Letter to Hong Kong Lawyer

Dear Editor of Hong Kong Lawyer,

As one of the world’s leading litigation finance companies, we write further to Kim Rooney’s article as Chair of the Hong Kong Law Reform Commission’s Sub-committee on Third Party Funding for Arbitration, on pages 46–48 of the Hong Kong Lawyer (January 2016 edition).

We concur that greater certainty over whether third party funding in arbitration is permitted is necessary to enhance Hong Kong’s competitive position as an international arbitration centre and to avoid Hong Kong being overtaken by its competitors.

However, as Burford Capital has expressed in its own written submission to the Sub-committee, we would go far further.

A meaningful number of commercial users of dispute resolution want or need access to external capital. Hong Kong should not only follow the Sub-committee’s recommendation to remove any ambiguity and explicitly allow the use of litigation finance in arbitration, but it should also expand the sanctioned use of litigation finance generally, including in commercial litigation.

Where other jurisdictions have embraced demand for commercial capital flows, Hong Kong is a noticeable outlier among sophisticated legal and capital markets in maintaining significant restrictions on commercial litigation and arbitration finance. By failing to remove barriers to its use and by inexplicably retaining an active prohibition against champerty, Hong Kong has already fallen behind other such centres and is continuing to see its position erode.

In the UK, litigation finance is not merely widely accepted but a mainstay of the justice system. In the US, the involvement of third parties in financing litigation by commercial plaintiffs and defendants is widespread and has been for decades. Third party funding is widespread in international arbitration before the world’s major arbitral institutions.

Hong Kong should move forward toward full acceptance of litigation finance. But the solution should not be to open the door only a crack. Adopting an unduly regulatory or interventionist approach to third party funding will not solve Hong Kong’s current problem.

Ultimately, if Hong Kong wants to be a world-class dispute resolution centre, it needs to act like one. It must embrace change decisively – and rapidly.

Jurisdictions: 

Chief Executive Officer
Burford Capital