Dispatch from Hong Kong

Vol. 19 No. 3

By

Editors’ note: Recognizing that the world is becoming a smaller place, Dispute Resolution Magazine is launching a regular feature to showcase both international dispute resolution and domestic developments outside the United States. The editors welcome suggestions for future issues.

After a century and a half as a colony of Great Britain, sovereignty over Hong Kong reverted to the People’s Republic of China on July 1, 1997. Although now a Special Administrative Region within the People’s Republic of China, Hong Kong was given a “high degree of autonomy” to run its own affairs, retained its traditional common law legal system (within a civil law country) and remained a robust capitalist economy (within a Communist state). This unique arrangement came to be known as “One Country, Two Systems.”

Hong Kong has taken full advantage if its unique status in many areas, not the least of which is its continuing leadership in the field of dispute resolution. In just the past few years, there have been major developments in the law and practice of both mediation and arbitration in Hong Kong. Among a number of important changes, a new statute (called an “ordinance” in Hong Kong) governing mediation and another new statute applicable to all arbitrations seated in Hong Kong have been enacted. Both the Hong Kong government (through the Department of Justice) and the Hong Kong judiciary have been major catalysts in bringing about these and other significant changes.

Mediation

Initiatives of the Hong Kong Government

In a major policy address in 2007, the Chief Executive of Hong Kong called for action to more effectively utilize mediation to resolve both higher-end commercial disputes and smaller local disputes.  Although mediation had been used in the construction industry for a number of years and to some extent in family law matters, it had not been widely used in commercial disputes generally or in connection with litigation. 

Following the Chief Executive's address, in 2008 the Secretary for Justice (called the Attorney General under British rule) established a cross-sector Working Group on Mediation to study the current development of mediation and the provision of mediation services in Hong Kong.

Three sub-groups were formed under the Working Group to study and make recommendations in the following areas: 1) public education and publicity; 2) accreditation and training; and 3) regulatory framework. In February 2010, the Working Group, taking into account the work of the several sub-groups, made its report with a number of recommendations. 

Among the most significant of these recommendations was one calling for the enactment of a stand-alone Mediation Ordinance to provide a legal framework for mediations conducted in Hong Kong. As a result of that recommendation, the Hong Kong legislature (Legislative Council) enacted the Mediation Ordinance in 2012, to take effect on January 1, 2013. As a Department of Justice press release issued before the Mediation Bill was introduced in the Legislature explained, the Mediation Bill sought to establish a legislative framework for conducting mediation without hampering the flexibility of the process and to assist in the promotion of mediation in Hong Kong. The press release went on to explain that, “The Bill is necessary to provide legal certainty regarding confidentiality of mediation communications and admissibility of mediation communications in evidence.”

 Initiatives of the Hong Kong Judiciary

In recent years, the judiciary in Hong Kong has actively promoted the use of mediation in civil proceedings. The chief justice issued Practice Direction 31 (PD31) applicable to all civil proceedings in the Court of First Instance and the District Court (except for particular proceedings in specialist lists for which similar but separate mediation procedures are provided). PD31 came into force on January 1, 2010.

PD31 requires that within 28 days from the close of pleadings, parties must file a Timetabling Questionnaire together with a Mediation Certificate signed by the party and its attorney. The Mediation Certificate must state the following: 1) whether or not the party is willing to engage in mediation and if not, the reasons; 2) that the party's attorney has explained the availability of mediation to resolve the dispute and the cost of mediation as compared to the cost of the litigation; and 3) that the party understands the contents of PD31.

A party wishing to attempt mediation must serve a Mediation Notice on the other side, and the party receiving the Mediation Notice must respond within 14 days. If the respondent does not agree to attempt mediation, reasons must be given. PD31 provides that the court, in exercising its discretion as to the costs of the action, may make an adverse-costs ruling against the party whose refusal to mediate the court has  found to be unreasonable.

Accreditation of Mediators

For a number of years, the Mediator Accreditation Committee (MAC) of the Hong Kong International Centre (HKIAC) has been the principal accrediting body for mediators in Hong Kong. The accreditation process of the MAC requires that a candidate take and pass a mediation training course of 40 hours approved by the MAC, pass two independent assessments and commit to a continuing professional development obligation. However, over time a number of other organizations instituted their own procedures for accrediting mediators. As mediation became more popular and gained government support, the sentiment for one central accrediting body grew. 

