Hong Kong shining as beacon of international arbitration

Hong Kong has long stood as a beacon of international arbitration, and its role has only grown more significant in the past year. This city, known for its vibrant business environment, has once again proven its resilience and prominence in international dispute resolution.

In this article, the authors explore Hong Kong’s recent achievements in arbitration, notable case law trends, and updates to local arbitration rules.

Institutional achievements

Heidi Chui
Partner
Stevenson Wong & Co.
Hong Kong
Tel: +852 2526 6311
Email: heidichui.office@sw-hk.com

Hong Kong’s status as a premier hub for arbitration is evident through the activities and achievements of its local arbitral institutions.

In 2023, the Hong Kong International Arbitration Centre (HKIAC) handled 500 matters, including 281 arbitration filings, marking its third-busiest year since 2017.

These cases involved 771 parties from 45 jurisdictions, highlighting Hong Kong’s global appeal. Notably, 75.1% of these arbitrations were international, with nearly 10% involving no Asian parties.

Financially, the total amount in dispute reached HKD92.8 billion (about USD12.5 billion), with an average dispute amount of HKD467.6 million.

The HKIAC also advanced its collaboration with mainland Chinese courts under the Hong Kong-Mainland China Arrangement on interim measures, processing 19 applications to preserve RMB3.5 billion (about USD491 million) in assets, with RMB544 million successfully preserved.

During the year, Hong Kong parties were also active in arbitrations by other prestigious bodies including: the International Chamber of Commerce, with 25% of all parties from Asia-Pacific and notable representation from China and Hong Kong; and the Singapore International Arbitration Centre, where Hong Kong was the top foreign user with 1,436 parties.

Hong Kong’s reputation was further solidified by hosting the ICCA Congress in May 2024, attracting more than 1,000 global arbitration professionals.

At the same time, the China International Economic and Trade Arbitration Commission (CIETAC) Hong Kong Arbitration Centre reported a median duration of just seven-and-a-half months to obtain an award; and the South China International Arbitration Centre (Hong Kong) joined a list of venue providers that can issue a “letter of proof” for eligible individuals to participate in arbitral proceedings in Hong Kong without needing an employment visa.

The Asian-African Legal Consultative Organisation’s Hong Kong Regional Arbitration Centre is meanwhile expanding its arbitrator panel, while this year’s launch of the Greater Bay Area Online Collaborative Platform by eBRAM International Online Dispute Resolution Centre further integrates legal services across the GBA.

Underscoring the city’s strategic importance as a gateway for mainland arbitration institutions to global markets, the Shanghai International Arbitration Centre (SHIAC) also opened its first offshore branch in Hong Kong,

Landmark rulings

In recent years, the interplay between winding-up cases and exclusive forum clauses has become a hot topic in Hong Kong’s arbitration community.

Elizabeth Chan
Consultant
Stevenson Wong & Co.
Hong Kong
Tel: +852 2533 2650
Email: elizabeth.chan@sw-hk.com

Traditionally, Hong Kong courts granted winding-up petitions if the debtor failed to pay a debt and lacked a credible defence, regardless of the existence of an exclusive jurisdiction clause and/or arbitration agreements in the contract forming the basis of the debt.

However, the landmark ruling in the case of Guy Kwok Hung Lam [2023] has shifted this dynamic. The Court of Final Appeal held that exclusive jurisdiction clauses should generally be respected, thereby holding parties to their contractual forum for dispute resolution. This decision underscores the importance of upholding contractual agreements as a matter of public policy.

Consequently, creditors may face challenges in having the Hong Kong court hear a winding-up petition if an exclusive jurisdiction clause exists, unless there are “strong reasons” to do so. However, the court retains the discretion to grant a winding-up order if the defence is deemed frivolous or an abuse of process.

Additionally, in the case of Simplicity & Vogue Retailing (HK) Co Limited [2024], the Court of Appeal confirmed that the Guy Lam case approach should apply where there is an arbitration clause.

In contrast, the UK Privy Council’s subsequent decision in Sian Participation Corporation (In Liquidation) v Halimeda International Ltd [2024] presented a differing position, stating that winding-up petitions should not be delayed by arbitration when there is no genuine dispute about the debt.

This approach potentially conflicts with the Guy Lam case ruling, leaving an open question in Hong Kong on whether courts will prioritise the contractual choice of forum or the existence of genuinely disputed debts in future cases. Despite this, the Guy Lam ruling remains binding law in Hong Kong.

