As reported in our March 2016 article, given the current uncertainty about whether Third Party Funding Agreements are permissible for arbitrations conducted in Hong Kong, the Third Party Funding for Arbitration Sub-Committee of Hong Kong’s Law Reform Commission was asked to consider whether legal reforms were needed to clarify such. The Sub-Committee concluded that reform is required and recommended that Hong Kong’s Arbitration Ordinance (Cap 609) be amended to provide that such funding is permitted. The extended consultation period ended in February 2016 and the Sub-Committee’s further report is awaited. No doubt, in anticipation of the Arbitration Ordinance being amended to expressly provide for third party funding in arbitrations in Hong Kong, the CIETAC Hong Kong Arbitration Center has (in May 2016) released its draft Guidelines for Third Party Funding in Arbitration, for public consultation. The consultation period ends on 19 July 2016.
Draft CIETAC HKAC TPF Guidelines
The introduction to the Guidelines (which are to be cited as “CIETAC HKAC TPF Guidelines”) makes it clear that they are to be voluntary and that parties and arbitrators shall not be deemed to have adopted them simply because they participate in arbitration proceedings in which there is an element of funding. For the purpose of the Guidelines, third party funding (Funding) arises when a professional third party or entity (Funder) contributes funds, or provides other material support to a party in arbitration (Funded Party) and has a direct economic interest in the award to be rendered in the arbitration.
The draft Guidelines include the following:-
Parties Seeking Funding
The Guidelines set out a number of things which the person seeking funding should do, namely:-
The Guidelines set out a number of matters which the arbitral tribunal should do, namely:-
It is still not clear when the legislation for third party funding will be in place in Hong Kong. The publication of the draft Guidelines should be welcomed by the users of CIETAC arbitration. It will encourage parties to consider various issues which may arise from third party funding when it is formally recognised as legal in Hong Kong.