Third Party Funding in Arbitration Hong Kong to modernise it’s rules

10 Jan 2017

As we have reported previously, the use of third party funding in litigation and arbitration is significantly on the increase in England and various other jurisdictions.

Towards the end of 2016, the Hong Kong Law Reform Commission consulted upon permitting third party funding for arbitration where the seat of the arbitration is Hong Kong.

The Commission published a report on 12th October 2016 recommending changes to clarify the position and the Hong Kong Government has accepted their recommendations.  On 30th December 2016 it published the Arbitration Mediation (Third Party Funding) (Amendment) Bill 2016.

The Bill closely follows the Commission’s recommendations and is likely to become law in the near future.

The Bill will permit third-party funding in arbitration and mediation and will provide for a Code of Practice to be issued.  It will also require disclosure where third party funding is being used.

The Bill does not seek to apply retrospectively so will only affect agreements entered into once it becomes law.

It is clear that there is a universal appetite to seek external funding (whether because of affordability or for cashflow or risk sharing reasons) for litigation and arbitration and the whole area of third party funding (and related after the event insurance) is likely to continue to develop and increase in importance.  This is now increasingly being recognised by judicial systems around the world.

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