International dispute resolution centre
In April 2017, delegates from New Zealand’s Ministry of Foreign Affairs & Trade concluded preliminary negotiations in Beijing for the planned upgrade of the 2008 Free Trade Agreement (“the New Zealand-China FTA”).
The upgrade aims to raise bilateral trade to NZ$30 billion by 2020 while removing tariffs from New Zealand’s most popular exports (eg fresh dairy products) by 2024.
It is the latest initiative by both countries to strengthen trade relations that generated NZ$23b in 2016 — a quarter of which was the result of foreign direct investment.
Given the strong investment and trade ties, it is important for New Zealand and Chinese partners to agree on an effective method and venue for resolving disputes. In this respect, Hong Kong is key. After more than 150 years of colonial rule under the British, Hong Kong reverted to Chinese sovereignty in 1997 under the “one country two systems” doctrine. As a Special Administrative Region, Hong Kong enjoys a high degree of autonomy and retains a separate legal system from that of Mainland China.
Like New Zealand, Hong Kong’s legal system is based on English common law. Hong Kong has a long tradition of upholding the rule of law and judicial independence; two key foundations for the city’s success as a global dispute resolution centre. Hong Kong has been ranked the most judicially independent jurisdiction in Asia by the World Economic Forum’s Global Competitiveness Report over the past 10 years. Hong Kong’s highest court, the Court of Final Appeal (HKCFA), whose power of final adjudication is constitutionally entrenched, regularly includes judges from other common law jurisdictions, including New Zealand. The most recent appointee from New Zealand was Sir Thomas Gault, former justice of the New Zealand Supreme Court, who served from 2006-2015.
The most effective means of dispute resolution for cross-border transactions, including between New Zealand and Chinese parties, is arbitration. In arbitration, disputing parties select the individuals who decide their dispute as well as the applicable law. In many disputes between Chinese and nonChinese par- ties, Hong Kong is selected as the dispute resolution venue and Hong Kong law as the applicable law (and as is it based on English common law, it has a large degree of commonality with New Zealand law).
The final decision of an arbitration, known as an award (equivalent by analogy to a judgment in a court case), is legally binding.
Under international law, a party from one country can have an award in its favour enforced against a party from another country. If, for example, in an arbitration between a New Zealand party and a Chinese party, the New Zealand party obtains an award finding that the Chinese party owes it monetary sums, the New Zealand party can attach the Chinese parties’ assets in China (or wherever they are, in over 150 other countries in the world).
The same is true if the Chinese party obtains an award in its favour against a New Zealand party. It is the binding nature of arbitration that makes it the international dispute resolution method of choice. Unlike arbitral awards, it is very difficult to enforce national court judgments against foreign parties in foreign countries.
Hong Kong is a sophisticated and mature jurisdiction when it comes to arbitration.
It is one of the most preferred venues for international arbitration and enjoys particular advantages in relation to arbitrations between Chinese and non-Chinese parties. Chinese parties choose Hong Kong because it is part of China; foreign parties choose Hong Kong because of its independent legal system based on common law, and its independent judiciary.
The Hong Kong Government and judiciary, and many Hong Kong legal professionals and industry experts, are able to practise and conduct business in both English and Chinese.
All Hong Kong legislation and regulations are enacted in both languages. In 2011, Hong Kong was the first major Asian jurisdiction to enact the model law for arbitration promulgated by the UN. Since that time, legal reform has kept apace with, and often led, international arbitral practice.
The Hong Kong courts are predictable when it comes to arbitration, and consistently adopts a pro-arbitration approach. Hong Kong is also home to one the world’s leading international arbitration institutions: the Hong Kong International Arbitration Centre (HKIAC).
HKIAC has extensive experience handling disputes involving parties from mainland China: of 260 arbitrations filed with the Centre in 2017, approximately 28 per cent involved mainland Chinese parties.
Also, 80 per cent of HKIAC’s caseload in 2017 involved parties from the Asia-Pacific.
HKIAC’s secretariat is staffed by multilingual and international experts in the field; in 2016, a New Zealander was appointed as the Secretary-General of HKIAC.
Various sources of international law, both in force and proposed, contain dispute resolution provisions applicable to New-Zealand China cross border investment. The New Zealand-China FTA provides for arbitration under arbitration rules promulgated by the United Nations. HKIAC has experience in administering arbitrations under these rules since 1986.
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) also encourages the use of arbitration by private parties between whom international commercial disputes have arisen in relation to the CPTPP free trade area.
New Zealand investment capacity in Southeast Asia is likely to expand once the CPTPP enters into force: of 11 countries who are party to the agreement, four are also members of the Asean 4 bloc.
Despite stagnation of the original TPP — incited by the withdrawal of the US — its dispute resolution provisions were imported into the CPTPP. These provisions are similar to those found in the New ZealandChina FTA.
Sarah Grimmer is secretary-general of the Hong Kong International
Arbitration Centre