Understand Your Rights. Solve Your Legal Problems
In this article, independent arbitrator Joe Liu explores these developments and more unique facets of dispute resolution in Hong Kong.
Arbitrations seated in Hong Kong are governed by the Hong Kong Arbitration Ordinance (Cap 609) (‘Ordinance’). The Ordinance provides a modern and sophisticated legal framework for arbitration that is based on the latest version of the UNCITRAL Model Law and has been updated regularly to reflect international best practice.
The Ordinance contains 112 articles and four schedules. These provisions deal comprehensively with matters from the commencement of an arbitration to the issuance of the arbitral award, and limits court interference to areas expressly provided for in the Ordinance.
The Ordinance adopts a unitary regime that applies to both international and domestic arbitrations. The Hong Kong International Arbitration Centre (‘HKIAC’) is the default appointing authority under the Ordinance. Unless the parties have designated another appointing authority, HKIAC determines the number of arbitrators and appoints arbitrators or mediators in the circumstances specified in the Ordinance. The Ordinance also includes express provisions on the confidentiality of arbitration and related court proceedings, the enforceability of emergency arbitrator relief, the use of third-party funding in eligible proceedings, the arbitrability of intellectual property disputes, and several opt-in provisions that permit greater involvement of the Hong Kong courts.
There have been several important developments regarding Hong Kong arbitration in recent years. I will highlight three developments in relation to the availability of interim relief from Mainland Chinese courts in Hong Kong arbitration, the mutual enforcement of arbitral awards between Hong Kong and Mainland China, and outcome-related fee structures for arbitration in Hong Kong.
By virtue of the interim measures arrangement between Hong Kong and Mainland China that came into force on 1 October 2019 (‘Interim Measures Arrangement’), Hong Kong has become the first jurisdiction outside of Mainland China in which parties to eligible arbitral proceedings may seek interim relief from Mainland Chinese courts. The Interim Measures Arrangement is a strategically and practically important mechanism that can be used to preserve assets, evidence or conduct of the counterparty in Mainland China. This was previously only possible in respect of arbitration on the Mainland but has now been made available to arbitration in Hong Kong. The Interim Measures Arrangement has generally worked well in practice. At the time of this article, the HKIAC has processed 82 applications made to 26 different Mainland courts and seen 52 orders made in respect of those applications. 48 of those orders granted the applications preserving assets valued approximately $2.1 billion in total.
There have been several important developments regarding Hong Kong arbitration in recent years.
The legal framework governing the mutual recognition and enforcement of arbitral awards between Hong Kong and Mainland China has also been updated. On 19 May 2021, the supplemental arrangement on mutual enforcement of awards between Hong Kong and Mainland China (‘Supplemental Enforcement Arrangement’) fully came into effect. The Supplemental Enforcement Arrangement introduces several clarifications and amendments to enhance the previous enforcement regime. For example, under the enhanced regime, a successful party in an arbitration may pursue enforcement proceedings in Hong Kong and Mainland China simultaneously, provided that the total amount recovered does not exceed the amount determined in the award. A party may also seek interim relief from the enforcement court after the issuance of the award. The Supplemental Enforcement Arrangement, together with the Interim Measures Arrangement, empowers Mainland courts to issue interim relief in support of all stages of a Hong Kong arbitration.
Another significant development is the enactment of legislative amendments to allow outcome-related fee structures (‘ORFS’) in arbitration and related proceedings in Hong Kong. These amendments offer greater funding flexibility for users of arbitration by legalising three types of ORFSs, namely conditional fee agreements, damages-based agreements and hybrid damages-based agreements, with appropriate safeguards. The amendments are expected to come into force later this year and further details of the new OFRS regime will be fleshed out by subsidiary legislation. Hong Kong’s OFRS regime complements its third-party funding regime, which has been fully effective since February 2019 and enables Hong Kong to offer a wide range of funding options to users of arbitration.
