Third-Party funding now officially allowed in Hong Kong

July 2017

A few months after Singapore’s legislative initiative, Hong Kong’s Legislative Council passed an ordinance on 14 June authorizing third-party funding for arbitrations that are seated in Hong Kong as well as for arbitration-related services provided in Hong Kong.
The ordinance provides that third-party funding of arbitration and mediation is no longer prohibited by the common law doctrines of maintenance and champerty. The ordinance opens the door for the drafting of a code of practice for third-party funders, following a public consultation process. Such code will establish rules concerning the principal provisions of funding agreements as well as basic requirements that third-party funders must meet in order to provide funding services in Hong Kong. Non-compliance with the code of practice will not of itself render a funder liable to judicial proceedings but such failure to comply may be taken into account by a court or tribunal if considered relevant.
Finally, as is now the case in Singapore, the existence of a funding agreement in Hong Kong will have to be disclosed. The disclosure must be in writing, must mention the existence of an agreement as well as the name of the funder and must be addressed to every party in the arbitration as well as to the administering institution.