Mainland disputes, and demand for bilingual skills, on the rise

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Given its proximity and mature legal framework, Hong Kong has traditionally been the preferred location of parties from mainland China to resolve their disputes. The counterparties to China-related deals have equally embraced Hong Kong as a neutral and familiar venue for arbitration. The Hong Kong International Arbitration Centre (HKIAC) has benefited greatly from this ideal nexus and has gained extensive experience handling China-related disputes. Of the 293 new cases registered with the HKIAC in 2012, 114 involved parties from mainland China.

A growing number of the China-related disputes we handle relate to corporate issues. While share purchase agreements and joint venture contracts form the major sources of the relevant disputes, as might be expected, several new trends of China-related corporate disputes have surfaced from the cases filed with the HKIAC. Specifically, we note that disputes involving private equity (PE) and venture capital (VC) funds have been increasing. Another trend is the increased number of Chinese-language only, or bilingual, proceedings. We share our observations below.

Increased PE/VC

Given the complexity of the underlying transactions, cases involving PE/VC investors as parties to the disputes generally involve multi-party and multi-contract scenarios between companies, investment funds, and sometimes individuals. It is not uncommon to see several groups with interests in one case, with counterclaims and cross-claims often submitted. In addition, due to the intertwined interest of Chinese parties and their foreign partners, the traditional model of foreign parties and Chinese parties as two poles to the disputes is not as clear-cut as before. In some cases, both sides may have a strong Chinese background, for example, a BVI structure controlled by Chinese shareholders, or an individual with a Chinese background who holds a foreign passport. These foreign elements often lead to cross-jurisdictional issues.

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The authors, Ruth Stackpool-Moore and Guan Zhong, are Managing Counsel and Assistant Counsel, respectively, at the HKIAC

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