The Korean Legal News (https://news.koreanbar.or.kr/news/articleView.html?idxno=33768)
"Litigate Without Bearing Legal Costs… 'Eliminating Contingent Liabilities Through TPF'"
"Lee & Ko and LITIG Equity Partners Hosted 'Effective Management of International Disputes and Strategic Use of TPF' Seminar on the 25th
'The TPF Market Reaches $17.5 Billion… Validity of Agreements Recognized Internationally'
'Shifting Dispute Risks to Funders… No Impact on Financial Statements'"
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Utilizing TPF (Third Party Funding), a method of litigation funded by a third party, can eliminate contingent liabilities, according to recent advice. TPF refers to agreements in which a funder covers the costs of international arbitration or foreign litigation, including advisory fees, legal expenses, and court costs. In return, the funder receives a predetermined share of the award if the case is won.
Lee & Ko (represented by Managing Partner Sang Gon Kim) and international dispute funding advisory firm Litig Equity Partners (represented by CEO Jinseung Moon) co-hosted a seminar titled "Effective Management of International Disputes and Strategic Use of TPF" on the 25th at the International Conference Room of the Korea Federation of Banks in Jung-gu, Seoul.
Attorney Joon Won Lee of Lee & Ko delivered a presentation on "Strategies for Korean Companies to Manage Contingent Liabilities through TPF."
Citing statistics from 2024, Attorney Lee explained, "The TPF market is currently valued at approximately $17.5 billion, or about 24 trillion KRW. It is projected to grow at an annual rate of around 11%, reaching a market size of $67.2 billion (approximately 90 trillion KRW) by 2037."
Lee also highlighted the legal acceptance of TPF, stating, "Singapore has codified the inclusion of TPF in arbitration and mediation procedures through its Civil Law Act. Similarly, Hong Kong formally legalized TPF in arbitration in 2017. Cases in China have upheld the validity of funding agreements, and jurisdictions like Germany and France also generally permit TPF."
Lee emphasized the advantages of TPF, saying, "TPF allows litigants to transfer the financial risk of disputes to funders. Additionally, it eliminates the need to record legal costs as liabilities on financial statements, which is another significant benefit."
He further noted, "Even in international disputes that appear to be a David versus Goliath battle, funding can provide a means to counter unfavorable circumstances. With TPF, there’s no need to account for potential future legal costs, enabling parties to focus solely on the merits of the claim during negotiations."
Tae Hun Lee, an attorney licensed in Alabama, USA, and Hanwool Park, an attorney at LITIG Equity Partners, delivered a presentation on "Effective use of TPF by Korean Companies in Cross-Border Disputes."
Tae Hun Lee highlighted the maturity of TPF, stating, "TPF has been a growing business globally for over 40 years and can assist Korean companies with managing legal costs, validating cases, and devising multinational enforcement strategies."
He added, "Its use in Korea has gradually increased and entered a practical growth phase around 2022. Since last year, there has been significant growth, particularly in enforcement funding."
Attorney Hanwool Park discussed cases involving the use of TPF, including instances where funding costs were awarded in judgments. He explained, "Norscot, a ship management company, utilized TPF to file a claim with the ICC against Essar for breach of contract and sought reimbursement of the funding costs. The ICC arbitrator ordered Essar to reimburse Norscot for the costs it owed to the funder."
Park further explained, "Essar appealed to the High Court of England, arguing that the arbitrator had exceeded their authority by ordering reimbursement of the funding costs. However, the court upheld the arbitrator's decision, stating that awarding funding costs was not an abuse of authority and was a legitimate decision. The court interpreted these costs as 'other costs' related to arbitration."
He also referenced the ICC Report, which notes that "if a winning party must repay TPF costs, it ultimately suffers a financial loss, and thus, these costs can be shifted to the losing party." Park estimated that "approximately 10% of cases seek TPF costs from the losing party, with about half—5%—resulting in reimbursement."
The presentation also covered a range of TPF applications, including funding cases for defendants, enforcement cases, and the overall process of utilizing TPF.
