Distinguished Guests, Ladies and Gentlemen:

First of all, thank you for giving me this opportunity to meet and address such a distinguished gathering of the arbitration community. It is indeed my great honour to be invited to speak on the first day of the Hong Kong Arbitration Week. May I extend to all of you a very warm welcome, especially to those who travelled from overseas jurisdictions to participate in the events of the Arbitration Week. Given the presence of so many leading members of the arbitration community, I am sure this conference and other events of the Arbitration Week would provide good opportunities for fruitful and constructive exchanges. For the purpose of this evening, I will focus on two main areas.

The first area concerns the development of international arbitration culture. Those of you who were here about a year ago would remember the insightful Inaugural Address delivered by Dr Julian Lew QC (Note 1). Dr. Lew highlighted the worldwide economic changes that have been taking place over the past decade, and observed that such changes led to a major change of focus in international arbitration. In addition, Dr. Lew stressed that many Asian jurisdictions have adopted the UNCITRAL Model Law as the basis of their arbitration legislative regimes, and that these jurisdictions will be "in the vanguard" of the development of international arbitration law and practice in the 21st century (Note 2). Following up on these observations made by Dr. Lew, I will make a few remarks concerning the development of an international arbitration culture, especially in the Asian context.

The second area that I will deal with is the question of what makes an effective international arbitration framework. Wearing my hat as the Secretary for Justice of Hong Kong, I will examine this question from the policy perspective and by using Hong Kong as an example for the purpose of the discussion.

International Arbitration Culture

Dealing first with international arbitration culture, I wish to make the following key points at the outset before making a few brief elaborations:

(1) First, the global economic balance has clearly shifted from the West to the East. Such an economic change, together with the continuing trend of globalization and regional integration, do have and will continue to have significant impact on the development of international arbitration.

(2) Second, in developing an international arbitration culture, it is of paramount importance to bear in mind the objectives of international arbitration. There is no point in developing an international arbitration culture solely for the sake of doing so. The development of international arbitration culture should serve the ultimate aim of enabling international arbitration to have a healthy and sustainable future which can meet the needs of the ever changing international environment.

(3) Third, in the context of Asia, it may still be a bit early to suggest that there is an established Asian international arbitration culture at the present stage. However, the arbitration communities and relevant stakeholders in Asia should take an active role in both the Asian arbitration arena as well as at the international level. Not only would such active participation be conducive to the development of an international arbitration culture in Asia, it would enable different jurisdictions in the region to make their respective contribution to the development of international arbitration at the worldwide level.

Economic Changes

As noted earlier, Dr. Lew in his address made last year, pointed out the worldwide economic changes that have been taking place over the past decade, and the consequential shift of focus in international arbitration. On the whole, I agree with his analysis. By way of a preface to what I am about to say, I would add two related observations.

Economists and economic reports suggest that Asia has since become the top destination for investors, with China occupying the top rank. Without going into figures or statistics, it appears to be the majority view these days that the global economic balance has shifted from the West to the East, with China being the most powerful growth engine in Asia. By way of example, the World Bank released a report in May projecting a threefold increase over the current level in the investment flows into the developing countries and regions in the next 20 years. It was forecasted that by 2030, China will be the largest investor in the world accounting for around 30% of the global gross investment. With the increase in trade and commercial activities, the need for international arbitration service would likewise increase. The important question is how best to meet such an increasing demand and how jurisdictions in Asia can make the best out of it.

On top of economic changes, the impact of globalization and regional integration is also relevant as those two processes give rise to more cross-border, transnational or international trade disputes. It is a fact of life that differences and disputes do arise in the course of commercial activities, even if all parties concerned are acting in good faith (Note 3). Although court litigation will remain to have an important role to play, international arbitration as a means of dispute resolution will certainly become more and more popular as it can offer advantages that litigation simply cannot. Amongst others, the growing interest in investment arbitration is but one example that illustrates this point (Note 4). This phenomenon is perfectly understandable if one takes into account the flow of investments into Asia. Besides, Chinese corporate investors are beginning to make use of private-to-government investment arbitration mechanism.

Objectives of International Arbitration Culture

Moving on to the question of developing an international arbitration culture. The first natural question is what is meant by the expression "international arbitration culture". Like the expression "international arbitration civilization", there does not appear to be any universally accepted definition of the term "international arbitration culture".

