Expert legal commentary: Hong Kong’s Emergence as a Centre of Transnational Arbitration

By Mr Malcolm Chin, Partner, Minter Ellison, Hong Kong

Mr Malcolm Chin

Since the end of the Second World War, arbitration, given impetus by international conventions, has evolved into the leading method of resolving complex cross-border or transnational disputes. As a result arbitration has become something of a growth industry, with jurisdictions increasingly vying with each other to promote their own arbitration regimes to the international community.

Traditionally European centres such as London and Stockholm have been at the forefront of this movement but now cities in Asia have joined them.  While for example Seoul is making great strides, the two front runners remain Hong Kong and Singapore. By some measures Singapore is seen as having overtaken Hong Kong; for example it markets itself aggressively as leading the field in terms of the number of fully administered arbitrations it attracts. The Singapore International Arbitration Centre, SIAC, has certainly modelled itself to a degree on the doyen of institutional arbitration bodies the ICC – with, some suggest, a price tag to match. But there are other measures of success. One of Hong Kong's strengths, other than its large pool of experienced practitioners and acceptability to the PRC and foreign investors as the preferred neutral venue, is the flexibility which it offers.

This has been reinforced by the regular steps taken by the Hong Kong government, its judiciary and its arbitration practitioners to ensure that it remains at the forefront of arbitration best practice. Recently, for example, in view of the key role that confidentiality plays in the popularity of international arbitration, the Hong Kong statute governing arbitration, the Arbitration Ordinance, was amended to introduce the most far reaching confidentiality provisions in Asia. Other amendments enable an arbitrator to be appointed at short notice where necessary and the emergency relief orders which he may make to be recognised and enforced by the courts. For its part the HKIAC amended its rules for administered arbitration in November 2013 to take advantage of these changes and enable a party to apply for urgent interim relief before the constitution of the arbitral tribunal. The availability of such fast track arbitration will undoubtedly be attractive to many commercial organisations.

Another area in which Hong Kong has introduced radical change is so called med-arb. This enables parties to an arbitration to agree during the course of proceedings to engage in a non-binding mediation of the dispute with the arbitrator acting as mediator. If this is unsuccessful the arbitrator resumes his role.  As can be seen, issues may arise such as the access of the arbitrator to confidential information which he has acquired in his capacity as mediator, and the Ordinance takes steps to address this. Med-arb though not yet common in Hong Kong is popular in the PRC largely on cultural grounds and a landmark decision of the Hong Kong Court of Appeal in the Keeneye case has confirmed the judiciary's essentially non-interventionist approach to this and other forms of arbitration.

The long-running and well-publicised disputes between the leading PRC arbitration body, CIETAC, and its breakaway sub-commissions in Shanghai and Shenzhen have created significant uncertainties about procedures and enforcement, in particular for parties with broadly-worded pre-dispute arbitration clauses. As a result the PRC Supreme People's Court has had to intervene. In the circumstances PRC parties, already enthusiastic users of Hong Kong's arbitration services, may decide that agreeing to med-arb in Hong Kong makes a lot of sense.

It has been said, sometimes by those with an axe to grind, that post-handover Hong Kong is too close to the PRC to be a neutral arbitration venue in PRC-related cases. The Hong Kong courts however remain robustly independent and recent decisions enforcing arbitral awards against PRC state owned entities have served to demonstrate this. The rule of law is alive and well in Hong Kong as evidenced by its continued prominence as a financial hub and front runner in global league tables of commercial freedom and ease of doing business. Singapore too has had to address suggestions that its judiciary is too closely linked to the country's long-standing governing political party. The fact is that both centres have well-deserved reputations and enormous and overlapping strengths and that, in today's Asia, there is more than enough room for both of them to continue to flourish.