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Update: The Changing Face of the Arbitration Landscape in the Greater Bay Area

  • Market Insight 15 May 2020 15 May 2020
  • Asia Pacific

  • Trade & Commodities

Update: The Changing Face of the Arbitration Landscape in the Greater Bay Area

One of the key highlights in the Outline Development Plan for the Guandong-Hong Kong-Macao Greater Bay Area 2019 ("Plan") is the explicit support given to Hong Kong to boost its status as the centre for international legal services. It also encourages the solidification of judicial cooperation among Guangdong, Hong Kong and Macao in the hope of providing accessible, high quality and costs efficient dispute resolution services for the development of the Greater Bay Area ("GBA").  

Guangdong, Hong Kong and Macao Arbitration Alliance

However, integrating the three different legal systems of the GBA will not be a straight-forward task.

With the continually increasing demand for dispute resolution services within the GBA, it is unsurprising to see the demand growth of 9 arbitration centres within the GBA municipalities of Dongguan, Foshan, Guangzhou, Huizhou, Jiangmen, Shenzhen, Zhaoqing, Zhongshan and Zhuhai in addition to the existing Hong Kong and Macao Centres.

In 2019, the Guangdong, Hong Kong and Macao Arbitration Alliance was established and a cooperation memorandum was signed to foster cooperation and communication among these various arbitration centres.

Individually, these arbitration centres in the GBA have been gradually implementing changes to prepare themselves for these challenges. This update provides a quick overview and outline of some recent observations relating to 4 out of these 11 arbitration centres, namely: the Hong Kong International Arbitration Centre; Shenzhen Court of International Arbitration; the International Court of Arbitration of Hengqin New Area; and the Nansha International Arbitration Centre:

Arbitration Centres in the GBA

  • Hong Kong: Hong Kong International Arbitration Centre ("HKIAC")

Hong Kong is ranked among the top five seats of arbitration in the world and the HKIAC needs no further introduction. Founded in 1985, HKIAC has always been a popular choice for parties to submit their disputes, whether: domestic or international; or arbitration or mediation. HKIAC has also handled the most number of cases involving Chinese parties among other international arbitration centres which is particularly relevant given the high successful enforcement rate of arbitral awards in China. Since 1999, only 3 of such awards were not enforced in China.

In 2019, over half of the arbitrations submitted to HKIAC were administered under the HKIAC Administered Arbitration Rules. With the introduction of the new HKIAC Administered Arbitration Rules 2018 which brings in significant developments relevant to use of technology, disclosure of third party funding, emergency arbitrator procedure, provisions for single arbitration under multiple contracts (which will be useful for complex disputes involving multiple parties under multiple contracts for the same set of facts), concurrent proceedings etc, it is clear that HKIAC's position as one of the most important arbitration centres in the GBA will be further strengthened.

  • Shenzhen: Shenzhen Court of International Arbitration (also known as the South China International Economic and Trade Arbitration Commission) ("SCIA")

Among the other Mainland arbitration centres in the Great Bay Area, SCIA has the longest history of nearly 40 years since its establishment in 1983 in the Shenzhen Special Economic Zone.

Formerly known as the China International Economic and Trade Arbitration Commission South China Subcommission, SCIA was first established as an arbitration institution for resolution of contract disputes and other property rights disputes between both domestic and international individuals and entities.In 2012, it moved into the Qianhai special economic zone and changed its name to SCIA.

The SCIA is the "first" arbitration institution in Mainland China in the following aspects:

  • To acquire a legal person governance model established by legislation;  
  • To include arbitrators from foreign jurisdictions on its panel (since 1984); and
  • To render an arbitral award that was enforced outside Mainland China pursuant to the New York Convention (in 1989).

The SCIA has been developing substantively in the fields of mediation and arbitration throughout the years.In particular, they have established and made available various professional dispute resolution systems for both domestic and international parties, such as “Chamber of Commerce Mediation + Arbitration”, “Hong Kong Mediation + SCIA Arbitration”, etc.

  • Hengqin: International Court of Arbitration ("HICA")

The International Court of Arbitration of the Hengqin New Area in Zhuhai was established in mid-2014. It was set up to facilitate the development of the free trade zone, which benefits from various preferential trade and investment policies.

The HICA is supervised by the Zhuhai Arbitration Commission.The rules of HICA are modelled upon the Arbitration Rules of China’s International Economic and Trade Arbitration Commission (CIETAC), and with reference to the rules from international arbitration centres including Hong Kong, Singapore, Stockholm, etc.

Despite its relatively short history, the HICA has been developing rapidly with an international perspective:

  • It has handled cases in different languages with arbitrators from Hong Kong, Macao, Taiwan and various other countries. 
  • It has handled numerous cases on-site and online, many of which have referred to international arbitration rules.

With the advantage of the free trade zone, the Zhuhai Arbitration Commission has used the HICA as a platform to launch series of pioneering dispute resolution measures, including the first “provisional arbitration rules” in China.

  • Nansha: Nansha International Arbitration Centre ("NSIAC")

Situated in the state-level New Area, NSIAC is led by the Guangzhou Arbitration Commission but has retained flexibility in setting its own rules and adopting a more international practice based on the UNCITRAL Model Law as well as the arbitration rules of Hong Kong and Macao.

Parties having arbitrations at NSIAC also benefit from various flexibilities:

  • Free to appoint arbitrators who are qualified in the Mainland, Hong Kong and Macao;
  • Free to agree on using arbitration rules or business rules of Hong Kong, Macao or some other places;
  • Free to choose the language for the arbitration.

NSIAC also enjoys a unique geographical advantage being the only port in Guangzhou and in the centre of the Pearl River delta urban cluster, adjacent to Hong Kong and Macao.

Conclusion

To conclude, it is clear that whilst Hong Kong has long had an established presence as a well-renowned centre of dispute resolution, other centres in the GBA are becoming no strangers to catch-up, and whilst Hong Kong has had a relatively unchallenged time from Guangdong institutions in building up its international track-record, it would appear that, on the back of domestic referrals, the GBA institutions are pushing efforts to build up a respectable international presence.

As a result, the arbitration landscape is expected to change rapidly in the GBA. More developments are expected to come as the Plan extends to 2035 in the long term, these include but are not limited to reviewing and streamlining the relevant laws of the three legal systems and the resolving of disputes arising from conflict of laws. Hong Kong should seize this invaluable opportunity to complement the GBA institutions as part of the region's growth and development in the domestic and international legal and dispute resolution arena.

If you wish to discuss this article, please contact Mun Yeow, Jon Howes, Christopher Short or Vivian Wong.

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