Lawyers in Hong Kong to be able to charge success fees in arbitration

A new part 10B (21-page 334KB PDF) has been added to the Arbitration Ordinance. The new provisions set out a framework for outcome-related fees in arbitration and establish an advisory body to draft regulations and a code of practice. Once effective, lawyers and clients in Hong Kong SAR will be permitted to enter into success fee and contingency fee arrangements for arbitration and arbitration-related proceedings.

The amendment is expected to take effect later in 2022.

International arbitration expert Mohammed Talib said: “The passing of the new ordinance is an important milestone on the way to making outcome related fees available to those arbitrating in Hong Kong SAR. The main provisions in relation to such fees are not yet brought into operation and this will happen on a day to be decided by the Hong Kong administration. Nonetheless the passing of the ordinance now gives greater certainty as to the system that will be used in Hong Kong SAR in relation to outcome related fees.”

“The reason for the further time needed to bring the full amendments into force, and to permit the use of outcome fees in Hong Kong SAR, is due to the need to develop a Code of Practice in relation to outcome related fees with which lawyers who enter into such agreements for arbitration are ordinarily expected to comply with in connection with those agreements,” he said.

In March, the Arbitration and Legal Practitioners Legislation (Outcome Related Fee Structures for Arbitration) (Amendment) Bill 2022 was published, and it was passed at the end of June.

In December 2021, the Law Reform Commission (LRC) of Hong Kong SAR recommended removing the prohibition of lawyers using outcome-related fee structure (ORFSs) in arbitration and related court proceedings in and outside of Hong Kong SAR.