India’s lower house of Parliament approves further amendments to the Indian Arbitration Act

As previously reported here, a draft Bill to amend the Arbitration and Conciliation Act 1996 (the “Act“) was approved by the Indian Cabinet on 7 March 2018 (the “Bill“). The Bill was listed as a part of the agenda for the monsoon session of the Indian Parliament and was passed by the Lower House on 10 August 2018, without any amendments. The text of the Bill can be found here.

The Law Minister has described the Bill as “a momentous and important legislation” aimed at making India “a hub of domestic and international arbitration”. The key features of the Bill are:

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HONG KONG: COURT OF FINAL APPEAL REJECTS POLICY ON DEPENDANT SPOUSAL VISAS FOR SAME-SEX COUPLES

A landmark decision of the Hong Kong Court of Final Appeal (CFA) has upheld the decision of the Court of Appeal (discussed here) that the Hong Kong Director of Immigration’s policy of refusing to grant dependant visas to same sex spouses is discriminatory and not justified (QT v Director of Immigration [2018] HKCFA 28). Continue reading

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Filed under Constitution, Employment, Evidence, Government proposals and consultations, Hong Kong, Judicial review, Jurisdiction, Remedies

HONG KONG HIGH COURT PROVIDES GUIDANCE ON THE ENFORCEMENT OF MAINLAND JUDGMENTS IN HONG KONG

The Hong Kong Court of First Instance (“CFI“) recently handed down judgment in Export-Import Bank of China v Taifeng Textile Group Co. Ltd and Another [2018] HKCFI 1840, which concerns the enforcement of a Mainland judgment in Hong Kong. The CFI provided guidance on various aspects of the enforcement exercise which serves as useful practice reminders for practitioners. Continue reading

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Filed under China, Hong Kong, Interim applications

Latest bank victory – Hong Kong High Court dismisses mis-selling claim

The Hong Kong Court of First Instance has recently handed down its judgment in Shine Grace Investment Ltd v. Citibank, N.A. and Another (HCCL 28/2008), a case relating to alleged mis-selling of equity accumulator contracts by Citibank.

In dismissing the plaintiff’s claim, Mr Justice Peter Ng applied the Hong Kong Court of Appeal’s (CA’s) reasoning in Chang Pui Yin & Ors v Bank of Singapore [2017] 4 HKLRD 458 that a bank-customer relationship alone does not without more give rise to a duty to advise on the part of the bank. Instead, whether the bank has assumed any such duty or legal responsibility will be assessed objectively, for instance through the contractual terms and any other relevant factual circumstances concerning the bank and its customers.

This is another welcome decision for banks, affirming the central importance of the contractual terms themselves. As a matter of contractual interpretation, the court rejected an argument that the SFC’s main code of conduct had been incorporated by the express terms of the relevant contractual documents. Apart from the contractual terms, the relative sophistication and character of the customer in question was also highly relevant to the court’s decision.

Going forward, financial institutions will no longer be able to rely on their contractual terms to exclude or limit liability in relation to investments entered into after 9 June 2017. Since that date, where a written client agreement is required under SFC regulations (ie, primarily where individual investors and inexperienced corporate investors are involved), a financial institution subject to the regulations is required to include a mandatory suitability clause in the agreement, and may not derogate from this requirement by way of any other contractual arrangement. In the longer term, this is likely to mean fewer mis-selling cases along the lines of Shine Grace. Continue reading

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Filed under Contract, Financial Services Regulation, Hong Kong

UK Supreme Court provides clear guidance on bank’s liability to undisclosed third parties for credit references

The UK Supreme Court (“UKSC“) has handed down its much anticipated judgment in NB Banca Nazionale del Lavoro SPA v Playboy Club [2018] UKSC 43, ruling that a bank owed no duty of care to undisclosed third parties who ultimately relied on their references.

