1.01  Hong Kong is one of the premier venues for international arbitration in the world. According to a recent study, Hong Kong ‘meets or even exceeds all standards’ set out in the Chartered Institute of Arbitrators’ ten principles of an effective, efficient, and ‘safe’ seat of international arbitration (CIArb Principles).¹ This chapter discusses some of the main contributing factors that make Hong Kong a leading global arbitration centre.

1.02  Described as a ‘barren rock’ some 150 years ago, Hong Kong has developed into a world-class international commercial and business centre and the financial capital of Asia.

1.03  After more than 150 years of colonial rule under the British, Hong Kong reverted to Chinese sovereignty on 1 July 1997 under the ‘one country, two systems’ principle. As a Special Administrative Region (SAR), Hong Kong retains a separate legal system from that of mainland China based on the English common law.²

1.04  Hong Kong has long been at the forefront of international arbitration developments. As the first major Asian jurisdiction to adopt the latest version of the UNCITRAL Model Law on International Commercial Arbitration (UNCITRAL Model Law),³ Hong Kong has taken consistent and measured steps to build a sustainable world-class arbitral framework, which includes modern arbitration legislation and an esteemed arbitral institution, the Hong Kong International Arbitration Centre (HKIAC). As a result, in 2015, Hong Kong was recognized as the world’s second most improved seat over the past five years.⁴ In 2021, Hong Kong (p. 2) ranked as one of the top three seats in the world, with 50 per cent of survey respondents choosing Hong Kong as a preferred seat.⁵

1.05  Today, there are forty-plus arbitral institutions around Asia that are seeking to emulate Hong Kong’s success.⁶ Hong Kong’s position as a leading international arbitration seat is underpinned by a number of important factors that together provide a favourable environment for the conduct of international arbitration proceedings. These include:

1. (1)  its strategic location;

2. (2)  its strong industry expertise;

3. (3)  a developed legal framework;

4. (4)  an independent judiciary;

5. (5)  free choice of arbitral procedures, legal representation, and arbitrators;

6. (6)  access to interim measures from the mainland Chinese courts; and

7. (7)  the worldwide enforceability of Hong Kong awards.

1.06  Each of these factors is now discussed.

1.07  Hong Kong is Asia’s capital for finance and trade and an international financial centre with an integrated and sophisticated network of financial institutions and markets. Strategically located in the heart of the fast-developing Asia-Pacific region, Hong Kong boasts features which highlight developed communications and first-class transportation infrastructure, making navigation around the city simple and efficient. This includes Hong Kong’s international airport and metro system, which are regarded as some of the best and busiest in the world, alongside its leading hotels and restaurants.

1.08  In particular, Hong Kong enjoys a convenient geographical location for the conduct of arbitrations involving Asian parties. It can be reached in under four hours on a flight from Beijing, Tokyo, or Seoul in North Asia, and Bangkok, Singapore, and Jakarta in South-East Asia. There are also direct flights connecting Hong Kong to major business centres in Africa, India, North America, and Europe. The construction of the high-speed rail and the Hong Kong-Zhuhai-Macau Bridge provides an additional mode of transportation connecting Hong Kong with mainland China, making the travel time between Hong Kong and multiple cities in Southern China less than one hour. Further, Hong Kong has an open visa policy that allows nationals of more than 165 countries to visit Hong Kong without a visa.

1.09  Hong Kong is home to many of the world’s leading corporations, financial institutions, and professional service organizations. Of the largest 100 banks in the world, over 70 have an operation in Hong Kong⁷ and more than half of the global 100 law firms have offices in Hong Kong.⁸ Many international companies are attracted to Hong Kong given its status as one of the most open and transparent economies in the world, with low level of corruption, its independent judiciary, and its commitment to the rule of law.

