Regulation of Third Party Funding in International Commercial Arbitration - Perspective from Hong Kong
20 Pages Posted: 25 Jul 2017
Date Written: July 1, 2016
It is perhaps no longer of significance to engage in further debates on whether third party funding in international commercial arbitration is an evil hazard. It may be said that the consensus nowadays is to explore the most appropriate way of regulating such novel creature. This paper seeks to join such exploration by first providing a legal basis for third party funding to be insulated from the effect of the ancient law of champerty. Secondly, it provides a detailed analysis of the locus standi of third party funders in arbitration by reference to Hong Kong law relating to non-signatories.
Based on the unique legal status of third party funders, this paper argues that special measures should be taken to maintain the integrity of the arbitral process and to protect the unfunded party from unjust results:
1) the identity of the funder shall be disclosed, but the content of the funding agreement will be disclosed only if normal evidentiary burden has been fulfilled;
2) arbitral tribunals should consider all relevant circumstances of the case when considering applications for security for costs and it should be made clear that mere existence of funding relationship does not lead to an automatic order for security for costs;
3) amending the Arbitration Ordinance is the most direct way to make funders liable for adverse costs orders, but the statute should be amended in such a way that the non-signatories law is respected, funders are not punished and opponents are not getting a windfall.
Keywords: Third Party Funding, Regulation, Hong Kong, Non-Signatories, Champerty
JEL Classification: K33
Suggested Citation: Suggested Citation