Transcript:

Intro: Hello and welcome to Arbitral Insights, a podcast series brought to you by our international arbitration practice lawyers here at Reed Smith. I'm Peter Rosher, Global Head of Reed Smith's International Arbitration Practice. I hope you enjoy the industry commentary, insights and anecdotes we share with you in the course of this series, wherever in the world you are. If you have any questions about any of the topics discussed, please do contact our speakers. And with that, let's get started. 

JP: Welcome back to the next episode of Arbitral Insights, in which we'll discuss recent developments at the Hong Kong International Arbitration Center with Joanne Lau, who is the HKIAC Secretary General. I'm JP Duffy. I'm an international arbitration partner based in New York that acts as both counsel and arbitrator and international arbitration seated around the world under a variety of governing laws and arbitral rules. I'm qualified in New York, England, and Wales, and the DIFC courts in Dubai, where I previously practiced. I routinely represent clients in arbitrations involving China and East Asia, and I also have the good fortune to be listed on the HKIAC Arbitrator panel. With us today is Joanne Lau. Joanne is the HKIAC Secretary General and Principal Officer, which is a role she assumed just about a year ago in February 2024. Prior to becoming the HKIC Secretary General, Joanne was an international arbitration partner at Allen & Ophrey in Hong Kong, where she practiced for over a decade. Joanne brings a wealth of experience with us today and a wealth of information, and we're really lucky and grateful to have her speaking with us. So thank you, Joanne, and welcome.

Joanne: Thank you for having me.

JP: Great. Well, we're so glad you can join. Let me begin just by setting the table a bit and giving a bit of background information on the HKIAC. While it doesn't need any introduction because it's so well known, there may be listeners in the U.S. Or elsewhere that are less familiar, so I'll just start by giving a bit of background there. Celebrating its 40th anniversary this year, the HKIAC is an independent, not-for-profit arbitral administrator that was established in Hong Kong in 1985 by a group of leading business people to provide dispute resolution services in Asia. It provides a full range of alternative dispute resolution services, including arbitration, mediation, adjudication, and domain name dispute resolution. Joanne will discuss them in greater detail later on, but the HKIAC also has some of the most modern and innovative arbitration rules in the world, having just updated its rules last year that took effect on 1st June 2024. The HKIAC also offers state-of-the-art hearing facilities that were ranked first worldwide for location, value, IT services, and staff helpfulness. To give you an idea of how prominent the HKIAC is globally, the 2021 Queen Mary Survey, which most listeners will know, also found that the HKIAC is the third most preferred used arbitral institution globally. And in 2023, it received more than 281 arbitration cases, with a total amount in controversy of approximately $12.5 billion. Around 90% of the administered cases are international. So clearly, the HKIAC has accomplished amazing things in its first 40 years, and we're really lucky to have Joanne tell us more about it. So with that, let's turn to Joanne so we hear more from her and less from me. And let's start by talking about the HKIAC's caseload a bit. Joanne, the HKIAC is one of the most transparent arbitral organizations in the world, and it publishes detailed case statistics on its website. But I'd like to dig into those statistics a bit more for the audience's benefit. While the HKIAC administered cases involving parties from 45 jurisdictions in 2023, what were the top three jurisdictions in that year?

Joanne: Sure. And I might be a bit greedy here talking about more than three jurisdictions. But just to answer your question first, in 2023, our top jurisdictions, first of all, unsurprisingly, is Hong Kong, Hong Kong parties, followed by mainland Chinese parties. Again, I think that one is unsurprising. And then at 3, 4, 5, 6, in that order, BVI, Cayman Islands, Singapore, and the United States. I would say these are pretty consistently featured in our most popular jurisdiction. So 2023 was similar to the previous several years in terms of parties who often submit cases to HKIAC.

JP: Joanne, you mentioned the Cayman Islands and the BVI as some of the top five jurisdictions, I think. What's the reason for that?

Joanne: For BVI and Cayman Islands, a lot of those entities from those places, they could be investment vehicles. I think quite a lot of them also have Chinese shareholders or Chinese interests, although not exclusively so. So I think that's one of the reasons why BVI and Cayman feature heavily in our caseload.

JP: Got it. So it's a function of offshore Chinese investment structures that parties typically use. Is that right?

