Hong Kong is one of the major centers of international arbitration. Surveys conducted by White & Case and Queen Mary University has demonstrated that Hong Kong continues to be top-five choices of the seat of arbitration. Behind the success of Hong Kong, there are several advantages which support the vigorous development of its arbitration services.

These advantages include its Impressive economic performance, developed legal framework and supportive judiciary, the active legal community, convenient location and its China connection. This article will briefly address each of these factors.

 

Economic Performance

 

We shall start with the impressive economic performance of Hong Kong. Nowadays, Hong Kong is no doubt among the most modernized city in the world. Under the sustained effort of the Hong Kong government, the idea of “free port” has been largely realized in Hong Kong. Such idea opens Hong Kong to the world by reducing various barriers to international economic activities that are common in other places. Hong Kong has no foreign exchange restriction. It has relatively low barriers on foreign trade and investments. This openness comes with clear rewards. As the Doing Business published by World Bank demonstrates, Hong Kong is among the best places in the world to conduct commercial activity. This favorable business environment enables Hong Kong as the choice of various multinational corporation to establish their branches, regional headquarters or even headquarters. It also attracts massive cross border trade and investment, and make this small region populated with a whole spectrum of industries.

The enormous amount of transactions happened in Hong Kong creates enriched soil for legal service to grow, and the high-quality legal service in turn provides an incentive to do business in Hong Kong. A virtuous cycle is therefore created. 

 

Legal Framework

 

The next advantage of doing arbitration in Hong Kong is its comprehensive legal framework. As the first Asian jurisdiction which adopted the UNCITRAL Model Law on International Commercial Arbitration (the “Model Law”), Hong Kong has dedicated significant effort in refining its legal framework. Currently, the most important legislation in terms of arbitration in Hong Kong is the Arbitration Ordinance (“HKAO”), which took effect on June 1, 2011. With the introduction of HKAO, a unitary system substituted the original bifurcated system which divided domestic and international arbitration before 2011. HKAO adopts the 2006 version of the model law and goes beyond that in many aspects. It provides all the basic coverage, from the recognition and enforcement of the agreement to arbitrate, composition of the arbitral tribunal, the conduct of the arbitration, to the setting aside of an arbitral award and recognition and enforcement of a foreign award. In addition, HKAO stipulates that interim measures made by a tribunal or through emergency arbitrator procedure shall be recognized and enforced as well. In the 2017 amendment of HKAO, provisions regarding third-party funding were supplemented into the legislation, following tightly to the latest development in the international arbitration.

Turning to the international/transborder legal framework applicable to Hong Kong. The New York Convention, which is the most important international instrument in international arbitration, covers Hong Kong. When the UK acceded the Convention, it extended the effect of the convention to Hong Kong in 1977. And after the transfer of the sovereignty to China, the People’s Republic of China government, who was also a party of the Convention, declared the Convention would continue to be effective in Hong Kong. The only difference is that the Convention no longer governs the recognition and enforcement of an award made in China or Macau and vice versa. They are now in the territory of bilateral arrangements between these jurisdictions. These legal instruments ensure the enforceability of an arbitral award made in Hong Kong. One noticeable recent development is that Hong Kong and China enters into another arrangement that promotes reciprocal assistance in the enforcement of interim measures in arbitration, which furthers the attractiveness of doing arbitration in Hong Kong.

 

Supportive Judiciary

 

A supportive judiciary of Hong Kong ensures the legal framework discussed above functions well. The more than 100 years’ British ruling establishes a solid common law legal system in Hong Kong, which is different from the more civil law styled legal system of China. That is due to the fact that concurrent with China’s resumption of its sovereign over Hong Kong, a promise of “One Country, Two Systems” which allows Hong Kong to remain its economic and legal system until 2047 was made.

The highly competent, efficient judiciary is therefore preserved. In terms of arbitration, Hong Kong’s court system is adopting a highly pro-arbitration attitude. The various support it provides is listed in the previous session. In addition, the supportiveness of the court also reflects in the court’s professional knowledge on international arbitration and their pro-arbitration interpretation. For instance, if the court can be certain the parties’ have agreed to arbitrate their dispute, it will usually remedy the possible defects in the arbitration agreement in accordance with the authorities provided by the HKAO.     

While some might cast doubts on the independence of the judiciary after the Chinese resumption of the sovereignty over Hong Kong, the record so far has demonstrated such worries are largely unfounded. As the World Economic Forum rated, Hong Kong remains to be the top jurisdiction when it comes to judicial independence. In fact, it was ranked first place among the Asian jurisdictions in 2018

 

Legal Community

 

Hong Kong has a well-developed, and highly sophisticated arbitration community. A large amount of leading international law firms, arbitration practitioners and arbitrators have their base in Hong Kong. In terms of arbitral institutions, Hong Kong has its flagship institution Hong Kong International Arbitration Centre (HKIAC), which has become one of the most reputable arbitration institutions. In addition, to taking advantage of the various benefits of Hong Kong addressed in this article, a variety of foreign institutions are also eager to set or has set their base in Hong Kong. These institutions include the International Chamber of Commerce (ICC), The China International Economic and Trade Arbitration Commission (CIETAC), CIArb, etc. The Taiwan based Chinese Arbitration Association, Taipei (CAA) recently joined the Hong Kong’s arbitration community by establishing a Hong Kong branch “CAA International Arbitration Centre” which specializes in international arbitration.

Another advantage of Hong Kong’s is that there is a close relationship between the legal community and other industries or professions. When one requires assistance regarding the industry-specific matters in the arbitral proceeding, an expert of that industry is readily accessible. The same applies to interpreter or expert in foreign/international laws.

 

 

Convenient location and China connection

 

Hong Kong is a unique mix of Chinese and western society. On the one hand, the geographical proximity and the Chinese origin of most of the population of Hong Kong make it culturally very resemble with China. On the other hand, the western colonization has brought significant western influence in its legal, political, and social structure.

This gives Hong Kong a competitive edge in a world where China has been and expected to be more influential in the international economy. As a fruit of its mixture nature of both western and Chinese culture, Hong Kong has historically served as a bridge between China and the world. This feature works in favor of choosing Hong Kong to be the place of arbitration in arbitration involves a Chinese party, as it may be a neutral ground that both sides may accept.

 

Jeffry Lo