Commercial Litigation Trends in Hong Kong
As pandemic-era restrictions end and Hong Kong reopens fully, the city faces an array of fresh challenges across the legal sector, which remains a hub for dispute resolution in Asia.
In this article we hear from Charles Allen, partner at RPC and head of the firm’s Hong Kong office, as he expands on these trends and the concerns that face the city and its judiciary post-COVID. What can we expect to see from this jurisdiction in 2024 and beyond?
As we are now approaching the final few months of 2023, what trends have you seen in the Hong Kong commercial litigation space since January?
This year finally saw an end to COVID-19 restrictions in Hong Kong and a total reopening of the city as a major hub for international business. Hong Kong remains a popular choice for commercial parties to resolve their Asian disputes due to its robust common law judicial system and well-respected and independent judiciary.
The shockwaves from COVID-19, supply chain disruptions and the resulting global economic downturn can be seen in the number of new business disputes we have seen, along with an uptick in the number of debt and insolvency claims coming our way in 2023. Consequently, our disputes practice has remained busy despite the global economic downturn.
Similarly, the shift towards remote working, spurred on by the pandemic, has led our contentious employment practice to see an increase in cross-border disputes stemming from employees working abroad whilst under Hong Kong contracts of employment.
Cybersecurity remains another key area of concern for clients in Hong Kong. With a marked 50% increase in technology-related crime in Hong Kong in the first half of this year, we continue to see commercial litigation in this area. We have received instructions during 2023 in relation to cybersecurity breaches, recovery of crypto-assets and cyber-fraud. Crypto-asset recovery actions have been assisted by the Hong Kong Courts’ recognition of cryptocurrencies as property in the recent landmark case of Re Gatecoin Limited [2023] HKCFI 914.
Cybersecurity remains another key area of concern for clients in Hong Kong.
We expect crypto litigation to remain prevalent in Hong Kong, particularly as the city cautiously reopens itself to retail investment in cryptocurrencies through its brand-new regulatory scheme for virtual asset trading platforms overseen by the Securities and Futures Commission.
International arbitration has remained a highly popular dispute resolution tool in Hong Kong this year, as I cover in more detail below.
What other developments have you seen in your own practice this year? Do these trends fit a broader pattern of developments in commercial litigation from previous years?
A large proportion of the new commercial disputes instructions we have received have been to act as counsel in arbitrations. It is clear, in fact, that there has been an increase in the number of arbitrations, continuing the general trend in Hong Kong in which international arbitration is seen as the preferred method of resolving commercial disputes.
The increased flexibility and confidentiality that international arbitration offers makes it a popular option for commercial parties, and the Hong Kong International Arbitration Centre (HKIAC) remains one of the leading global arbitral institutions, receiving its highest number of filings in over a decade in 2022.
We continue to see truly pan-Asian and global disputes seated in Hong Kong under HKIAC and other rules, but with the benefit of various agreements with Mainland China, Hong Kong is particularly popular for disputes with a Mainland element. For example, this year parties to Hong Kong arbitrations have made regular use of the 2019 Hong Kong-Mainland China arrangement on interim measures, continuing the trend of last year in which parties sought to preserve $1.1 billion of assets or evidence in the Mainland in the HKIAC alone.
The extent of the continued growth of arbitration in Hong Kong, as well as in the breadth of the RPC’s commercial disputes practice, is evidenced by our engagement as counsel this year on arbitrations spanning a wide variety of industries, including the construction, insurance and financial services industries. In my personal capacity, I have also received an increased number of arbitral appointments this year. New matters include disputes concerning COVID-era PPE supply contracts and cryptocurrency.
The increase in arbitration may have led to a slight decrease in the number of commercial cases going through the courts in Hong Kong, although we continue to be busy in that arena too, especially in the professional indemnity space. On the other hand, we have seen a slight reduction in the number of enquiries relating to regulatory and competition disputes.
The increased flexibility and confidentiality that international arbitration offers makes it a popular option for commercial parties
What litigation-related advice would you offer to law firms and to corporations as we near 2024?
Key advice currently is to be patient when bringing claims in the Hong Kong courts. The courts have a very significant workload currently, meaning there are long waiting lists. For example, we recently had a case set down for a 11-day trial midway through 2025.
Notwithstanding the current burden on the judiciary, the quality of judicial decision-making in Hong Kong remains consistently high, and our courts remain an attractive venue for Asian disputes, particularly those involving Mainland Chinese parties. I would therefore encourage parties not to be deterred by the current backlog of cases from choosing the Hong Kong Courts as a venue for commercial disputes.
That said, parties requiring tighter control of timelines should consider including Hong Kong arbitration clauses in their commercial contracts. As I highlighted above, Hong Kong remains a global leader in this field.
Do you have any further observations to make about the evolution of commercial litigation in Hong Kong?
An arrangement that will significantly improve the ease of enforcement of Hong Kong judgments in Mainland China (and vice versa) is set to come into force shortly. The Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance is slated to come into force this year, and is intended to more closely integrate the enforcement regimes across the two jurisdictions. Amongst other things, enforcement will no longer require an exclusive jurisdiction clause in favour of mainland courts, and non-contractual civil judgments and criminal proceedings containing an order for the payment of money can now be enforced in Mainland China.
The Ordinance will also expand the scope of types of decision and the number of designated courts whose decisions can be enforced on the Mainland. This increased enforceability aims to make the Hong Kong courts an even more desirable and effective option, as parties will have a route to recoup damages and costs if they are successful in a claim against a Mainland party.
The heavy workload of senior members of the judiciary has recently attracted a lot of attention. In our view, the judiciary could benefit from a major recruitment drive, especially for the High Court bench. One possibility would be to have a closer look at senior solicitor advocates for potential appointment. They could either be appointed directly to the High Court bench, or judges from the District Court – a number of whom already sit as deputy High Court judges – could be permanently promoted, with their positions being backfilled by solicitor advocates interested in a judicial career.
In terms of procedure, the Hong Kong courts are currently in the process of improving their technological capabilities. Court e-filing began a staged roll-out in May 2022, although it is currently only available in personal injury and tax actions before the District Court. But this roll-out is set to be extended to other causes of action and courts. This should help to modernise the Hong Kong Court system in light of post-pandemic ways of working.
Charles Allen, Partner
3504-06, 35/F One Taikoo Place, 979 King’s Road, Quarry Bay, Hong Kong
Tel: +1 852 2216 7167
Charles Allen is the head of RPC’s Hong Kong office and leads its commercial disputes practice. Partner, solicitor advocate and dispute resolution lawyer, Charles leverages his 25+ years of experience of practice in the jurisdiction to advise clients on a wide range of commercial disputes across the Asia Pacific Region in court and arbitration proceedings. Charles also sits as an arbitrator in commercial matters and regularly sits as Chairman in the Solicitors Disciplinary Tribunal.
RPC is a full-service international law firm widely acclaimed as a disputes powerhouse. It is sought after by clients to act on a broad variety of disputes, including some of the most complex and high value on the market. Named Law Firm of the Year three times since 2014, RPC represents industry-leading clients in insurance, retail, media, tech, professional services and numerous other fields.
