Korean Conglomerate Prepares Arbitration Against Foreign Government with Third-Party Funding

Surge in International Dispute Funding – Advisory Firms like LITIG Active in the Market

A well-known Third-Party Funding (TPF) case involved the botulinum toxin drug dispute between Medytox and Hugel, which culminated in a final ruling by the U.S. International Trade Commission (ITC) on October 10, declaring that Hugel had not committed violations such as “strain theft.”This dispute became notable because all litigation costs on the claimant side were funded by a global litigation and dispute resolution investment firm. This TPF-backed international dispute allowed U.S. law firm Quinn Emanuel Urquhart & Sullivan to represent Medytox in filing an ITC complaint, alleging unfair trade practices in the U.S. import of botulinum toxin drugs.In a March 2022 press release announcing its ITC complaint, Medytox disclosed the TPF arrangement, stating: “Litigants can alleviate substantial financial burdens through TPF investors, while funders can share in the financial upside by participating indirectly in high-probability claims.”

Another TPF case involving a Korean company was the FuelCell Energy (FCE) dispute with POSCO Energy and Korea Fuel Cell, which escalated into an ICC arbitration and counterclaims totaling approximately KRW 1 trillion. The case, eventually settled in 2021, also began through FuelCell’s use of international dispute funding to initiate arbitration.

Interest in third-party funding (TPF) for international arbitration and litigation, which is already widely used abroad, is rapidly increasing in South Korea as well. International dispute funding refers to a service in which a third-party funder provides financing—on a non-recourse and unsecured basis—to a party involved in an international arbitration or litigation, covering legal expenses or enforcement costs related to judgments or arbitral awards. Even if the funded party loses the case or fails in enforcement, they bear no financial burden, as the funder assumes the risk of financial loss on the funds (investment) provided.

No Burden on Parties Even If They Lose

According to LITIG Equity Partners, a leading advisory firm specializing in international dispute funding, the global Third-Party Funding (TPF) market reached approximately USD 25.5 billion as of the end of 2023. Although Korea entered the market slightly later than Japan (which began around 2015), the use of TPF has steadily expanded—from large conglomerates to public enterprises and SMEs. Industry-wise, TPF is becoming increasingly active in trade, construction, machinery, manufacturing, and intellectual property sectors.

In 2022, among the 286 international arbitration cases filed with the Hong Kong International Arbitration Centre (HKIAC), 73 cases (approximately 25.5%) involved parties who disclosed the use of third-party funding. TPF is available not only to claimants but also to respondents, and it can even be introduced mid-proceeding.

Recognizing the growing interest in international dispute funding, LITIG Equity Partners hosted a forum on November 1, titled “Analysis of Domestic and International Case Studies on TPF.” The event brought together senior representatives from Korea’s top globalized industries—construction/engineering, shipbuilding/maritime, trading, chemicals, automotive, tires, and telecommunications manufacturing.

Held at the JW Marriott Hotel Seoul in Banpo-dong, the forum featured a presentation by Benjamin Byun, a foreign attorney in the International Arbitration Group at Kim & Chang, titled “International Disputes and Third-Party Funding.” He emphasized that the rise in outbound business activities by Korean companies inevitably leads to more disputes and stressed the importance of managing these risks efficiently. He notably stated, “Corporate disputes should be recognized as valuable assets, and it is essential to manage the resolution and enforcement risks effectively.”

Following that, Taehun Lee, a foreign attorney at LITIG Equity Partners, delivered a session titled “Successful Negotiation Strategies for TPF.” He explained the specific roles of funding advisory firms like LITIG and how to leverage TPF effectively.

Then, Mitchell Dearness and Lau Chee Chong from OMNI Bridgeway—a globally listed litigation funder on the ASX that also provides judgment and award enforcement services—presented on “Successful Funding for International Disputes.” They introduced case studies across various regions and received positive feedback. Lau Chee Chong, Investment Manager and Senior Counsel at OMNI Bridgeway, emphasized: “Even if you win an international dispute, complex enforcement challenges await.” He repeatedly stressed the importance of the enforcement phase.

Attorney Taehun Lee added: “In the Korean market, we’re seeing a growing number of TPF cases involving overseas IP litigation (such as ITC cases), international arbitration, and enforcement proceedings.” He explained that TPF is increasingly being used by Korean businesses engaged in overseas operations—particularly in high-cost or high-risk enforcement scenarios. He also noted that third-party funding has a long global history dating back to the 1980s. Originally emerging in North America and Europe, TPF has since expanded through Australia, and matured among global corporations. In the Asia-Pacific region, countries like Australia, Hong Kong, Singapore, China, and India have actively adopted TPF. Even in Japan, traditionally a conservative legal market, TPF has gained meaningful traction.

The forum reached its peak during a lively panel discussion that followed the keynote presentations, with an active Q&A session between panelists and the audience. Professor Joon-Hyug Chung of Seoul National University School of Law moderated the discussion, which featured insights and experiences from Youngil Ma, foreign attorney and Head of the Overseas Legal Group at Samsung SDS; Seyeon Kim, attorney at Kim & Chang’s International Arbitration Group; Lau Chee Chong, UK-qualified lawyer at OMNI Bridgeway; and Jinseung Moon, CEO of LITIG Equity Partners.

Attorney Seyeon Kim remarked, “There are cases where parties receiving funding actually want to disclose that fact—because receiving funding can signal that the case has real merit.” She added, “Disclosing the use of funding can significantly enhance a party’s leverage in settlement negotiations. It also seems that some parties feel it increases their chances of a favorable outcome, even if the case proceeds to a final decision.”

 “The Fact That Funding Was Secured Itself Holds Significant Meaning”

Attorney Taehun Lee also commented, “In reality, funders reject more than half of the cases—they don’t offer funding easily. So the very fact that a case has received funding carries substantial meaning.”

An illustrative example is Nanoco Technologies, a UK-based company that filed a patent infringement lawsuit against Samsung Electronics in the U.S., alleging that Samsung’s QLED TVs infringed its patents—with the backing of third-party funding. Just one day before the trial was scheduled to begin, on January 6, 2023, Nanoco reached a $150 million settlement with Samsung to end the litigation. According to the funder GLS Capital, which financed Nanoco’s legal costs, the settlement included the transfer and licensing of certain patents owned by Nanoco, as well as the resolution of all related legal proceedings in the United States, Germany, and China.

The forum also featured discussion on how large corporations turn to TPF not because they lack funds, but rather as a strategic tool for risk management. A member of an in-house legal team explained, “There’s strong interest in TPF not only from legal departments, but also from finance teams. From an accounting perspective, they want to clean up liabilities quickly and manage exposure efficiently. That’s why legal teams often suggest, ‘We have this good idea called third-party funding—let’s look into it.’”

One attorney at the forum revealed that a major Korean conglomerate is preparing to initiate an investor-state arbitration (ISDS) against a foreign government with funding from OMNI Bridgeway, including post-award enforcement support. LITIG Equity Partners is said to have led the funding arrangement, with a top Korean law firm and a U.S. law firm acting as co-counsel. This signals the growing uptake of international dispute funding among Korean corporations.