1.10  Indeed, Hong Kong remains a premier gateway in connecting the Asian region with the rest of the world and a top international financial centre. This is evidenced by the many international accolades Hong Kong has received over the years, including:

1. (1)  the world’s largest market for initial public offerings (IPO) and ranked first globally for IPO proceeds;⁹

2. (2)  ranking of third out of 189 economies for ease of doing business according to the World Bank’s Doing Business 2020 report;¹⁰

3. (3)  ranking as third worldwide for foreign direct investment (FDI) flowing in and out of the city;¹¹

4. (4)  frequently ranked one of the top three financial centres in the world;¹²

5. (5)  ranked first for attractiveness to FDI in the Milken Institute’s 2017 Global Opportunity Index;¹³ and

6. (6)  the world’s largest global offshore Renminbi business hub.¹⁴

1.11  Hong Kong is also seen to be a desirable place to establish operations as it provides ready access to high-quality professional services, such as accountants, architects, and engineers. In fact, Colliers International has recently ranked it as the ‘top location for the law sector in Asia’.¹⁵ For companies requiring intellectual property (IP) services, Hong Kong is known as a regional marketplace for services such as copyright trading, licensing, franchising, design services, and technology transfer.

(p. 4) 1.12  For companies requiring international arbitration services, Hong Kong has a large pool of experienced and multilingual professionals who can be called upon to assist in international arbitration proceedings. These include lawyers, accountants, translators/interpreters, and technical experts, such as architects, surveyors, and engineers.

1.13  Hong Kong has a well-established and respected legal system, based on English common law principles and underpinned by the Basic Law, Hong Kong’s ‘mini-constitution’. English and Chinese are both official languages in the courts and Hong Kong judges enjoy a strong reputation for independence, professionalism, and efficiency.

1.14  The Hong Kong Arbitration Ordinance (Cap 609) (Arbitration Ordinance) is the arbitration legislation in Hong Kong and governs all arbitrations seated in the territory. The Arbitration Ordinance came into force on 1 June 2011 and was subsequently amended in July and December 2013, in July 2015, in June 2017, and in October 2019.¹⁶ The Arbitration Ordinance is a modern piece of legislation that supports arbitration and restricts court involvement in the arbitral process. It also creates a unitary regime applicable to both domestic and international arbitrations. Hong Kong is the first major Asian jurisdiction to adopt the UNCITRAL Model Law (2006), which provides an internationally recognized procedural framework for arbitral proceedings, accessible to users from both civil law and common law jurisdictions.

1.15  A detailed discussion of the Arbitration Ordinance is contained in Chapter 2.

1.16  The rule of law and judicial independence in Hong Kong are constitutionally guaranteed by the Basic Law. Articles 18 and 82 of the Basic Law provide that:

Article 18 The courts of the Hong Kong Special Administrative Region shall exercise judicial power independently, free from any interference. Members of the judiciary shall be immune from legal action in the performance of their judicial functions.

Article 82 The power of final adjudication of the Hong Kong Special Administrative Region shall be vested in the Court of Final Appeal of the Region, which may as required invite judges from other common law jurisdictions to sit on the Court of Final Appeal.

1.17  The Court of Final Appeal (CFA), which in June 1997 replaced the Privy Council in London as the highest appellate court in Hong Kong, plays an important role in the development of the common law in Hong Kong. Pursuant to Article 82 of the Basic Law, the CFA includes twelve non-permanent judges from other common law jurisdictions as well as the chief justice and three permanent judges.

1.18  Hong Kong provides complete flexibility to parties in relation to the procedure of their arbitration. Parties are free to choose institutional arbitration proceedings in Hong Kong under the auspices of HKIAC, the International Chamber of Commerce (ICC), CIETAC Hong Kong Center, or any other arbitral institution. Alternatively, parties may opt for ad hoc proceedings where the arbitration is conducted without the involvement of an arbitral institution. Both types of arbitrations are permitted under Hong Kong law.

1.19  Parties to arbitration in Hong Kong are free to choose their legal representatives and advisors from anywhere in the world, without restriction. This is enshrined in section 63 of the Arbitration Ordinance, which provides that statutory provisions that place restrictions on foreign counsel representing and advising parties do not apply to in arbitral proceedings in Hong Kong. The only exception is that Hong Kong-qualified solicitors and barristers must be retained to present any arbitration-related applications before the Hong Kong courts.¹⁷

1.20  Equally, parties to arbitrations in Hong Kong enjoy full freedom to appoint arbitrators of their choice. The Arbitration Ordinance does not prescribe any requirement regarding the qualifications of an arbitrator, except that he or she must be independent and impartial. HKIAC also does not require a party to designate an arbitrator from its panel or list of arbitrators.

