Third Party Funding for Arbitration

The legal doctrines of maintenance and champerty, which prohibit third party funding of litigation both as a tort and as a criminal offence, save in some exceptional circumstances, have been held by the Hong Kong courts to continue to apply in Hong Kong.

A Third Party Funding for Arbitration Sub-Committee (“Sub-Committee”) set up under The Law Reform Commission of Hong Kong considered that, under the current law, it is unclear whether the operation of the doctrines also apply to third party funding for arbitrations taking place in Hong Kong. They noted that this question was left open by the Court of Final Appeal in 2007 in the case of Unruh v Seeberger (2007) 10 HKCFAR 31.

The Sub-Committee was also of the view that the apparent ambiguity could affect Hong Kong as a major international financial and arbitration centre. One factor parties are starting to increasingly weigh when considering where to resolve their disputes is potential financing options available to them in different jurisdictions.

The Sub-Committee studied the matter and in October 2015 produced a consultation paper to seek comments on its recommendations on the reform for and supervision of third party funding for arbitration in Hong Kong.

The Law Society’s Arbitration Committee and the Working Party on Litigation Funding have jointly reviewed the consultation paper. Both are in support of the main recommendation to legislate to expressly permit arbitration funding in Hong Kong. They are also in favor of expediting the subject review, with a view that the necessary reform could be implemented in good time. The Council endorsed the recommendations made by the Committee and the Working Party.

The Law Society’s full submission is available at http://www.hklawsoc.org.hk/pub_e/news/submissions/20160106.pdf.

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