I have been involved in Hong Kong arbitration as counsel, tribunal secretary, case management supervisor at the HKIAC and in other roles. My overall experience is that arbitration in Hong Kong is a highly flexible process with multiple procedural options for managing and streamlining the proceedings. The length and costs of a Hong Kong arbitration depend largely on your use of counsel, choice of arbitrator, management of legal fees, and adoption of proper strategy, procedural mechanisms, technology and funding options for the process. Some arbitrators and counsel tend to run all arbitral proceedings in a particular manner. I think it is important for arbitrators and counsel to think innovatively and devise the process for determining issues in a manner that is most suitable and cost-saving for each case.
Hong Kong has become the first jurisdiction outside of Mainland China in which parties to eligible arbitral proceedings may seek interim relief from Mainland Chinese courts.
I have set up my own practice as an independent arbitrator and I am available for appointments in arbitrations seated in any jurisdictions and under any arbitration rules. I have experience in sale of goods, commodity, corporate, investment, banking, energy and technology disputes under a variety of governing laws, including Chinese, English, Hong Kong, Indian, Singapore and New York laws. I am also available for appointments in domain name disputes and have experience in proceedings under the Uniform Domain Name Dispute Resolution Policy and the CNNIC Domain Name Dispute Resolution Policy. I am able to conduct proceedings in English, Chinese or both languages.
My past experience in arbitral institutions and private practice give me the skills and confidence to work as a full-time arbitrator. During my time at HKIAC, I gained insights on the institutional rules and practice, oversaw the administration of a large amount of cases, worked with numerous arbitrators including some of the world’s most eminent arbitrators, and observed how they worked and determined cases. Similarly, my experience at the Singapore International Arbitration Centre (‘SIAC’) was also valuable as I was closely involved in case management and dealt with procedural matters on a daily basis. In addition, I worked on multiple complex and high-value arbitrations at Allen & Overy. Those experiences honed my skills to think, write and speak as a lawyer who is able to run cases in an efficient, competent and professional manner.
I believe the combination of my institutional and private practice experiences in multiple jurisdictions and my language skills will be beneficial to my arbitrator career.
Joe Liu, Independent Arbitrator
12/F, One Peking, 1 Peking Road, Tsim Sha Tsui, Hong Kong
Joe Liu is an independent arbitrator and domain name panelist with a wealth of experience in international dispute resolution. He is able to draw upon insights gained from work in a global law firm and several major arbitral institutions, including experiences gained as the Acting Secretary-General and Deputy Secretary-General at the Hong Kong International Arbitration Centre (HKIAC). Able to conduct proceedings in English, Cantonese or Mandarin, Joe has particular expertise in representing parties in high-value and complex disputes.
Mediator Lidia Casselman examines these benefits more closely in this article, with a focus on the legal disputes most commonly encountered by the elderly, and shares the philosophy that guides her own practice of elder mediation.
As per the Mediators’ Institute of Ireland, the institution of which I am a member, “Mediation is a process in which an independent, neutral mediator assists two or more disputing parties in resolving the discord in a collaborative, consensual manner.”
An ‘elder’ is generally considered to be a person above the age of 60. Therefore, elder mediation is the process of mediation in which an elder could be either a part or a beneficiary.
Elder mediation can unfold over a whole array of causes. However, over 90% of cases concern family issues. Generally, this is more likely due to their dependent nature within a family. Issues could arise from different life circumstances, such as choosing a nursing home, disputes over care-giving responsibilities or disagreements regarding future financial planning, but it can also concern more severe matters like elder neglect or abuse. This is where elder mediation overlaps with family law.
They overlap mainly in purpose – to assure fairness and protection of an elderly person’s rights – but they differ in their approaches. While family law creates a clear and fast way of sorting disputes, it can often be rigid, neglectful of feelings and emotions, and thus imposing a third-party position that cannot be ignored without consequences; a fact that can ruin lives and relationships. By contrast, mediation creates a safer environment that will eventually lead to less ill will due to its more personal and empowering approach.