In this instance, a bank had provided a credit reference for its client for the purposes of applying a cheque cashing facility at the London Playboy Club. The Club did not request for the reference in its own name, but through an associated company, to avoid disclosing the purpose of the reference. Subsequently, the cheques that were drawn by the client in the Club’s favour were returned unpaid, and the Club suffered losses as a result. It was common ground that only the Club had an interest, given that other parties, including the associated company suffered no losses.

The issue was whether the bank owed any duty of care to the Club, which was an undisclosed third-party. The UKSC ruled in the negative, and it is likely that the Hong Kong Courts will adopt the same approach in similar cases. See our UK banking litigation e-bulletin for a more detailed discussion: https://sites-herbertsmithfreehills.vuturevx.com/34/17764/compose-email/supreme-court-provides-clear-guidance-on-liability-to-third-parties-for-bankers–references.asp

 

Gareth Thomas
Gareth Thomas
Partner, Head of commercial litigation, Hong Kong
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Dominic Geiser
Dominic Geiser
Partner, Hong Kong
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Delhi High Court agrees to enforce CIETAC arbitral award against Indian company despite CIETAC split

In its decision of 4 July 2018, the Delhi High Court (“Court“) has agreed to enforce a China International Economic and Trade Arbitration Commission (CIETAC) award against an Indian company, despite the award debtor’s arguments that the dispute should have been referred to and administrated by the now independent Shanghai International Arbitration Centre (SHIAC), which until mid-2012 was the Shanghai Sub-Commission of CIETAC (“Shanghai Sub-Commission“). The Court’s decision is interesting not only in discussing the 2012 split of CIETAC, but also because it may provide some guidance on how Indian courts may, in future, deal with structural changes to other arbitral institutions, such as the very recent termination of the joint venture between LCIA and Mauritius (the LCIA-MIAC Arbitration Centre), or the Shenzhen Court of International Arbitration (SCIETAC/SCIA) and the Shenzhen Arbitration Commission (SAC) merger at the beginning of 2018. Last but not least, this decision reinforces a pro-enforcement approach of Indian courts in relation to foreign arbitral awards.

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HONG KONG: UNLAWFUL DISMISSAL REINSTATEMENT RIGHTS FROM OCTOBER

Amendments to the Employment Ordinance (“EO“) which strengthen the Labour Tribunal’s (“LT“) powers to make an order for reinstatement or re-engagement where an employee has been unreasonably and unlawfully dismissed have been passed and are to take effect from 19 October 2018. This represents a move away from the current position where both the employer and employee must agree to reinstatement or re-engagement. We anticipate that applications for reinstatement will increase; including as a strategy by employees seeking to leverage greater settlement payments from employers unwilling to take them back.

Strengthening the power of the LT

Previously, the LT was only able to make an order for reinstatement or re-engagement with the consent of both the employer and the employee. From October, where the employee has been found to have been unreasonably and unlawfully dismissed under section 32A(1)(c) of the EO (“Unlawful Dismissal”), the LT can order reinstatement or re-engagement without the employer’s agreement. Unlawful Dismissal will occur where an employee is dismissed without a valid reason and one or more of the following is present:

  • the employee is pregnant or on statutory maternity leave;
  • the employee is on statutory sick leave or is suffering from a work-related illness or injury where an assessment of compensation due under the Employees’ Compensation Ordinance is pending;
  • the dismissal is due to the employee being a member or officer of a trade union or having engaged in lawful trade union activities; or
  • the dismissal is due to the employee having given or agreed to give evidence in relation to:
    • an alleged breach of the EO, the Factories and Industrial Undertakings Ordinance or any work safety obligations; or
    • a workplace accident.

In all other cases, an order for reinstatement or re-engagement will still require the consent of both parties.

Additional financial compensation and criminal liability

In the event the employer fails to comply with an order for reinstatement or re-engagement, they must pay compensation to the employee of the lesser of HK$72,500 or three times the employee’s average monthly wages.

