Hong Kong takes steps to further its international reputation in arbitration

By Matt Hu, InvestHK
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With its strong, mature legal system and fully independent judiciary, Hong Kong is well positioned to be an international arbitration centre. Arbitral awards made in Hong Kong are enforceable in more than 140 contracting jurisdictions to the New York Convention. With regard to mainland China, the Supreme People’s Court and the Department of Justice in 1999 signed the Arrangement Concerning Mutual Enforcement of Arbitral Awards, which was modelled on the principles of the New York Convention. The arrangement has set out the conditions of mutual enforcement of arbitral awards, and has been effectively implemented by courts in the Hong Kong Special Administrative Region (HKSAR) and mainland China. This has further strengthened the status of Hong Kong as a regional centre for international arbitration.

Matt Hu Head of North China Investment Promotion InvestHK The Government of Hong Kong
Matt Hu
Head of North China Investment Promotion
InvestHK
The Government of Hong Kong

Hong Kong has a strong pool of multilingual professionals supporting the arbitration industry, including around 1,100 barristers, 6,700 local practising lawyers, 1,100 registered foreign lawyers and 29,000 accountants.

In 2011, the number of arbitration cases handled by the Hong Kong International Arbitration Centre (HKIAC) was 275, of which 65% were international and 35% were domestic. Forty-one cases were fully administered by the HKIAC in accordance with its rules. The total amount in dispute for administered cases was approximately US$3.8 billion. Among these cases, 38% were maritime disputes, 29% were commercial, 15% were corporate disputes, 14% involved construction and 4% involved insurance.

HKIAC’s role

Established in 1985, the HKIAC has since fostered the development of arbitration in Hong Kong. The non-profit organization is tasked with the mission of administering arbitrations and other dispute resolution activities, including mediation and adjudication. The HKIAC has formulated various rules including rules for domestic arbitrations, “short form” proceedings, small claims, documents-only proceedings and electronic transaction disputes. While the HKIAC is financially self-sufficient, the HKSAR government has pledged full support, for instance by providing additional office space to cater for expanded hearings. This is a clear demonstration of the determination on the part of the Hong Kong government to work with the industry to push Hong Kong forward as the leading arbitration centre of the Asia-Pacific region.

International practice

The new Arbitration Ordinance, which came into effect in June 2011, represents a major milestone in enhancing the arbitration regime in Hong Kong. The legislation unifies domestic and international regimes of arbitration on the basis of the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration. As a result, the arbitration law has evolved in tune with the latest and best international practice, and is more familiar and easily accessible to local and foreign arbitration users and practitioners. The new ordinance reinforces the advantages of arbitration, including respect for the parties’ autonomy as well as savings in time and costs, and at the same time protects confidentiality in arbitration proceedings and related court hearings.

The legislation incorporates detailed provisions drawn from the 2006 additions to the UNCITRAL model law regarding interim measures and preliminary orders. It also provides for opt-in provisions on appeals of points of law, consolidation of arbitrations and challenging of an arbitral award. In general, the disclosure of information relating to arbitral proceedings and awards is prohibited. However, under exceptional circumstances – such as pursuing a legal right or challenging an arbitral award in legal proceedings – disclosure can be granted. The enactment of the new law and additional accommodation for the HKIAC will facilitate the establishment of arbitration companies in Hong Kong.

In February 2010, the Hong Kong government introduced a Financial Dispute Resolution Scheme (FDRS), through the establishment of a Financial Dispute Resolution Centre (FDRC), to provide a one-stop, independent avenue for consumers to solve monetary disputes between financial service providers and consumers.

All licencees or regulatees of the Securities and Futures Commission and the Hong Kong Monetary Authority, such as brokers or banks, are required to join the scheme. The FDRC not only provides a cost-efficient and time saving alternative to litigation for financial instrument investors, it is expected to popularise the usage of mediation and arbitration services in solving financial disputes in the city.

hong-kong-takes-steps-to-further-its-international-reputation-in-arbitration-2Setting up in Hong Kong

The International Chamber of Commerce set up the International Court of Arbitration in Hong Kong, its first office in Asia, in November 2008. The move has enhanced Hong Kong’s provision of arbitration services and fostered closer ties with international arbitration organisations.

In September, the China International Economic and Trade Arbitration Commission (CIETAC), one of the world’s largest arbitration institutions, launched an office in Hong Kong, the first to be set up by CIETAC outside the mainland. The Hong Kong Arbitration Centre will provide a platform for co-operation between the arbitration professions of Hong Kong and the Mainland, and add to the impetus of keeping up service standards and raising their global competitiveness. The establishment of the office speaks for Hong Kong’s status as a regional centre for international arbitration.

As the mainland’s economic development continues to mature, and more enterprises go global, there will be increasing demand for high-end legal and dispute resolution services from these enterprises. At the same time, more foreign investors and companies are involved in transactions with mainland counterparts, and Hong Kong is an ideal third place for settling disputes.

Matt Hu is the head of North China investment promotion at InvestHK, a department of theHong Kong SAR government

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