There is no conflict in which mediation cannot play a significant part, whenever the parties involved are willing. Any conflict implies hard feelings, sentiments of mistrust, hate and, most of all, fear. The most common issues we see solved using mediation are conflicts within families regarding elder care, such as personal preferences, the type of medical approach that should be followed, mistreatment, abuse, and financial pressure related to nursing care.
We also see conflicts between a nursing home and the family of a resident, or conflicts between staff of nursing homes and their elderly victims. Some nursing homes see the mediator as part of the ’family’ and mediation is a more advantageous and financially viable tool of sorting these internal and external disputes. Other conflicts refer to issues between an elderly person and friends or neighbours, former employers, health care facilities or other governmental institutions, just to name a few.
Elder mediation can unfold over a whole array of causes. However, over 90% of cases concern family issues.
The common denominator of all conflicts is a loss or the threat of a loss. This loss can have a material form, like a financial loss or the loss of material good: a car, a house, etc. In other cases, it may be an immaterial loss, such as loss of a right or of an advantage. Every loss is accompanied by a deep sense of injustice and fear. The elderly are a vulnerable category and, although most of them do not show it or verbalise it, they surely feel it.
Mediation, as a process, offers a very human approach to both the person and the issue. We start by addressing the feelings and emotions of the client and, once the client feels understood and accepted, the process progresses towards the brainstorming part of the mediation that will more likely conclude in a practical solution that will deliberately benefit all parties involved. The mediation process gives the subject the confidence they need in order to find within them a desire and strength for a solution.
What makes the mediation process unique is its complement of features: it is a voluntary process that is private, confidential, informal and flexible, with no time limits or rules on how the mediation should be conducted. Each mediation can and should be tailored to meet the parties’ needs. The mediator is simply a facilitator, assisting the parties in reaching an agreement or settlement, while remaining independent and impartial throughout the process.
The typical mediation process involves five parts:
The most common pitfall of the mediation process lies in its own nature. Being a voluntary process, each party can refuse to negotiate. The whole process can end abruptly and suddenly at any given point during the lengthy and ongoing mediation operation if one party leaves or refuses to cooperate any further. This can generate frustration and a deep sense of abandonment that can worsen the conflict.
The elderly are a vulnerable category and, although most of them do not show it or verbalise it, they surely feel it.
Meanwhile, mediators need to be aware of their impartial role. Human nature tends to be generally subjective and a mediator might find themselves sympathising with one party to the detriment of the other. This is even more likely when one of the parties is an elder, as one tends to favour the more vulnerable side. The mediator must keep their objectiveness in check at all times and at all costs.
My personal journey as a mediator started at the end of 2017. Although mediation had been a part of the general framework governing separations and divorces in Ireland since 1989, it was only in 2017 when mediation was given special recognition in Ireland's civil justice system by the Mediation Act, enacted on 2 October 2017 and applied from 1 January 2018. This act states the obligation of being offered the possibility of using mediation as a resolution for a dispute, while also regulating its process and features.
I consider myself lucky to be part of the first generation of mediators trained within this statute. Due to the high rate of success (somewhere between 75% and 90%) I could witness how mediation's popularity increased and started being used in different areas, including elder mediation. Due to the vulnerable nature of the subject, the elderly need to be heard, understood and empowered to choose the outcome of the conflict they are part of. Mediation is the enabling process that does exactly that.
Elder mediation is a growing practice area. In most countries, mediation – including elder mediation – is now seen as a more human approach to solving conflicts, and which is clearly easing a general overload of litigation. Judges are recommending mediation at the beginning of the litigation process and solicitors are required by law to advise clients to consider mediation to resolve the dispute. While some US states do recommend mediation, other states are now mandating a form of alternative dispute resolution prior to any form of litigation (from my own experience, South Carolina requires this for the circuit and family courts). I expect this empowering approach to soon spread globally because of its incontestable benefits. Ideally, people will soon prefer mediation due to its successful human approach and will even recommend it. There is no better advertisement than a happy customer.
