China: The Hong Kong Special Administrative Region (SAR)

Through the Basic Law, the Hong Kong SAR remains a common law jurisdiction after the People’s Republic of China (PRC or China) resumed sovereignty over Hong Kong on July 1, 1997.

The Basic Law was enacted by the PRC’s National People’s Congress on 4 April 1990 and took effect in Hong Kong immediately after the handover of sovereignty. It is similar to a mini-constitution for Hong Kong, and its most prominent feature is the underlying principle of "one country, two systems". This guarantees that the existing capitalist system and way of life in Hong Kong will be preserved for 50 years.

Under the Basic Law, the laws previously in force in Hong Kong (the common law, rules of equity, locally enacted legislation, some legislation imported from the United Kingdom, decisions of the local courts and some customary laws) "shall be maintained". The only exceptions are laws that contravene the Basic Law. All laws are subject to amendment by the Hong Kong legislature.

The Courts. The highest court in the Hong Kong SAR is the Court of Final Appeal, which has replaced the Judicial Committee of the Privy Council in London as the final appellate court for Hong Kong. Cases before the Court of Final Appeal are heard by a panel comprising the Chief Justice, three permanent judges and one non-permanent judge (who is typically a distinguished judge from another common law jurisdiction such as England and Australia). The judges of the Court of Final Appeal are appointed by the Chief Executive, in accordance with the recommendations of an independent commission, and approved by the legislature.

In civil cases, the Court of Final Appeal will only hear appeals from the Court of Appeal if the matter concerns disputes or property or civil rights of the value of HK$1,000,000 (US$128,000) or above or, at the discretion of the Court of Appeal or the Court of Final Appeal, if the matter is of great general or public importance.

Beneath the Court of Final Appeal is the High Court comprising the Court of Appeal and the Court of First Instance. The jurisdiction of the High Court emanates from the High Court Ordinance. Proceedings in the High Court are governed by the Rules of the High Court.

The Court of Appeal hears appeals on all matters, civil and criminal, from the Court of First Instance and the District Court, as well as appeals from the Land Tribunal.

The Court of First Instance has unlimited jurisdiction over both civil and criminal matters. In addition to its general jurisdiction, the Court of First Instance also comprises various specialist courts (or lists) which have specific jurisdiction over certain types of civil disputes: commercial, bankruptcy and winding-up, construction and technology, constitutional and administrative law, admiralty, probate, personal injuries and family. Almost all major commercial litigation in Hong Kong will commence in the Court of First Instance and depending on the nature of the dispute will be listed before one of these specialist courts.

Below the High Court, there is the District Court, the Magistrates Court, the Juvenile Court and the Coroner’s Court. The District Court has limited jurisdiction in both civil and criminal matters. The District Court’s jurisdiction for monetary claims is limited to HK$600,000 (US$77,000).

The court system of Hong Kong also includes various specialized tribunals that include the Labour Tribunal, the Land Tribunal, the Small Claims Tribunal, the Obscene Articles Tribunal and tribunals established by legislation. The decisions of most of these tribunals can be appealed to a Judge in the Court of First Instance.

The Legal Profession. As a legacy of the English system, the legal profession in Hong Kong is split into two branches: solicitors and barristers. Solicitors have rights of audience in the District Court and hearings in chambers in the High Court. Barristers have these rights and also the sole right of audience in hearings and trials in open court in the High Court and Court of Final Appeal. Barristers are sole practitioners who are appointed by solicitors and do not deal with clients directly.

The Trial Process. The trial process in Hong Kong is adversarial in nature and has similar features as those in many other common law jurisdictions like England and Wales and the United States. In all civil cases, opposing parties in a matter will have to plead their case in writing prior to the commencement of a trial. Opposing parties are entitled to discovery and to serve interrogatories on the other side before trial. In civil cases, evidence is usually admitted in writing as witness statements prior to trial and the opposing side will have the opportunity of cross examining witnesses at trial. A single judge sitting in open court hears all civil trials in the District Court and the Court of First Instance. Depending on its complexity and size, a case may take up to a year and a half to complete.

Unless otherwise ordered, the losing party is usually required to pay a substantial part of the legal costs incurred by the successful party. These costs are usually reviewed by a Master in a process called taxation before they are payable by the losing side. In Hong Kong, lawyers are not permitted to enter into contingency fee arrangements in litigation matters.

