The HKIAC’s arbitration caseload reached its highest level for more than a decade last year, according to the institution’s recently released 2022 case statistics. The figures underline Hong Kong’s continuing international appeal as well as its unique strengths as a seat for China-related disputes. They also show that Hong Kong’s arbitration third party funding regime, introduced in 2019, is now firmly established and increasingly popular with parties. This suggests that success-based fee arrangements, recently allowed in the jurisdiction, may also see rapid adoption.
Caseload and amounts in dispute
- The HKIAC received 344 new arbitration filings in 2022, up nearly 25% since 2021.
- Approximately 50% of those arbitrations arose from contracts signed in 2020 or later, underlining the continued appeal of Hong Kong as a leading international seat.
- Following a record-breaking year in 2020 and another very strong year in 2021, the total amount in dispute in all administered cases fell slightly to HK$36.7 billion (approximately US$4.7 billion), a reduction of 7% year-on-year.
- The total amount in dispute in all arbitration cases was HK$43.1 billion (approximately US$5.5 billion), a reduction of 21% year-on-year.
- The vast majority of administered arbitrations (93.4%) and a substantial majority of all arbitrations (83.1%) were international in nature, i.e. at least one party was not from Hong Kong.
- Parties from 63 jurisdictions participated (an increase of more than 50%).
- 16 different governing laws were applicable (an increase of nearly 25%), with Hong Kong law being the most common, followed by English law and Jersey law.
- There was a roughly equal split between arbitrations involving no parties from Mainland China and those involving at least one party from Mainland China, demonstrating Hong Kong’s unique status as a centre for the resolution of both China-related and international disputes.
- A significant factor in Hong Kong’s suitability for China-related disputes is the arrangement with the mainland on interim measures which came into force in 2019. This empowers mainland Chinese courts to order interim measures in support of Hong Kong-seated arbitrations, with Hong Kong being the only seat outside mainland China to benefit from such support.
- The HKIAC processed 26 applications to 14 different mainland courts under the arrangement in 2022, with a total of 86 applications having been processed since the arrangement was introduced.
- Out of 58 decisions of which the HKIAC is aware, 54 applications were granted (a success rate of 93%) and the total value of assets preserved was RMB 14.5 billion (approximately US$ 2.1 billion).
- These figures underline the readiness of mainland courts to preserve assets in support of Hong Kong-seated arbitrations, and demonstrate that access to interim relief under the arrangement can be a valuable tool in China-related disputes.
Innovation in funding and fee structures
- There was a more than twelve-fold increase in the number of disclosures of third party funding in arbitrations administered by the HKIAC (with 74 disclosures being made in 2022 compared with 6 in 2021).
- This represents a significant vote of confidence in Hong Kong’s arbitration third party funding regime, which first came into effect on 1 February 2019. The number of disclosures suggests that parties to a significant proportion of HKIAC arbitrations are now benefiting from access to third party funding. It is also an encouraging sign of the enthusiasm with which parties are likely to greet recent changes to the law allowing success-based fee arrangements for arbitrations and related proceedings.
- Taken together, the two regimes provide parties with a wide range of options for funding arbitrations and structuring tailored fee arrangements with their lawyers, making Hong Kong one of the most progressive seats in the world in these areas.
- Herbert Smith Freehills partner Kathryn Sanger co-chaired the sub-committee of the Law Reform Commission of Hong Kong which conducted a public consultation on the introduction of success-based fee arrangements. She is a member of the advisory bodies on third party funding for arbitration and success-based fee arrangements, and is one of the territory’s leading experts on alternative fee arrangements.
Diversity and inclusion
- 27% of arbitrator appointments made by the HKIAC in 2022 were of female arbitrators, up from 21.8% in 2021.
- This is the highest level since the HKIAC first started publishing female appointment figures, and is significantly higher than the proportion of female arbitrators designated by the parties (18.9%) and co-arbitrators (11.4%).
- The HKIAC therefore appears to be making progress in this area, although work remains to be done.
- The pivot to virtual hearings seen in 2020 and 2021 continued. The HKIAC hosted a total of 93 hearings in 2022. 81% were fully or partially virtual (up from 73% in 2021) and the remaining 19% were in-person. It remains to be seen whether this trend will continue following the loosening of Covid restrictions worldwide, although post-pandemic wisdom suggests that virtual hearings, in some form or other, are here to stay.
For more information, please contact Simon Chapman KC, Partner, Kathryn Sanger, Partner, Martin Wallace, Professional Support Consultant, or your usual Herbert Smith Freehills contact.