Case law trends

Hong Kong courts have issued nearly 60 decisions related to arbitration since October 2023, reflecting the jurisdiction’s dynamic nature and the judiciary’s active engagement in arbitration issues.

Justin Kim
Associate
Stevenson Wong & Co.
Hong Kong
Tel: +852 2533 2648
Email: justin.kim@sw-hk.com

One notable case was Song Lihua v Lee Chee Hon [2023], where the Court of First Instance reinforced the principle that arbitrators have immunity from being compelled to give evidence about their decisions. This decision aligns the protection of arbitrators with that of judges, ensuring they can operate without fear of litigation against their decision-making processes, thus bolstering confidence in arbitration as a dispute resolution mechanism.

Another significant case was the related HKCFI 2540 decision in the same case, where the Court of First Instance further found that one of the arbitrators had not properly participated in the hearing – frequently disconnecting and appearing distracted. This undermined the fairness and impartiality of the proceedings, justifying refusal to enforce the award. This decision highlights the courts’ commitment to ensuring procedural integrity in arbitration.

Issues related to arbitrator impartiality and public policy were also scrutinised in TGL v SDC [2024], where the Court of First Instance emphasised that for a claim of arbitrator bias to succeed, there must be a clear and rational connection between the arbitrator’s associations and the potential influence on their impartiality.

Similarly, in G v N [2024], the Court of First Instance granted leave to appeal, providing an opportunity to consider the interplay between the public policy issue of illegality and the Hong Kong court’s pro-arbitration approach of minimal intervention.

The case of G v X [2024] exemplified the complexities of enforcing mainland Chinese arbitral awards in Hong Kong. This case highlighted the Hong Kong courts’ approach to managing parallel proceedings and conflicting arbitral awards, reflecting Hong Kong’s robust legal framework supporting cross-border arbitration issues.

Jurisdictional challenges were addressed in AAA v DDD [2024], where the Court of First Instance set aside an arbitral tribunal’s decision on jurisdiction. The tribunal incorrectly assumed jurisdiction over disputes related to a Promissory Note despite conflicting arbitration clauses in related contracts. The court emphasised the necessity of clear invocation of arbitration provisions specific to each contract.

Further, CMBDCDHAW Investments Limited v CDH Fund V Ltd Partnership [2024] delved into the jurisdiction of an arbitrator to resolve disputes, stressing the foundational requirements for arbitration, including the existence of an actual dispute.

In the case of Minting Dome Holding LLC v Deng Jie [2024], the Court of First Instance examined exclusive jurisdiction clauses and their enforceability, particularly in international commercial disputes involving cryptocurrency transactions.

New HKIAC rules

The HKIAC recently introduced its new Administered Arbitration Rules In June 2024 to enhance efficiency, integrity, diversity, environmental sustainability and information security in arbitration proceedings.

These changes, announced at the 2024 ICCA Congress, signify a substantial step forward for the HKIAC. The new rules grant tribunals significant powers and take necessary measures to preserve the arbitration’s efficiency and integrity. They can also suspend or cease to administer arbitration if costs are not paid in full before the tribunal’s constitution.

Diversity and inclusion have been given prominence, including when appointing arbitrators. Environmental impacts and information security are now critical factors, reflecting a modern and responsible approach to dispute resolution.

Efficiency enhancements include confirming the tribunal’s power to determine preliminary issues, bifurcate proceedings, and set a fixed time limit for declaring proceedings closed. The new rules also confirm the emergency arbitrator’s power to make interim-interim orders pending emergency decision, and provide the HKIAC with new powers to review and adjust tribunal fees and expenses.

These new rules apply to all relevant arbitrations commenced on or after 1 June 2024, ensuring uniform application and addressing concerns around efficiency, cost-effectiveness and guerrilla tactics. They reflect the HKIAC’s commitment to maintaining confidence in arbitration in a rapidly changing global environment.

Takeaway

In conclusion, Hong Kong thrives as a global arbitration hub, bolstered by its robust legal framework, experienced judiciary and innovative rule updates. As the landscape of international arbitration evolves, Hong Kong remains at the forefront, providing a dynamic and reliable environment for resolving complex disputes.

STEVENSON WONG & CO.
In association with AllBright Law (Hong Kong) Offices
39/F, Gloucester Tower, The Landmark,
15 Queen’s Road Central, Central, Hong Kong
Tel: +852 2526 6311
Email: info@sw-hk.com

_{Images are for reference only.Images and contents gathered automatic from google or 3rd party sources.All rights on the images and contents are with their legal original owners.}