In­no­va­tion re­in­forces HK’s sta­tus as a lead­ing international ar­bi­tra­tion hub

China Daily (Hong Kong) - - COMMENT - The au­thor is a part­ner at international law firm Latham & Watkins in Hong Kong.

Ac­cord­ing to the 2015 International Ar­bi­tra­tion Sur­vey pre­pared by Queen Mary Univer­sity of Lon­don, Hong Kong has main­tained its po­si­tion as one of the world’s lead­ing ar­bi­tra­tion hubs, rank­ing as the third most pre­ferred seat of ar­bi­tra­tion world­wide and the first in Asia. To re­main at the fore­front of ar­bi­tra­tion, Hong Kong is con­stantly in­no­vat­ing and rein­vent­ing it­self as an ar­bi­tral seat. This ar­ti­cle looks at three of those in­no­va­tions.

First, third-party fund­ing in ar­bi­tra­tion: The Law Re­form Com­mis­sion’s re­port on third-party fund­ing for ar­bi­tra­tion, re­leased on Oct 12 as a fol­low-up to its con­sul­ta­tion pa­per in Oc­to­ber 2015, has fur­ther demon­strated the pro-ar­bi­tra­tion stance of the Hong Kong gov­ern­ment and the ar­bi­tra­tion com­mu­nity. The key rec­om­men­da­tions in the re­port are to per­mit third-party fund­ing for ar­bi­tra­tions seated in Hong Kong, and also for ser­vices pro­vided in Hong Kong for ar­bi­tra­tion tak­ing place out­side Hong Kong, the ra­tio­nale be­ing that a party with a good case in law should not be de­prived of the fi­nan­cial sup­port it needs to pur­sue the case by ar­bi­tra­tion. The pro­posed re­form quells the un­cer­tainty pre­vi­ously posed by the Court of Fi­nal Ap­peal in Un­ruh v See­berger. This has left open the ques­tion of whether the doc­trines of main­te­nance and cham­perty ap­ply for third-party fund­ing for ar­bi­tra­tions. Cer­tain amend­ments would be in­tro­duced to the Ar­bi­tra­tion Or­di­nance to ex­pressly al­low for such ar­range­ments in ar­bi­tra­tion. With a view to reg­u­lat­ing third-party fund­ing ac­tiv­i­ties, the com­mis­sion has sug­gested clear stan­dards for fun­ders op­er­at­ing in Hong Kong to be de­vel­oped and that a “light touch” ap­proach should be adopted for the ini­tial three-year pe­riod. The com­mis­sion also pro­posed that a Code of Prac­tice should be drawn up, serv­ing as safe­guard against risks that may arise from fund­ing ac­tiv­i­ties.

Sec­ond, in­tel­lec­tual prop­erty ar­bi­tra­tion: An­other area that will un­dergo de­vel­op­ment is the issue of in­tel­lec­tual prop­erty (IP) ar­bi­tra­tion. The Hong Kong International Ar­bi­tra­tion Cen­tre (HKIAC) an­nounced in March 2016 that in re­sponse to the rise in IP dis­putes in Hong Kong, it had launched a panel of 30 ar­bi­tra­tors of­fer­ing ex­ten­sive ex­pe­ri­ence in IP dis­putes. The de­vel­op­ment of Hong Kong’s in­tel­lec­tual prop­erty land­scape is also com­ple­mented by the gov­ern­ment’s pro­posed amend­ments to the Ar­bi­tra­tion Or­di­nance in De­cem­ber 2015, as part of an ef­fort to clar­ify that dis­putes over IP rights can be re­solved by ar­bi­tra­tion in Hong Kong. In par­tic­u­lar, the amend­ments seek to af­firm that en­forc­ing an ar­bi­tral award solely be­cause the award is with re­spect to a dis­pute re­lat­ing to IP rights would not be con­trary to pub­lic pol­icy. The pro­posal rec­om­mended that the ar­bi­tral awards should bind only the par­ties to the ar­bi­tral pro­ceed­ings but not bind a li­censee. This ap­proach should be fol­lowed, given that an ar­bi­tral award is a res­o­lu­tion of pri­vate af­fairs and hence its ef­fect should be lim­ited in­ter partes. These pro­posed amend­ments can be con­trasted with the po­si­tion on the Chi­nese main­land, where the issue of patent va­lid­ity is an ad­min­is­tra­tive mat­ter and as such can­not be sub­mit­ted to ar­bi­tra­tion. As the gov­ern­ment is work­ing to­ward in­tro­duc­ing draft amend­ments into the Leg­isla­tive Coun­cil for vet­ting, it is an­tic­i­pated that leg­is­la­tion in this area will en­hance Hong Kong’s in­tel­lec­tual prop­erty dis­pute res­o­lu­tion frame­work and en­cour­age the use of Hong Kong as a seat for the ar­bi­tra­tion of IP dis­putes.

