Hong Kong's Legislative Council on Wednesday passed a bill allowing third-party funding in arbitration, which is expected to come into effect later this year. 

Singapore, Asia's other leading arbitration seat, passed a similar bill in January, so this move is “a welcome development, which will help Hong Kong maintain its status as one of the world's leading dispute resolution centres,” said Justin D'Agostino, global head of disputes at Herbert Smith Freehills, in a statement. 

D’Agostino, who was a member of the Hong Kong Law Reform Commission's Sub-committee on Third-Party Funding for Arbitration, added: “Arbitration attracts sophisticated parties, who seek sophisticated solutions to funding their claims without taking undue risks. Funding is one of those solutions. It is fantastic that there is no longer an obstacle to using it here in Hong Kong.” 

The city has taken a moderate approach for an initial three-year period, noted Mun Yeow, a disputes resolution partner at Clyde & Co, in a blog post. “Notably, the legislation also provides that a funded party must notify the tribunal and every party of the existence of funding and the identity of the funder either at the commencement of the arbitration or, if the agreement is made later, within 15 days of it being made.”  

She continued, “Such a requirement does not currently exist in other major arbitration jurisdictions, including as England & Wales, and those jurisdictions will watch with interest how this measure impacts both the funding and arbitration markets.”