Third party funding is a hot topic in Asia.
As noted on this blog, Singapore introduced legislation in 2017 to allow third-party funding in international arbitration and associated proceedings, including enforcement and mediation. Hong Kong’s funding legislation takes effect today.
Our Singapore team is already representing clients in two significant Singapore-seated arbitrations in which the claimants are third-party funded. It is understood that these are amongst the first funded arbitrations in Singapore. We expect Hong Kong arbitrations to generate high levels of interest in funding once the law is in force.
In the light of these exciting developments, Herbert Smith Freehills has contributed the Hong Kong and Singapore chapters of Getting the Deal Through: Litigation Funding 2019. The chapters discuss the trends and legal landscape for funding in both Hong Kong and Singapore.
As noted in our earlier post, Hong Kong published its long-awaited Code of Practice for Third Party Funding of Arbitration on 7 December 2018.
Publication of the Code has removed the final hurdle to third party funding of Hong Kong arbitrations. The law that allows such funding will come into effect on 1 February 2019, via sections 98K – 98O of the Arbitration Ordinance (Cap. 609). These sections abolish the criminal and tortious offences of champerty and maintenance in relation to third party funding of arbitration, as well as arbitration-related court and mediation proceedings. For more detail on the law, click here.
The Code was published by Hong Kong’s Secretary for Justice, Teresa Cheng SC, in her capacity as the “authorized body” under Part 10A Arbitration Ordinance. Compliance with the Code will be overseen by an “advisory body”, consisting of three senior Hong Kong lawyers, whose powers derive from s.98X Arbitration Ordinance.
Hong Kong has published its long-awaited Code of Practice for third party funders, and announced that amendments to the Arbitration Ordinance which permit funding of Hong Kong arbitrations will come fully into force on 1 February 2019. Similar amendments to the Mediation Ordinance (Cap. 620) have been deferred for further consultation.
An ICSID tribunal has rejected a State's application for security for costs in circumstances in which the other party had third-party funding in the form of ATE insurance which specifically provided for cover of the State's costs.
Italy's request for security for costs
The application formed part of arbitral proceedings brought by Eskosol S.p.A. in liquidazione ("Eskosol") under the Energy Charter Treaty and the ICSID Convention against the Italian Republic ("Italy"). Italy sought security for costs in support of its ICSID Arbitration Rule 41(5) application for summary dismissal of Eskosol's claims on the basis that they are manifestly without legal merit.
This week has seen two major developments in Singapore arbitration. First, Singapore's Ministry of Law has published draft legislation to legalise and regulate third party funding for arbitration (and arbitration-related litigation and mediation) in Singapore. Second, the Singapore International Arbitration Centre (SIAC) confirmed the release of the sixth edition of its Rules: the SIAC Rules 2016, to come into effect on 1 August 2016.
Below we explain briefly the effect of the proposed legislation and the SIAC Rules 2016. More in-depth analysis will follow.
On 1 December, the Commission on Arbitration and ADR of the International Chamber of Commerce (ICC) issued a report intended to inform users of arbitration of the factors that tribunals consider when allocating costs between parties to arbitration.
A 60-strong Task Force drew on a study of over 300 ICC awards and contributions from eight other institutions (LCIA, PCA, SCC, HKIAC, CIETAC and SIAC). The report summarises some of the trends apparent from those awards, the institutional contributions and the Task Force's experiences under different national legal systems and from arbitration practices across the world. It therefore provides a very useful insight into the approach to costs adopted by many different tribunals in many different contexts.
The report does not endorse a particular approach on the allocation of costs in arbitration. Nor does it seek to provide rigid guidelines for tribunals to follow. However, it re-enforces that tribunals should use the allocation of costs as a case management tool, to ensure parties conduct proceedings in an expeditious and cost-effective manner.
This blog post summarises the key points in the ICC's report and the key conclusions that parties might take into account when engaged in arbitration.
The Hong Kong Law Reform Commission has today published a Consultation Paper recommending that third party funding should be permitted for arbitrations in Hong Kong. The Paper invites public comment on the recommendation, and how third party funding should be adopted in Hong Kong. A link to the paper can be found here.
The Consultation Paper is a comprehensive study of the third party funding industry, examining current third party funding methods in other jurisdictions, as well as the potential benefits and drawbacks of permitting third party funding for arbitration in Hong Kong. The Consultation Paper also reviews the current law relating to third party funding in Hong Kong, as well as the law and regulation for third party funding in several other jurisdiction (including England & Wales, Australia, USA, Mainland China, and Singapore).
Justin D'Agostino, the Global Head of Herbert Smith Freehills' Dispute Resolution practice and the firm's Regional Managing Partner for Asia and Australia, is a member of the Law Reform Commission Sub-Committee which drafted the Consultation Paper. The Sub-Committee includes key members of Hong Kong's arbitration community, including Kim Rooney, a barrister at Gilt Chambers (Chair of the Sub-Committee), Teresa Cheng SC, Chairwoman of HKIAC, Robert Pang SC, Jason Karas and Victor Dawes SC.