Why arbitrate in Hong Kong?

Riding on the success of “Why Hong Kong is Irreplaceable” in February which acknowledged Hong Kong’s strength is premised on infrastructure, talents and business opportunity, the Asian Academy of International Law (AAIL) co-organised with the Department of Justice (DoJ) a series of “Why Hong Kong” webinars. I was honoured to be invited to deliver a keynote speech at the first webinar, “Why Arbitrate in Hong Kong”, on March 31. There were around 600 registrations from about 55 jurisdictions. The full event is now available for review at AAIL’s website. I would like to take this opportunity to share with you some of the insightful and valuable views of the panel speakers.

The opportunities in the Greater Bay Area development, highlights the importance of intellectual property (IP) rights protection and efficient resolution of IP disputes. As pointed out by one of the speakers, IP rights are generally territorial and in some countries IP rights are not arbitrable owing to public policy considerations. In advising her client to choose Hong Kong as a seat of arbitration, the speaker pointed out that the arbitrability of IP rights in Hong Kong as set out in the Arbitration Ordinance is an attraction. Parties prefer to arbitrate rather than litigate in open courts disputes involving IP, so as to benefit from the confidentiality afforded to the technology and know-how from being exposed to the public.

China, being the second largest economy in the world, provides ample business opportunities. The availability and enforceability of interim measures play an important role in the choice of seat of arbitration. Hong Kong, with its unique advantages under the “One Country, Two Systems”, reached the interim measures arrangement with the Mainland, which allows parties to arbitral proceedings that are seated in Hong Kong and administered by one of the six arbitral institutions to apply to the Mainland courts for such measures. Hong Kong is the only jurisdiction outside the Mainland where this is possible.

Third party funding is often used in investment and commercial disputes. The speakers pointed out that in Hong Kong, third party funding is not only useful to fund impecunious companies to pursue their claims but also generally welcomed by other enterprises. The regulatory framework in the Code of Practice for Third Party Funding of Arbitration sets out the practices and standards with which third party funders are to comply and serves to encourage its use but also provide necessary protection to parties that receive funding. In that way, third party funding serves not just as a tool for access to justice but also for business opportunities when it is engaged to ease the cash flow problems of going concern, especially in this difficult times of the economy due to the pandemic.

In the last session of the webinar in investment arbitration, the speakers pointed out that there are abundance of talents experienced in the construction field. It is particularly relevant to the Belt and Road Initiative as most of the projects are construction-related. Being a gateway for investment to and from China, Hong Kong and the Mainland signed the CEPA Investment Agreement which provides for promotion and protection of investments between the two jurisdictions. It is noteworthy that investment mediation is the only available mechanism for resolving investment disputes under the CEPA Investment Agreement. Hong Kong has been active in promoting the use of mediation to resolve investment disputes and providing training in this area with a view to building up a team of investment mediators specialised in handling international investment disputes in Asia. In April, there will be the “Why invest in Hong Kong: Current Opportunities” and investment opportunities will be discussed.

One of the new initiatives in Hong Kong is to look at how to provide a level playing field compared with other popular arbitral seats which allow some form of contingency fee structures. The Law Reform Commission has undertaken a consultation to examine the recommendation by its sub-committee of permitting lawyers to use outcome related fee structures for arbitration taking place in and outside Hong Kong.

Finally, I noted that the speakers shared their experience in a common theme: neutrality - the neutrality in arbitral tribunals, supervising courts and the legislative framework. If I may echo the words of one of the speakers, the Arbitration Ordinance provides an “important gate-keeping function in terms of neutrality”. It is kept up to date and amended to implement developments quickly. Last month an amendment was made to reflect and implement the Supplemental Arrangement reached between Hong Kong and Mainland in November last year and that will reinforce our strength as an arbitration friendly jurisdiction.

The 14th Five-Year Plan continues to support Hong Kong to enhance its status as an international financial centre and establish itself as a centre for international legal and dispute resolution services in the Asia-Pacific region. There is also clear policy support for Hong Kong to develop into an international innovation and technology hub and a regional intellectual property trading centre, etc. In order to avail ourselves of this opportunity, Hong Kong will continue to capitalise on its uniqueness of being the only common law jurisdiction in China by actively promoting the use of Hong Kong law as the governing law of contractual disputes. The importance of Hong Kong law in deal-making is widely recognised and we will further explore the advantages of it in the upcoming webinar “Why Use Hong Kong Law” to be held in May.

It is promising to see that the Hong Kong International Arbitration Centre and the Law Society of Hong Kong have also organised a series of webinars to promote Hong Kong. With collaboration and synergy, the bodies in Hong Kong will work together to further promote the interests of Hong Kong in the legal and dispute resolution sector.

The shift of global economy is without a doubt moving to Asia. It is inevitable that more transactions generate more disputes. Ideally, disputes should be dealt with in the region where the transactions took place, for costs and efficiency but also for the understanding of the culture within the region. It is encouraging to see that other parts in Asia have been developing in the provision of arbitral service. Through fair, open and clean competition, and collaboration, all those involved in the provision of services will be able to bring about benefits for the users of arbitration. I believe that Hong Kong’s continued improvements as a hub for international legal, deal-making and dispute resolution services in the Asia-Pacific region will create positive synergies and generate more deals.

April 11, 2021