The Arbitration and Mediation Legislation (Third Party Funding) (Amendment) Ordinance 2017 (“Amendment Ordinance”) was gazetted in June 2017. By virtue of the Amendment Ordinance, the authorised body (as defined in the Amendment Ordinance) may issue a code of practice setting out the practices and standards with which third party funders are ordinarily expected to comply in carrying on activities in connection with third party funding of arbitration and mediation. Furthermore, before issuing the above code of practice, the Amendment Ordinance requires that the authorised body must consult the public about the proposed code and publish a notice to inform the public of the proposed code.
On 30 August, the Department of Justice (“DOJ”) released the draft Code of Practice for third party funders (“Draft Code”) for consultation. The draft Code was passed to various specialist committees of the Law Society for review.
The Arbitration Committee, the Mediation Committee and the Anti-Money Laundering Committee of the Law Society have studied the Draft Code. They provided comments and proposed amendments to the Draft Code. The Personal Injuries (“PI”) Committee on the other hand expresses strong reservation on mediation funding under the Amendment Ordinance insofar as PI litigation is concerned. The PI Committee considers that, inter alia, the Amendment Ordinance is not clear whether post-action mediation for PI cases should be considered as part of litigation (contentious) proceedings where the doctrine of champerty applies. The PI Committee takes the view that the launch of the mediation funding regime in Hong Kong would be a loud wake-up call to recovery agents. It also envisages two practical problems to arise when the Amendment Ordinance is to come into full effect. These two problems relate to (i) Order 80 settlements / cases under the Employees Compensation Assistance Fund Scheme, and (ii) legal aid cases. After further deliberation, the PI Committee asks to exclude PI litigation from mediation funding regime.
The above are set out in more details in the Law Society’s submission on the Draft Code:
Third Party Funding of Arbitration in Hong Kong – Update
On 7 December 2018, the Department of Justice issued "A Code of Practice for Third Party Funding of Arbitration", setting out the practices and standards with which third party funders are expected to comply in carrying on activities in connection with third party funding of arbitration in Hong Kong. See link: https://www.doj.gov.hk/eng/public/pdf/2018/pr20181207e4.pdf
A notice was gazetted on the same day, appointing 1 February 2019, as the date on which relevant provisions of Section 3 of the Arbitration and Mediation Legislation (Third Party Funding) (Amendment) Ordinance 2017, relating to Divisions 3 and 5 of new Part 10A of the Arbitration Ordinance, shall come into operation.