The Legislative Council of Hong Kong concluded the third reading and passed the Arbitration and Mediation Legislation (Third Party Funding) (Amendment) Bill 2016 on 14 June 2017. The amendments once taken effect will permit third party funding in arbitration and mediation cases. The amended arbitration law will greatly enhance and strengthen Hong Kong’s status as a leading centre for international legal and dispute resolution services in the Asia-Pacific region. We will highlight the main features of this key breakthrough of the arbitration regime in Hong Kong below:-
1. The amendments apply to Hong Kong seated arbitration, the costs and expenses of services that are provided in Hong Kong in relation to the arbitration outside Hong Kong and mediation, reflecting the pro-mediation, pro-arbitration and international arbitration friendly approach adopted by the Hong Kong Courts.
2. The Arbitration Ordinance (Cap. 609) will be amended, after which common law offences of maintenance and champerty will cease to apply to third party funding in relation to arbitration and mediation. The amendments operate to permit a person who does not have an interest recognised by law in the arbitration to provide funds to a funded party in the arbitration, in return for a share in the financial benefit of the award if the arbitration is successful.
3. The mechanism for third party funding in Hong Kong is much more flexible than the Singaporean counterpart, in the sense that besides professional funders, any person “who is a party to a funding agreement” and “who does not have an interest recognised by law in the arbitration other than the funding agreement” can participate in arbitration funding. Upon compliance with the legal requirements under the new regime, in principle law firms can operate and set up a funding arm specifically providing the services for arranging and coordinating third party funding in Hong Kong.
4. To avoid conflict of interests, lawyers who in the course of the lawyers’ legal practice, act for any party in relation to the arbitration are not allowed to directly fund the arbitration.
5. To reinforce the rule of law and to avoid the abuse of the new regime, third party funding must fulfil a series of strict requirements, including signing and execution of a written funding agreement after the commencement of the regime.
6. The amended ordinance has yet to encompass a separate set of regulatory provisions at this stage. However, the Secretary for Justice has been empowered by the Government to appoint an “authorised body” to draw up a Code of Conduct and monitor the compliance of the funders, including but not limited to capital adequacy requirements, confidentiality, avoiding conflicts of interests.
7. The amendments are expected to take effect this year, keeping pace with the development of the Code of Conduct.
It is expected that the new regime will promote the development of mediation and arbitration in Hong Kong, strengthening Hong Kong as the hub for international law and disputes resolution centre in Asia. Providing a comprehensive legal service to our clients, Stevenson, Wong & Co. possesses profound experience in cross-border disputes resolution with a team of seasoned practitioners who always act in the clients’ best interests. Please contact our Mr. Eric Lui or Ms. Heidi Chui for any enquiries or further information about our services.