1.21  On 2 April 2019, the Hong Kong government and the Supreme People’s Court of the People’s Republic of China (Chinese Supreme Court) entered into the Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings by the Courts of the Mainland and the Hong Kong Special Administrative Region (Interim Measures Arrangement).¹⁸ The Interim Measures Arrangement came into force on 1 October 2019. It allows any party to arbitral proceedings seated in Hong Kong and administered by a qualified arbitral institution to apply to the relevant mainland Chinese courts for interim measures in accordance with the relevant laws and regulations of mainland China. Equally, the Interim Measures Arrangement allows any party to arbitral proceedings administered by a mainland Chinese arbitral institution to apply to the Hong Kong courts for interim measures pursuant to Hong Kong law.

1.22  In September 2019, HKIAC and five other arbitral institutions became qualified institutions under the Interim Measures Arrangement.¹⁹ As a result, any party to an arbitration administered by HKIAC and seated in Hong Kong is able to seek interim relief from the mainland Chinese courts in accordance with the Interim Measures Arrangement.

(p. 6) 1.23  Under the Interim Measures Arrangement, a party to eligible arbitral proceedings in Hong Kong may apply for interim measures from the mainland Chinese courts before or after the administering institution accepts a Notice of Arbitration.²⁰

1.24  If a party applies before the institution accepts a Notice of Arbitration and the relevant mainland Chinese court decides to grant an interim measure, the party must submit to the court documentary proof to confirm that the institution has subsequently accepted the arbitration within thirty days from the date of the court’s decision. In the event of a failure to provide such proof, the court will terminate the interim measure granted.²¹

1.25  If a party applies after the institution accepts a Notice of Arbitration, the party must submit its application to the institution which will forward the application to the relevant mainland Chinese court for determination.²² The Chinese Supreme Court has clarified that in practice a party may submit its application to the relevant court directly with a letter of acceptance of the arbitration issued by the administering institution.²³

1.26  The Interim Measures Arrangement is a groundbreaking development for arbitrations in Hong Kong and mainland China. It creates a unique advantage for Hong Kong arbitration because Hong Kong is the only non-mainland jurisdiction that benefits from interim measures of protection by the mainland Chinese courts. PRC law does not otherwise allow mainland courts to order interim measures in support of an arbitration seated outside mainland China, and there is no similar arrangement between mainland China and any other foreign jurisdiction.

1.27  A detailed discussion of the Interim Measures Arrangement and HKIAC’s practice of handling applications under this arrangement is contained in Chapter 8.

1.28  In 1997, China extended its membership of the New York Convention to Hong Kong. As a result, arbitral awards made in Hong Kong may be enforced in all other New York Convention member states. Under the Arrangement Concerning Mutual Enforcement of Arbitral Awards Between the Mainland and the Hong Kong SAR, which came into force in 2000, awards made in Hong Kong may be enforced in mainland China and vice versa on terms that largely mirror those contained in the New York Convention.²⁴ Passed in 27 November 2020, the Supplemental Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and Hong Kong SAR introduced amendments designed to enhance (p. 7) enforcement under the Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and Hong Kong SAR.²⁵

1.29  HKIAC is the flagship institution in Hong Kong providing dispute resolution services worldwide. It was established in 1985 and is one of the longest-standing arbitral institutions in the Asia-Pacific region. Headquartered in the heart of Asia, HKIAC provides a one-stop-shop service for resolving arbitration, mediation, adjudication, and domain name disputes and hosting hearings (both physical and virtual). The growing popularity of HKIAC’s services is reflected by the large number of cases HKIAC has handled since its establishment. In total, HKIAC has managed over 10,500 cases over the past 35 years. In relation to arbitrations, HKIAC experienced a healthy growth over the years with a 20 per cent increase from 2018 to 2020.

1.30  HKIAC regularly introduces initiatives to address the needs of arbitration users and to reflect best practice in international arbitration. These initiatives include the following:

1. (1)  In June 2014, HKIAC was the first commercial arbitral institution to introduce a tribunal secretary service. The service trains members of HKIAC’s secretariat as tribunal secretaries and offers arbitral tribunals the option to appoint them as tribunal secretary.²⁶

2. (2)  In August 2014, HKIAC included an express governing law provision in its model arbitration clause, in order to avoid uncertainty as to which law governs the arbitration clause and related jurisdictional disputes.²⁷

3. (3)  In November 2015, HKIAC became the first international arbitral institution to open a representative office in mainland China.²⁸

