Globalisation has exposed businesses to various risks. With Hong Kong being one of the leading business and financial hubs in the Asia-Pacific, arbitration is becoming accepted as an efficient and important part of risk management.

Arbitration reduces cross-jurisdictional problems. Businesses prefer this method because it is less costly and provides more confidentiality than court litigation. This makes the case records public and accessible by outsiders, whereas arbitration can make sure everything is confidential.

Peter Malanczuk, director of WTO Law & Dispute Resolution Centre at City University of Hong Kong, said: 'The obvious advantage that exists is that while a court case is limited by jurisdiction and [with] no general convention among countries, international arbitration proceedings are conducted with reference to the United Nations Commission on International Trade Law, which was created to overcome the differences in socioeconomic and legal backgrounds of countries and is accepted in over 60 countries with different legal systems.'

Mr To added: 'There is a growing trend for people to follow this mechanism and overseas parties trust the Hong Kong system which boasts of a consistent, ethical, fair and credible procedure of enforceable arbitration.

'If a supplier sends some goods and the customer finds them faulty, you need an expert on those goods to make a judgment. The expert checks the goods and gives his opinion on who is right and who is wrong and the decision is binding on the two parties in dispute.'

With 300 arbitrators on its panel, the HKIAC, for a fee, can appoint an appropriate arbitrator for the parties in dispute.

'We have seen a remarkable growth of dispute cases from sectors including construction and shipping. And recently, we have handled more sophisticated issues relating to technology transfers, intellectual property and licensing agreements,' Mr To said.

An arbitrator does not need to have a legal qualification as long as they have substantial experience in a certain field and understand arbitration laws.

'Being an arbitrator is advancement from your own profession, just like many other arbitrators in Hong Kong whose first arbitration experience came from their professional work, such as engineers, lawyers and accountants,' said Gary Soo, president of the Hong Kong Institute of Arbitrators. The institute offers arbitration training and courses to the public, focusing on the essential legal and practical knowledge on how an arbitration case is conducted.

There are also masters degree courses run by Hong Kong's universities to help professionals and executives develop knowledge and skills in arbitration, mediation and negotiation for a variety of commercial disputes.

Professor Malanczuk said: 'There is an increase in the number of mediation cases especially in areas of family, insurance and construction disputes. I have co-ordinated an in-house mediation training programme with the Department of Justice.'

Mediation is another form of ADR, but unlike arbitration it is a non-binding resolution process.

A high number of professionals such as engineers, who have to deal with contracts and labour disputes, take courses in arbitration.

With trade a major pillar of the Hong Kong economy, there has been a steady increase of maritime arbitration cases in recent years. Another area that arbitration can play a vital role in is the settling of international commercial disputes.

Philip Yang, a past chairman of the HKIAC, who specialises in maritime arbitration and handled at least 20 such cases last year, said: ' Due to the history and experience, arbitration in maritime disputes is doing better in terms of economy and efficiency than it does in other areas of arbitration.'

Despite all the advantages arbitration can offer in settling a commercial dispute, Hong Kong people seem generally unaware of the process.

Mr To said: 'The government needs to play an active role in changing this perception and educating the public. Hong Kong people are not aware of this alternative method of resolving disputes.

'If you asked someone in Hong Kong what they would do if they had a labour dispute with their employer, they would think of taking it to a court of law immediately. But in Shanghai, I asked a hotel receptionist the same question and her answer was arbitration.'

Competition is heating up with other jurisdictions in Asia trying to become an international arbitration centre which translates into ample business opportunities and stronger international influence.

To bring Hong Kong's arbitration system up to date to meet the needs of the business community, local arbitration organisations have proposed amendments to the Arbitration Ordinance which is under review by the government.

'It would be good for Hong Kong to see that these can become laws soon,' Mr Soo said.