If it later becomes no longer ‘reasonably practicable’ for an employer to re-instate or re-engage the individual, it can apply for relief against the payment of compensation provided that it can show that the circumstances making compliance ‘no longer reasonably practicable’ are ‘attributable to the employee’, or due to a ‘change in circumstances beyond the employer’s control’. This application for relief must be made within seven days from when the reinstatement or reengagement was to occur.

Non-compliance with an order for reinstatement or re-engagement is not itself an offence, however, if the employer then fails to pay the compensation due wilfully and without reasonable excuse, they will be guilty of a criminal offence and may be subject to fine of up to HK$350,000 and three years’ imprisonment.

Retrospective effect

The amendments to the EO will not have retrospective effect and will only apply to dismissals (or notice of dismissals) where the employee was informed of the dismissal after 19 October 2018.

Key takeaways

As noted above, the ability for the LT to order reinstatement without the consent of the parties is limited to Unlawful Dismissal cases. However, it may be that, where the relationship between the employer and employee has broken down, former employees may pursue applications for reinstatement as leverage in settlement discussions. Accordingly, to avoid increased risks of claims and the time and costs associated with responding to them, employers must take additional care when dismissing employees to ensure that they have a valid reason for doing so and the termination cannot be argue to be an Unlawful Dismissal.

Gareth Thomas
Gareth Thomas
Partner, Head of commercial litigation, Hong Kong
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+852 2101 4025
Tess Lumsdaine
Tess Lumsdaine
Registered Foreign Lawyer (New South Wales)
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+852 2101 4122

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Filed under ADR, Employment, Hong Kong, Jurisdiction, Mediation, Mediation (General), Miscellaneous, Remedies

Admissibility of foreign judicial documents as evidence in subsequent civil proceeding

The Hong Kong Court of First Instance recently in Capital Century Textile Co Ltd v Li Dianxiao [2018] HKEC 1429 considered the question in relation to the admission of a PRC criminal judgment as evidence in Hong Kong civil proceedings. This article discusses and compares the position in Hong Kong and in the Mainland China.

Hong Kong

It is a well-established rule of evidence in common law jurisdictions that judicial and factual findings in earlier proceedings are not admissible for use in subsequent ones. This is known as the Hollington principle, which has long been a source of controversy for its inflexibility. The principle has been modified by s62 of the Evidence Ordinance in Hong Kong to allow the admission of domestic criminal convictions as evidence in subsequent civil proceedings.

In Capital Century Textile Co Ltd v Li Dianxiao [2018] HKEC 1429, Capital Century sought to adduce and rely on a PRC judgment in criminal proceedings against Li in the 2nd Intermediate People’s Court in Beijing, as evidence to undermine the defence of Li in the Hong Kong civil proceedings. The Hong Kong Court of First Instance was required to determine the admissibility of the PRC judgment. In this case, the judge reaffirmed that the application of the Hollington principle and its importance to ensuring the right to a fair trial.

Essentially, the right to a fair trial requires an impartial and independent judge to formulate his own opinions based on the admissible evidence and the submissions made to him. He should not be influenced by the opinion of someone else. If findings of fact and inferences made by another judge were admitted in later proceedings, there is a risk that the subsequent decision-maker would be influenced by the opinion of the earlier adjudicator. This principle is only subject to limited exceptions of opinions of scientific and expert witnesses who might be better placed to evaluate a specialist area than the judge, and where the findings are binding on other courts by reason of “estoppel per rem judiciatam” (i.e. a doctrine which bars a party from litigating a specific issue that has been decided in prior separate proceedings).

At the same time, it is also important to note that the Hollington principle does not impose a blanket ban on admitting earlier judicial findings in subsequent proceedings. The admissibility question is a fact-sensitive one and should be examined with the purpose of the principle in mind. For example, if the judgment sought to be adduced only summarizes and report factual evidence presented in that court, without any element of judicial judgment and opinion, there is no risk of influencing the subsequent adjudicator with another’s opinion. In the circumstances, in Capital Century, the court delineated different sections in the PRC judgment in its analysis. In doing so, it held admissible the section which merely summarized the factual evidence presented in the 2nd Intermediate People’s Court in Beijing, and held inadmissible the evidence which engaged the opinion of the PRC court – hence triggering the operation of the Hollington principle.

