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18 March 2019 | by LexisNexis Hong Kong

On 1 February 2019, a new Part 10A to the Arbitration Ordinance, which was added by the Arbitration and Mediation Legislation (Third Party Funding) (Amendment) Ordinance 2017, came into operation and permits third party funding of arbitration in Hong Kong.

Under the new section 98K of the Arbitration Ordinance, the common law offences of maintenance and champerty do not apply to third party funding of arbitration. The Hong Kong Bilingual Legal Dictionary (available on Lexis Advance® Hong Kong) defines maintenance as a common law crime of assisting and encouraging a party in litigation by a person who has neither an interest in the litigation nor lawful justification. Champerty is an aggravated form of maintenance in which the consideration given for the maintenance of a suit is part of anything gained as the result of the proceedings, or some other profit. Third party funders would thereby be able to freely fund parties to arbitration without risk of committing criminal offence of maintenance or champerty. This is intended to enhance Hong Kong’s status as an international arbitration centre and would likely increase the attractiveness of arbitration as an alternative dispute resolution mechanism.

A Code of Practice for Third Party Funding of Arbitration was issued earlier on 7 December 2018 detailing the standards and obligations that third party funders are expected to comply with. These obligations include maintaining a minimum of HK$20 million of capital to meet debts as they become due and payable, and having effective procedures in place to prevent any conflict of interest.

For more information on arbitration law, please see:

Butterworths Hong Kong Alternative Dispute Resolution Handbook

Butterworths Hong Kong Arbitration Handbook – Second Edition

Chinese Arbitration Law

The Annotated Ordinances of Hong Kong – Arbitration Ordinance (Cap 609)

Lexis® Practical Guidance – Hong Kong Dispute Resolution

For enquiries about the above publications, please contact your Account Manager via sales.hk@lexisnexis.com

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