Hong Kong Allows Third-Party Funding of Alternative Dispute Resolution

Hong Kong Allows Third-Party Funding of Alternative Dispute Resolution

A bill passed by the Hong Kong Legislative Council allows third parties to provide funding to a party involved in arbitration and mediation proceedings in return for receiving a financial benefit if the negotiation is successful. The Arbitration and Mediation Legislation (Third Party Funding) (Amendment) Bill 2016 was passed in the Legislative Council last month following a public consultation in 2013 by the Hong Kong Law Reform Commission. Prior to the new law, third-party funding for alternative dispute resolution (ADR) was prohibited by the centuries-old doctrines of maintenance and champerty.

Hong Kong Ally Law Third Party Funding

Colin Cohen, Senior Partner at Ally Law member firm Boase Cohen & Collins, acclaims the new law as helping to promote Hong Kong as an international center for arbitration. “It allows businesses involved in disputes to make better use of their financial resources and share the risks of pursuing a claim. Any business, no matter its size, is going to be happy to reduce legal costs while still being able to seek justice.” Mr. Cohen noted that the “legislation also calls for a Code of Practice which will provide clear ethical and financial guidelines and implement safeguards against potential abuse. Overall, the change in the law is desirable and necessary.”

The law is expected to take effect later this year.

Arbitration and mediation are dispute resolution alternatives to litigation, and can relieve your company of the expenses and time demands of a protracted litigation process. Several jurisdictions, such as Singapore, have similar legislation shifting costs in ADR proceedings. Consult with your Ally Law member firm to determine if your contracts would support an ADR provision, and if any current disputes you are involved in can appropriately be resolved through an ADR mechanism. For more information about our services in this area, contact us at yourally@ally-law.com.

Click here for the complete release by Ally Law member Boase Cohen & Collins.

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