Post 1997 Hong Kong has continued to flourish as a centre of international business and dispute resolution. The legal certainty derived from its often vaunted adherence to the rule of law and its continuing separation from the PRC under the "one country two systems," combined with Hong Kong’s proximity to Mainland investment opportunities, has ensured that Hong Kong has strived, successfully, to be at the forefront of global dispute resolution practice and a leading arbitration center of the Asia Pacific region.

Litigation Legal claims through the courts remain the most common form of dispute resolution and the Hong Kong courts remain one of the most highly regarded in Asia. This is due in part to a long legal heritage closely modeled on the English Common law system which was largely preserved by the 1997 handover process. This has allowed a continuance of judicial and legal expertise in many specialist areas such as maritime, construction, cross border contracts and company law.

Hong Kong has also introduced civil justice reforms from 2009. These reforms empowers judges with wider case management power and imposes stricter responsibilities on parties to properly manage the cases, with the intent to promote cost effectiveness of Court procedures, ensure the expeditious handling of cases, promote procedural proportionality, ensure fairness, to facilitate settlement and to ensure fair distribution of court resources. The reforms also led to a furthering of the promotion of alternative dispute resolution (ADR), in particular mediation. Since the gradual implementation of these reforms from April 2009, Hong Kong has seen a shift in litigation culture towards a more productive approach to dispute resolution.

Subject to certain thresholds, commercial claims are started in the Court of First Instance of the High Court by the issuance of a writ or originating summons and are procedurally governed by the Civil Practice Rules. These Rules are supplemented and expanded on by Practice Directions. The Rules make specific provisions for specific types of action and also govern pre action conduct. Failure to follow the Rules or the Practice Directions can lead to adverse cost consequences.

The courts have wide ranging discretionary powers to grant interim orders which can take a number of forms but with overriding objectives to preserve evidence or further the interests of justice.

A trial is heard by a single Judge in the Court of First Instance and submissions from both parties are normally delivered by Barristers. Factual and Expert evidence is commonly led through both written witness statements and oral evidence delivered in court.

There are two appellate courts, the Court of Appeal and the Court of Final Appeal. Applications for leave to appeal to a higher court and entitlement are not an absolute right but dictated by the Civil Practice Rules. Most commonly appeals are made on errors of law and heard by three Judges at Court of Appeal level and five at the Court of Final Appeal.

Cost orders in Hong Kong follow the basic position that costs follow the event, that is to say that the losing party will generally be ordered to pay the prevailing party’s costs. The Rules however give Judges wide judicial discretion.

Arbitration

Hong Kong has been extremely proactive in its recognition of the global trend in commercial disputes towards ADR such as Mediation and Arbitration.

This has manifested itself most recently with the new Arbitration Ordinance which came into force on 1 June 2011. The Ordinance seeks to promote the recognized advantages of Arbitration in commercial disputes over litigation. These advantages include speed, flexibility in structure, confidentiality and non judicial intervention.

Specifically this is achieved by the following developments:

First, Hong Kong has unified the different regimes which previously applied to ‘international’ and ‘domestic’ arbitrations. In practice this will simplify the ‘domestic’ arbitration regime and limit judicial appeals of arbitral decisions while still allowing parties the option to ‘opt in’ to the old Ordinance’s provisions for ‘domestic arbitrations’ and continuing to uphold existing domestic arbitration agreements for a further six years.

Secondly the Ordinance emphasizes the arbitrators primacy, giving the tribunal wide ranging powers to deal with matters which may arise before and during proceedings. These powers allow the tribunal to rule on questions of law and procedure and to make binding orders to enforce its decisions without judicial oversight. This will streamline the arbitral process helping to reduce costs and time.

Thirdly, in recognition of the rise in importance of mediation, the Ordinance allows the arbitrator, after commencement of the arbitration, to act as a conciliator if all parties consent. If the matter does not settle by mediation then the arbitrator must, before resuming arbitral proceedings, disclose to all other parties any information accessed while acting as a mediator which is material to the arbitral proceedings. This provision should expedite settlement between the parties.

Fourthly and perhaps most importantly are the provisions relating to confidentiality. The Ordinance reinforces the obligation of absolute non-disclosure by any party, relating to the arbitration proceedings or award. It also provides that any judicial proceedings regarding an arbitration must be in closed court and part names may be redacted unless the court determines otherwise.

The overall result of these developments is to ensure that most arbitrations in Hong Kong are conducted under the UNCITRAL Model Law under which the Ordinance is based. This will help avoid preliminary issues as to the regime which governs a particular dispute and will be attractive to overseas parties who seek the comfort of familiarity and certainty. The Ordinance should also reduce costly delays which can occur through applications to the court and further an important objective of arbitration; that the award be full and final.

Mediation

Hong Kong has been quick to recognize other forms of ADR, in particular mediation. Mediation is a fast developing alternative to arbitration with extremely high success rates and with the potential to produce resolutions through a less acrimonious process.

Hong Kong recognizes the value of mediation as well as other forms of ADR through the recent Practice Direction 31. This enshrines the courts duty to promote ADR and for the parties to consider it. It also gives the court ‘teeth;’ if a party is unreasonable in its failure to engage in mediation then this may result in adverse cost consequences.

Hong Kong as a prominent forum for dispute resolution.

There are several other reasons why Hong Kong has proved to be such a successful venue for all forms of dispute resolutions. It is an extremely convenient place from which to conduct dispute resolution being a major transport hub with first rate legal facilities, excellent infrastructure, world class hotels and amenities. The second reason is due to the sheer scale and quality of expertise in Hong Kong with over 8000 local and international lawyers and 1,500 arbitrators making it one of the largest dispute resolution pools of talent in Asia. The third reason must be due to the Hong Kong International Arbitration Center which for 26 years has served as the focal point for the development, promotion and implementation of alternative dispute resolution activities in Hong Kong. This organization has driven modernization and ensured quality, ensuring Hong Kong remains competitive internationally in the field of ADR.

This article was published online at corporatelivewire.com, October 10, 2011