Joanne: Yeah, correct. And I think another reason is to also look at the types of cases that HKIAC gets. So we do have a lot of shareholder disputes or post-M&A disputes. And especially when it comes to, as we discussed earlier, some of the China-related transactions, parties often choose to structure those through offshore vehicles. So hence, you do see BVI and Cayman entities in those transactions and consequently those disputes as well.

JP: Yeah, that's really interesting. I've certainly done HKIC arbitrations that have involved that structure, which is why I asked, because I think it's a surprise sometimes to people in the U.S. To see that that is so common. Now, you mentioned as well, I think some of the other jurisdictions you mentioned were the U.S. and Singapore. Let's start with Singapore. How often do you see cases involving parties from Singapore?

Joanne: Pretty regularly. And I think if you look at parties from Asia, Singapore is the active economy, large economy in Asia. So it's not surprising that we have lots of cases from Singaporean parties. The other one, I would say, you know, South Korea and Singapore might be the two most common Asian parties that we see in our cases. So yeah, we do see those pretty regularly.

JP: That's really interesting, given that both jurisdictions have their own arbitral institutions or arbitral institutions that are associated with them. Is that a function typically of the counterparty to the dispute, do you find?

Joanne: I would say sometimes, but not necessarily so. So we, in terms of our case law, I think around 40% of our cases would involve one mainland Chinese party. The remaining 60% don't have any mainland Chinese parties. So I think you're right that in a number of disputes with Singaporean parties or South Korean parties on one side, you might see a mainland Chinese party on the other side. And HKIAC would be a very natural choice of arbitral institution in those cases. But then we also see some cases, say, between a Singaporean party and another, say, Southeast Asian jurisdiction or between South Korean party and a party from elsewhere in the world. So there's a variety, although I think you're also right that in disputes which involve one mainland Chinese party, there may be even more reason for parties to think of Hong Kong and HKIAC.

JP: Got it. Got it. Well, that's still a very strong endorsement for the HKIAC as a strong arbitral institution in the region that people would choose. That's a really interesting figure. Now, you also mentioned the U.S. being one of the top five or six parties. Is that a trend that you have seen continue in the years, or is that a trend that's increasing? What's the trend there that you're seeing?

Joanne: I would say that's a pretty steady, it's a very steady observation. So US features quite consistently in our top 10 popular jurisdictions throughout the years. There are a lot of US, China investments and transactions going on. And, you know, despite some geopolitical tensions in recent years, I don't see that changing. And that I think, you know, US and China, they will continue to be very active, strong economies. So I do foresee that we'll continue to see US being in our top 10 jurisdictions. If you say whether we've seen any particular changes in parties in our cases, I would say maybe in the past two, three years, we've seen more activity from Middle East. I think that's one. The other one is we've also been seeing some cases with the Latin America connection. And again, going back to the types of cases that HKIC often handles. And by that, I mean, you know, where the Chinese investments are going. I think the reason Middle East and Latin America has come up more may also be a reflection of the fact that there are a lot of Chinese investments going to these parts of the world.

JP: That's fascinating. I want to talk in a minute about what industries you're seeing there, but let me focus for just a second on, take those in pieces. Let's start with the Middle East. Are there particular jurisdictions in the Middle East from which you're seeing more cases rather than less?

Joanne: UAE, yeah, we've seen, we haven't released our latest statistics yet. But to give you a teaser, I think UAE might be in our top 10 jurisdictions for 2024.

JP: Okay, great, great. Yeah, I would suspect that would be the case. You know, it's been a little bit since I've lived in the UAE, but that's a jurisdiction that even when I was living there, was seeing increased cross-border activity with China. So that's an unsurprising development, in my view. What about Saudi?

Joanne: Saudi, not yet last year, but I managed to make two trips to Riyadh last year. And there is definitely a lot of mutual interests on both sides, I would say. In Hong Kong, we hear a lot of businesses talking about the activity and opportunities in Saudi Arabia. And likewise, when I was in a Riyadh last year, there was a lot of interest in Asia. And we've also seen visitors from Saudi Arabia in Hong Kong. So even though we haven't seen it in our cases yet last year, it's certainly a jurisdiction that I'm very interested in exploring more.

