Hong Kong's reputation as a neutral arbitration centre grows

After the flurry of major disputes in the 2000s that followed the construction of Hong Kong's then new airport, the average number of construction arbitrations has dropped in the city.

Figures from the Hong Kong International Arbitration Centre show that in 2007, of the 448 arbitrations the centre handled, two in every five involved construction. By 2011, the number had dropped to 275, of which just one in seven was a construction arbitration.

Several reasons explain this decrease. First, Hong Kong is at the early development phase of the next huge surge of construction, which almost rivals the airport's heady days. Disputes may not crystallise into arbitrations for a few more years.

Second, Hong Kong has seen an important trend of non-construction arbitration initiated in the city by parties actually conducting their business on the mainland. That trend has decreased the overall share of construction arbitration.

What we have seen increasingly is international and mainland parties selecting Hong Kong as their neutral arbitration forum. Even banks are doing it.

I was contacted by the legal team of an Australian bank who were concerned that they may face litigation in mainland China against their mainland counterpart bank. I suggested that both might benefit from an arbitration clause in a neutral jurisdiction - Hong Kong.

We also recently handled a manufacturing dispute where the European party began arbitration proceedings in Hong Kong against a mainland entity, both parties having drafted a neutral arbitration clause into their manufacturing contract at the outset. Arbitration in Hong Kong not only worked, it preserved their business relationship.