Burford welcomes the passage earlier today of the Arbitration and Mediation Legislation (Third Party Funding) (Amendment) Ordinance in Hong Kong. This legislation clarifies that third-party funding of arbitration and mediation is permitted under Hong Kong law.
The legislation is both welcome and important. It is a further step in the ongoing growth of litigation and arbitration finance as an accepted reality of the business of law.
Over the last few years there have been important steps forward in Hong Kong and Singapore. This legislation follows the earlier recommendations of the Law Reform Commission of Hong Kong, which in October 2016 released a report recommending that the law be amended to make clear that third-party funding of arbitration is permissible in Hong Kong.
The legislation, while important in itself, is just a step in the right direction. As we said in our January 2016 letter to the Law Reform Commission during the comment period for their report, we believe that more steps are needed. As we said then:
Hong Kong should move toward full acceptance of litigation finance. The growing interest in the use of litigation finance in Asia is a natural outgrowth of its successful use in other jurisdictions. Lawyers in Hong Kong who have seen their partners in other offices benefit from the use of third-party financing arrangements are interested in learning whether similar results can be achieved in Asia, and it is clear that Asian clients are clamoring for financial solutions to litigation expense. There is no question that Hong Kong is ceding adjudication matters – in both arbitration and civil litigation – to other fora because of its opposition to third party funding.
The solution, however, is not to open the door only a crack. Burford already faces far more demand for its capital than it has capital available. Adopting an unduly regulatory or interventionist approach to third party funding will not solve the current disinclination to do business in Hong Kong and will simply leave the status quo in place….
Thus, if Hong Kong merely opens the door a crack to litigation finance but seeks an onerous and intrusive regulatory regime, it will achieve much the same result as if it had not engaged in any reform at all."
We look forward to the gazettal of the current legislation later this year, and the concomitant finalization of the Code of Practice for funders. We welcome the opportunity to engage with the Department of Justice on the draft Code and we stand ready to answer questions from clients and from law firms about third-party finance in Hong Kong and the region.