JP: Yeah, I wouldn't suspect that it's far behind. It's a very, very, very active jurisdiction. So I'm certain the amount of time you're spending and the effort you're putting into it will certainly see results. Now, you mentioned Latin America as well. Are there particular jurisdictions in Latin America from which HKIC is seeing more parties? And are there jurisdictions that it would like to see more parties from?

Joanne: Yeah. So in Latin America, last year I made a trip to Mexico City, and we do have some cases involving Mexican entities. But apart from that, I think there are still a few places where we are seeing more activity and are hoping to see even more. Places like Brazil, Peru, there are more and more Chinese interests in those places as well. And I think, you know, with more transactions, it's inevitable that you also see more disputes. So we're hoping to be more visible in Latin America to capture those opportunities.

JP: That's great. That's great. And I'm sure that that will be the case because those jurisdictions are all very, very active. And certain jurisdictions like Brazil really do rely very, very heavily on arbitration, both cross-border and domestically to resolve disputes. So I'm certain that will be a fruitful exercise for you. Now, let's talk a bit, if we could, just about some of the industries from which HKIAC tends to see more cases. I know you said shareholder disputes, which is, in my experience, pretty common. Are there particular industries within the shareholder category in which you see more or less disputes?

Joanne: Yeah, I think in terms of shareholder disputes, some of the industry which have been generating quite a lot of disputes are the tech industry. And in particular, we actually thought, well, maybe cryptocurrency disputes are just phased and might end. But actually, the reality is even last year, we've continued to see crypto disputes. So tech is one big area and not just crypto, but fintech, like e-commerce. And the other one is like medical tech. Yeah, we've seen a lot of disputes, including shareholder disputes in those areas. The other industry is life sciences. I think last year we've seen quite a number of pharmaceutical disputes. So that's another big area. And then the third one, not necessarily shareholder disputes, but Hong Kong being a business commercial hub, we also get a lot of disputes in the banking and financial industry. Although not necessarily shareholder disputes. And just to maybe add on one point, it depends on how you categorize industries and cases, but across these different industries, when it comes to shareholder disputes, we see a lot of private equity investors involved in those shareholder disputes as well.

JP: Well, it's funny you mentioned that because the first ever HKIAC arbitration that I did as a young associate was a PE investment, a US PE investment in the tech sector. So I think that was actually routed, I think, through the BVI and the Caymans. I forget, I think it was called the WOFE structure, but that's a very interesting development. Now, you mentioned life sciences as well. Is there a particular aspect? You mentioned medtech, I think, as well, but is there a particular sector of the life sciences industry in which you're seeing more disputes?

Joanne: Not really, but like, say, licensing of drugs, that is one area where there's definitely some noticeable trend.

JP: Licensing disputes. Yeah, that makes a lot of sense as well. I do a lot of that work and I see a lot of people choosing both Hong Kong and HKIAC. Hong Kong is a seat and HKIAC is the administrator in the deal documents. So that's unsurprising as well and a good development. Now, are there particular industries that the HKIAC sees as underrepresented, like industries on which you would like to focus in the future and see more of?

Joanne: I think one of them, like we are already doing quite a lot of that, like construction, infrastructure disputes. I think they consistently feature in our top three or top four sectors in terms of numbers of disputes. But I feel like especially like from my trips to like the Middle East, that there are still so much more of those transactions where HKIAC can actually play a really helpful role in administering those kinds of disputes. So I do hope to see even more construction and infrastructure project disputes in the future. But other than industries, we also look at our opportunities through the lens of jurisdictions. So I mentioned Middle East and Latin America just now, and those are places where HKIC really wants to continue to invest time and energy in. But on top of that, I think I made quite a lot of overseas visits last year, but one place where I haven't managed to go yet and will definitely be doing so this year is Africa. I think there are a lot of opportunities in Africa and there is scope for HKIAC to build more presence there to introduce our services to Africa-based parties.

JP: Definitely, definitely. And if you look at the capital flows coming from East Asia and China in particular, Africa is certainly a critical location.

Joanne: Yeah.

JP: I mean, it's such a diverse area as well. I mean, it's a continent, so it's got any number of possibilities.

Joanne: I mean, it's not like one trip would do the trick, but it's definitely not. I think it'll take many, many, many trips.

