HK homes in on Belt & Road disputes

By Brad Wang, Madhav Kumar and Raymond Gao

China’s Belt and Road initiative covers 68 countries and 65% of the world’s population. As a financing and dispute resolution centre, Hong Kong has been updating its laws on dispute resolution to support the initiative.

In 2017, Hong Kong passed several laws to improve its dispute resolution legal framework. China International Economic and Trade Arbitration Commission (CIETAC) has also been working to facilitate the resolution of Belt and Road initiative disputes. CIETAC established its Hong Kong Arbitration Centre (CIETAC Hong Kong) branch in 2012, which began administering cases in 2015.

In 2017, CIETAC Hong Kong developed several initiatives in line with those legal updates being passed in Hong Kong. CIETAC also released its investment arbitration rules to assist in the resolution of disputes between investors and host countries. In the rules, the role of CIETAC Hong Kong has been confirmed in resolving investment disputes.

Arbitration of IP disputes. Intellectual Property disputes (IP disputes) can be expected in cross-border transactions and investments. On 14 June 2017, the Hong Kong government passed the Arbitration (Amendment) Bill 2016, which was subsequently published as the Arbitration (Amendment) Ordinance 2017 (amendment ordinance 2017) in the Government Gazette on 23 June 2017. It clarified that all IP disputes can be submitted to arbitration, and that doing so will not be contrary to the public policy of Hong Kong.

With this update, IP disputes arising in multiple jurisdictions can be resolved in a single forum (Hong Kong) instead of a party needing to initiate legal proceedings in each jurisdiction. This can save a lot of time and reduce costs. Additionally, the party can use the award enforcement mechanism under the New York Convention, and Hong Kong’s respective arrangements with the PRC and Macau, to enforce in their jurisdictions the arbitral awards made in Hong Kong.

CIETAC Hong Kong is pooling resources and expertise in IP disputes to better facilitate the practice in Hong Kong.

Third party funding. It is now common to have third-party funding involved in investment arbitration. The Legislative Council on 23 June 2017 published the Arbitration and Mediation Legislation (Third Party Funding) (Amendment) Ordinance 2017 in the Government Gazette. This amendment ordinance introduced a new part 10A to the ordinance, which sets out the framework for third-party funding in arbitration and related procedures.

CIETAC Hong Kong in September 2017 accordingly released its guidelines for third party funding in arbitration. The guidelines provide checklists for the parties seeking funding, the funded parties, and arbitrators in the arbitration.

Apology legislation. A dispute does not necessarily end with an arbitral award or judgment. The Legislative Council on 1 December 2017 enacted the Apology Ordinance in order to promote and encourage parties to offer apologies with a view of preventing the escalation of disputes and facilitating amicable settlement.

Section 8 of this ordinance confirms that an apology is not admissible as evidence in an arbitral proceeding (along with other legal proceedings) to determine fault or liability of the apologizer. However, the decision maker, such as an arbitrator, may exercise the discretion to admit a statement of fact contained in an apology as evidence in the proceedings, but the same shall be done only if it is just and equitable to do so, and regard must also be given to the public interest or the interests of the administration of justice.

CIETAC Hong Kong adopts CIETAC arbitration rules for cases it administers. In the rules, various models of mediation were introduced to provide alternatives for parties to settle their disputes.

CIETAC investment arbitration rules. CIETAC became the first arbitration institution in China to release its own investment arbitration rules. These come at a time when the Belt and Road initiative is gaining impetus. The rules apply to investor-state disputes, disputes between investor and inter-governmental organizations, or any other institution, organ, or other type of entity mandated by the government, or whose conduct is attributable to the state, and of whose contract refers to CIETAC arbitration.

The CIETAC investment arbitration rules may be administered by the CIETAC Investment Dispute Resolution Centre (IDRC) or CIETAC Hong Kong. Where the parties have agreed to adopt these rules, or to arbitration administered by CIETAC, the CIETAC IDRC is the default centre for administration of the rules. CIETAC Hong Kong will administer the cases upon parties’ choice when the parties have agreed as such, or where the parties have agreed the seat/ place of arbitration to be Hong Kong.

The rules state that all hearings are to be made open to the public unless the parties agree, or the tribunal decides, otherwise. Information relating to arbitration may also be publicly disclosed by CIETAC unless the parties agree otherwise.

Brad Wang is managing counsel, and Madhav Kumar and Raymond Gao are deputy counsel at CIETAC Hong Kong Arbitration Centre. David Giron, an intern at the centre, also contributed to the article.