violating UK competition law.

An article in Reuters outlines the case, which is being spearheaded by Jeremy Newman, a former panel member of the UK’s competition regulator. The legal action is structured as an opt-out class-style suit, meaning any eligible estate agent in the UK is automatically included unless they choose otherwise. The claim is being funded by Innsworth Capital, one of Europe’s largest litigation funders, and the legal team includes Scott + Scott UK and Kieron Beal KC of Blackstone Chambers.

Rightmove has responded to the legal filing by stating it believes the claim is “without merit” and emphasized the “value we provide to our partners.” However, news of the action caused a sharp drop in its share price, falling as much as 3.4% on the day of the announcement. The suit comes at a sensitive time for Rightmove, which has already warned of slower profit growth ahead due to increased investment spending and a softening housing market.

The case underscores the potential of collective actions to challenge entrenched market practices, particularly in digital platform sectors where power imbalances with small business users are pronounced. For litigation funders, this marks another high-profile entry into platform-related disputes, with significant financial upside if successful. It may also signal a growing appetite for funding large opt-out claims targeting dominant firms in other concentrated markets.

Commercial Deals

Nera Capital Launches $50M Fund to Target Secondary Litigation Market

By John Freund |

Dublin-based litigation funder Nera Capital has unveiled a new $50 million fund aimed squarely at secondary market transactions, signaling the firm’s strategic expansion beyond primary litigation funding. With more than $160 million already returned to investors over its 15-year track record, Nera’s latest move underscores its ambition to capitalize on the growing appetite for mature legal assets.

A press release from Nera Capital details how the fund will be used to acquire and sell existing funded positions, enabling Nera to work closely with other funders, claimants, and institutional investors across the U.S. and Europe. This formal entry into the secondary market marks a significant milestone in Nera’s evolution, with the firm positioning itself as both a buyer and seller of litigation claims—leveraging its underwriting expertise to identify opportunities for swift resolution and collaborative portfolio growth.

Director Aisling Byrne noted that the shift reflects not only the increasing sophistication of the litigation finance space, but also a desire to inject flexibility and value into the ecosystem. The secondary market, she said, complements Nera’s core business by allowing strategic co-investment and fostering greater efficiency among experienced funders. Importantly, the fund also opens the door for outside investors seeking litigation finance exposure without the complexities of case origination.

Backed by what the firm describes as “sophisticated investors,” the fund will support ongoing transactions and new deals throughout the UK and Europe over the next 12 months.

The move highlights an emerging trend in litigation finance: the maturation of the secondary market as a credible, liquid, and increasingly vital component of the funding landscape. As more funders diversify into this space, questions remain about valuation methodologies, transparency, and the long-term implications of a robust secondary trading environment.