JP: Well, no, I'm laughing because someone asked me the other day, they said, you know, can you give us an update on arbitration in Africa? And I kind of chuckled and said, you know, you realize it is a very, very large continent. So which part are you talking about? But that's, yeah, that's certainly, it's a very, very fruitful jurisdiction. Well, let's shift gears a bit then and talk about the new HKIAC rules that you released in 2024. Those took effect on 1st June of last year, if I recall. And they've got some really innovative aspects, what do you see as the most innovative aspect of the updated rules?

Joanne: I think, first of all, before turning to the innovative changes, one thing that has not changed is HK IAC has maintained what we call a light-touch approach to case administration. So even though we've reflected on it, we still do not have, for example, a formal award scrutiny process. So we're light-touched, we prioritize efficiency, we focus our energy on the appointment of arbitrator process, but then we leave the arbitrator to manage the process and we trust that they'll do a good job in award drafting. So that ethos has not changed, but there are a few changes, which I think are really interesting and have been very positively received by users. One is Article 13.6, where we added a provision to spell out the range of case management powers that a tribunal has. So we talked about how the arbitral tribunal may, in its discretion and after consulting with their parties, determine preliminary issues, they can bifurcate proceedings and conduct arbitration in sequential stages, etc. So what we want to achieve through that is to just encourage tribunal members to be a bit more assertive and tailor. Trying to tailor-made the procedure so that the case can be conducted as efficiently as possible. And I think having this provision here really encourages tribunal members to be a bit braver in not always adopting the same procedure, but really thinking through what makes the most sense for parties. The other one, which is very innovative and has been very well received, is our new Article 9A on diversity. And in particular, the first subclause talks about how the parties and co-arbitrators are encouraged to take into account considerations of diversity when designating arbitrators. And even just last year, since we've implemented the 2024 rules, we've already seen some change in behavior in that co-arbitrators, especially, they've been turning their minds more consciously and trying to come up with some names which they haven't tried out before. So we were very delighted to hear the positive feedback from adding this new Article 9A. The third one, I would say we've also added some provisions in relation to greener arbitration. So we expressly put in our rules that tribunals should take into account environmental impact when designing procedures of the arbitration. So that I think is very new as well, if you look across the globe of different versions of arbitral institutions rules.

JP: That's fascinating. And the diversity point is really important. So it's really great to hear that the HKIAC has taken it by the horns and really embraced it. And really great to hear that users and tribunals are embracing that as well, because that's really where the decisions get made. So wonderful to hear that. Now, one of the aspects as well of the new rules, or I guess the updated rules is the better way to say it, is emergency arbitration. Now, how does emergency arbitration under the 2024 HKIAC rules work?

Joanne: For the emergency arbitration procedures, we've had it for a very long time already. So the 2024 update is more a refinement of the procedure. So it remains the case that when an emergency arbitrator is appointed, he or she will need to issue a decision within 14 days. So that has always been the deadline and that has remained. But what we've introduced in the 2024 update is to provide for interim, interim relief. So what we've seen in the past is sometimes parties have a super, super urgent situation where they can't even wait for 14 days to get their relief. And emergency arbitrators, they might want to just issue a relief to maintain the status quo first, to hold the ring whilst they decide the emergency relief being requested. So what we want to make clear in our 2024 rules is that if an EA decides to grant this kind of interim-interim relief, they can do so pending the conclusion of the EA proceeding. So it avoids any kind of argument that, say, if the EA has granted this interim-interim relief, does it mean that their jurisdiction is then over? So it's to avoid that kind of uncertainty. and because we see it in reality in emergency arbitrator proceedings. So having that clarification is very helpful for parties, I believe.

JP: Yes, that is extremely helpful because I have faced that situation within the last two years where someone made that argument that what was effectively a procedural order to hold the status quo, there was really an interim EA award that terminated the EA's jurisdiction. It led to an awful lot of fighting. So it's very, very good to see that that's been taken into consideration. Now, there's also been some developments in the enforcement of EA awards between Hong Kong and the mainland. Am I right about that?

