Hong Kong: Land Premium Disputes In Hong Kong – Accelerated Resolution Via Arbitration

In the Chief Executive's January 2014 Policy Address, Mr. Leung Chun-ying outlined the Hong Kong Government's plan to streamline procedures for resolving land premium disputes in order to improve land supply for housing and other uses in the short to medium term. This involves the Government introducing a "Pilot Scheme for Arbitration on Land Premium" to facilitate swifter agreement with property developers on the issue of premiums payable for lease modification and land exchange. The Pilot Scheme was put forward for consideration by Hong Kong's Legislative Council (LegCo) in July 2014 and has since been launched by the government in late October 2014.

Premiums in dispute

In Hong Kong, land premiums are payable when a property developer wishes to seek lease modifications/ land exchanges from the Government. Disputes over such land premiums tend to be quite prevalent since the sums demanded by the Government are generally not commercially acceptable to developers. While setting high premiums allow the Government to pre-empt any potential accusations of collusion with the private sector when the valuation assessment comes under scrutiny by LegCo, it also creates a strong disincentive for developers to pursue their development projects as it would mean their profits are eroded. As such, extensive negotiations and repeated appeals ensue. The failure of the parties to reach common ground often leads to stalled development projects and lands remaining idle for years until some commercial imperative provides impetus for the parties to agree. The introduction of an arbitration mechanism is therefore seen as a means to expedite the dispute resolution process and break the deadlock more readily.

The Government's Pilot Scheme at a glance

The Government's Pilot Scheme was officially launched on 27 October 2014 and will run for an initial period of two years. The arbitration mechanism will be subject to review over time and its application will be fine-tuned and broadened after the Government acquires the relevant experience. The general features of the Pilot Scheme include:

Trigger mechanism

Both the Government and the developer is entitled to refer a land premium dispute to arbitration after a substantial exchange of views (i.e. after at least two appeals by the developer) and no agreement could be reached. This allows for the issues in dispute to be crystallised following a substantive exchange of information.

Case priority

Should the land premium arbitration case load exceed the capacity of the Lands Department, the Department of Justice and the available arbitrator candidates, cases will be prioritised in accordance to higher yields (i.e. gains in flat numbers or non-residential gross floor area); wider premium gaps and lesser complexity of issues in dispute.

Scope of arbitration

The matters to be arbitrated will be confined to the amount of premium and any disagreement on fundamental issues such as lease interpretation (e.g. interpretation of "industrial" use) and government policies must be resolved by way of civil proceedings in court.

Tribunal composition and appointment

Land premium arbitrations will be decided by an Arbitral Tribunal of three arbitrators to be led by a nominated President to be agreed by the parties. Other members of the Tribunal are to be nominated by each of the parties respectively to be agreed by the other party. The President of the Tribunal must be a legal professional with at least 10 years post-qualification experience, while the other members should comprise of valuation professionals with at least 10 years of experience in land matters and professional valuation. The appointed arbitrators need not, however, hold any arbitration qualifications. The Hong Kong International Arbitration Centre (HKIAC) will be the Appointing Authority in the event of any disagreement.


Arbitrators will be required to make a written declaration as to their independence and impartiality, as well as being subject to an ongoing duty of disclosure for any conflicts of interest that may be relevant. Such declarations may be disclosed by the Government as its discretion. Anti-collusion provisions will also be included in the Arbitration Agreement to prohibit unauthorised discussions outside of the arbitral proceedings, and arbitrators will be deemed 'agents' in the context of Section 9 of the Prevention of Bribery Ordinance and will be liable for offences under the legislation in the event of misconduct.

Walk away provisions

To deter developers from walking away during the arbitration proceedings or after receiving an arbitral award, they will be required to execute a Deed of Undertaking which stipulates their agreement to restrictions on alienation of the subject lot and on transfer of shareholding (if the lot is held by a company) until the execution of the relevant lease modification/land exchange. The developers must also pay the Government 15% of the premium last assessed by the Government in the event the developer purports to discontinue the arbitral proceedings or fails to execute the lease modification/land exchange at the premium under the arbitral award.

Date of valuation and timeframe

The valuation date will be the date when the Arbitral Tribunal is first constituted. However, to prevent the assessed land premium to be too out of date, the parties will agree on a suitable timeframe for an award to be handed down on a case-by-case basis (i.e. generally expected to be around 10 weeks after constitution for 'documents only' proceedings but longer if hearings are required). Extensions of time may be allowed by agreement of the parties, and the valuation date may be adjusted accordingly to reflect an unforeseen extension.

Arbitral award

The Tribunal is able to decide on a suitable land premium amount by consensus or majority vote and is not confined to any pre-determined upper or lower limits. The details of the arbitration will be kept confidential in view of the commercially sensitive nature of the information involved, although the Government reserves the right to disclose information to the public about concluded cases.


Each party will be required to bear their own legal and other costs while the costs of the arbitral proceedings (i.e. the fees and expenses of the Tribunal) shall be borne by the parties in equal shares unless the Tribunal within its discretion deems a different allocation is appropriate.


An arbitral award in a land premium dispute will be subject to the same court appeal mechanism as defined in the Arbitration Ordinance (Cap 609).


The Pilot Scheme will undoubtedly face a number of hurdles in the process of implementation. For example, there is the question of whether the Government will succeed in obtaining developer buy-in that arbitration represents a commercially viable solution to premium disputes. Also, the issue of enforcement and appeals to the arbitral award will certainly be matters of contention. While the performance of the Pilot Scheme is unknown at this stage, the first test case will be closely scrutinised by the industry and will shed more light on the actual effectiveness of the arbitration mechanism in practice. If the aforementioned complications could be overcome, it is anticipated that the mechanism could serve to expedite the resolution of less complex land premium disputes. For more complex cases, particularly those involving disputes over fundamental issues such as lease interpretation and government policies, the parties will nevertheless need to resolve the matters via court proceedings.

While the Domestic Arbitration Rules of the HKIAC are said to apply to arbitrations under the Pilot Scheme, the pro-forma Arbitration Agreement provided by the Government includes extensive modifications to these Rules. As a result, there may be some uncertainty as to precisely which of the other procedural rules will, by implication, be adopted.

Furthermore, since a List of Disputes is intended to be annexed to the Arbitration Agreement, parties should take care when setting out and agreeing the issues as this will determine the scope of the Tribunal's jurisdiction and it may be difficult to subsequently amend this list. Developers are advised to seek independent legal advice to better protect their interests

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions