MARKET COMMENTARY 11
With regard to arbitration, while it is not entirely clear whether third-party funding for arbitration is permitted under Hong Kong law, in principle, there is nothing preventing such transactions, provided that there is a proper commercial purpose to the transaction. THIRD-PART Y FUNDING IN THE PR C Unlike the position in Hong Kong, there are no laws or regulations that expressly prohibit third-party funding of arbitration in the PRC. However, such transactions do not appear to have been used in the PRC and legal commentators have noted there do not appear to be any professional funders active in themarket, either for litigation or arbitration. Nonetheless, it appears that the PRCmay be open to allowing third-party funding. The “Measures on Lawyers’ Fees” Lawpassed in 2006 allowed lawyers to charge contingency fees in certain cases, capped at 30% of the proceeds. Further, in a recent Hong Kong case, the Court permitted the liquidators of a Hong Kong registered company to enter into a third-party funding arrangement with a party in the PRC on the basis that it was permitted under PRC law. While that case is not binding in themainland, it does tend to indicate amore receptive attitude to third- party funding in the PRC than onemight expect. With regard to arbitration, similar to the position in Hong Kong, it is unclear whether third-party funding is permitted to fund arbitration claims seated in the PRC, but there is nothing in principle preventing it. PROSPECTS FOR THIRD-PART Y FUNDING IN HONG KONG AND THE PR C While it may yet take some time before third-party funding of arbitration proceedings is officially recognised in Hong Kong and the PRC, some tentative steps have been taken in that direction. A consultation paper released by the LawReformCommission of Hong Kong in 2015 has recommended that the lawbe reformed to clearly allow for third-party funding of arbitrations taking place in Hong Kong. The six-member subcommittee responsible for preparing the report unanimously concluded that third-party funding should be written into the lawprovided that “clear ethical and financial standards” for third-party funders be established and enforced by either a statutory or self-regulatory body. CONCLUSION While it is probably too early to saywhether third-party funding of arbitration claims will become a feature of the legal landscape the PRC in the near future, if the government of Hong Kong adopts the changes recommended by the LawReformCommission, it is not unreasonable to assume that the PRC could, in time, follow suit. In light of these developments, the future of third-party funding in Hong Kong and the PRC looks reasonably bright. Third-party funders and lawyers who are prepared to take on arbitrations on a contingency fee basismay therefore want to “watch this space”.
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