In May 2012, the Law Reform Commission of Hong Kong (Commission) recommended the implementation of a class action scheme in Hong Kong – see our alert in relation to the recommendations here.

The Commission’s recommendations have attracted both praise and censure. Those in favour welcome the perceived forced mindset and behavioural change for companies operating in Hong Kong and the increased protection for Hong Kong consumers, and ultimately investors, if the regime were to be extended to include securities actions.

On the other hand, those expressing concern tend to focus on the impact that the regime could have in Hong Kong, in particular through increased costs, not only for companies defending such claims, but also flow on costs such as insurance premiums.

The Democratic Alliance for the Betterment and Progress of Hong Kong is reportedly keen on the class action procedure being implemented urgently, so that consumers, who individually would be unable to litigate their legitimate claims, can have their voices heard.1 The Hong Kong General Chamber of Commerce, however, has strong reservations about the Law Reform Commission’s recommendations. CK Chow, the Chamber’s chairman, has commented on the impact the regime could have on Hong Kong’s status as a free market,2 although such regimes already exist in other “free market” jurisdictions such as the United States, Australia and the Netherlands.

One of the main criticisms of the proposal relates to the issue of funding for class actions. The proposal does not adequately address how class actions will be funded. As we have previously noted3, litigation funding is still illegal in Hong Kong and until that position is addressed it is unlikely that class actions, even with a regime in place, will get off the ground. The Commission’s proposal is for an incremental introduction of the regime, starting with consumer actions which could be funded by the use of the Consumer Council’s Consumer Legal Fund. However, it was noted recently by the chief executive of the Consumer Council that the fund currently has HK$18million (approx. AUD2.2m) and so one large claim could easily delete the entire fund.4 The issue of funding, therefore, remains a very real impediment to any effective class action regime being implemented in Hong Kong.

It remains to be seen what the legislature will make of the recommendations; there had been no hint yet of whether a bill will be drawn up. It is also interesting to note that only three of the over 20 reports the Commission has released in the last ten years have led to new laws in Hong Kong. There has also been no suggestion that the legislature is considering the abolition of maintenance and champerty to make way for litigation funding in Hong Kong. The Legislative Council Panel on Administration of Justice and Legal Services has discussed the Commissioner’s proposal,5 but as yet, there is no indication of any action being taken in response to it. The Panel was due to discuss the proposal at its July meeting (on 10 July 2012), but minutes of that meeting are yet to be released.

It is, therefore, still a waiting game to see when, or indeed if, the Commission’s proposal will translate into a class actions regime in Hong Kong.