HONG KONG HK

Hong Kong Dispute Resolution: Plans for 2019 and Beyond?

Here, we take a look at market trends and emerging best practices in the dispute resolution space to offer a guide as to what could be top of mind for practitioners in 2019 and beyond

Arbitration

What’s on the horizon? We’ve seen key changes in the evolution of the arbitration arena in Hong Kong, with a host of reforms undertaken to boost efficiency, create clarity, and to align the city’s mechanisms with those of England & Wales, Australia and Singapore. Most notably, the issuance of the Code of Practice for Third Party Funding came into effect on 1 February. This expressly allows for third party funding for arbitration and related matters and this key development irrefutably abolishes the doctrines of champerty and maintenance. What we will expect to see this year is greater clarity and transparency in the Hong Kong panorama as it enables a person or entity who has no interest recognised by law in the arbitration to be a third party funder. The Code, which was published in early December 2018, outlines the practices and standards for third party funders. An advisory body will oversee elements that pertain to funding agreements, confidentiality, conflicts of interest, termination and other related issues.

What you can expect to see: Greater clarity and transparency and a spike in the number of funding agreements as Hong Kong’s landscape aligns itself with forward-thinking jurisdictions. It is likely that these new provisions will make it easier to ensure that strong claims can be pursued; and will allow claimants to hedge their costs. In construction disputes, which are often lengthy and expensive, funding may allow parties to spread risk by not having to bear the whole cost of bringing or defending a claim, and will certainly provide considerable cash flow benefits – the traditional ‘life-blood’ of the construction industry.

DVC’s Anthony Houghton SC and Benny Lo closely examined the impact of the Code at the high-level Think Hong Kong, Think Global event in Tokyo recently.

For more on recent trends on how third party funding is viewed by the courts in a civil claim, refer to the recent Raafat Imam v. Life (China) Company Limited and Others [2018] HKCFI 1852 case featuring DVC’s Clifford Smith SC, Sabrina Ho and Tommy Cheung. The Mongolian Mining and China Solar cases, are cases of third party funding in the insolvency context.

For more on third party funding in the insolvency domain and the interaction between insolvency and arbitration please see Look-Chan Ho’s overview from 2018’s Arbitration Week and Look-Chan Ho and Tommy Cheung‘s presentation on Controlling Costs.

Belt & Road Initiative

Another prominent change to Hong Kong’s landscape in 2019 includes the Belt & Road Initiative.

The Belt & Road Initiative which is made up of a belt of overland corridors and a maritime road of shipping lanes linking over 60 countries will bring about complex investment opportunities bisecting the transport, logistic, maritime, telecommunications and other sectors. With multiple cross-border investors tied together contractually, this will inevitably (and unavoidably) lead to a myriad of disputes impacting international trade, commercial, company & insolvency, intellectual property, construction, telecommunications and other major sectors. Given that arbitration is the most popular and cost-efficient mechanism used to resolve cross-border disputes, Hong Kong is geographically poised to leverage contentions arising from these ventures. DVC has handled numerous enforcement (and setting aside) of awards.

The proposed Greater Bay Area initiative is potentially another landmark infrastructure project that will link Hong Kong, Macau and nine cities in Guangdong Province in order to establish a trading, logistical, manufacturing and technological axis for commercial activity. Another significant change entailed the implementation of the new administered arbitration rules (‘HKIAC Rules’) enacted in Q4 of last year.

What you can expect to see: 2019 and going forward, due to the HKIAC Rules being implemented, we will likely see many gridlocked parties turn to Hong Kong as a seat for these arbitrations.