After 19-month-wait, Third-Party Funding for Arbitration Allowed in Hong Kong

After a wait of a year and a half and consideration of over five years, third-party funding of arbitration has now been permitted in Hong Kong.

Long-awaited amendments to an arbitration ordinance which expressly permits third parties to fund the cost of arbitrations seated in Hong Kong took effect on Feb 1.

The city’s Legislative Council first passed the ordinance in June 2017 but some key provisions could not take effect until a code of practice for third-party funders was issued. The code was issued by the Hong Kong Department of Justice in December.

In June 2013, the Law Reform Commission of Hong Kong formed a subcommittee to review whether reform to allow such legal financing was needed. At that point, third-party funding

Ronald Sum, a Hong Kong-based partner and East Asia arbitration head of Locke Lord, said, “It’s a turning point for Hong Kong. Just the fact that there is another way [to afford arbitration]. It’s an additional service that Hong Kong can offer to the parties.”

The move brings Hong Kong in line with other major international arbitration centres like London and New York as well as regional rival, Singapore. A similar bill permitting third-party funding for arbitration was passed by the city-state in January 2017, and it took effect less than two months later.