The Government will introduce legislative amendments to clarify third-party funding of arbitration and mediation is not prohibited by the common law doctrines of maintenance and champerty, the Department of Justice said today.
The proposed amendments to the Arbitration Ordinance and the Mediation Ordinance will also set out the standards and practices that third-party funders have to follow, including financial and ethical standards.
The department said the proposed amendments were formulated on the basis of the recommendations made in a Law Reform Commission report published in October and a steering committee's views.
Third-party funding in arbitration and other dispute resolution proceedings is getting widespread in Australia, England and Wales, various European jurisdictions and the US.
The involvement of a third party is usually driven by the funded party's lack of financial resources to pursue legal claims.
However, parties who have financial means may also seek third-party funding for contentious proceedings as a financial or risk management tool.
The courts in Hong Kong do not object, in principle, to third-party funding of arbitration and related proceedings.
But whether it is allowed under the common law doctrines of maintenance and champerty is unclear.
The department believes the amendments will attract more arbitrations, further enhancing Hong Kong’s competitiveness as a leading international dispute resolution services centre in the region.
The amendment bill will be gazetted on Friday and put forward to the Legislative Council for review on January 11.
