KUALA LUMPUR, Feb 13 — Malaysia and the European Union (EU) recognise the need to regulate third-party litigation funding due to the lack of transparency of funding arrangements, potential conflicts of interest and the impact on the cost and duration of arbitral proceedings.

Minister in the Prime Minister’s Department (Law and Institutional Reform) Datuk Seri Azalina Othman Said said both parties, in a series of bilateral meetings recently, achieved a consensus that this agenda demands heightened attention and coordinated efforts by global leaders at an international scale.

This, she said, should also involve forums that include nations from regions such as the United States, EU and Asean to effectively address and combat such abuses.

"Today, the paucity of coordinated regulatory framework on third-party funding poses a significant global threat, impacting various nations and across all sectors, including EU member states that are not spared from such detrimental effects.

"This phenomenon has penetrated the region (and) inadvertently undermined the integrity of arbitral processes and the outcomes,” she said in a Facebook posting today.

The series of bilateral meetings and discussions were joined by the Attorney-General’s Chambers Malaysia, Legal Affairs Division (Prime Minister’s Department) and Wisma Putra as well as eminent representatives from the European Commission, European Parliament and European External Action Service.

Azalina explained that while arbitration is respected as a form of alternative dispute resolution, the exploitation of this system through unethical means, including attempts to seize sovereign assets, is unacceptable.

"There is a pressing need for concerted global action to combat the misuse of third-party litigation funding solely for profit-seeking purposes, which subverts the pursuit of justice.

"Constructive measures must likewise be taken to address rogue arbitrators who tarnish the global confidence towards the entire arbitration system,” she said.

Azalina said that during the meetings, she had also taken the opportunity to share Malaysia’s experience in handling the Sulu case as the matter is actively litigated across four EU member states.

"To date, the consecutive landmark decisions in favour of Malaysia demonstrate the international legal community’s commitment to uphold the rule of law and to guard against any abuses of the civil justice system,” she said.

She also expressed Malaysia’s interest in understanding in greater detail the European Parliament’s resolution proposing a directive on the regulation of third-party litigation funding, a regulatory framework that Malaysia championed wholeheartedly as a result of the Sulu case.

"The Government of Malaysia has been proactively calling for a robust debate on regulating third-party litigation funding vis-a-vis the need for greater transparency, accountability and ethical professionalism among the funders,” she said. — Bernama