Hong Kong is to take a step closer towards introducing class actions, with a working group made up of public officials and private sector representatives set to meet for the first time this month.

The working group meeting comes after the Law Reform Commission (LRC) of Hong Kong issued proposals in May last year that could change the way companies operating in Hong Kong respond to claims from multiple parties.

Banks and other financial institutions are likely to be particularly affected should consumers be able to band together to bring claims for fraud, mis-selling and product liability, for example.

Current regulations allow only very limited options for multi-party disputes in Hong Kong, with individuals allowed to bring group claims only where they each have the same contract.

The proposed changes would overhaul this, with an opt-out procedure meaning that all potential Hong-Kong resident class members would be bound by the decision, thus preventing future claims unless they actively opt out of the class action.

Lawyers say that if the rules are introduced, they could eventually force more financial institutions to settle out of court when sued by investors.

Barrister Anthony Neoh, a former adviser to the Securities & Futures Commission (SFC) in Hong Kong and chair of the sub-committee appointed by the LRC to research the matter, said: "[With class actions, defendants] feel more pressure. They don't want the hassle of going to court, so they settle.

"But, looking at all the pros and cons, it is in the interests of the community to have class actions. In a lot of these cases, there is not enough in it for many people to go and sue independently, so you let the producer of the product go scot-free."

The LRC's May report proposed allowing group proceedings for all civil cases further down the line. This could include lawsuits brought  against those issuing and advising on share issues, which do not fall into the consumer bracket.

It also recommended that proceedings could be funded by topping up the existing Consumer Council Litigation Fund, with this to later become a general class action fund to be administered by the legal aid department. It ruled out extending legal aid to cover class actions or the use of litigation funding companies.

Commenting on the plans, Paul Mitchard QC (pictured, above), head of Skadden Arps Slate Meagher & Flom's Asia litigation and arbitration group and co-head of the global practice, said: "The question to ask is when the court rules will change. There have been huge delays in this already and there is no real timetable for introducing a wider scheme."

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