3 May 2016
Voted in legal circles as the most preferred and used dispute resolution service outside of Europe, the Hong Kong International Arbitration Centre (HKIAC) broke new ground by becoming the first international arbitration institution to open in the Chinese mainland. The HKIAC representative office, which launched in Shanghai last November, was soon followed by similar moves by the Singapore International Arbitration Centre last January, and the Paris-based International Chamber of Commerce, in February.
Having successfully built its profile in Hong Kong as a multi-award winning centre of international dispute resolution, the HKIAC had for many years wanted to open an office in the mainland, according to John Budge, HKIAC Vice Chairperson.
“Since users from the Chinese mainland are a very important source of cases for us, it makes good business sense to have an office in Shanghai,” he said. “In 2014, for instance, 44 per cent of the HKIAC’s total arbitration caseload had at least one Chinese entity as party to the arbitration.”
Fueling Cross-Border Investment
With the China-spearheaded Belt and Road Initiative set to generate a spike in cross-border trade and investment, and more international disputes likely to arise as a result, the timing of the HKIAC’s expansion is strategic, Mr Budge said. “With Belt and Road, it is a great time to have an office in Shanghai.”
This tide of investment will flow both ways. Stephen Hung, President of the Council of the Law Society of Hong Kong and a partner at law firm Li & Partners, noted that with the Belt and Road initiative set as the national strategic direction, there will be active involvement by the Chinese government in overseas infrastructure investment and construction. He cited various region-wide projects already in the pipeline, including railways, energy plants, industrial parks, oil and gas and fibre-optics cable networks among the more than US$8 trillion worth of infrastructure development needed in the Asia-Pacific region, according to estimates by the Asian Development Bank.
Mr Hung also believes that the Belt and Road presents Hong Kong with a unique opportunity to act as an international dispute resolution venue and a debt-issuing platform, as a source of financing for the Asian Infrastructure Investment Bank. “The legal profession in Hong Kong is well-experienced in serving multi-jurisdictional clients in complex cross-border matters,” he said. “We are thus perfectly placed to provide the necessary support for the projects.”
Mr Budge agreed that given the complexities of infrastructure projects of the scale the Initiative facilitates, which typically involve a network of agreements and various subcontractors, “it is conceivable that disputes may arise at any given stage of a project.”
The HKIAC’s Shanghai office will foster closer cooperation between the HKIAC and its mainland counterparts to further develop international arbitration, Mr Budge believes. “It will promote international best practices in mainland China, and provide a unique platform to connect Chinese companies and lawyers with world-class arbitration practice.”
Due to its vast experience in dispute cases involving the mainland, Mr Budge said, the HKIAC was approached by Shanghai government officials to set up in the Shanghai Pilot Free Trade Zone.
Its subsequent opening, he said, reinforces the HKIAC’s role as a leading dispute resolution services hub in Asia. “The HKIAC Shanghai office is an example of its instrumental role in fostering closer ties with local arbitration commissions, Chinese businesses and lawyers to promote the development of international arbitration and its best practices in mainland China.”
The fact that HKIAC was the first international arbitration body to open in the mainland, “also reflects once again that Hong Kong, in part due to its geographical and cultural proximity to China, remains the premier arbitration hub outside of Europe.”
Sally Harpole, an international arbitrator, mediator and lawyer whose eponymous practice was established after she arrived in Hong Kong in 1987, agreed that the HKIAC’s Shanghai branch opening is an exciting development.
“The HKIAC boasts all of those advantages for addressing the requirements of China-related disputes, including local access to a large pool of arbitrators and counsel who are respected professionals with deep China experience, including language skills,” said Ms Harpole, who added that the centre’s international staff have done outstanding work maintaining a modern, cutting-edge approach to arbitration procedures.
“As I am bilingual in Mandarin and English, I know it is vital to insist on the highest possible standards when arbitral procedures require translator support,” she noted. “In my experience, which includes more than 30 arbitration cases at the HKIAC, no other arbitral institution outside the Chinese mainland can provide this type of expert language support at the same level of proficiency as can the HKIAC.”
It is not surprising that, when Chinese parties consider an arbitration venue outside the mainland, the HKIAC is frequently their first choice, Ms Harpole added. “In fact, international parties from all areas of the world can feel comfortable arbitrating in Hong Kong because of the reliable, open legal system and attractive local features.”
Ms Harpole hopes that the Shanghai branch office will help mainland-based parties and their counsel to become more familiar with the HKIAC and its procedures. “Over time, the greater understanding achieved with the HKIAC’s physical operation in Shanghai should bring benefits for all concerned.”