Legal cooperation vital for Bay Area’s success

Eliza Chan says developing the area into a real city cluster requires government-backed initiatives to streamline the legal systems of its regions

The Guangdong-Hong Kong-Macao Greater Bay Area is an initiative directed toward linking Hong Kong and Macao with the nine major cities of Guangdong’s Pearl River Delta. Details about it were published in the Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area on Feb 18. The objective is for the Bay Area to become a megalopolis.

In relation to legal development, the outline development plan identifies several objectives to enhance cooperation in legal matters between Guangdong, Hong Kong and Macao. The suggestions, among others, include expediting the development of the legal services industry, encouraging and supporting legal services organizations in providing services for the Belt and Road Initiative and for mainland enterprises going global, setting up a multi-faceted dispute resolution mechanism, as well as collaborating with Hong Kong to develop an international legal services center and an international commercial dispute resolution center.

There are a few ways for Guangdong, Hong Kong and Macao to legally cooperate. Firstly, the nine cities of the Pearl River Delta could consider signing agreements on mutual enforcement of arbitral awards with Hong Kong and Macao that is specifically applicable to the Bay Area. Even though the Chinese mainland has separately signed arrangements on mutual enforcement of arbitral award with Hong Kong and Macao, a multilateral agreement catered to the Bay Area may promote quicker and more effective enforcement of arbitral awards for commercial disputes involving multi-jurisdictional elements.

Furthermore, multi-faceted dispute resolution mechanisms should be set up in the Bay Area. Following the establishment of the Guangdong-Hong Kong-Macao Commercial Mediation Alliance in 2013 and the Mainland-Hong Kong Joint Mediation Center in 2015, policies should be implemented in the Bay Area that encourage parties to utilize these resources prior to trial. The other Bay Area cities could also learn from Hong Kong’s experience, such as providing a practice direction that encourages parties to use alternative dispute resolution administered by a neutral third party. According to Practice Direction 31, where a party unreasonably fails to engage in mediation, the court has discretion in making an adverse costs order. Even though mediation is not mandatory in Hong Kong, the possibility of an adverse costs order encourages parties to try mediation first. It is important for the Bay Area to create a mechanism that encourages parties to resolve disputes by way of alternative dispute resolution, especially before costs and hostility arise between the parties.

The Bay Area could also consider making more policies that encourage movement of legal talent within the 11 cities. On March 19, the Qianhai free trade zone in Shenzhen announced that Hong Kong and Macao residents may work in the area without a permit. Similar policies in other cities of the Bay Area could be further implemented to strengthen judicial cooperation and exchanges in the region. Law schools in Guangdong, Hong Kong and Macao should also be encouraged to jointly train high-quality talents in learning legal knowledge from all three legal systems.

Finally, the current Civil Procedure Law of the People’s Republic of China should be reviewed. Article 270 of the Civil Procedure Law states that the trial period of civil cases involving overseas element by the people’s court will not apply the time restrictions stated in articles 149 and 176. Article 149 requires the people’s court to conclude a case within six months after docketing the case, while Article 176 requires the people’s court to conclude an appeal case within three months after docketing the case. In other words, the strict trial period restrictions that apply to mainland residents do not apply to “overseas-related” civil cases involving Hong Kong, Macao and Taiwan residents. Instead, the trial period is up to the court’s discretion. If there is no trial period restriction for overseas-related cases, the conclusion of a case’s trial period may be indefinite and the parties’ legal rights cannot be protected in time, which may undermine the confidence of Hong Kong and Macao residents and companies, as well as the confidence of international enterprises in investing in the Chinese mainland. The Civil Procedure Law should be amended to protect companies and residents of Hong Kong and Macao in the Bay Area.

For the Bay Area to become a world-class city cluster and a megalopolis, it is essential that government-backed policies are enacted to streamline the legal processes of the mainland, Hong Kong and Macao. Improving alternative dispute resolution mechanisms, encouraging movement of legal talent, and reviewing outdated laws in the Bay Area could be a few suggestions to consider.

Multi-faceted dispute resolution mechanisms should be set up in the Bay Area ... The Bay Area could also consider making more policies that encourage movement of legal talent within the 11 cities ... Law schools in Guangdong, Hong Kong and Macao should also be encouraged to jointly train high-quality talents in learning legal knowledge from all three legal systems.