Litigation funding refers to the way where potential claimants finance their litigation claims through a third party funding company. Generally, the funding company provides an advance to the litigant and receives a share of the settlement, if the litigation claim is successful.

The Law against champerty and maintenance dates back to medieval England. Maintenance inferred a person with no interest in the litigation, assisting and encouraging a party in litigation. Champerty was a form of maintenance whereby the maintaining company received a percentage of the successful litigation’s proceeds. This traditionally put a ban on litigation funding by third parties. The Law was abolished in England in 1967, and third party litigation funding has since grown in several common law jurisdictions. Although Hong Kong is taking longer than other common law jurisdictions to fully accept third party litigation funding, it is clear moves are in place to become more accommodating.

Hong Kong holds a strict stance on litigation funding. It appears the authorities would be prepared to prosecute champerty as a criminal offence; however, there are exceptions. Recently, the Court of Final Appeal showed signs of reconsidering the law against champerty and maintenance. The ever-changing demands of public policy are pushing the courts to review the law, adopting a more flexible approach to litigation funding, mainly in relation to insolvency.

Developments involving the introduction of conditional fee arrangements for solicitors mean the acceptance of litigation funding is moving even closer to Hong Kong. These no win, no fee arrangements would allow third party litigation funding, in conjunction with solicitors, on the basis that the solicitors would only charge their client fees if the case is successful. Equally, the funding third party would only receive a share if the case is successful.