In this regard, it has been said within the context of globalization that "arbitral proceedings are increasingly conducted in a uniform manner regardless of the place of arbitration and any governing national law."(Note 5) This has led to discussion about a culture of international arbitration, as many see arbitration as "a meeting point for different legal cultures, a place of convergence and interchange wherein practitioners from different backgrounds create new practices." (Note 6) This culture of arbitration has been said to refer to the "gradual convergence in norms, procedures and expectations of participants in the arbitral process," including the "fusing together" of elements of the common law and civil law traditions. (Note 7)

The next question, amongst other similarly important questions in this aspect, is this: what should be the objectives of international arbitration culture? This is an important question, and is no less important than questions such as why do we need an international arbitration culture, or how an international arbitration culture can assist the future development of international arbitration. Indeed, unless we are clear with our objectives, it would be difficult (if not impossible) to decide what should or should not be done when making strategic planning for developing a proper framework for international arbitration (an issue which I will deal with in the second part of my address this evening).

In my view, at least three key objectives of an international arbitration culture merit consideration in the present context.

First, putting aside its wider implications, international arbitration is a form of dispute resolution service. The end-users of this service is largely the international business community, and to some extent the states or governments if the disputes involve the government or their agencies. Viewed from this angle, the objectives of international arbitration culture must at least be consistent with, if not in support of, the key objectives of international arbitration, which stress party autonomy, confidentiality, cost-effectiveness, finality and effective enforceability of the arbitral award. These key objectives are also the main attractions of international arbitration, or the main reasons for which the international business community opt for arbitration instead of litigation. If international arbitration culture develops in a direction inconsistent with the attractions of international arbitration, such culture would simply be counter-productive.

At the risk of making a slight digression, may I add this brief observation, if not a caveat. Recently, there have been debates over the need to have regulatory control to maintain the quality and standards of international arbitration, as well as to enhance the accountability of arbitrators. This is certainly not the appropriate occasion to discuss those matters in detail, but the issues arising from those debates are not entirely irrelevant in the present context. While I believe no one would gainsay the importance of maintaining public confidence in international arbitration, nor would anyone argue against the need to ensure that end-users of international arbitration would receive quality services, I have considerable reservation over the setting up of a regulatory regime (especially an over-arching regime) for international arbitration services. It is doubtful whether regulatory control would be ultimately conducive to the objectives of international arbitration, and I do not want to see the suffocation of international arbitration by regulatory control.

Second, although it is a form of services to the business community, international arbitration should not be viewed solely as a form of professional services, still less purely a commercial commodity. The importance of international arbitration goes beyond that of a professional service or an industry. Viewed from a macro perspective, international arbitration is a form of access to justice in the context of international legal order. The concept of access to justice is not, and should not be, confined to the traditional means of resolving disputes before one's domestic court, but should cover access to extra-judicial means of dispute resolution including arbitration. No healthy development of international arbitration culture can afford to lose sight of this consideration, which means that at times proper weight should be given to overriding public interest.

Third, an international arbitration culture should be truly international and yet flexible enough to cater for regional or cultural differences. When discussing international arbitration civilization, Professor Christopher Gibson once observed that "The civilization of international arbitration should thus have a unifying global vision and coherent legal system, yet maintain exchange with other external or national legal systems" (Note 8). This observation applies with equal force in respect of international arbitration culture. The development of an Asian international arbitration culture should not be used as an excuse to foster an inward mentality. Instead, any development of international arbitration culture in this region should facilitate the proper integration of Asian cities into the bigger international community.

The Asia Pacific Context

I now address the question of whether an international arbitration culture is developing in Asia. Due to the growing popularity of international arbitration in Asia, this question has since become a fashionable one. Putting aside issues concerning the definition of "international arbitration culture" and debates as to when a norm or practice becomes a culture, this remains a difficult question. Asian countries and cities are very diversified, whether in terms of culture, language, history, legal system and supporting infrastructure and others. Different Asian cities are at varying stages of economic development, as well as development of their respective arbitration regimes and supporting software. Some cities in Asia are far more developed, some are at the embryonic stage, while others are somewhere in between. On the whole, whilst things are moving fast in Asia, it may still be a bit early to suggest that there is already in existence an Asian international arbitration culture. Having said that, the following points are worth noting.

First, the UNCITRAL Model Law will certainly continue to play an important role in the development of international arbitration culture in Asia. Dr. Lew, in the address he made last year, stated that widespread adoption of the UNCITRAL Model Law has "promoted unprecedented harmonization" of national laws and rules governing international arbitration. In a similar vein, Dr. Shahla Ali of the University of Hong Kong has commented that the flexible structure of international arbitration based on the Model Law system allows countries to opt in or out of particular provisions, allowing for the coexistence of procedural variation preferences "with a relatively high level of substantive legal uniformity across regions." (Note 9)Due to its popularity and flexibility, it is anticipated that the UNCITRAL Model Law and the jurisprudence developed therefrom will constitute a very significant factor in shaping the future international arbitration culture in Asia (although, as will be discussed below, the Asian arbitration community may have a role to play in the future development of the UNCITRAL Model Law and its jurisprudence).

