OverviewofResolvingDisputesinHongKong

03 November 2005

Edward Alder, Rosamund Cresswell

1. Overview

Hong Kong is a common law jurisdiction and Hong Kong substantive law is very similar to that of the UK. Hong Kong has a comprehensive and sophisticated set of procedural rules to regulate civil proceedings and a high quality and corruption free judiciary drawn from the practising legal profession.

Due to its geographical and historical background Hong Kong is a completely bilingual (Chinese and English) city. However, at present, English is still the predominant language and will remain so for the foreseeable future. Apart from very exceptional cases all legal arguments and judgments are in English.

2. Emergency Relief

Injunctions restraining or requiring certain behaviour by a party can be obtained under Hong Kong law, as they can under UK law. They can be obtained at short notice either before proceedings are commenced or during the litigation.

In appropriate cases the party seeking the injunction may not necessarily have to give notice of his application as to do so would allow the potential defendant time to destroy/remove assets or evidence.

As a general rule, an injunction will not be granted if a suitable alternative remedy will suffice. In addition, the party applying for the injunction will be required to compensate the other party for losses it suffers should it transpire after trial that the injunction should not have been granted. The court may also require the applicant to put up security as a condition of making the order.

Emergency relief is expensive to obtain in Hong Kong but in most cases it is very effective and often results in the final resolution of the dispute at that stage.

3. Process

  • Timing

Typically, a case will take approximately 18 to 24 months before reaching trial, although various procedures are available to bring the case to a much earlier conclusion, depending on the circumstances (see interim measures below).

  • Courts

A claimant commences an action in either the Small Claims Tribunal, the District Court or the High Court depending on the value and the complexity of the claim. Cases where the amount at stake is over HK$1,000,000 (€107,440) are normally heard in the High Court.

There are also specialist courts for certain types of cases, for example, the Lands Tribunal, the Labour Tribunal and the Copyright Tribunal.

  • Interim measures

Parties can seek the assistance of the court on a whole variety of measures before trial. The most important applications in practice include obtaining early judgment, emergency relief (see paragraph 2 above), disputing jurisdiction, posting of security in respect of legal costs and asset freezing.

  • Case Management

Compared with the English system, the courts of Hong Kong take a less active role in managing each case, as a result of which the parties to a large extent control the pace of the proceedings.

  • Appeals

As a general rule, appeals to the Court of Appeal do not require leave but the scope of appeal is generally limited to issues of law rather than fact. Further appeals to Hong Kong’s highest court, the Court of Final Appeal, are governed by strict leave criteria.

4. Disclosure

In Hong Kong, parties must disclose to each other all relevant documents which are or have been in their possession or control. This obligation includes documents which could adversely affect a party’s own case. Failure to disclose or, worse still, destruction of documents, can lead to serious penalties. With the exception of legally privileged documents (see below) each party is entitled to inspect and take copies of the other party’s documents. Advice early on can ensure that relevant documents are retained and disclosed in the best way to protect a party’s position.

5. Privilege

In general, Hong Kong public policy favours the open and frank conduct of legal proceedings. However, legal professional privilege is an important exception to this rule.

Hong Kong law confers protection ("privilege") on certain categories of documents which may come into existence either before or during litigation. Communications between a party and its legal advisers are nearly always privileged, as are communications with third parties if legal proceedings are contemplated. A party cannot be required by his opponent to disclose such privileged documents, even if they are relevant to the case.

In addition, parties are strongly encouraged to try to settle their disputes. Communications (such as settlement offers) between parties which are issued by parties "without prejudice" to their legal position and come into existence in the course of trying to settle a dispute are privileged and as such may not be put into evidence without both parties’ consent.

6. Enforcement of Judgments

In Hong Kong foreign judgments can be enforced by commencing fresh proceedings for recognition of the judgment or in some cases under a statutory registration scheme.

If a party is seeking to enforce a foreign judgment under the registration scheme he must be able to satisfy the Hong Kong court that the foreign jurisdiction in question gives reciprocal treatment to judgments of the Hong Kong courts.

In the case of the UK, the requirements for reciprocity are not satisfied as there are no reciprocal enforcement facilities in the UK for judgments from Hong Kong.

7. Costs

Pursuing a claim through the court has historically been expensive in Hong Kong, particularly if it goes to trial. However, Hong Kong legal costs have been steadily reducing over the last five years and are now similar to or lower than those in London.

Generally, the Hong Kong courts follow closely the "loser pays" rules. However, the courts have a wide discretion on the question of costs and will take into account such matters as the parties’ conduct before, as well as during, the proceedings in this regard.

The general rule is that a successful party will be able to recover its costs from the unsuccessful party although, in practice, such costs will be limited to approximately 60%-70% of the actual costs incurred because of the way costs are assessed by the court.

8. Arbitration and ADR

In Hong Kong, there are three forms of dispute resolution methods: (i) court litigation (as discussed above), (ii) arbitration and (iii) less formal alternative modes of dispute resolution ("ADR").

Arbitration

Arbitration is a private adjudication in which a neutral party hears the parties’ arguments and makes a decision on this basis. A dispute will only be resolved by arbitration if the parties have agreed in advance in a contract that all disputes under the contract will go to arbitration, or alternatively they agree after a dispute has arisen to follow that course.

The Hong Kong Arbitration Ordinance is widely recognised as being one of the most advanced arbitration statutes in the world. As a result, Hong Kong is an ideal jurisdiction for international arbitration. The Ordinance incorporates the UNCITRAL Model Law for international arbitration, promulgated by the United Nations and recommended to member nations. Hong Kong is a party to the New York Convention and Hong Kong awards are therefore readily enforceable around the world.

The Hong Kong International Arbitration Centre (HKIAC) is a leading dispute resolution centre in the Asia-Pacific region. In December 2001 the Asian Domain Name Dispute Resolution Centre (ADNDRC) was formed to provide dispute resolution services in regard to disputed generic top level domain names. The ADNDRC is one of the only four approved domain dispute providers in the world, and the first and only one in Asia.

The two main advantages of arbitration are that it is a confidential process and the arbitrator appointed by the parties is normally an expert in the field of the dispute.

ADR (Alternative Dispute Resolution)

ADR is generally a non-adjudicatory process by which the parties engage the help of a neutral third party to resolve their dispute by negotiated agreement. The main modes of ADR in Hong Kong are mediation and negotiation.

The advantage of ADR is that it is more cost-effective than litigation or arbitration and has ultimate flexibility in the solution that can be found to the dispute. Its success depends, however, upon a mutual willingness to take part in the process and the quality and training of the third party neutral.

ADR is not common in Hong Kong yet and has not been actively encouraged by the Hong Kong courts other than in the family law jurisdiction.

Written by Edward Alder and Rosamund Cresswell in our Hong Kong office.


Important - The information in this article is provided subject to the disclaimer. The law may have changed since first publication and the reader is cautioned accordingly.