Joanne: Well, between Hong Kong and mainland, what we have is something called the Hong Kong-Mainland-China Interim Measures Arrangement. And that is the reason why, say, if a party wants to seek urgent interim relief in a China-related case, often they would seek to utilize the interim measures arrangement rather than emergency arbitrator relief. And just to provide a bit of context, in, say. Mainland China right now, there is still no mechanism or no express mechanism for a mainland Chinese court to grant interim relief in support of a foreign seated arbitration. There is also no mechanism in mainland China for the courts to enforce an emergency arbitrator relief. The only exception is if it's a party to a Hong Kong seated arbitration administered by certain institutions, including HKIAC, then those parties are able to rely on that interim measures arrangement to make an application to mainland Chinese courts to get interim relief from the mainland Chinese courts. So this has been in place since October 2019, and it has been very, very effective. So HKIAC has handled more than 140 applications for interim measures and And the total amount of assets frozen in mainland China by mainland Chinese courts under this arrangement is around 3 billion US dollars. So that is a strong reason why parties often think of HKIAC and Hong Kong SEAT when they are dealing with, say, a counterparty with assets in mainland China.

JP: Yes, that is a very, very, very important thing to keep in mind when people are structuring deal. So that's a very, very good endorsement for both Hong Kong and the HKIAC. Now, that's actually a good segue as well to talk about what some of the HKIAC's plans are outside of Hong Kong. Now, HKIAC has its principal office in Hong Kong, but that's not its only office. So the HKIAC opened, as I understand it, in Seoul in 2013. What was the impetus for opening that office?

Joanne: Yeah, so Seoul was our first representative office outside of Hong Kong. And back then it was quite a natural choice because South Korea has always been a jurisdiction where Hong Kong and HKIAC collaborated with a lot. So there is a vibrant dispute resolution community and the jurisdiction was supportive of international arbitration. It was developing quickly, going from strength to strength. So it was to help us get closer to the users and practitioners in South Korea. And that led us to open an office so we can collaborate more closely and to hear feedback. And it was the same in 2013. And I would say it's still the same today in that over the years, we still see Korean parties featuring consistently, regularly in our top jurisdictions. And we still see a very supportive and vibrant dispute resolution community in Seoul.

JP: Yeah, it is definitely an active jurisdiction. It seems to be getting increasingly more active. Now, that is obviously a great development in 2013. But the HKIAC has also opened an office in Shanghai that's celebrating its 10-year anniversary. And in December of 2024 HKIAC opened up a Beijing office if I'm correct, is that, Is that right?

Joanne: Yeah.

JP: Great. Well, tell us more about those offices then.

Joanne: Yeah. So mainland China is one of our big markets. And HKIAC, we play a unique function, I think, in bringing international arbitration and common law jurisdiction closer to mainland Chinese users. And by opening a Shanghai office in 2015, what we really wanted to do is to act as a bridge to help mainland Chinese practitioners and users to get to know international practitioners, international dispute resolution, but equally also to introduce international practitioners and international users to the practices and the stakeholders in mainland China. So by having a Shanghai office where we can host more events, conduct trainings, that has really served an important function for. HKIAC in achieving those objectives. For opening a Beijing office, that was a hugely exciting development for us. It happened just last month. I think it's also a reflection of just how, how. Like the extent of development that we've seen in mainland China and the opening up of the arbitration scene, because by opening a Beijing office, HKIAC has actually become the very first offshore arbitral institution to have an office in Beijing. And I think Beijing will serve some of the similar functions as our Shanghai office, in that it will also engage in capacity building, training, seminars. But on top of that, Beijing also has a very active group of state-owned enterprises who are interested in international dispute resolution. So there are more activities and opportunities that we can capture there. And for our Beijing office, we will also have hearing facilities. So say if in the future, say some witnesses or some parties want to make use of our Beijing office and doing some of their hearings, that is a possibility as well. So we're very excited about all the new things that the new Beijing office will bring.

JP: Well, that's great. And I know I've spoken to your staff about getting the director for the Beijing office in, and I think we're planning a podcast on that in the future as well. So looking forward to hearing more about that because it is a really, really impressive development. You've now been the Secretary General for about a year, and HKIAC is celebrating its 40th anniversary this year. So it's a natural time to reflect on past successes and to look at what the organization hopes to accomplish in the future. So as we get towards the conclusion of our conversation, I'd love to hear what you see as the future. What you think, well, let me start with this. What, you know, let's talk a bit about what you see as your accomplishments over the last year and then where you'd like to see the HKIC, say, in five years, 10 years in the future.

