HK gets in line with international practice on dispute resolutions
On Wednesday a new law will align Hong Kong's arbitration system with international practice, which lawyers say will boost the city's bid to be Asia's premier arbitration hub.
The Arbitration Ordinance will remove the distinction between domestic and international arbitrations in Hong Kong, said Peter Chow, a partner with law firm Bryan Cave.
'The key change is the introduction of a unitary regime based on international practice. This is a complete revamp of the old law. It aims to be more user-friendly. In particular, practitioners from outside Hong Kong will appreciate this.'
The aim of the law is to attract more international businesses to resolve legal disputes in Hong Kong since their lawyers will be more familiar with international practice, Chow said. 'Parties may choose Hong Kong to resolve disputes even though they have no Hong Kong connections.'
Modelled on the United Nations Commission on International Trade Law, the law applies only to international arbitration cases in Hong Kong, not domestic cases, said James Kwan, an international arbitration expert at law firm Baker & McKenzie. A unitary regime avoids confusion and gives clearer details on matters such as confidentiality, Kwan said.
Hong Kong's current system recognises arbitration awards made in countries that are signatories to the New York Arbitration Convention, and China. The new law broadens this recognition and enforcement of international arbitral awards to jurisdictions beyond China and New York Convention states, said a note by law firm Latham & Watkins.
'The wide recognition of arbitral awards and extensive provisions for their enforcement will foster Hong Kong as an ideal arbitration centre for international entities engaging in China-related business. With the new Arbitration Ordinance, Hong Kong has taken another ... step in maintaining its position as the pre-eminent forum for commercial arbitration in the region,' the note said.
'Hong Kong already has the advantage of an independent judiciary ... and institutions such as the HKIAC [Hong Kong International Arbitration Centre] which is renowned for transparency and independence. Having user-friendly legislation can only bolster Hong Kong's reputation as an arbitration hub,' Kwan said.
Chow said Hong Kong and Singapore were the leading arbitration centres in Asia. 'Singapore is positioning itself as the leading centre and challenging Hong Kong.'
'In terms of numbers Hong Kong still leads Singapore, but last year the cases administered by the HKIAC dropped. On the other hand, the case load handled by the Singapore International Arbitration Centre doubled in the last three years.'
The HKIAC handled 291 cases last year against 429 in 2009. There were 175 international cases and 116 domestic cases. Singapore handled 198 cases including 140 international cases.
The Singapore government plays an active role in promoting arbitration, for example by supporting the development of the world's first integrated dispute resolution complex with international institutions such as the American Arbitration Association in Singapore, said Chow.
'Chinese clients prefer Hong Kong as an arbitration centre, but some US and European clients can't shake off the perception that Hong Kong is too politically tied to China. Singapore is seen to be more neutral than Hong Kong. Also, Korean and Indian parties prefer Singapore,' he said.
The changes will have a significant impact on Hong Kong's construction industry, which accounted for 28 per cent of arbitration cases last year, Chow said.
'Large numbers of cases involve the construction industry. Hong Kong is expected to increase spending on infrastructure projects in the next few years, to the tune of more than HK$50 billion this year alone. All these are likely to lead to more legal disputes.'
Hong Kong's construction industry wants to keep some features of domestic arbitration under the current system, Chow said.
Kwan said: 'The construction industry got what it wanted - an option to incorporate aspects of a regime it was familiar with.'
This includes appeals on questions of law, having a sole arbitrator which saves time and costs, and consolidation of arbitrations into a single set of proceedings, as infrastructure projects often involve many contracts, subcontractors and suppliers.
The number of arbitration cases handled by Hong Kong last year
- City heard 421 cases in 2009
- Singapore handled 198 cases last year'