The Arbitration Landscape in Hong Kong

Being a common-law jurisdiction and a part of the People's Republic of China, Hong Kong has a unique position in arbitration. As an arbitration venue, Hong Kong has benefited from the increasing number of Chinese-related disputes arising from the escalation of foreign investment and economic activities in Asia, and in particular China. It has been said that, by retaining its English common law-based legal system, foreign parties regard Hong Kong as a fair and familiar forum with neutrality for resolving commercial disputes. With its proximity in location, Chinese parties regard Hong Kong as a culture-friendly venue. From statistics kept at the Hong Kong International Arbitration Centre (HKIAC), a total of 448 cases was recorded in 2007. This figure has not yet included the 135 domain-name disputes that were handled by the HKIAC. Among them, the number of cases with both parties from Mainland China is also increasing.

The existing Arbitration Ordinance (cap 341) applies the UNCITRAL Model Law as the statutory regime for international commercial arbitration¹ and the New York Convention for enforcement of arbitral awards made overseas in places of signatories to the Convention,² and also of arbitral awards from various arbitration commissions in Mainland China.³ There is also clear adherence to the New York Convention and the common law by judges. The Construction and Arbitration List has further been created in the High Court to hear arbitration-related cases for quite some time now.

To maintain Hong Kong's position in the international arbitral arena, Hong Kong is responsive to the needs of users and is supporting and updating its legal landscape in arbitration. These can be demonstrated from the following aspects.

Recent cases review

It may perhaps be good to start by looking at some recent cases to see how the courts of Hong Kong are applying the laws.

Hong Kong courts are consistently known for being supportive toward arbitration. In the recent case of UDL Contracting Ltd v Apple Daily Printing Ltd,⁴ disputes arose between the parties to a contract for the construction of a printing workshop and support offices. The claim predicated on certain oral agreements and representations. One of the issues to be determined in an application for stay of proceedings was whether these claims were 'in connection therewith' as regards the contract. The Court of First Instance ruled in favour of a stay and remarked that the construction of an arbitration clause should start from the assumption that the parties, as rational businessmen, were likely to have intended any dispute arising out of the relationship into which they have entered or purported to enter to be decided by the same tribunal. Hence, with this approach, arbitration clauses would be construed by the courts accordingly, unless the language made it clear that certain questions were intended to be excluded from the arbitrator's jurisdiction and decided otherwise by the courts via separate litigation.

In the case of Monstermob Group Inc v Qian Yongqiang,⁵ the Court of First Instance continued a worldwide Mareva injunction until the conclusion of a Hong Kong-based ICC arbitration, which would resolve the dispute between these parties. The disputes concerned a BVI company listed in the UK and arose from a share purchase agreement involving a purchase price of US$112 million. On the evidence, the court found a good arguable case on the crucial elements of the claim and believed that there would be a real risk in the dissipation of assets in the event that the claimant ultimately were to succeed in the arbitration. This case casts light on the evidence that Hong Kong courts would be looking for in approaching such an issue.

In another recent case concerning the enforcement of a CIETAC arbitral award,⁶ the issue of impossibility of performance was, inter alia, raised as a public policy ground for opposing enforcement before the Court of First Instance in Hong Kong. As said, the New York Convention grounds were applicable to the enforcement of such an award. The award directed one of the parties to continue the performance of an agreement to transfer the shareholding in a Hong Kong company that owned land in Mainland China. That party argued that this was in effect a disguised transfer of land that would be contrary to the law of Mainland China. In rejecting such an argument and giving leave to enforce the arbitral award, the court remarked that the stringent approach of the court was justified as a matter of comity, since, as the parties had agreed to submit to arbitration and had actually gone through an arbitration process, it would be wrong and unjust in principle if a successful party were denied the court's assistance in enforcing an award, other than for compelling reasons.

From these cases, it can be seen that Hong Kong courts are still very supportive throughout the process of arbitration.

A new arbitration bill

On the last day of 2007, a consultation paper with a draft bill on the reform of the law of arbitration in Hong Kong was published by the Department of Justice of Hong Kong. The draft bill adopted with modifications the proposals as set out in the report of committee on Hong Kong Arbitration Law, recommending a unitary regime that applied the Model Law to govern both domestic and international arbitrations. The draft bill was a rewritten one to replace the existing Arbitration Ordinance (Cap 341). During the process, arbitration laws around the world were examined with a view to incorporating international best practice. The amendments to the UNCITRAL Model Law in 2006⁷ had also been taken into account in the draft bill.