Human nature tends to be generally subjective and a mediator might find themselves sympathising with one party to the detriment of the other.
In 2016 when I completed my Healthcare Supervisory Management degree at Kinsale College, County Cork, I really wanted to get an insight of the managerial side of things, but one cannot have healthcare and management without touching upon the subject of the vulnerable elderly. I realised then that they represented a large category of the population that often struggles with far more issues that we could imagine.
Personally, I have always had a soft spot regarding the elderly due to my strong relationship with my grandmother. I grasped an indescribable love that only a grandparent can feel and provide. But the elderly are not just the stereotypical image of a peaceful person rocking on a chair. They are not spared from troubles and conflicts – in fact, they might even have more problems and challenges that younger people could imagine. I realised then that mediation could be the most caring approach for an elderly person to solve any conflict they might face. I knew I could be good at it and that was my starting point.
Professionally, throughout my legal career I gathered a fair knowledge of the litigation process with all of its advantages and disadvantages. As a mediator I learned the absolute advantages of the mediation process. I find mediation a more human, elegant and empowering way of resolving conflicts that gives people the opportunity to be empathetic during the process.
Mediation is my way of helping people to deal with conflict. Conflict is, unfortunately, an eminent part of life. We wish it was not, but we know it is. We cannot hide from conflict and it is sad that most people were never taught how to deal with it. Children rarely have a class in school about dealing with conflict, and sometimes parents or families may not present a good example of conflict management. Unmanaged conflicts affect people’s quality of life and even ruin one’s mental or physical health. To solve them requires a combination of counselling with an outside purpose.
Further, I strongly believe that we are each born in this world with a set of innate given talents and abilities. We are each uniquely gifted, and that is a great thing, as all talents are needed in a healthy society. These gifts can be used to help us make a living, but also to the benefit of others. I find fulfilment in helping others, in realising that I can have an impact in changing lives for the better. Nothing beats the feeling of seeing people shaking hands and being able to look each other in the eye again after solving a conflict. I will continue to improve myself at helping people that way.
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Alan Lakein once said: “Planning is bringing the future into the present, so that you can do something about it now.” Sometimes we make plans, other times the plans come to us. One of the beneficial consequences of the COVID-19 pandemic (trying to keep a positive approach) was that people were encouraged and successfully adapted to the use of online communication and remote work, and mediation was no exception.
Beginning in 2019 I was given the opportunity to travel to the US more often, and a few months ago I moved to South Carolina temporarily. While I am still working remotely with and for my Irish clients, one of my plans for the autumn of 2022 is to become certified as a mediator in South Carolina. It could be a lengthy process, but success is the result of small steps taken with purpose. At the moment I try to make myself familiar with the US culture and legal system in order to acquire the knowledge and skills required to successfully assist US clients through mediation.
I recently became part of the Mediation and Meeting Center in Charleston that offers pro-bono mediation for clients within the low income category while launching my own mediation practice, Access Mediation Services in Myrtle Beach.
As already mentioned, I will continue to serve my Irish clients and the Romanian community in Ireland through online mediation as one of my continual goals. As Albert Einstein said: “If you want to live a happy life, tie it to a goal.”
Lidia Casselman, Legal Consultant/Mediator/Commissioner for Oaths
Access Mediation Services LLC (USA)
Ard Na Clug, Bellmount, Innishannon, Co. Cork, Ireland
300 Wembly Way, Murrells Inlet, South Carolina, USA
Tel: +353 86-847-4598 (Ireland) | +1 843-485-2562 (USA)
Lidia Casselman was born in Romania, graduating from the Alexandru Ioan Cuza Police Academy of Bucharest in 2000 with a major in Law. She would then move to Ireland in 2004, where she worked in business management in both Dublin and Cork for 12 years. In 2016 she began work as a legal executive in Cork, specialising in Irish immigration and, later, Probate. She soon became a member of the Teaching Council of Ireland as a qualified law teacher for third-level education.
