20 Aug 2018
ABNR Hosts Roundtable Discussion on Recent Developments and Third-party Funding in Arbitration Arena

On August 8, ABNR Counsellors at Law played host to a well-attended roundtable discussion on topical arbitration issues at ABNR’s offices in Jakarta’s SCBD. Organized in conjunction with the International Chamber of Commerce (ICC)’s Indonesia Arbitration & ADR Commission (IAAC), the event was titled “Arbitration Case Studies and Third-Party Funding.”

The speakers were ABNR Senior Foreign Counsel and IAAC Co-Chairman Mr. Theo Bakker, IAAC Chairman Prof. Dr. Frans Winarta and IAAC Co-Chairman Mr. Andi Kadir, all of whom are prominent arbitration practitioners in Jakarta.

In his presentation, Theo afforded interesting insights into the development of third-party funding around the region, and the current situation as regards third-party funding in Indonesia.

Third-party funding (“TPF”) refers to an arrangement under which a party that is not involved in litigation or arbitration proceedings provides funding to a party that is involved (usually the claimant) in exchange for an agreed return, such as a fixed percentage of any award made to the claimant. While a TPF provider typically undertakes to pay the funded party’s lawyers’ fees, and disbursements and other expenses, its commitment may also extend to paying the respondent’s costs if the funded party is ordered to do so. Often the funder will also provide security for the respondent’s costs if the court or tribunal so orders.

Theo described the various advantages of third-party funding, such as providing greater access to justice, allowing meritorious claims to proceed that would not otherwise have been pursued, and levelling the playing field so that cases are not resolved solely on the basis of unequal economic resources or risk preference. Conversely, he also highlighted the dangers that may arise in the arbitration context, such as the repeated appointment of a particular arbitrator in cases involving the same funder.

Theo explained that while third-party funding of arbitration proceedings was now commonplace in Singapore, and Hong Kong, it remained less common in both the litigation and arbitration arenas in Indonesia.

He highlighted how, under both the Indonesian Advocates Law of 2003 and the Indonesian Lawyers Code of Ethics of 2002, client and lawyer in Indonesia were free to agree on fees based on the principle of freedom of contract The Advocates Law only required that lawyers’ fees be agreed based on the principle of fairness.

In practice, Theo said, litigation lawyers in Indonesia usually charge a fixed flat fee for each stage in the litigation process, often in combination with a success fee and/or a contingency fee.

He explained that despite there being no impediment from the legal or ethical perspective on TPF in Indonesia, there was nevertheless one significant obstacle that could thwart its development here, namely, the difficulties that can sometimes arise in enforcing both domestic and foreign arbitral awards. As funders require returns on their investments out of the proceeds of arbitration awards, these difficulties clearly had the potential to slow down the development of TPF in Indonesia.

Theo is a Netherlands-qualified lawyer who has practiced in Southeast Asia since 1984. He is an international commercial arbitrator registered with BANI, SIAC and HKIAC and is a Fellow of the Chartered Institute of Arbitrators and a Fellow of the Asian Institute of Alternative Dispute Resolution.He also serves as Vice Chairman of the EU-ASEAN Business Council, where he represents EuroCham Indonesia, on whose Executive Board he has sat since inception.

For more information on arbitration in Indonesia and around the region, please contact Mr. Theo Bakker at tbakker@abnrlaw.com