Hong Kong: a seat for resolving India-related disputes?

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Indian parties have real choice when considering arbitral venues in Asia now that the Indian government has opened the doors to arbitration in Hong Kong, say Chiann Bao and Kiran Sanghera at the Hong Kong International Arbitration Centre.

On 19 March, the Indian government’s official gazette formally notified China – which includes the Special Administrative Region of Hong Kong – as a New York Convention jurisdiction, opening the doors for Hong Kong-rendered awards to be recognized and enforced in India. This historic development, which removes any doubts about Hong Kong as a viable seat of arbitration for disputes with an Indian nexus, is already making Indian parties think about Hong Kong as an attractive alternative for arbitration in Asia.

Growing trade

This development comes at a crucial time as trade between India and China recently reached unprecedented levels. In just one year, from 2010 to 2011, trade between the two nations grew from US$61.7 billion to a record US$73.9 billion. With both governments committed to promoting and facilitating this growth, bilateral trade talks were initiated in late 2011 through the inaugural India-China Strategic Economic Dialogue. Both governments have agreed to a US$100 billion bilateral trade target for 2015, but given the rapid pace of trade in recent years, it is widely expected that this target will be met as early as 2013.

Chiann Bao
Chiann Bao

As deepening economic ties between China and India help to align their individual interests, parties to Sino-Indian disputes are beginning to consider convenience, reliability and expertise when selecting a seat for international arbitration. In this regard, Hong Kong stands out as a highly appealing venue for Sino-Indian disputes. Seated at the crossroads of trade between China and India, it is well located to act as a convenient meeting point while also offering a sophisticated, pro-arbitration legislative and judicial framework that makes it attractive to parties from across the globe.

Neutrality is critical

For Indian parties wary of giving their counterparty a home-court advantage, neutrality has been a determinative factor in considering potential arbitral venues, particularly for disputes with a Sino-Indian angle. Hong Kong’s unique position as a legally and economically autonomous region of China places it squarely at the centre of Asian trade while ensuring its neutrality in managing international disputes. Hong Kong’s common law legal system and legislature are firmly rooted in the English legal tradition and they operate independently from China’s judicial and legislative systems. This means that the legal framework underwriting Hong Kong’s arbitral system is completely independent of Chinese influence, despite its territorial links to the mainland.

Indeed, parties around the world have consistently placed their faith in the neutrality of Hong Kong’s legal system and its independence as an arbitral venue. In 2011, for example, parties who arbitrated at the Hong Kong International Arbitration Centre (HKIAC), most commonly came from the United States, Singapore, Japan and South Korea, as well as from China.

As Indian parties begin to consider Hong Kong, they can rest assured that its legislative and judicial independence strengthens its appeal as a pro-arbitration seat and has made it an attractive option for India’s trading partners.

Experience, pro-arbitration courts and laws

As many international parties have found, Hong Kong courts routinely uphold the finality of arbitral awards and the principle of party autonomy. Hong Kong’s arbitration law is among the most modern and progressive in the world, keeping pace with the needs of the global business community while conforming to widely acknowledged “best practices” in international arbitration.

Its status as a hub for international commerce and its recognition as the world’s freest economy have made it home to a deep pool of specialized, well-trained, and experienced arbitrators and professionals from which to draw expertise and support.

Unique features of HKIAC

In addition to its neutrality and global positioning, Hong Kong’s appeal also stems from the strength of the HKIAC’s administrative offerings, certain aspects of which will be particularly attractive to Indian parties. A unique feature of the HKIAC, and an advantage it offers over comparable institutions, is its flexibility regarding the calculation of arbitrators’ fees: parties who arbitrate at the HKIAC may choose to calculate fees either on the basis of an ad valorem schedule, which varies depending on the value of the dispute, or on an hourly basis, which reflects the scope and timeframe of arbitral proceedings. Notably, this is an option that many other institutions do not offer.

Furthermore, in an effort to enhance the cost-effectiveness of Hong Kong-based arbitrations, the HKIAC is in the process of amending its administrative rules to include a cap on arbitrators’ hourly fees, which will make costs more predictable and manageable. The HKIAC’s responsiveness to the priorities of the global business community has been a selling point for many foreign parties throughout its past.

Now that the Indian government has opened the doors to arbitration in Hong Kong, Indian parties are faced with real choice when considering arbitral venues in Asia. The HKIAC has already seen heightened interest from Indian parties and it is expected that many more Indian parties will begin to recognize the advantages of Hong Kong as a seat of arbitration and the HKIAC as a natural choice for international dispute resolution.

Chiann Bao is the secretary-general of the Hong Kong International Arbitration Centre, where Kiran Sanghera is a counsel.