On 16 August 2021, the Department of Justice launched a two month public consultation to seek comments on the draft Code of Practice for Third Party Funding of Mediation (the “Code”).
The Code proposes several practices and standards that third party mediation funders are ordinarily expected to comply with in carrying on activities in connection with third party funding of mediation in Hong Kong. A failure to comply with a provision of the Code does not, of itself, render any person liable to any judicial or other proceedings. A failure to comply with the Code may however be considered by any court or arbitral tribunal if it is relevant to a question being decided by that court or arbitral tribunal.
Summarised below are some of the main standards and practices identified in the Code.
Category | Description |
Funding Agreement |
The third party funder must:-
|
Capital Adequacy Requirements |
The third party funder must:-
|
Conflicts of Interest |
The third party funder must:-
|
Confidentiality and Legal Professional Privilege | The third party funder will observe the confidentiality and privilege requirement of all information and documentation relating to the mediation. |
Control |
The funding agreement must set out clearly:-
|
Liability for Costs | The funding agreement must state whether (and the extent) that the third party funder is liable to the funded party to meet any liability for adverse costs, pay any premium to obtain costs insurance, security for costs and other financial liability. |
Grounds for Termination |
The funding agreement must state whether the third party funder may terminate the funding agreement in the event that the third party funder:-
The funding agreement must not confer a discretionary power to the third party funder to terminating the funding agreement in absence of circumstances described above. |
Complaints Procedure | The third party funder must maintain effective procedure for addressing complaints against them. |
The consultation period will end on 15 October 2021. We await to see whether any significant amendments will be made to the draft Code. Contact us if you would like to find out more about the Code, mediation, or third-party mediation funding.