Second, as I alluded to earlier, one has to take into account the extent of diversities amongst Asian jurisdictions. Such diversities extend to differences concerning legal systems, legal tradition and legal infrastructure. Amongst others, there are significant differences between common law jurisdictions and continental jurisdictions over issues such as discovery of documents and cross-examination of witnesses. Notwithstanding such differences, the successful "merger" of the procedural approaches of the common law and civil law systems is reflected in the rules of the leading arbitral institutions, the promulgation of certain international standards for use in arbitration, and procedural practices commonly adopted in arbitration proceedings (Note 10). Examples include the Rules for the Taking of Evidence in International Commercial Arbitration published by the International Bar Association ("IBA") and also the IBA Guidelines on Conflicts of Interest in International Arbitration.

Third, it is also interesting to note the divergence between Western and Chinese dispute resolution traditions and culture, especially the underlying cultural attitudes and approaches to settlement in international arbitration. At least one study has shown that cultural and socio-economic distinctions are reflected in varying arbitrator perceptions of the role of arbitrators in settlement (Note 11). Amongst others, such differences would have impact on how we should deal with issues arising from the hybrid process of "med-arb" or "arb-med". This hybrid process has admittedly generated quite divergent views in various jurisdictions, especially on questions such as whether a person who has acted as a mediator can properly act as an arbitrator after his attempt to mediate has failed, and if yes, what safeguards (if any) should be built in.

Fourth, following from the second and third points above and in view of the widespread use of such international rules and guidelines, greater participation by the Asian arbitration community in the future revisions of these rules and guideless would be most desirable so as to ensure that views of the arbitrators and end-users of arbitration in Asia can be heard and properly taken into account. Such participation and dialogues will benefit not just the Asian arbitration community, but the entire international arbitration community since they would enhance better mutual understanding. Further, such participation will likely enhance confidence and trust on the part of Asian end-users, so much so that they would be even more willing to resort to international arbitration when disputes arise.

Effective International Arbitration Framework

On the question of what makes an effective international arbitration framework, I believe there are several key features which are essential, namely:

(1) a strong legal system which steadfastly upholds the rule of law;
(2) an independent judiciary which embraces the importance of international arbitration and thus would be prepared to be appropriately pro-arbitration;
(3) a modern legislative framework for arbitration, representing the latest international practice;
(4) a sufficient pool of highly competent legal professionals and arbitration practitioners;
(5) proper training in the law and practices concerning international arbitration;
(6) a strong local presence of arbitration institutions, with modern hearing facilities; and
(7) supportive and responsive policymakers who place high priority on sustaining and promoting international arbitration services within their jurisdiction.

As stated earlier, I would now like to use Hong Kong as an example for the purpose of illustrating why these features are essential.

The fundamentals of Hong Kong's legal system

Whilst a part of the People's Republic of China, Hong Kong is unique in the world because of the "One Country, Two Systems" policy which has been in operation since 1997. This allows Hong Kong to maintain her common law system, and indeed becomes the only common law jurisdiction in the Greater China region, the hallmarks of which are its strict adherence to the rule of law and our jealous safeguarding of the independence of our Judiciary.

The international community has high confidence in the judiciary of Hong Kong, and deservedly so, because of its world-class standard. The Court of Final Appeal comprises not only the best judicial talents from within Hong Kong, but also top judges from other common law jurisdictions including Britain and Australia. When it comes to international arbitration, the Hong Kong courts have a proven track record of adopting the approach of minimum intervention and pro-arbitration. The well-known example is the decision by the Court of Final Appeal, our highest court, in the recent case of Pacific China Holdings Limited (in liq.) v Grand Pacific Holdings. (Note 12)

On the legal practice side, Hong Kong has a large pool of legal practitioners consisting of both talented local professionals and experts from other jurisdictions. As at 20 August 2013, we have a total of 1,225 barristers, 7,652 solicitors and 1,250 registered foreign lawyers. The presence of such an array of local and international lawyers enables Hong Kong to provide top quality legal services in numerous different areas to meet the needs of the local and international business communities.

