The Official Journal of The Law Society of Hong Kong – (FEB 2020)
【Development Of ThirdParty Funding in Dispute Resolution in Major Common Law Jurisdictions s】
Given the limitations of legal aid, it is not uncommon for claimants to give up the claim due to a lack of financial support even though there are sufficient grounds. Regrettably, litigation funding has been regarded as a criminal offence and civil tort in Hong Kong, and thus such agreements were not enforceable. Nevertheless, the Court has adopted a more lenient and pragmatic approach to this concept in recent years. This article seeks to analyse the evolution of litigation funding, its implementation in major common law jurisdictions and the evolution of its implementation in Hong Kong.
Champerty and maintenance as offences were abolished in the United Kingdom in 1967. As feudal lords disappeared, maintenance which could potentially help the poor but forbidden in the past, has eventually revived in the form of litigation funding. Its positive effects include: for individuals who are entitled to file a claim but cannot afford the litigation or arbitration fees, third-party funding can help them access justice; for companies facing financial difficulties, third-party funding can help them initiate valuable proceedings; third-party funding firms enhance economic efficiency by injecting more cash flow into economic activities through litigation or arbitration. Third-party funding is charged under a "pay when succeed" basis, that is, a certain percentage can be charged as compensation after lawsuit is successful.
Third-party funding in Hong Kong has also gradually improved through legislative amendments in recent years. The general idea is to exceptionally exclude third-party funding in arbitration from the two torts, namely maintenance and champerty. After several revisions, the Arbitration and Mediation Legislation (Third Party Funding) (Amendment) Ordinance 2017 took effect on 1 February 2019. The Code of Practice for Third Party Funding of Arbitration issued earlier sets out in detail the standards for third party funders and funded parties. Third-party funding in both arbitration and mediation are not prohibited by the rules on maintenance and champerty under the common law. However, unlike in Australia, funders are not permitted to influence the legal representatives of the funded parties in Hong Kong. Generally speaking, as a major international trade center and arbitration hub in the Asia Pacific region, Hong Kong is in the forefront in terms of third-party funding. Hong Kong has to expedite the legislation on third-party funding (which is already the case) on the one hand, while on the other hand strengthen the training for legal professionals in order to transit from rejecting to accepting third-party funding in common law jurisdictions. Although the attitudes towards thirdparty funding are different in various jurisdictions, the overall trend is evolving from rejection in the past to gradual acceptance and improvement by legislation. On the basis of Hong Kong’s relatively advanced development, relevant legislation should be optimised in Mainland China, drawing reference from various countries. Certainly, this requires a wide extent of discussions of exchanges. Editorial note: This is a translation of the Chinese article