The Hong Kong Legislative Council has passed amendments to the Arbitration Ordinance to permit third party funding of arbitration in Hong Kong.

The amendments follow reforms proposed by the Hong Kong Law Reform Commission in October 2016 which recommended permitting third party funding of arbitration and associated proceedings with appropriate safeguards and regulation.

Hong Kong, in line with similar recent legislation in Singapore, has taken a 'light touch' approach for an initial three year period and has provided clear ethical and financial standards for funders to meet. 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. 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.

This legislation will be welcome by the arbitration and funding communities and will serve to enhance Hong Kong's offering as a global arbitration seat.