Hong Kong as an emerging arbitration venue

As Asia continues to grow in economic prominence, one of the region’s most established international arbitration venues is also raising its game.

The rise of arbitration and Hong Kong’s standing as an arbitration venue
Offering many perceived advantages over litigation, arbitration has emerged in recent decades as the favored means of resolving international commercial disputes. For example:

• Arbitration is more flexible than litigation and its consensual nature allows parties to agree a procedure that best suits their circumstances. This includes the right to chose the members of the tribunal that will resolve a dispute.
• Commercial parties enjoy not having to litigate their dispute in the (sometimes, partisan) home courts of their counter party.
• Arbitration is private in nature and can be more easily kept confidential than litigation.
• International reciprocity arrangements mean that arbitration awards are more readily enforceable around the world than are national court judgments – for example, an arbitral award rendered in the US or the UK is, prima facie, enforceable in China, while a court judgment rendered in those jurisdictions is not.

Parties seeking to resolve Asia-related disputes by way of arbitration have long chosen to do so in Hong Kong. Arbitration users are attracted to the Special Autonomous Region for a combination of factors, including its common law legal system and its arbitration-friendly judiciary.

The user-friendliness of the Hong Kong International Arbitration Centre (the HKIAC) has also helped. The HKIAC, which recently celebrated its 25th anniversary, is one of only two leading arbitral institutions in Asia (the other being the Singapore based SIAC).

In 2010, the HKIAC handled 624 dispute resolution matters, including 291 arbitration matters, 107 domain name disputes and 226 mediations. This made it the fourth busiest arbitration venue in the world by case load and the second busiest venue in Asia after the China International Economic and Trade Arbitration Centre (CIETAC) (although notably, the great majority of CIETAC arbitrations are domestic in nature and do not involve an international element).

It was also placed joint fifth in a ranking of ‘preferred arbitration institutions’ composed by the School of International Arbitration at Queen Mary, University of London.

It is unsurprising that Hong Kong’s growth as an international arbitration venue has mirrored China’s rise as a global economy. Combining geographical and cultural proximity to China with legal independence, Hong Kong is arguably unrivaled as a convenient forum for resolving disputes between Chinese and international parties.

Modernization measures
Hong Kong is not resting on its laurels though. The last 12 months have seen Hong Kong take significant steps to improve its attractiveness as an international arbitration venue. Most notably, Hong Kong’s domestic arbitration law has been overhauled with the coming into force of the new Arbitration Ordinance in June 2011.

The new legislation removes the pre-existing distinction between domestic and international proceedings, a simplifying measure. Among other changes, it also introduces various provisions aimed at reducing the scope for intervention by the Hong Kong courts in the arbitration process. In this regard, the Arbitration Ordinance follows closely the minimum standards for national arbitration legislation established by the UN (known as the UNCITRAL Model Law), generally regarded as reflecting best international practice.

Mirroring this legislative reform, the HKIAC itself has taken measures to enhance its arbitration facilities and personnel. In mid-2011 the HKIAC further internationalized its management structure with the appointment of several new international members of its governing council.

In June 2011, Hong Kong’s Secretary for Justice announced a doubling of the floor space at the HKIAC headquarters at Two Exchange Square, in Central, Hong Kong. The center now covers approximately 1,300 square metres of conference and hearing facilities.

It is expected that these reforms will further enhance Hong Kong’s considerable attractiveness as an arbitration hub and in turn its reputation as a centre for international trade and commerce.