Third-Party Funding of Arbitration and Alternative Dispute Resolution in Hong Kong

Abstract

In June 2017, Hong Kong passed legislation amending the Hong Kong Arbitration Ordinance to permit third-party funding of arbitration, mediation, and related proceedings.These amendments had all taken effect by February 1, 2019. Hong Kong’s regulatory regime requires third-party funders to comply with the financial and ethical standards set out in the Code of Practice for Third Party Funders of Arbitration, issued on December 7, 2018. This article explains why Hong Kong concluded that third-party funding of arbitration, mediation, and related proceedings under the Hong Kong Arbitration Ordinance should be allowed, why it needs to be regulated, and the key provisions at the heart of Hong’s Kong’s “light touch” regulatory approach embodied in the Code of Practice. The article also touches on a number of emerging issues, including whether an arbitral tribunal should have the power to make an adverse costs order against a third-party funder and the recoverability of the funder’s benefit under the funding agreement following Essar Oilfields Services Ltd. v. Norscott Rig Management Ltd.