Costly and time-consuming litigation can cause entrepreneurs to lose a lot of money, leading to cash flow problems and even threatening their ability to continue their business operations. One alternative to these financial challenges is litigation funding. This can be an option for people intending to file a lawsuit or those being sued to address potential financial liquidity problems caused by the financial demands of litigation.
Litigation funding refers to financial support provided by an unrelated third party with no interest in the dispute who agrees to fund the costs a party incurs during the dispute resolution process in exchange for a portion of any money potentially awarded to the party being funded. If the funded party loses the case, the third party (i.e., the funder) is solely responsible for the costs.
Although litigation funding is available in various countries, Thailand considers it to be contrary to public order and good morals, which renders litigation funding agreements void and unenforceable.
Recognition and Enforcement in Thailand
There are no laws or regulations in Thailand that specifically mention litigation funding. However, the Supreme Court has consistently ruled that litigation funding is not recognized and is not legally enforceable under Thai law.
These Supreme Court precedents have established that agreements to receive benefits in return for pursuing litigation in which the funding party is not involved would be an act of seeking benefit from the litigation of others. As noted above, this purpose has been viewed as contrary to public order and good morals, which results in the agreement being void and unenforceable by other Thai courts (Supreme Court Judgment No. 7014/1999). Therefore, if a litigation funding agreement were in place in a Thai dispute and the funded party won, the funding party would most likely not be legally entitled to any portion of the award or other agreed-upon benefits (but see below for an exception).
Any lawyers who witness or assist in litigation funding arrangements for their clients may be considered in breach of expected professional conduct according to Thailand’s Lawyers Council Regulations on Lawyer Conduct B.E. 2529 (1986) and risk being suspended or disbarred.
As mentioned above, however, there is an exception. If the funding party does have an interest in or involvement in the dispute, this changes the calculus. When presented with such a case, the Supreme Court considered that the litigation funding did not constitute seeking benefits from pursuing others’ litigation. Instead, the actions only represented the funder pursuing its own interest, so the actions were legally enforceable and not contrary to public order or good morals (Supreme Court Judgment No. 2582/2520).
Furthermore, Thai law stipulates that in class-action cases, the plaintiff’s lawyer is entitled to receive an award upon winning the case, including costs related to class-action proceedings according to section 222/37 of the Civil Procedure Code. In a successful class-action case in which the plaintiff’s lawyer funds the litigation, the lawyer would be entitled to receive a portion of the money awarded for winning the case. Even though this case bears some similarity to litigation funding, the law stipulates that the lawyer has a right to a portion of the award upon winning the case, and the court will determine the amount of the award. The award here is not from a litigation funding agreement between individuals.
As for arbitration, Thailand does not yet have any legal provisions related to arbitration funding. If there is a dispute regarding a breach of an agreement to fund costs in arbitration proceedings and the parties choose to go to arbitration to receive an arbitral award, any party seeking enforcement of that arbitral award in Thailand would have to apply to the court to make a judgment to enforce the award. Thai law authorizes the court to dismiss an application to enforce an arbitral award if the enforcement would be contrary to public order or good morals. In that regard, the court may consider that the agreement is contrary to public order or good morals and dismiss the request to enforce the award according to the Thai Arbitration Act B.E. 2545 (2002).
Conclusion
Even though litigation funding is common in many countries, it is considered contrary to public order and good morals in Thailand. If a third party provides litigation funding without any involvement or interest in the case, there is a risk that the agreement would be unenforceable under Thai law. To avoid this risk, prospective funders of litigation costs in Thailand must consider whether they can show that they have any interest or involvement in the case.
For further information, please contact:
Alongkorn Tongmee, Tilleke & Gibbins
alongkorn.t@tilleke.com
