Overview

• Hong Kong is a prime venue for commercial dispute resolution with its mature and well-developed legal system.
• Hong Kong has an enormous pool of experienced professionals available to support commercial dispute resolution, typically through arbitrations and mediations.
• Arbitration awards made in Hong Kong are enforceable through the courts of most of the world's trading economies.
• The number of disputes resolution cases handled by the Hong Kong International Arbitration Centre (HKIAC) has increased from 448 in 2007 to 602 in 2008.
• New HKIAC rules introduced in September 2008, offering choices of more user-friendly language and greater arbitration autonomy, are expected to facilitate concerned parties to settle their dispute resolutions via arbitration in Hong Kong. Endorsing Hong Kong’s position as a premier location of international arbitration, the International Court of Arbitration of the International Chamber of Commerce (ICC) opened its first office in Asia in November 2008.
• Chinese mainland companies are increasingly using Hong Kong as an arbitration centre. Increasing opportunities will arise when more foreign investors or traders transact with companies on the Chinese mainland after WTO accession. Many foreign investors prefer to settle disputes in a "third" place. Hong Kong is a suitable "third" place for settling disputes involving Sino-foreign projects.

Industry Data

Range of Services

Arbitration is a legal process through which awards are issued to the disputing parties by arbitrator(s) rather than the court. For an arbitration to take place, the concerned parties in dispute must both agree that the dispute will be handled by arbitration and not by court. This agreement is usually signed as a clause in the commercial agreement before the occurrence of any disputes. In 2008, 602 cases were carried out under the umbrella of the Hong Kong International Arbitration Centre (HKIAC), up from 448 in 2007. On the other hand, a large number of arbitrations are also conducted in Hong Kong privately.

Another option to resolve disputes is by mediation. It is a process of settling disputes through discussion sessions between involved parties under the presence of a neutral third party, i.e. a mediator. Unlike arbitrators, mediators are not given any power to impose a settlement for the disputes. Instead, they act as a shuttle diplomat by encouraging the disputing parties to discuss, and helping them filter out their emotional elements. In the event of the parties reaching an agreement, a legally binding contract consisting of all the agreed terms will be signed. If an agreement cannot be reached within a certain period, the mediator will suggest a temporary or permanent end to the mediation to save cost.

The Hong Kong Arbitration Ordinance is widely recognised as one of the most advanced arbitration statutes in the world. Arbitration awards made in Hong Kong are enforceable through the courts of most of the world's trading economies through its being a party to the New York Convention. These awards are also enforceable on the Chinese mainland since the establishment in 2000 of the arrangement on mutual recognition and enforcement of arbitral awards between Hong Kong and the mainland. The Model Law on International Commercial Arbitration of the United Nations Commission on International Trade Law (UNCITRAL) has been used for international arbitrations held in Hong Kong.

Service Suppliers

Arbitrators are generally recognised senior experts from professions capable of understanding the technical issues involved in an arbitration case. Therefore, they can be lawyers, accountants, engineers, architects or quantity surveyors. In other words, the suppliers of arbitration services are scattered throughout professional services firms in an economy. In this connection, prime centres for arbitration are often major commercial centres in their own right.

Mediators are trained, neutral third parties with skills and knowledge to resolve disputes. They usually have expertise in various fields, such as social work, architecture, teaching, law, engineering, etc. Their duties include organising and arranging a process to facilitate the parties in dispute to discuss their matters and try to end their arguments through mutual understanding. They should conduct the process in an impartial and confidential manner. The role of mediators is to assist both parties reaching a settlement, instead of adjudicating.

Being a leading commercial centre in Asia, Hong Kong has strong expertise in commerce, finance, information technology, business law, shipping and construction with an enormous pool of experienced professionals available to support commercial dispute resolution through arbitrations as well as mediations.

The institutions related to arbitration and mediation services in Hong Kong include the following: the Hong Kong International Arbitration Centre (HKIAC), the Hong Kong Institute of Arbitrators (HKIArb), the Chartered Institute of Arbitrators (CIArb), the International Chamber of Commerce (ICC), the Hong Kong Institute of Mediation (HKIMed), the Hong Kong Mediation Centre (HKMC), the Hong Kong Mediation Council (HKMC) and the Conflicts Resolution Centre (CRC).

Exports

Compared to other venues for arbitration in Asia, Hong Kong probably handles the largest number of cases in which neither party is local. For example, of the 313 arbitrations cases (excluding domain name disputes) handled by HKIAC in 2007, 78 cases involved both parties that were non-Hong Kong companies. In comparison, 61 cases involved Hong Kong and foreign companies, with the remaining 174 cases involving both parties that were Hong Kong companies. For cases which involved solely non-Hong Kong companies, they included parties from the Chinese mainland, the US, Taiwan, Singapore and South Korea.

Also worth noting is that even mainland companies are increasingly using Hong Kong as an arbitration centre. Arbitration cases in which both parties involved were mainland companies, while Hong Kong was specified as the place of arbitration, rose from nil prior to 1997 to 15 in 2005, and to 20 in 2007.

Industry Development and Market Outlook

• In recent years, arbitration and mediation have gained in popularity as alternatives to resolve disputes without resorting to traditional litigation. Probably, more international commercial arbitrations have taken place in Hong Kong than in any other city in the region.
• There is a significant growth of arbitration in Asia in recent years. In 1985, the China International Economic and Trade Arbitration Commission (CIETAC) handled 37 cases, whereas in 2008, the number of cases leaped to 1,230. Similarly, HKIAC handled only 9 cases in 1985, but the figure surged to 602 in 2008.
• HKIAC also places great emphasis on disputes resolution concerning Internet-related services. For example, it has handled a growing number of disputes concerning .cn domain names in recent years, with only 8 cases handled in 2005, rising to 128 in 2008. This confirms HKIAC as a key player in providing dispute resolution services concerning .cn related domain names.
• Increasing Sino-foreign arbitration opportunities have arisen in the wake of China’s WTO accession. Many foreign investors prefer to settle disputes in a "third" place. Hong Kong is a suitable "third" place for settling disputes involving Sino-foreign projects.
• In January 2008, HKIAC signed a cooperation agreement CIETAC to enhance sharing of information, case management techniques and arbitration knowledge between the two organisations.
• In September 2008, HKIAC introduced some new rules on the administration of international arbitration, offering a choice of more user-friendly language in Sino-foreign dispute cases and allowing greater autonomy for disputed parties in their arbitration cases.
• Under the Hong Kong Arbitration Bill passed in the Legislative Council in February 2009, both domestic and international arbitrations follow a single set of rules. This can reduce confusion and bring the laws of Hong Kong in line with international standard. The new ordinance also adopts the United Nations Commission on International Trade Law (UNCITRAL) standards.
• As outlined in the 2007-08 Policy Address, the Hong Kong government is committed to promoting Hong Kong as an international disputes resolution centre. Among other things, HKIAC completed in March 2008 the Professional Services Development Assistance Scheme (PSDAS) project to promote arbitral services in Hong Kong to the US.
• In November 2008, the International Court of Arbitration of International Chamber of Commerce (ICC) opened its first office in Asia in recognition of Hong Kong’s position as a premier location of international arbitration services. This is expected to enhance Hong Kong’s provision of arbitration services while fostering closer ties with international arbitration organisations.