Enforcement of Judgments. Foreign judgments can be enforced in Hong Kong in two ways: at common law, and through registration. At common law, the judgment creditor has to commence proceedings by way of a writ action in Hong Kong for the judgment debt. Through the registration procedure, certain foreign monetary judgments can be registered in Hong Kong pursuant to the Foreign Judgments (Reciprocal Enforcement) Ordinance. Once registered, these Ordinance judgments can be enforced in the same way as a judgment obtained in the courts of Hong Kong. The disadvantage of enforcement at common law is the cost and uncertainty of having to establish liability for the debt.

Reciprocity allows a foreign judgment to be enforced through registration in Hong Kong. Countries like Australia, Belgium, France, Germany, Israel, New Zealand and Singapore have confirmed that judgments of the Hong Kong SAR are recognized and enforceable in their respective countries. Therefore monetary judgments from these countries can be enforced by way of registration in Hong Kong. The list of countries that are willing to recognize and enforce Hong Kong judgments is not closed. The Department of Justice is still waiting for clarification from numerous other countries as to the status of Hong Kong judgments in their respective jurisdictions.

The United Kingdom has indicated that Hong Kong SAR judgments are not enforceable in the same way as they were prior to July 1, 1997 and therefore judgments from the United Kingdom may only be enforceable in Hong Kong at common law. Similarly, judgments emanating from countries like the US, Japan, Korea and the PRC, which traditionally do not have reciprocal enforcement of judgment arrangements with Hong Kong, have to be enforced through common law principles.

The Hong Kong Court of Final Appeal recently allowed the enforcement of a Taiwanese judgment in Hong Kong at common law.

Arbitration and ADRs. Arbitration is a popular method of dispute resolution in the Hong Kong SAR especially for construction, technology shipping and international trade disputes. Arbitration in the Hong Kong SAR is governed by the Arbitration Ordinance, which provides for separate regimes for domestic and international arbitrations. The domestic regime is derived from English law and the international regime is based on the model law drafted by the United Nations Commission on International Trade Law (UNCITRAL).

The Hong Kong International Arbitration Centre (HKIAC) was established in 1985 to administer and support arbitrations in Hong Kong. The Arbitration Ordinance empowers the HKIAC to appoint arbitrators in the absence of an agreement between the parties. The HKIAC maintains panels of well qualified international and local arbitrators.

Other forms of dispute resolution process are also becoming very popular in Hong Kong especially in the construction, engineering or technology industries. These processes include mediation, conciliation, adjudication and expert appraisal or determination. Amongst these, mediation is one of the most widely used and the HKIAC maintains a panel of mediators in various specialisations.

The Hong Kong SAR is a party to the New York Convention by virtue of the People’s Republic of China being a signatory of the New York Convention. Arbitral awards made in the Hong Kong SAR can therefore be enforced in any of the jurisdictions that are signatories to the Convention. Likewise, the Hong Kong SAR recognizes foreign arbitral awards from Convention countries. Arbitral awards made in Mainland PRC are enforceable in Hong Kong and vice versa.

Jones Day’s Hong Kong Office was established in 1986 to serve the legal needs of mainly international clients with strategic and business presence in Hong Kong and China. In 1996, the office became one of the first US- based law firms to be permitted to practice Hong Kong law. Our office has since grown into a complete multidisciplinary practice comprising more than 35 lawyers who are focused on serving international and local corporations, business people, financial institutions and government organizations. Dispute resolution is a major part of our Hong Kong practice.

The Hong Kong dispute resolution team comprises 11 lawyers, most of whom are qualified in Hong Kong as well as in other jurisdictions like Australia, England and Wales, New York, New Zealand, the PRC and Singapore. Our team of lawyers has been involved in some of the region’s largest and most complex litigations and arbitrations and is one of the region’s leading disputes practices focusing on the following areas:

• Banking and finance

• Commercial fraud

• Company law

• Construction, engineering and infrastructure

• Defamation

• Employment

• Financial regulation

• Information technology

• Insolvency

• International trade and sale of goods

• Judicial review and administrative law

• PRC joint venture disputes

• PRC debt collection

• Securities

Most of our lawyers are multilingual, fluent in English as well as Chinese Mandarin, Cantonese and other dialects, and capable of advising on disputes connected with the Greater China region. Our strength is our ability to work as one firm, with our Beijing, Shanghai and Taiwan offices, to present clients with a one-stop option for cross-border disputes in the Greater China region.

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.