Hong Kong could be losing millions of dollars in business due to slow progress by the SAR and Beijing governments in finalising an agreement to enforce arbitration awards involving mainland companies. Legal firms are increasingly replacing Hong Kong with Singapore as an arbitration venue when drawing up business contracts, experts say, hurting the SAR's reputation as an arbitration-friendly centre. 'Anyone who does arbitration in Hong Kong is aware of it and is lamenting it,' said Louise Barrington, director of the Asian office of the International Chamber of Commerce (ICC), which handles arbitrations worldwide. Industry practitioners have been warning for more than a year of the consequences of failing to resolve the issue, which was a direct result of the handover. Before July 1 last year, Hong Kong companies were able to enforce arbitral awards overseas under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards - known as the New York Convention - to which the mainland is also a signatory. However, since then Hong Kong has been considered part of the mainland under the convention, which does not cover disputes within a state. That means companies which win arbitration awards in Hong Kong or in the mainland have been unable to directly enforce them in the other jurisdiction. The problem was highlighted by two cases this year where companies won arbitration awards from the China International Economic and Trade Commission but could not turn to the Hong Kong courts to get them enforced. Determining the amount of lost business is difficult, because arbitration is a secret process and disputes may not arise until years after a contract is written. But with more commercial disputes likely against an uncertain economic backdrop, add up the income associated with the people involved in an arbitration case and the figures could be significant, the industry said. 'It's hurting Hong Kong because if someone comes to me and says should I choose Hong Kong as a place to hold my arbitration and if I find out the other party is Chinese, I say 'I'm sorry, no I can't recommend that',' Ms Barrington said. 'I say 'go somewhere else, go anywhere else that has good law but don't come to Hong Kong until this is settled'.' Christopher To, general secretary of the Hong Kong International Arbitration Centre (HKIAC), said: 'Singapore is clapping its hands.' Expectations of a resolution, which officials have been saying is imminent since handover time, rose again earlier this month. Secretary for Justice Elsie Leung Oi-sie said a draft agreement was being discussed and while a few minor issues had to be sorted out, she hoped to be able to sign the agreement by the end of the year. Even if a deal is announced in a few weeks' time, amendments will need to be made to Hong Kong's Arbitration Ordinance and to laws in the mainland. They will then need to be approved by the Legislative Council and the Supreme People's Court. Arthur Bowring, director of the Hong Kong Shipowners Association, said: 'The word that I'm getting back is that lawyers find it difficult to recommend Hong Kong as a venue for arbitrations when dealing with mainland clients.' 'There is the possibility of business being shifted to [Singapore]. 'People know it's a very serious issue and needs to be solved quickly. Once people believe it's being solved, they'll no longer be moving business out of Hong Kong,' Mr Bowring said. Companies often choose arbitration over legal action for reasons of secrecy, speed, convenience and that proceedings can be 'tailor-made' to suit the parties, says Ms Barrington. Last year, the HKIAC recorded 218 cases. Most disputes - 60 per cent to 70 per cent - were in the construction field. Globally, the ICC arranged 452 arbitrations last year. So far this year the figure is 10 more than at the same time last year.
