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Following the consultation paper issued by the Third Party Funding for Arbitration Sub-Committee of Hong Kong’s Law Reform Commission (LRC) in October 2015 and recommendations made by the LRC in its report dated 12 October 2016, the Legislative Council of Hong Kong passed the Arbitration and Mediation Legislation (Third Party Funding) (Amendment) Bill 2016 on 14 June 2017. (For more information about the Consultation Paper and LRC’s recommendations, please see the articles in our March 2016 and October 2016 newsletters). The Arbitration and Mediation Legislation (Third Party Funding) (Amendment) Ordinance 2017 (The Amendment Ordinance) is expected to come fully into effect later this year.
The Amendment Ordinance amends the Arbitration Ordinance (Cap. 609) to ensure that third party funding of arbitration is not prohibited by the common law doctrines of maintenance and champerty, and provides for related measures and safeguards. Similar amendments are also made to the Mediation Ordinance (Cap. 620).
The key amendments to the Arbitration Ordinance are as follows:-
The implementation of the Amendment Ordinance will no doubt further enhance Hong Kong’s position as a leading arbitration hub. The new law has been widely welcomed by the arbitration community and it is anticipated that institutional funders will begin funding arbitrations as soon as the Amendment Ordinance comes fully into force. It is important for parties to arbitration to consider carefully the terms of any funding agreement they are considering entering into and advisable for them to seek professional advice before entering into such. We await the issue of the Code of Practice setting out the practices and standards with which third party funders will need to comply. The Amendment Ordinance states that there must be a public consultation process before the Code is issued and that is therefore likely to be the next step.
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