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Article: May 2017: Asia-Pacific Litigation Update

Business Litigation Reports

Japan Litigation Update—Libel Case Defines Privacy Rights as to Internet Search Engines. The Japanese Supreme Court issued a decision regarding privacy that also has implications for third-party internet sites that contain personal information.

The plaintiff/appellant was a man seeking an order that Google remove from its search engine the details of his arrest on child prostitution charges over five years ago, in 2011. The man had paid a female high school student to commit an indecent act, and had been fined 500,000 yen (approximately $5,000). He sued Google for libel, based on infringement of his privacy rights.

The District Court agreed with him, ordering Google to delete a total of 49 search results that brought up the arrest records containing the man’s name. The court cited to his “right to be forgotten” after a certain period of time. That decision, however, was reversed by the appellate court, which instead pointed to the public interest in not expunging the man’s criminal record.

The Supreme Court agreed with the appellate court. The Supreme Court held that “the deletion (of references to the conviction) can be allowed only when the value of privacy protection significantly outweighs that of the information disclosure.”

To determine whether the privacy interest significantly outweighs the public interest in having access to the information, the court outlined a number of factors: the degree of infringement on privacy, the type of search that yields the information and whether only narrowly tailored searches can protect the information from being found too easily, the industry in which the plaintiff is employed, the purpose and significance of the news and articles themselves, the importance of providing real names, whether the information consists of addresses or other personal information apart from the news itself, and the accuracy of the information. Here, the Supreme Court concluded that the information in question could not be deleted because the arrest on child prostitution charges is “subject to society’s strong disapproval and is a matter of the public’s interest.”

The case is part of a trend seeking to protect personal information from public search engines. According to the Japanese Supreme Court, district courts across Japan received 52 petitions for court injunctions to remove personal data from search results in the first nine months of 2016 alone. This was also the first of five “right to be forgotten” cases pending in the Japanese Supreme Court.

The “right to be forgotten” itself appears to trace back to a 2014 opinion issued by the European Union’s top court, which upheld an individual’s petition to seek removal of links to media reports. Despite the term’s international use, and despite the District Court’s use of the term in this case, the Japanese Supreme Court did not mention the right to be forgotten in delineating its balancing test.

Recent Developments Regarding Litigation Funding in Asia-Pacific Region. No Opt-In Required for Australian Litigation Funding. Twenty-five years since the advent of Australia’s federal class action regime and over a decade since the High Court decision in Campbells Cash & Carry Pty. Ltd. v. Fostif Pty. Ltd. (2006) 229 CLR 386, where third-party funding of class action proceedings was first judicially endorsed, there has been another game-changing decision in relation to litigation funding in Australia.

In October 2016, the Federal Court’s judgment in Money Max Int. Pty. Ltd. (Trustee) v. QBE Insurance Group [2016] FCAFC 148 (“Money Max”), approved the use of “common fund orders.” Under such an arrangement, if the claim settles or the plaintiffs obtain a favorable judgment, all class members are required to pay the litigation funder a contingency out of their recovery monies, whether or not they signed a litigation-funding arrangement.

Prior to the Money Max decision, one of the concerns with Australia’s “opt-out” regime was the inability of funders to limit so-called “free riders”—those group members who benefit from the class action without making any contribution towards its cost. As a result, many funded class actions in Australia proceed as “closed-class” where only plaintiffs who agree to the funding arrangement are represented in the suit and able to recover. Many have viewed “closed-class” actions as impeding, rather than promoting, the underlying policies of the class action regime—as they limit remedies to a finite number of people and potentially leading to overlapping or competing class actions.

In Money Max, the applicant filed a shareholder class action on behalf of itself and an open class against QBE Insurance Group Ltd. (“QBE”). The applicant alleged that QBE had engaged in misleading or deceptive conduct in breach of Australian Corporation Law. Early on in the proceedings, the applicant filed an interlocutory application for a common fund order. At the time of the hearing, the applicant had approximately 1,290 class members who had signed a litigation-funding agreement with International Litigation Funding Partners Pty[?]. Ltd. (the “Funder”). Despite the number of funded class members, the majority of the open class had not entered into a funding agreement with the Funder, leaving the funded class members to bear the cost of the action against QBE on behalf of all unfunded class members. Because of this inequity, the applicant asked the court to apply the terms of the litigation agreement (i.e., the Funder’s contingency) to all class members, not just those who had entered into a funding agreement. Over QBE’s objection, the court ordered that all class members would be bound by litigation funding terms to be later set by the court, likely after settlement or judgment.

Although the Money Max decision could be viewed as assigning judicial limitations over third-party funding—as funders will now be subject to the courts’ power to vary, set, or reduce their commission rates in a “common fund” settlement —the decision nonetheless should make “open class” actions more economically attractive to funders and will likely result in further significant growth in both domestic and foreign funders launching class action claims in Australia.

Litigation (and Arbitration) Funding in Hong Kong. Hong Kong courts traditionally have prohibited third-party litigation funding as maintenance and champerty, subject to some minor exceptions. This appears unlikely to change in respect of domestic commercial litigation. Given that Hong Kong also lacks a class action regime, its attraction as a key litigation market for funders is limited. There is, however, an ongoing push toward permitting the funding of arbitrations, which would further secure Hong Kong’s position as a prime arbitration venue. In a first-instance decision, Cannonway Consultants Ltd. v. Kenworth Engineering Ltd. [1995] 1 HKC 179, the court held that it was not appropriate to extend the prohibition on dispute funding to arbitrations taking place in Hong Kong. Subsequently, in Unruh v. Seeberger (2007) 10 HKCFAR 31, the Hong Kong Court of Final Appeal expressly left open the question whether the prohibition applies to arbitrations. On October 12, 2016, the Law Reform Commission of Hong Kong released a report recommending that the law be amended to make clear that third-party funding of arbitration and associated proceedings in Hong Kong is permissible. A Bill to implement the Commission’s recommendations was read in the Legislative Council on January 11, 2017 and is currently being considered by a Bills Committee.

As currently drafted, the Bill would apply to arbitrations seated in Hong Kong, and to services provided in Hong Kong related to arbitrations pending elsewhere. However, lawyers will not be permitted to provide funding, and funders will be required to follow a code of practice to be issued by a body authorized by the Secretary for Justice. When a funding agreement has been reached, the party must notify the other parties to the arbitration and the Tribunal of this fact (although not the terms of the agreement), and of the name of the third-party funder. No date has been set for the commencement of the Bill.

Funding in Singapore. Historically, save for some limited exceptions (e.g., in the context of insolvency), third-party funding of disputes has been restricted under Singaporean law. On January 10, 2017, the Civil Law (Amendment) Act was passed by the Parliament of Singapore, permitting third-party funding of international arbitration. The changes will also apply to court proceedings to the extent that they relate to international arbitration, but will not, at this stage, extend to domestic litigation. This development is evidence of the government’s intention of marketing Singapore as a leading regional hub for international arbitration.

The Civil Law (Amendment) Act sets out the requirements that must be met by an entity for it to be considered a “qualifying Third Party Funder,” and thus be permitted to engage in third-party funding in Singapore. These include the funder having access to sufficient funds immediately within its control and having its principal business be the providing of funds for dispute resolution processes. In other words, only “professional” funders will be welcome to operate in Singapore. In addition, changes are also proposed to the Legal Profession Act to allow lawyers to recommend third-party funders and to provide related funding advice to clients, so long as the lawyer does not receive any direct financial benefit in doing so.