Commitment at the policy level

Turning to look more specifically at the features of Hong Kong's international arbitration framework, one of the top policy objectives of the Department of Justice is to enhance Hong Kong's status as a leading centre for legal and dispute resolution services in the Asia Pacific region, especially as an international arbitration hub. This policy commitment was affirmed in the 2013 Policy Address, and we are making strenuous efforts both within and outside Hong Kong to implement this policy. The key initiatives that we are pursuing include: (1) continuing to enhance the statutory framework for arbitration in Hong Kong; (2) enhancing the recognition and enforcement network for arbitral awards made in Hong Kong; and (3) facilitating the establishment and growth of world class arbitration organizations here.

Legislative Regime

Hong Kong's arbitration statute (Note 13), which is widely recognized as one of the most advanced in the world (Note 14), underwent a major overhaul in 2010, and our new Arbitration Ordinance (Cap 609) came into effect in June 2011. This new Ordinance reinforces the advantages of arbitration and, principally, it unifies our previous domestic and international arbitration regimes so that both are now regulated on the basis of the UNCITRAL Model Law.

Another important feature of the legislation is that it seeks to enhance the confidentiality of arbitration proceedings and related court hearings. Although the UNCITRAL Model Law is silent on the protection of confidentiality (Note 15), we took the view that confidentiality is one of the main reasons why parties choose to settle disputes by arbitration. Consequently, without the need to incorporate a specific confidentiality clause, a statutory duty of confidentiality will bind parties' proceedings if the seat of their arbitration is in Hong Kong. Besides, unless otherwise agreed by the parties or under any exceptions as provided for in the Ordinance, no party may publish, disclose or communicate any information relating to arbitral proceedings and awards. In adopting this approach, the Ordinance adheres to the international practice that, having regard to the private and confidential nature of arbitration, arbitral awards should only be made public with the consent of the parties concerned.

Enforceability of arbitral awards is a highly relevant consideration when parties consider where to arbitrate. Although Hong Kong arbitral awards are already enforceable in over 140 jurisdictions under the New York Convention, the Department of Justice will continue to seek to enlarge Hong Kong's enforcement network. After clearing the doubt over the enforceability of Hong Kong arbitral awards in India in March last year, further steps in this regard was taken in July this year when the Ordinance was amended to introduce provisions to implement the Arrangement Concerning Reciprocal Recognition and Enforcement of Arbitral Awards which was concluded between Hong Kong and Macao in January this year. These provisions will come into operation in around mid-December 2013.

In the same amendment exercise, new provisions were included to reflect innovations in the arbitration sector on emergency rules and procedures. In particular, amendments were introduced to make it clear that emergency relief granted by an emergency arbitrator in or outside Hong Kong is enforceable in accordance with the provisions of the Arbitration Ordinance.

Apart from the Arbitration Ordinance, the Department of Justice is also conscious of the need to conduct other reviews of our law so as to make Hong Kong an arbitration friendly jurisdiction. One recent example is the setting up of the Sub-Committee on Third Party Funding for Arbitration by the Law Reform Commission of Hong Kong. This Sub-Committee is tasked to look into issues concerning third party funding in the context of arbitration, so as to see if any legislations or law reform should be introduced.

Facilitating the establishment and growth of world class arbitration organizations in Hong Kong

Hong Kong's position as a leading centre for arbitration services has for many years been bolstered by the wealth of experience of its arbitrators. There are currently 326 persons included on the Panel of Arbitrators maintained by the Hong Kong International Arbitration Centre ("the HKIAC"), and a further 115 (less experienced) persons on the HKIAC List of Arbitrators. As well as lawyer arbitrators, other disciplines represented include accountants, engineers and quantity surveyors. Arbitrators in Hong Kong come from a diverse range of backgrounds and nationalities as well as jurisdictions from which they received their professional training. It is no certainly exaggeration to say that some of them are well known figures in the international arbitration community.

In terms of arbitration institutions, we are proud to have our own signature arbitration institution, namely, the HKIAC referred to earlier. Over the years, it has earned international recognition and has been providing excellent support and services to the arbitration community in the region as an independent and non-profit making body. Further, the Department of Justice is actively engaged in facilitating the establishment and growth of other world class arbitration organizations in Hong Kong. This policy was given a boost in 2008 when the ICC International Court of Arbitration established its Asia Office in Hong Kong (the very first one outside its Paris headquarters). This was followed by CIETAC when it established its CIETAC Hong Kong Arbitration Centre in Hong Kong in 2012 (which is the first one outside the Mainland). With the presence of more arbitral institutions in Hong Kong, end-users will have a better choice.

