Malaysia Final Code of Practice for Third-Party Funding 2026: Key Implications for Arbitration

Malaysia has taken a significant further step in strengthening its arbitration framework with the issuance of the Final Code of Practice for Third Party Funding 2026 (the “Code”). The Code introduces a structured regulatory regime governing third-party funding (TPF) in arbitration and related proceedings, reinforcing transparency, integrity, and market confidence while preserving commercial flexibility.

The Final Code of Practice is available here.

Regulatory Background: Malaysia’s Progressive Arbitration Reforms

The Code should be understood within the broader context of Malaysia’s deliberate and progressive arbitration reforms. Previously, we reported on Malaysia’s formal introduction of third-party funding in international arbitration matters following amendments to the Arbitration Act 2005, which lifted traditional restrictions on maintenance and champerty for qualifying proceedings.

Our earlier commentary, The Introduction of Third-Party Funding in International Arbitration Matters in Malaysia – A Welcome Development, examined how these reforms enhanced access to justice and strengthened Malaysia’s appeal as an arbitral seat.

This reform trajectory continued with the Arbitration (Amendment) Bill 2024, which introduced targeted legislative changes to further align Malaysian arbitration law with international best practices.

We analysed these developments in The Key Changes of the Arbitration (Amendment) Bill 2024, noting the legislature’s focus on efficiency, neutrality, and party autonomy.

Purpose and Scope of the Code of Practice for Third-Party Funding

Against this backdrop, the Code represents a shift from recognising the permissibility of third-party funding to regulating how funding should be responsibly conducted. The Code establishes baseline standards applicable to third-party funders operating in Malaysia, with a clear emphasis on accountability, transparency, and the integrity of arbitral proceedings.

Key Features of the Final Code of Practice

The Code introduces several core requirements that are likely to shape funding practices in Malaysia:

• Governance and financial adequacy requirements designed to ensure that third-party funders have sufficient capital, risk management frameworks and internal controls to meet their funding obligations throughout the lifecycle of a dispute.
• Mandatory disclosure obligations requiring funded parties to disclose the existence of third-party funding arrangements, aimed at mitigating conflicts of interest in arbitrator appointments while preserving confidentiality over the commercial terms of funding agreements.
• Standards of conduct limiting undue funder influence over strategic, procedural, or settlement decisions, thereby safeguarding party autonomy and the independence of legal counsel.
• Confidentiality and data protection obligations aligned with international arbitral best practices and the expectations of foreign parties.

Practical Implications for Parties, Funders, and Counsel

For claimants, the Code enhances confidence in engaging with professional funders operating under a defined regulatory framework. For funders, the Code raises compliance expectations and underscores the importance of governance, capital planning, and transparent engagement with funded parties.

Legal counsel will need to be particularly mindful of disclosure obligations and conflict management. Early assessment of funding-related disclosures is likely to become a standard feature of arbitration strategy, particularly in complex or multi-party proceedings.

For foreign companies, the Code sends a clear signal that Malaysia is committed to aligning its third-party funding regime with international norms, reducing regulatory uncertainty and reinforcing confidence in Malaysia as a seat for international arbitration.

Alignment with Institutional Arbitration Developments

The Code also complements wider institutional and procedural developments within Malaysia’s arbitration ecosystem. In this regard, funding regulation aligns with institutional reforms such as the AIAC Arbitration Rules 2026, which emphasise procedural efficiency, transparency, and effective case management.

For further discussion, see our earlier guide, AIAC Arbitration Rules 2026: A Guide for Foreign Companies.

Conclusion: Strengthening Malaysia’s Position as an Arbitration Hub

The Final Code of Practice for Third Party Funding 2026 represents a decisive step in Malaysia’s evolution from recognising third-party funding to regulating it within a structured and principled framework. When viewed together with recent legislative amendments and institutional reforms, the Code reinforces Malaysia’s position as a modern, credible, and arbitration-friendly jurisdiction.

Aqran Vijandran regularly advises clients on arbitration, third-party funding arrangements, and dispute resolution strategy in Malaysia and the region. We continue to monitor regulatory and institutional developments affecting international arbitration and funding practices and can assist parties and funders in navigating the implications of the Final Code of Practice for Third Party Funding 2026.