Hong Kong: Primed and Ready

Within a few months of the entry into force of Singapore’s new third‑party funding framework, in June 2017, the Legislative Council of Hong Kong passed the Arbitration and Mediation Legislation (Third Party Funding) (Amendment) Ordinance. The Ordinance was gazetted on June 23, 2017, but only partially entered into force: the sections lifting the prohibition on third‑party funding is not yet operational.
On December 7, 2018, the Secretary for Justice issued a Code of Practice for Third Party Funding of Arbitration (following a public consultation that closed at the end of October), and concurrently published a notice in the Gazette providing that the sections of the Ordinance relating to third‑party funding will enter into force on February 1, 2019. Once it enters into force, the new legislation will permit third‑party funding in arbitration cases (both international and domestic) seated in Hong Kong, as well as in related proceedings including ancillary court proceedings both in and outside Hong Kong.
Disclosure of funding arrangements:
Whether or not disclosure of funding arrangements should be made mandatory in arbitration proceedings has been the subject of some debate. A tension exists between, on the one hand, parties’ general preference to keep their financing arrangements private, often coupled with fears that a revelation of funding might lead to a (perhaps false) impression that the funded party is impecunious, and the imposition of an order for security for costs; and, on the other hand, concerns over potential conflicts of interest (e.g. if an arbitrator has an interest in a funder that is involved in proceedings they are hearing) going uncovered if disclosure is not made to all parties. Recent surveys suggest that the balance of opinion is largely in favor of at least some limited disclosure.
Consistent with the terms of the Ordinance, new Article 44 of the HKIAC Rules provides that a funded party is under a continuing obligation to disclose to each party to the arbitration, the tribunal (or emergency arbitrator, as applicable) and HKIAC: (i) the fact that a funding agreement has been made; and (ii) the identity of the third-party funder.
Similar disclosures already were required in connection with funded arbitration proceedings in Singapore, but there the obligation is placed on the legal representative of the funded party, rather than the party themselves, pursuant to amendments to the professional conduct rules for lawyers in Singapore that entered into force in March 2017.
Topics: Hong Kong | Disclosure | Arbitration
Work cited: Marla Decker | Lake Whillans
https://lakewhillans.com/articles/third-party-funding-in-asia-arrived-and-set-to-thrive/