4. (4)  In October 2016, HKIAC began to offer its hearing and meeting space to parties free of charge in respect of dispute resolution proceedings in which at least one party is a State listed on the Organisation for Economic Co-operation and Development (OECD) Development Assistance Committee (DAC) List of official development assistance (ODA). HKIAC also provides administrative support.²⁹

5. (5)  HKIAC has launched two specialist panels of arbitrators, one for intellectual property disputes (in March 2016),³⁰ and the other for financial services disputes (in May 2018).³¹

6. (p. 8) (7)  In April 2019, HKIAC was the first non-Russian arbitral institution to obtain permission to function as a permanent arbitral institution in Russia with the ability to administer a range of Russian-related disputes under Russian law.³²

7. (8)  In August 2019, HKIAC amended the rules that govern its role as the statutory appointing authority under the Arbitration Ordinance in order to allow HKIAC to waive fees in certain arbitrations seated in Hong Kong and to streamline the process for exercising its statutory functions.³³

8. (9)  As noted in Section 6 above, in September 2019, HKIAC qualified as an arbitral institution for the purposes of the Interim Measures Arrangement;³⁴ and

9. (10)  In 2020, HKIAC established a dedicated virtual hearing space from its Hong Kong premises featuring state-of-the-art technical facilities.

1.31  Many of the developments above have made a positive impact on the development of international arbitration practice and received worldwide recognition. In particular, HKIAC’s model clause and tribunal secretary service and the opening of HKIAC’s representative office in mainland China received awards for best innovation or developments from Global Arbitration Review.³⁵

1.32  A detailed discussion of HKIAC and its services is contained in Chapter 3.

1.33  Hong Kong has a vibrant international arbitration community focused around professional organizations, practitioners, and arbitral and educational institutions.

1.34  Hong Kong owes much of its success as a leading arbitral seat to its legal community. At the time of publication, Hong Kong has approximately 9,900 practising solicitors and 1,500 barristers. Over 1,500 foreign lawyers qualified in thirty-four different overseas jurisdictions, including England and Wales, New York, and mainland China, are practising in Hong Kong. In addition, many of the world’s leading international law firms base their regional dispute resolution practices in Hong Kong. As a result, Hong Kong is home to a high concentration of leading arbitration practitioners and arbitrators.

1.35  Users of arbitration have direct access to a variety of world-class arbitral organizations in Hong Kong. In addition to HKIAC, Hong Kong receives strong institutional support from other arbitration organizations including the Chartered Institute of Arbitrators (CIArb) (East Asia Branch), the ICC’s Asia Secretariat, the China International Economic and Trade Arbitration Commission’s (CIETAC) Hong Kong Arbitration Centre, the China Maritime Arbitration Commission’s (CMAC) Hong Kong Arbitration Centre, and the Electronic (p. 9) Business Related Arbitration and Mediation (eBRAM) Centre. Hong Kong is also at the forefront of bringing the next generation of arbitration professionals into the fold. Founded by a group of young arbitration practitioners, HK45 is a young practitioners’ group that has developed into a highly regarded arbitration organization for young professionals to discuss and share ideas related to developments in arbitration.³⁶

1.36  Hong Kong has long been a centre for training future alternative dispute resolution (ADR) professionals in the region. HKIAC has organized and hosted a large number of dispute resolution conferences and training, including a regular tribunal secretary training programme, that have attracted legal professionals from all over the world to Hong Kong. In fact, HKIAC founded the concept of an ‘arbitration week’ in 2012. This event has proven so successful that many other arbitration communities around the world now emulate it.

1.37  Arbitrators and practitioners based in Hong Kong often travel to neighbouring jurisdictions to work with the local community to improve and develop their arbitration framework.

1.38  There are three principal law schools in Hong Kong, each of which has dedicated programmes in arbitration and ADR.³⁷ The Vis Moot (East), the sister of the renowned Willem C Vis Moot Competition, is held annually in Hong Kong and attracts students from approximately 300 law schools from around the world.

1.39  Hong Kong has seen an increasing interest as a place for conducting investor-State arbitration proceedings in recent years both in terms of hosting hearings and HKIAC administering investor-State disputes, seated in Hong Kong and elsewhere. This is reflected by the host country agreement entered into between the Permanent Court of Arbitration (PCA) and China in January 2015 to provide a legal framework for PCA-administered proceedings in Hong Kong.³⁸ The PCA’s host country agreement was preceded by a network of cooperation agreements that HKIAC concluded with various international bodies specializing in investment treaty disputes, including the PCA³⁹ and the International Centre for Settlement of Investment Disputes (ICSID).⁴⁰ HKIAC has hosted numerous hearings involving investor-State disputes, some of which were arranged under HKIAC’s cooperation agreements with the PCA and ICSID.

