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Third Party Funding of Arbitration in Hong Kong

In June 2017, the Arbitration and Mediation Legislation (third party funding amendment) Ordinance 2017 was published.  It introduces the framework for third party funding (TPF) for arbitration and mediation in Hong Kong by introducing a new part 10A to the existing Arbitration Ordinance (Cap 609).  This legislation allows for TPF of arbitrations in Hong Kong in return for a financial benefit if the arbitration is successful. 

Some have suggested that the benefits of TPF include expanding financing options for those unable to fund an arbitration proceeding, while the potential risks include the possibility for improper influence over proceedings, lack of transparency, conflicts of interest and a possibly grey zone within which the aims of TPF may align with those of controversial vulture funds.  To address some of these concerns, the third party funding amendment requires disclosure of funding agreements and lawyers are prohibited from funding a party for whom they act.  Close oversight will be necessary to determine whether such provisions provide sufficient safeguards to overcome the potential risks of TPF.

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