Mainland China

Courts in Mainland China take a similar approach to the admissibility of foreign judicial documents in the PRC court proceedings. “Foreign judicial documents” refer to judgments and arbitration awards rendered outside the territory of Mainland China. Judgments and awards rendered in Hong Kong are considered foreign judicial documents for this purpose.

There is no specific rule regarding whether Hong Kong judgments or awards can be directly admitted as evidence by the Mainland courts.

Under PRC law, a foreign judgment or foreign arbitral award could be recognised by the Mainland courts pursuant to a reciprocal judgement enforcement treaty or the New York Convention. According to the arrangement for mutual recognition and enforcement of civil and commercial judgments between Mainland China and Hong Kong,[1] subject to certain conditions, Hong Kong judgments can be recognised in the Intermediate People’s Court at the place of domicile or ordinary residence of the party against whom the recognition application is filed, or the place where the property of that party is situated.

Alternatively, a foreign judgement could be admitted as evidence in the same way as a normal documentary evidence created outside of China, by being notarised, authenticated, or certified through procedures stipulated in the relevant treaty concluded between the PRC and that foreign country.[2] Documentary evidence created in Hong Kong would need to be (i) attested by a China-Appointed Attesting Officer entrusted by the Mainland[3]; and then (ii) examined and transmitted by the China Legal Service (H.K.) Ltd, with its seal with specified usage and receiving court. In 2015, the Supreme People’s Court further clarified that notarisation, authentication or certification procedures are not necessarily the prerequisite of courts’ assessment of the factual findings unless such evidence concerns the parties’ identification.[4]

However, factual findings contained in foreign judicial documents are inadmissible in the Mainland courts. For all the evidence developed outside of Mainland China, the Mainland courts are required to form their own views on the admissibility after examining the factual evidence referred to in the factual findings of the foreign judicial documents, and taking into account the parties’ views on such factual evidence. Therefore, unless consented to by both parties, factual findings in foreign judicial documents would only be admitted after the Mainland courts conduct their independent examination and assessment of evidence.

Similarly, judicial findings, opinions and comments of foreign courts that are prepared by foreign judges based on their understanding of procedural and substantive laws of that country or region are also inadmissible in the Mainland court.

Conclusion

As cross-border commercial activities increase, there has been an increasing amount of disputes involving proceedings in both the Mainland and Hong Kong. The admissibility of Hong Kong judicial documents or judgments in support of Mainland proceedings (and vice versa) is clearly an important aspect in the overall strategy.

 


[1] Arrangement of the Supreme People’s Court between the Courts of the Mainland and the Hong Kong Special Administrative Region on Mutual Recognition and Enforcement of Judgments of Civil and Commercial Cases under the Jurisdiction as Agreed to by the Parties Concerned (Fa Shi [2008] No. 9)

[2] Article 11 of the Provisions of the Supreme People’s Court on Evidence in Civil Proceedings (Fa Shi [2001] No.33)

[3] Management Measures of China-Appointed Attesting Officer (Hong Kong) (2002) (Order No. 69, Ministry of Justice)

[4] Supreme People’s Court’s Minutes of the Second National Working Conference on the Trial of Foreign-Related Commercial and Maritime Cases (Fa Fa [2005]) No.26)

 

Dominic Geiser
Dominic Geiser
Partner, dispute resolution, Hong Kong
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Helen Tang
Helen Tang
Partner, dispute resolution, Shanghai
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Rachel Yu
Rachel Yu
Senior Associate, dispute resolution, Hong Kong
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Celine Wang
Celine Wang
Senior Associate, dispute resolution, Shanghai
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Weina Ye
Weina Ye
Senior Associate, dispute resolution, Shanghai
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Filed under China, Evidence, Hong Kong

INCREASE IN CIVIL JURISDICTIONAL LIMITS FOR DISTRICT COURT AND SMALL CLAIMS TRIBUNAL IN HONG KONG

On 27 June 2018, the Legislative Council passed resolutions to increase the civil jurisdictional limits of both the District Court (DC) and the Small Claims Tribunal (SCT). Subject to completion of legislative scrutiny and negative vetting, the amendments are expected to come into effect on 3 December 2018.