As part of the initiative to provide a more favourable environment for the provision of legal and arbitration services, the Hong Kong Government announced in December 2012 its decision to allocate part of the space in the West Wing of the former Central Government Office to house law-related non-government institutions, including arbitration and mediation institutions. We are working out the arrangements for taking the decision forward. The renovation of the building is tentatively scheduled for completion in 2017, and we hope that the enhancement in facilities may also help to attract other reputable arbitration bodies and law-related organizations to set up offices in Hong Kong.

Education

With regard to advanced arbitration training, Hong Kong has three postgraduate degrees available to those who wish to study international arbitration. The Master of Laws in Arbitration and Dispute Resolution (LLMArbDR) programme offered by the School of Law of the City University of Hong Kong was established in 1991. A similar degree programme (LLM(Arb&DR)) was established by the Faculty of Law of the University of Hong Kong in 2007. An LMM in International Commercial Dispute Resolution is now also available from Chinese University of Hong Kong. These courses, together with other short-term courses organized by different institutions from time to time, provide good training for those who wish to get specialist training in arbitration practice.

Conclusion

Ladies and gentlemen, the Hong Kong Government fully appreciates the pivotal role played by the rule of law, and that by legal and dispute resolution services in shaping the future of Hong Kong. We will spare no effort to ensure that Hong Kong's dispute resolution regime, including the part concerning international arbitration, would be up-to-date and cost-effective as well as in a position to meet the needs of the international business community. On this note, may I conclude by reiterating my gratitude to the organizers of this event, and to wish the conference and the other events of the Arbitration Week every success.

Thank you.

Ends/Monday, October 21, 2013

Note 1: Dr Julian DM Lew, QC, "Increasing Influence of Asia in International Arbitration", ICC-HK/HK45 Address, Hong Kong (12 October 2012).

Note 2: Dr Lew (2012), above, at para. 30 to 33.

Note 3: See the observation by Lord Donaldson of Lymington in his Sultan Azlan Shah Law Lectures in 1992, and quoted by Lord Bingham in his 2001 Sultan Azlan Shan Lecture, entitled “The Law as the Handmaid of Commerce”, collected in Tom Bingham, Lives of the Law: Selected Essays and Speeches 2000-2010 (OUP), at pp. 283-284.

Note 4: According to statistics released by the United Nations Conference on Trade and Development (UNCTAD) in May 2013, the number of cases filed under the investor-state dispute settlement (ISDS) mechanism reached a record high of 58 last year.

Note 5: Anne-Marie Loong, “Steps Toward An International Arbitration Culture? A Dissenting View From The People's Republic Of China,” World Arbitration & Mediation Review Vol 1:5 (2007) 665, at 665.

Note 6: Tom Ginsburg, Symposium: International Commercial Arbitration: The Culture of Arbitration (2003) 36 Vanderbilt Journal of Transnational Law 1335.

Note 7: Tom Ginsburg (2003), above.

Note 8: Chistopher S. Gibson, “Arbitration, Civilization and Public Policy: Seeking Counterpoise between Arbitral Autonomy and the Public Policy Defence in View of Foreign Mandatory Public Law”, Chapter 5 of Carbonneau & Sinopole (ed.) Building the Civilization of Arbitration (Wildy, Simonds & Hill Publishing), p. 66.

Note 9: Shahla F Ali, Resolving Disputes in the Asia-Pacific Region: International arbitration and mediation in East Asia and the West (2011, Routledge), at 39.

Note 10: Horacio A Grigera Naon & Paul E Mason (ed) International Commercial Arbitration Practice: 21st Century Perspectives (2012) (LexisNexis), at para. 2.03.

Note 11: Shahla F Ali, “Facilitating Settlement at the Arbitration Table: Comparing Views on Settlement Practice among Arbitration Practitioners in East Asia and the West” Onati Socio-Legal Series, Current Socio-Legal Perspectives on Dispute Resolution (2011) Vol 1, n 6. It should be added that, absent cultural differences, common law lawyers and continental lawyers also have very different views on this issue.

Note 12: [2012] 4 HKLRD 1. Another recent example is the case of Lin Ming v Chen Shu Quan [2012] 2 HKLRD 547, in which the court allowed an application to stay court proceedings in favour of arbitration, and consequently declined to grant an anti-arbitration injunction.

Note 13: Formerly comprised in the Arbitration Ordinance (Cap 341), now comprised in the Arbitration Ordinance (Cap 609).

Note 14: See Asia-Pacific Regional Arbitration Group (APRAG) website at: http:/www.aprag.org/scripts/view-member.asp?recordid=362.

Note 15: And only a comparatively small number of jurisdictions have incorporated an express duty of confidentiality in their arbitration regimes (for example, New Zealand).