Australia: Teresa Cheng, HKIAC: international arbitration: Q&A

Teresa Cheng, HKIAC chair

We speak with Teresa Cheng GBS SC JP who has replaced Huen Wong as Chair of the Hong Kong International Arbitration Centre (HKIAC).

  1. What are the key challenges facing you as chair of the HKIAC?

The HKIAC is a homegrown arbitral institution, an icon for arbitration in Hong Kong, and will reach its 30th anniversary next year. As the chair, my main role is to work with the HKIAC Executive committee under the supervision of the HKIAC Council to develop Hong Kong's position as an eminent arbitration and dispute resolution centre.

They say that challenges are what make life interesting; overcoming them is what makes life meaningful. My challenge is ensuring that my role is fulfilled through the capitalisation of soft power as well as the consolidation of the vast experience in arbitration in Hong Kong – and then connecting that with the future development of arbitration and dispute resolution internationally.

The strong and experienced Hong Kong arbitration community has been active in developing arbitration and other forms of dispute resolution. I hope to bring together those efforts so that the results will be even more prominent.

There are a large number of arbitral institutions growing in the region providing keen competition. Healthy competition is a challenge and it usually leads to better professional service. The HKIAC will continue to strive to remain a leader.

  1. Why did the HKIAC decide last year to adopt new administered arbitration rules?

Our 2008 Rules took on board several of the key changes that were ultimately adopted in the 2010 UNCITRAL Arbitration Rules and met with great success. During the past few years, however, Hong Kong adopted the 2006 UNCITRAL Model Law and we saw a few trends emerge that prompted us to amend our Rules. We have maintained our 'light touch, full service' approach, while revising our Rules to ensure that costs and time can be appropriately controlled.

For example, we have kept the existing arrangement for parties to choose how they wish to remunerate their arbitrators – on an ad valorem ['in proportion to the value'] basis or by the hour. But we have developed this choice by capping the hourly rate and by establishing practice notes to address expenses for arbitrators. This gives parties a meaningful choice, which parties and their counsel are deliberately making.

The commercial reality is that multiple contracts are often entered into under one business transaction. Disputes have become more complicated and often involve multiple parties. As a result, our revisions have addressed issues that complex disputes might face. These changes have also led to a few institutional adjustments including the establishment of a Proceedings Committee, which will provide guidance when decisions have to be made by the HKIAC under these Rules (such as joinder and consolidation). This will enhance the consistency, predictability and transparency of our decisionmaking process.

  1. How do the new Rules position Hong Kong and the HKIAC in relation to other international arbitral seats and institutions?

These new Rules are at the forefront of the new generation of institutional rules. We have taken great care to ensure that they reflect not only best practice but also what the users are looking for in a dispute resolution process. And we have done all of this while keeping costs competitive. Our 'light touch, full service' approach means that we provide the services that users and their counsel need in order to conduct an arbitration swiftly and economically.

Moreover, we make a wide range of services available to parties, both within the arbitration spectrum and for resolving disputes generally. For example, we have long provided services for ad hoc arbitrations where the HKIAC is identified as the appointing authority or where parties or the arbitrators wish to make use of our administration services (such as fundholding and providing hearing facilities). This service is as important to our work as is administering arbitrations under the Administered Arbitration Rules.

We also provide mediation services as well as support for other forms of dispute resolution. We believe that this flexibility allows parties to get the most out of an institution.

  1. Is there scope for (more) convergence of arbitral practice in the region?

The arbitration practice internationally, and not just regionally, has been converging. Within Asia, almost all jurisdictions have adopted the UNCITRAL Model Law, either the 1985 or the 2006 version. The international discussions in various platforms have also provided a means of convergence on best practice in international arbitration. This convergence will continue and in the medium to long term there will be a set of norms established and adopted by the international arbitration community.

  1. How important is China to the success of the HKIAC?

Given the increasingly significant role it plays in the world economy, China is important to the success of many companies and organisations. For those entities based in Hong Kong, such as the HKIAC, this could not be more true. Around half of the cases handled by the HKIAC have some China element to them: this is not surprising given that China is the second largest economy in the world. The HKIAC is fortunate in that it is ideally positioned to be an attractive institution for both Chinese and foreign parties alike. Hong Kong upholds the rule of law and prides itself on its independent judiciary. This, coupled with its long-standing position as an international financial centre, makes Hong Kong a reliable venue for foreign parties. And, of course, Hong Kong's position vis-ŕ-vis China, and its common culture and strong business connection, make Hong Kong familiar ground for Chinese parties. Being situated in such a position makes the HKIAC an easy decision for both Chinese and foreign parties.

Of course, China is not our only market. Indeed, our first office outside of Hong Kong is in Seoul, Korea. And, we view other jurisdictions as strategically important to our development. Indeed, the HKIAC is hosting a road show to promote its new Rules with seminars planned in May and June for London, Germany and New York. Closer to home, seminars will be held in Hong Kong and Shanghai.

  1. What are the major trends and challenges facing international arbitration in Asia Pacific?

The main challenges in the region will be the growing number of cases which will increase in complexity and significance. Major businesses have been set up in the Asia Pacific region focusing on investment in the region. Investor-state arbitrations may grow, even exponentially, if investors are aggrieved. There is also a need to maintain the growth of the maritime, IP and construction arbitrations in the region, given that most of these activities are now taking place here. We need to maintain expertise in these areas and cross-fertilisation amongst various jurisdictions should be encouraged. Hong Kong is the leading international financial centre in Asia and a growing number of equity funds are set up in Hong Kong. Their activities may generate financial and investment disputes where Hong Kong is best placed to resolve these given the expertise in this area.

"The HKIAC Rules are at the forefront of the new generation of institutional Rules. We have taken great care to ensure that they reflect not only best practice but also what the users are looking for in a dispute resolution process."
  1. You have been involved in some key arbitration cases before the Hong Kong courts. What is your most memorable case? Are you free to tell us about it?

Three cases stand out. The Grand Pacific Holdings case came to me twice – first when Pacific China Holdings tried to challenge the two party-appointed arbitrators and failed; and then when they sought to set aside the award and failed. It is meaningful to see the start and end of this arbitration being properly supervised by the courts.

The challenge arising from the FG Hemisphere case continues as there still seems to be misconception about its effect. It has nothing to do with Hong Kong as a seat of arbitration.

It points out that insofar as enforcement under the New York Convention is concerned, the jurisdiction of a national court over a foreign state will depend on the position of state immunity adopted by the enforcing state. State immunity (immunity from suit) relates to whether and, if so, when there is jurisdiction of a state court over a foreign state, and has no bearing on arbitration.

As to the Intraline Resources case, it came out at about the same time as the FG Hemisphere case, and some misunderstanding has also ensued. The Intraline Resources case deals with the concept of Crown immunity (in the US, sovereign immunity), which is a peculiar legal concept of the English common law system – the state cannot be sued in its own court unless there are provisions providing otherwise. The particular entity that is being considered in this case is not a state-owned enterprise but one which is a limb of and controlled by the Ministry of Communications of the Central People's Government. It is a shi ye dan wei (????) and is part of the state organ. The case does not touch on the liability and obligations of state-owned enterprises in commercial contracts. It is also worth noting that, in 2003, the Ministry of Foreign Affairs issued a note declaring that state-owned enterprises are not to be treated as 'the state'. They do not enjoy immunity afforded to the state. Indeed there are many cases in Hong Kong and elsewhere where Chinese state-owned enterprises are parties to arbitrations and litigation and no issue of immunity, state or Crown, has been raised.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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