Market Reaction: Commercial Litigation Third-Party Funding

In Raafat Imam v Life (China) Co. Ltd [2018] HKCFI 1852, the Court of First Instance refused to grant a declaration that a proposed commercial litigation funding agreement to be entered into between the plaintiff and a commercial third-party funder did "not offend the law prohibiting maintenance and champerty" or came within the "recognized exception relating to access to justice". 

It is important to emphasise that the agreement had not been entered into. Indeed, the plaintiff's application in the proceedings could be seen as something of a "test case", in order to test the parameters of the common law of maintenance and champerty in Hong Kong or its miscellany of exceptions.

The case has caught the eye of the commercial disputes market in Hong Kong; anticipating a day when such a case might come along (in the absence of, for now, progress with legislative initiatives of the sort seen in some other common law jurisdictions and disputes resolution centres).  

At the time of writing it is not clear whether there will be an appeal.

Without commenting on the merits of an appeal, Thomson Reuters asked around in the market about third-party funding for commercial disputes.

Denis Brock (Partner at O’Melveny, Hong Kong) notes:

"Commercial funders wishing to come to the Hong Kong market probably have two main strategies, which are not mutually exclusive. They can lobby and wait for legislative reform (which in the local circumstances of Hong Kong might take a while) and they can hope that the right case is pushed through the courts – ultimately, as far as the top court."

Amita Kaur Haylock (Counsel at Mayer Brown JSM) said:

"If you go down a 'test case' route, then you need the right case. For example, something that can tap into 'access to justice' considerations. One line of argument is to demonstrate that a plaintiff's impecuniosity is an 'access to justice' exception. Whether this might succeed on an appeal in a case remains to be seen.  A successful appeal could open up a possibility of funding for some other types of claims. We already have the potential for third-party funding of arbitration, including in my area of practice – intellectual property disputes."    

Gary Yin (Partner at RPC, Hong Kong) comments:

"If third-party funding for commercial litigation is accepted in Hong Kong (without impacting on legal aid) it will help fortify Hong Kong's reputation as a disputes resolution centre. What this case also does is remind all stakeholders to get on with full implementation of the legislative reforms relating to third-party funding for arbitration and commercial mediation in Hong Kong."   

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