In August, 2019 — in Hong Kong for Worldwide Enterprise: Stick a Fork in It, I wrote how Hong Kong’s days as Asia’s main worldwide enterprise hub have been over and I made the next predictions:
- Firms that have been deciding between Hong Kong or Singapore for his or her Asian headquarters would select someplace aside from Hong Kong.
- Rising corporations with workplaces in Hong Kong and elsewhere in Asia would scale back their hiring in Hong Kong and enhance it elsewhere.
- Firms would transfer personnel from Hong Kong to their different Asian workplaces.
- Fewer contracts would specify Hong Kong because the venue for arbitration.
- Firms would transfer their Hong Kong financial institution accounts elsewhere.
- Vacationers would select stopovers aside from Hong Kong.
- Many Hong Kong residents would finally go away.
My predictions weren’t nice, however they have been calling issues as I noticed them in gentle of China’s growing authoritarianism on the mainland and its growing need to do the identical with Hong Kong. My submit drew appreciable warmth, nevertheless it was my prediction on the demise of Hong Kong as an arbitration alternative that notably rankled.
Then in 2022, I wrote The Loss of life of Hong Kong Arbitration, on how I used to be seeing “a speedy acceleration of contracts now not calling for arbitration in Hong Kong and why I feel international corporations could be smart to associate with this pattern.” That submit made the next two arguments for the dying of Hong Kong arbitration:
Hong Kong Arbitration Provisions Will Develop into More and more Uncommon
The attorneys at my regulation agency imagine Hong Kong arbitration provisions not often make sense. Most of the attorneys at different regulation companies with whom I’ve spoken imagine the identical. With extra attorneys now not believing in Hong Kong arbitration provisions, they’ll grow to be rarer, and it will speed up as shunning Hong Kong for arbitration turns into extra normalized. With fewer contracts calling for Hong Kong arbitration, we must always count on Hong Kong arbitrations to finally grow to be much less widespread as nicely.
Hong Kong Arbitration is an Pointless Danger
With all that’s occurring between China (which incorporates Hong Kong) and Taiwan and the growing and prone to proceed decoupling as between China and america, Canada, the EU, Australia, and Japan (and others), does anybody not imagine Hong Kong for arbitration might be riskier sooner or later than it’s at present?
And if you’re a lawyer and also you for some purpose don’t see growing Hong Kong dangers, why would you are taking the separate threat of selecting Hong Kong from time to time dealing with the potential wrath of your shopper 5 or ten years from now for not having chosen another arbitral physique in your contract, when there have been no good causes not to take action?
One can argue all one needs relating to the dangers of Hong Kong arbitration, however the mere undeniable fact that much more attorneys now view Hong Kong as a riskier arbitration venue than Singapore, New York, Geneva, Paris, and London, should be purpose sufficient NOT to draft your contracts with a Hong Kong arbitration provision.
I’m now able to proclaim Hong Kong isn’t any extra of a global arbitration middle than Shanghai or Beijing. All three cities will arbitrate circumstances involving Chinese language corporations, however none might be chosen to arbitrate contracts that don’t contain Chinese language corporations. In different phrases, Hong Kong shouldn’t be London, nor New York, nor Geneva. Most significantly, it’s not Singapore, which has taken a lot arbitration work from Hong Kong that each time Hong Kong arbitration is talked about for a contract, somebody normally mentions how that is the primary time in months (and even years) the place Hong Kong has even been talked about.
A current Nikkei Asia article, Multinationals turn away from Hong Kong for dispute resolution, nails how corporations and their attorneys are actually selecting arbitration places aside from Hong Kong. Per Nikkei, “Firms drafting new contracts are more and more selecting locations aside from Hong Kong as the situation for arbitration, a dozen attorneys and company advisers in Hong Kong, Singapore and London instructed Nikkei Asia.”
It then quotes a lawyer who represents Japanese manufacturing corporations on how his shoppers “exclude Hong Kong as a seat of arbitration in contract negotiations, citing attainable bias. After 2020, when the nationwide safety regulation was enacted, many Japanese corporations assume that Hong Kong is probably not a impartial place to arbitrate, in order that they go to Singapore.” One other lawyer with monetary companies shoppers stated that “Western corporations dismiss the Chinese language metropolis as an choice in negotiations. The notion is that Hong Kong’s judiciary is now a part of China, so Hong Kong is commonly rejected by international corporations when writing up arbitration contracts. One more lawyer put it extra bluntly: “People . . . merely don’t wish to arbitrate . . . in Hong Kong.” I used to be interviewed by one of many reporters on this story, and this appears like me and I feel it was me, nevertheless it was some time in the past and I’m simply not sure this was me.
A lot of attorneys famous how sentiment lags behind the statistics, “as arbitration circumstances usually come up from contracts drafted a number of years in the past.” However the statistics are actually catching up as Singapore reported that new case filings hit a historic excessive for the primary quarter of 2023. Not surprisingly, the “HKIAC [Hong Kong International Arbitration Center] didn’t present quarterly figures.
There may be completely no purpose to imagine the decline in Hong Kong’s desireabily as an arbitration location will do something however proceed. Hong Kong has grow to be “simply one other Chinese language metropolis”, and as such, it would by no means once more be a global arbitration middle.