Alternative Capitalists

What kind of legitimate business model can generate recurrent high revenue streams? Have you ever thought about carrying on key activities with a view to becoming a third party funder to disputes in countries or regions that permit this, such as Mainland China? How can you lower the risk and costs to get high performance?

Most of the high-value disputes are in the patent family fields involving the same dispute with parties in different jurisdictions. The due diligence cost expended on primarily one set of facts and legal issues can be applied to resolve disputes in many jurisdictions. This business model is being executed in Mainland China with a view to capitalizing on at least several dozen patent families disputes.

Although the common law public policy - based doctrines of maintenance and champerty (ie offences and torts against officious intermeddlers in promoting litigation) still apply in Hong Kong, the Arbitration Ordinance Cap. 609 has been amended in 2017 to permit a third party to fund arbitration proceedings, arbitration court proceedings, emergency arbitrator proceedings and mediation proceedings (Section 98F). A Code of Practice would set out the practices and standards with which third party funders are ordinarily expected to comply (Section 98P(1)). Non-compliance with the Code may be taken into account if it is relevant to a question being decided by the court or arbitral tribunal (Section 98S(2)(b)).

I believe there is a ready market for third party funding as disputes may all seem costly and overwhelming, and it should facilitate not only financial risk allocation but stress management for the party funded. Where the business model is strategically planned and executed, some bullish third party funders expect 300%-1000% return on investment. When that materializes, alternative capitalists would have to subscribe to my thesis that innovation, marketing and intellectual property are the three essential elements of business success!

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