1.40  HKIAC began to administer investor-State arbitrations in 2018. To date, HKIAC has administered two investor-State arbitrations, both of which are governed by the UNCITRAL Arbitration Rules with one seated in Hong Kong and the other seated outside of Hong Kong.⁴¹

(p. 10) 1.41  Hong Kong has entered into twenty bilateral and multilateral investment treaties (BITs and MITs)⁴² and six free trade agreements (FTAs).⁴³ One of Hong Kong’s BITs was the subject of a high-profile dispute. In Philip Morris v Australia,⁴⁴ Philip Morris’s Hong Kong subsidiary filed a multibillion-dollar claim against Australia for its alleged breaches of the Hong Kong–Australia BIT by passing legislation requiring the plain packaging of tobacco products. The case was administered by the PCA under the 2010 UNCITRAL Rules.⁴⁵ The arbitral tribunal declined jurisdiction over Philip Morris’s claim on 17 December 2015.

1.42  Apart from investor-State arbitration, Hong Kong is also an attractive venue for investor-State mediation. In June 2017, Hong Kong and mainland China entered into an Investment Agreement under the Mainland and Hong Kong Closer Economic Partnership Arrangement (Investment Agreement).⁴⁶ The Investment Agreement includes multiple mechanisms for settling disputes between an investor and the host government. One of those mechanisms is mediation at the place of investment whereby an investor may submit an investment dispute arising from the Investment Agreement to a mediation institution designated by the host government and agreed to by the other government. In January 2019, the Hong Kong government designated HKIAC’s Hong Kong Mediation Council (HKMC)⁴⁷ and another Hong Kong mediation institution to administer disputes between a mainland Chinese investor and the relevant authorities or institutions of Hong Kong under the Investment Agreement.⁴⁸ HKMC’s primary role is to facilitate the appointment of mediators from a list of designated mediators and assist mediators in conducting mediations pursuant to a set of mediation rules produced by the Department of Justice of Hong Kong.⁴⁹

1.43  To attract more investor-State cases to Hong Kong, HKIAC offers its hearing space free of charge to parties to dispute resolution proceedings, in which at least one party is a State listed on the OECD DAC List of ODA assistance.⁵⁰ To date, there has been one case in which the parties were eligible for free hearing facilities at HKIAC.⁵¹

1.44  Hong Kong is ideally placed to handle disputes arising out of all types of international transactions. However, it enjoys a particular advantage in relation to international disputes involving Chinese parties.

(p. 11) 1.45  Hong Kong is widely regarded as the natural choice of seat for arbitrations between Chinese and non-Chinese parties. The Hong Kong government and judiciary, and many Hong Kong legal professionals and industry experts, are able to practise and conduct business in both English and Chinese. All Hong Kong legislation and regulations are enacted in both languages. This bilingual capability, alongside the historical and cultural link to mainland China, sets Hong Kong apart as an ideal place for doing business and resolving disputes with Chinese parties.

1.46  HKIAC’s particular expertise in managing China-related disputes is reflected in the large number of Chinese cases referred to it each year. In 2019, HKIAC handled 110 arbitrations involving a total of 156 mainland Chinese parties (ie 35.7 per cent of the total arbitration cases submitted to HKIAC that year).

1.47  Further, Hong Kong awards maintain a stellar track record in respect of enforcement globally, and, in particular, in mainland China. This has often been cited as a key strength of arbitrating in Hong Kong. Mainland Chinese courts have rarely refused to enforce any awards made in Hong Kong or issued by HKIAC and any decision by the mainland Chinese courts to refuse enforcement of a Hong Kong award must be approved by the Chinese Supreme Court.⁵²

1.48  As noted above, the entry into force of the Interim Measures Arrangement to allow the mainland Chinese courts to issue interim measures in support of eligible Hong Kong arbitrations is seen as a major advantage for Hong Kong as no other jurisdiction enjoys the benefit of mainland court support for interim relief. This provides further support for Hong Kong’s position as a leading centre for arbitrating China-related disputes.(p. 12)