In April 2013, the Hong Kong Mediation Accreditation Association Limited (HKMAAL) was launched. The four founding members of HKMAAL are the Law Society of Hong Kong (solicitors), the Hong Kong Bar Association (barristers), the Hong Kong International Arbitration Centre and the Hong Kong Mediation Centre. The HKMAAL is expected to be the premier accreditation body for mediators in Hong Kong, discharging both accreditation and disciplinary functions. While not itself providing training courses, it will set standards for training and accreditation.

Arbitration

A new arbitration law, repealing the existing Arbitration Ordinance, was enacted in November 2010 and became effective in June 2011. Under the repealed arbitration ordinance, it was said that Hong Kong had a “dual legal regime” for arbitrations that had their juridical seat in Hong Kong – part of the arbitration ordinance was applicable to “domestic” arbitrations, and different provisions applied to “international” arbitrations. The part of the repealed ordinance that applied to international cases was the UNCITRAL Model Law on International Commercial Arbitration (the UML), which was adopted in Hong Kong and became effective in 1990. Hong Kong was one of the first jurisdictions to enact the UML, which was initially promulgated by UNCITRAL in 1985.   

The most significant change brought about by the new arbitration ordinance was the abolition of the “dual regime” and the application of the UML (as amended in 2006) to all arbitrations seated in Hong Kong, both domestic and international. Because the domestic regime of the repealed ordinance contained provisions that were important to the construction industry, a very important industry in Hong Kong, many of those provisions were made available in the new ordinance by means of a list of “opt-in” provisions. These “opt-in” provisions are contained in Schedule 2 of the ordinance and include provisions for consolidation, court decision on a preliminary question of law, challenge to an award on the ground of “serious irregularity,” appeal from an award on a question of law and agreement on a sole arbitrator.

Other important changes brought about by the new ordinance include provisions relating to confidentiality, the “writing requirement” (‘Option I’ of Article 7 of the UML, as amended in 2006), new procedures for “preliminary orders” in conjunction with requests for interim measures and a number of others. As the repealed ordinance did, the new ordinance provides that the arbitrator may act as a mediator if the parties agree in writing.

The Hong Kong International Arbitration Centre

Established in 1985, the Hong Kong International Arbitration Centre (HKIAC) has increasingly become a focal point for both arbitration and mediation activities in Hong Kong. Located in the heart of the central business district, its premises have been recently renovated and the space has doubled. Its hearing rooms and facilities are available for ad hoc arbitrations, arbitrations administered by the HKIAC as well as other arbitral institutions, for mediations and for numerous other functions. 

HKIAC is in the process of revising its administered arbitration rules (based on the UNCITRAL Rules and first promulgated by HKIAC in 2008) to reflect best practices and to enhance the efficiency of the arbitral process. Key changes in these rules include those relating to joinder of parties, consolidation of arbitrations, interim measures of protection and emergency arbitrators. These new rules are expected to take effect in the latter half of 2013. 

Conclusion

At the crossroads of trade and commerce in the Asia-Pacific region, Hong Kong is well equipped to accommodate the resolution of a wide range of disputes, both domestic and international, with an up-to-date legal framework for both arbitration and mediation, support and encouragement from the government and the judiciary, world-class facilities and well trained and experienced professionals to serve the needs of the parties. Moreover, to encourage foreign parties to use Hong Kong as a venue, there is no requirement for special admission in order for foreign lawyers to represent their clients in arbitrations or mediations.

David Sandborg is a chartered arbitrator and fellow of the Chartered Institute of Arbitrators, a fellow of the Hong Kong Institute of Arbitrators, an HKIAC accredited mediator, a fellow of the College of Commercial Arbitrators, honorary fellow of the International Academy of Mediators and recipient of the 2007 Lawyer as Problem Solver Award from the ABA Dispute Resolution Section. Since 1995, he has been based in Hong Kong, where he practices as an international arbitrator and ADR neutral and consultant. He has taught arbitration and other ADR courses in law schools in Hong Kong, mainland China and a number of other countries in the Asia Pacific region. He can be reached at david.sandborg@gmail.com.

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The Ohio State University Moritz College of Law
Columbus, OH

 

Nancy A. Welsh
The Dickinson School of Law of the Pennsylvania State University Carlisle/ University Park, PA

 

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Cambridge, MA

 

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Hamline University School of Law
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San Francisco, CA

 

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Stradley Ronon
Philadelphia, PA

 

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McDermott Will & Emory LLP
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Donna Stienstra
Federal Judicial Center
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Zena Zumeta
Mediation Training & Consultation Institute
Ann Arbor, MI

 

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