Third, in­vestor-state dis­pute res­o­lu­tion: The growth in the use of the in­vestor-state dis­pute set­tle­ment (ISDS) mech­a­nism, as well as its sur­round­ing con­tro­ver­sies, has con­tin­ued to be a topic of cur­rent in­ter­est fol­low­ing the out­come of the Philip Mor­ris case in De­cem­ber 2015. In that mat­ter, the Hong Kong-in­cor­po­rated claimant lost its chal­lenge to Aus­tralia’s to­bacco plain pack­ag­ing laws for want of ju­ris­dic­tion. The Asia-Pa­cific re­gion has tra­di­tion­ally wit­nessed fewer such dis­putes, with the bulk of the ac­tiv­ity go­ing through in­sti­tu­tions such as the International Cen­tre for Set­tle­ment of In­vest­ment Dis­putes (ICSID) and the Per­ma­nent Court of Ar­bi­tra­tion (PCA). How­ever, in re­cent years Asia-Pa­cific coun­tries have been in­creas­ingly ac­tive in con­clud­ing treaties. Such treaties may con­tain pro­vi­sions en­abling for­eign in­vestors to claim against gov­ern­ments for dam­ages due to a vi­o­la­tion of treaty rights, even though some states have be­come cir­cum­spect over the po­ten­tial back­lash that the ISDS sys­tem may cause due to the do­mes­tic laws and poli­cies of the host coun­try. In order to fa­cil­i­tate the con­duct of in­vestor-state ar­bi­tra­tion in Hong Kong, the cen­tral gov­ern­ment and the PCA en­tered into a host-coun­try agree­ment and a re­lated mem­o­ran­dum of ad­min­is­tra­tive ar­range­ments in Jan­uary 2015. HKIAC in­tro­duced pro­ce­dures for ad­min­is­ter­ing UNCITRAL (The United Na­tions Com­mis­sion on International Trade Law) cases ap­pli­ca­ble to both international com­mer­cial and in­vest­ment treaty ar­bi­tra­tion, which be­came ef­fec­tive on Jan 1, 2015. More re­cently, the HKIAC an­nounced in Oc­to­ber 2016 that hear­ing fa­cil­i­ties will be of­fered to states free-of-charge in re­la­tion to dis­putes with at least one party as a state listed on the OECD (Or­gan­i­sa­tion for Eco­nomic Co­op­er­a­tion and De­vel­op­ment) De­vel­op­ment As­sis­tance Com­mit­tee list of of­fi­cial de­vel­op­ment as­sis­tance re­cip­i­ents. This ini­tia­tive pro­motes the use of the HKIAC in ad­min­is­ter­ing in­vestor-state dis­putes, as Hong Kong strives to fur­ther en­hance its in­fra­struc­ture and ca­pa­bil­ity in han­dling such dis­putes.

In con­clu­sion, Hong Kong en­joys the unique ad­van­tages of a sound le­gal sys­tem and a strate­gic lo­ca­tion on the doorstep of the Chi­nese main­land. These fea­tures have en­sured that Hong Kong re­mains a pop­u­lar place for ar­bi­tra­tion. How­ever, the Hong Kong ar­bi­tra­tion com­mu­nity must con­stantly be open to op­por­tu­ni­ties and re­cep­tive to changes, so as to en­sure that it does not lag be­hind international trends. The afore­said en­hance­ments will un­doubt­edly re­in­force Hong Kong’s po­si­tion as a lead­ing international ar­bi­tra­tion hub.

The Hong Kong ar­bi­tra­tion com­mu­nity must con­stantly be open to op­por­tu­ni­ties and re­cep­tive to changes, so as to en­sure that it does not lag be­hind international trends.”


A girl in one of her ad­ven­tures onto the rooftops of var­i­ous build­ings in the city, where she climbs up high and has pho­tos taken on the very edge.

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