Joanne: On accomplishments, I must start by saying whatever accomplishments that HKIAC has achieved, it's always a huge, huge team effort. So very grateful for the whole Secretary's hard work in the past year. It was a big year for us because we did the ICA Arbitration Congress in May, followed by the Hong Kong Arbitration Week again in October. And both of these had record-breaking attendance. So I think that was a huge boost for us, especially after the pandemic. It was a very good time for us to introduce Hong Kong to those who may be less familiar with our jurisdiction and to just showcase the vibrant nature of the dispute resolution community in Hong Kong and also showcase what HKIAC has been doing. So that was fantastic. Yeah, the 2024 rules were published and well received last year. And we had a very busy year in terms of caseload. So that is very significant for us. And towards the end of the year, we set up the Beijing office. So again, that's a very encouraging highlight and a big milestone for us. I think looking into the future. What I hope to see and achieve, I think for arbitral institutions, of course, we need to spend a lot of energy in promoting dispute resolution services and educating users about international arbitration best practices. But on a day-to-day basis, it's so important that we continue to maintain the highest standards in case administration and in appointment of arbitrators. And that means always being efficient, always giving guidance. Parties, the assurance that institutions are completely neutral, completely independent. And I think that requires constant effort and dedication on a day-to-day basis. So that is something that the whole team at HKIAC is constantly focusing on. But aside from that, I think there are a few things that I hope to see even more in the future. I think one is the tech development. HKIAC was one of the first movers in having an online case management platform. But given how quickly tech and AI is developing, I think this is going to be an ongoing journey. So further digitalization, further use of technology and how we can help arbitrators and users adopt the technology that can help cases be resolved more efficiently. I think that is something that HKIC is very focused on and is really looking forward to doing even more of. I think the final thing is just looking at the arbitration landscape in Asia over the past few years. And I think this trend will continue. I think it's a fast evolving landscape. So I think in recent years, you see more participants in arbitration. Common law lawyers, but also civil lawyers as well. You see foreign lawyers in Hong Kong. But increasingly, you also see Hong Kong local lawyers participating in international arbitration. You see more mainland Chinese practitioners. It's not just solicitors doing arbitration work. We also see more barristers in Hong Kong. So what I hope HKIAC and I'm confident will continue to do is to play that role in bringing the community together and to build that up so that, you know, new generations, when they enter into international arbitration, they would feel that it's a very supportive, inclusive community and that we can all work together to continue the development of international arbitration and to make sure, you know, Hong Kong as a jurisdiction stays at the forefront. In all the innovative developments.

JP: Joanne, that's really great. Thank you so much for sharing all that. And as I say, we are going to be recording a podcast in the future with the head of the Beijing office. So we're looking forward to hearing more about that as well. That concludes our discussion of the HKIAC. I want to thank our guest, Joanne Lau, for her invaluable insights. And I want to thank you, the audience, for listening. If you have any questions, you should feel free to reach out to Reed Smith about today's podcast. And we look forward to having you tune in for future episodes as well. So thank you again, Joanne. And we look forward to hearing more in the future.

Joanne: Thank you so much for having me. I really enjoyed our conversation.

JP: Great. So did I. Thank you. And look forward to having you back.

Joanne: Thank you.

Outro: Arbitral Insights is a Reed Smith production. Our producers are Ali McCardell and Shannon Ryan. For more information about Reed Smith's global international arbitration practice, email arbitralinsights@reedsmith.com. To learn about the Reed Smith Arbitration Pricing Calculator, a first of its kind mobile app that forecasts the cost of arbitration around the world, search Arbitration Pricing Calculator on reedsmith.com or download for free through the Apple and Google Play app stores. You can find our podcast on podcast streaming platforms, reedsmith.com, and our social media accounts at Reed Smith LLP. 

Disclaimer: This podcast is provided for educational purposes. It does not constitute legal advice and is not intended to establish an attorney-client relationship, nor is it intended to suggest or establish standards of care applicable to particular lawyers in any given situation. Prior results do not guarantee a similar outcome. Any views, opinions, or comments made by any external guest speaker are not to be attributed to Reed Smith LLP or its individual lawyers. 

All rights reserved.

Transcript is auto-generated.