The purpose of the reform was to make the law on arbitration in Hong Kong more user friendly. As the UNCITRAL Model Law would be familiar to practitioners from civil law as well as common-law jurisdictions, this would have the benefit of enabling the Hong Kong business community and arbitration practitioners to operate an arbitration regime which would accord with widely accepted international arbitration practices and development, thereby attracting more business parties to choose Hong Kong as the place to conduct arbitral proceedings.

In the draft bill, the existing enforcement mechanisms for arbitral awards were retained. The framework and content of UNCITRAL Model Law was also adopted. Those familiar headings used in the UNCITRAL Model Law were used as well for the benefits of the users. In particular, those amendments to the UNCITRAL 2006 concerning the interim measures were mostly adopted in the draft bill, save as to the mechanism for enforcement of such measures. Thus, under the draft bill, the existing approach under section 2GG of the Arbitration Ordinance (cap 341) for enforcement of orders and directions was preserved, while views were sought as regards whether to introduce conditions such as reciprocity or types of measures in respect of interim measures made outside Hong Kong.

The consultation period of the draft bill ended in July 2008. After consolidation of views, it seems that a new arbitration law for Hong Kong should be appearing some time in 2009.

HKIAC Administered Arbitration Rules

Apart from legislation, new rules for the game were also introduced in 2008. The HKIAC has recently published the HKIAC Administered Arbitration Rules, which took effect from 1 September 2008. This set of rules is the latest addition to the HKIAC publication to replace the HKIAC Procedures for the Administration of International Arbitration.

In the drafting of the HKIAC Administered Arbitration Rules, references have been made to the arbitration rules of different institutions around the world. Key improvements of the rules include the choice of user-friendly wordings and the allowance of more party autonomy for catering needs in individual cases. All of these have been done while keeping up with the international practices and legislative changes.

Good arbitrations do not run themselves. Parties may now agree to have their arbitration fully administered by the HKIAC under the HKIAC Administered Arbitration Rules. Rather than leaving administrative tasks allocated to one of the arbitrator's own staff, parties' legal teams, or sometimes even the parties themselves, as in the case of ad hoc arbitration, may get the benefits of professional administration offered by the HKIAC. Further, there can be more scope and safeguards over managing costs and delay.

Domain-name disputes in Hong Kong

As for domain-name disputes,⁸ the HKIAC has seen a steadily increasing caseload in 2008.

The HKIAC is a service provider for domain-name disputes concerning '.cn', '.hk', '.pw' and '.ph'. The HKIAC is also a partner in and manager of the Hong Kong office of the Asian Domain Name Dispute Resolution Centre (ADNDRC), which is one of the four domain-name dispute resolution providers approved by the Internet Corporation for the Assigned Names and Numbers (ICANN) to provide domain-name dispute resolution services in regard to generic top-level domain names (gTLDs), such as '.com', '.net' and '.org'. These are to be carried out under the Uniform Domain Name Policy (UDRP) issued by ICANN. On 21 December 2007, DotAsia Organisation announced the appointment of the HKIAC as the global official dispute resolution provider to handle disputes and challenges arising out of the launch of '.asia' domains.

The number of cases handled by the HKIAC up to September 2008 has already exceeded the total number of cases in the whole of 2007. It is also observed that there are more and more complaints concerning domain names in Chinese, involving complainants outside Hong Kong or China. With the launch of '.asia' and other new gTLDs, it is also anticipated that further expansion of domain-name dispute resolution services could happen in Hong Kong.

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From the above, it seems fair to say that Hong Kong's position in the region for the provision of dispute resolution services has been improving. With the incoming reform in arbitration legislation and rules, it is anticipated that the new landscape can provide an even more user-friendly dispute-resolution process for all users concerned.

Notes
1. Arbitration Ordinance (cap 341), Part IIA.
2. Arbitration Ordinance (cap 341), Part IV.
3. Arbitration Ordinance (cap 341), Part IIIA.
4. ²⁰⁰⁸ 2 HKC 534.
5. ²⁰⁰⁸ HKCU 1274
6. Xiamen Xin Jing Di Group Co Ltd v Eton Properties Ltd (2008) HCCT 54/2007, Reyes J.
7. See www.unictral.org/untiral/en/uncitral_texts/arbitration/1985Model_arbitration.html for details.
8. The HKIAC has been appointed by the China Internet Network Information Centre as a provider to handle internet keyword disputes.