The primary aim behind these changes is to allow better distribution of cases among the Court of First Instance (CFI), the DC and the SCT, such that the CFI can concentrate on handling cases with greater complexity or involving higher claim amounts. Apart from easing the caseload in the CFI, the changes are also expected to lower legal costs for parties whose cases may be brought to the DC or the SCT, where legal proceedings are generally less costly.

District Court

The changes raise the financial limit of the DC from:

  • HK$1 million to HK$3 million, in respect of the DC’s general jurisdiction and equity jurisdiction where the proceedings do not involve or relate to land;
  • HK$3 million to HK$7 million in respect of the DC’s equity jurisdiction for claims wholly involving or relating to land; and
  • HK$240,000 to HK$320,000 in respect of the DC’s jurisdiction for proceedings involving recovery of land or relating to the title to an interest in land, in terms of annual rent, rateable value or annual value of the land.

Small Claims Tribunal

The SCT will have jurisdiction over claims up to HK$75,000, as opposed to the current upper limit of HK$50,000. Apart from increasing the jurisdictional limit, the claim amounts corresponding to fees will also be adjusted in the Small Claims Tribunal (Fees) Rules. Further details are set out in summary table (b) below. Continue reading

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Filed under Hong Kong, Jurisdiction

New convention on the enforcement of mediation settlement agreements approved

On 26 June, at the 51st session of UNCITRAL, final drafts for a Convention on the Enforcement of Mediation Settlements and corresponding Model Law were approved. This paves the way for adoption by UNCITRAL’s Commission later this year. It is understood that the Convention will be called the Singapore Mediation Convention and will be signed at a ceremony in Singapore in 2019. The Convention must then be ratified by at least three member states to come into force.

Approval of the drafts represents the culmination of several years’ work by UNCITRAL Working Group II. Its aim has been to implement an international regime for the enforcement of mediated settlements broadly akin to the 1958 New York Convention for the enforcement of arbitral awards. This will increase the attraction of mediation for international parties, with all its well-known cost efficiencies and other potential benefits.

The initiative stems from a concern that the use of mediation to resolve international disputes has been impeded by the fact that, unless a  settlement reached via mediation is in the context of a pending arbitration and can be converted into an arbitral award,  parties can only enforce it in the same way as any other contract. In an international context, this can involve potentially difficult (and usually lengthy) processes to obtain a court judgment and then enforce it in a foreign jurisdiction.

Whilst problems of enforcement of mediated settlements have been sparse in practice (certainly compared to court judgments or arbitral awards), the Convention will no doubt add credibility to mediation as an international dispute resolution process. It will also make mediation particularly well suited to cross-border disputes.  At the Global Pound Conference series, delegates in Asia, Africa, the Middle East and Latin America all revealed a desire for legislation or conventions to promote the recognition and enforcement of settlements. This may reflect the varied and complex legal and political frameworks in these regions. Many of those surveyed manage businesses and disputes across several borders, where legal regimes can vary from stable, tested and familiar to those that are only a decade old. The call for regulation and certainty is even more critical as the pace of development intensifies through new trade treaties and investment, and massive initiatives such as the Belt and Road. The Convention and Model Law look set to respond well to this demand and may hail an inflection point for the use of mediation in these developing regions.

Materials approved on 26 June have not yet been made available on the relevant UNCITRAL webpage.  However they will in due course be posted on this page, which currently contains the most recent drafts (from February 2018) together with other details of the initiative.

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Filed under ADR, Mediation (General), Singapore