As a bilingual Romanian professional in Ireland, Lidia has often worked as an interpreter for Access Trnslation in the courts of law, the Irish police and other institutions. In 2017 she was appointed as a Commissioner for Oaths by the Supreme Court of Ireland and graduated Griffith College’s Professional Law Faculty with a Certificate in Mediation. In 2018 she became a full member of the Mediators’ Institute of Ireland with qualification in all areas, including family law. Since then she has been the only mediator in Ireland able to provide mediation services in both English and Romanian, a skill which she has used to serve the sizeable Romanian-speaking Irish community.
In this article we hear from Ralf Lindbäck, managing counsel at Wärtsilä Corporation, who shares his thoughts on this emergent ADR landscape.
Several aspects come to my mind. The resolution of cross-border disputes always involves multiple stakeholders. Procedural questions arise even if the parties have agreed on the dispute resolution roadmap and which path to take. Counter-claims, temporary injunctions enforcement issues may complicate the dispute process even further. There are cases in which dispute resolution processes intended to solve problems instead create them.
Increased stakeholder demands for transparency are certainly becoming an area legal counsel needs to consider and prepare for.
Companies are required to report and disclose how their business activities impact the economy, the environment and the society they operate in and how their business – including risk, claims and dispute management – contributes to sustainability. Expectations for transparent and responsible business conduct are also outlined in intergovernmental instruments.
Generally, according to sustainability reporting standards, a company must disclose management processes (including concepts and tools) which identify, assess, prevent and mitigate existing and potential adverse material topics that impact its business value chain, including supplier and customer relationships. Threatening disputes as well as cases in litigation or arbitration may adversely impact a company’s value chain. Interesting and difficult questions arise. By what means and to what extent can a company ‘outsource’ a future outcome of a dispute which, at the end of the day, may adversely and materially affect the company’s commitment to responsible business conduct and long-term value creation?
Increased stakeholder demands for transparency are certainly becoming an area legal counsel needs to consider and prepare for.
There is this rapidly emerging new dimension in international dispute resolution. Climate change, pandemics and geopolitical crisis shape our business environment. The role of business in society has changed. The world expects the private sector to step up.
We need to rethink and change the way we manage, design and control cross-border dispute resolution processes. The way we face and engage in international disputes will become very important in the future.
In parallel with traditional dispute resolution processes, there will be more focus on conflict avoidance, early case assessments and modelling, with a case-specific process design aiming at early dispute resolution to preserve long-term value creation. Our goal should be to raise the level and ambition of collaborative dispute resolution, like mediation, between contracting parties and stakeholders.
A structured claims and dispute management process aligned with the company’s business culture and strategy is a good starting point. It supports risk management and decision-making. Depending on a company’s business operations and activities, the claims and dispute management process includes key elements such as:
Such a claims and dispute management process should be flexible and encourage continuous improvements of the process itself, as well as concepts and tools which include the use of legal tech and software solutions.
This is a very good question, to which I do not have an answer. As said, business in society is changing. There is a fast-growing number of companies in different industries (including production, retail, finance, insurance etc.) who are committed to becoming net-positive.
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A net-positive business approach recognises that, besides reducing negative environmental impacts, a company enhances the positive impacts of its individual and collective business activities – that is, environmentally, socially and economically. There is a strong emphasis on creating long-term value for the company’s business and its stakeholders, including the local society the company operates in. The scale of challenges in future business requires stakeholder collaboration, continuous innovation and transformative partnerships.
All this, in my mind, will also have a major impact on future international dispute resolution processes. We will see the growing importance of conflict avoidance, early case assessments and modelling, and case-specific process designs aimed at resolving disputes through mechanisms like arbitration proceedings or mediation prior to litigation. Responsible business conduct is aligned with access to justice and due process. Such a new approach to claims and dispute management creates long-term value for share- and stakeholders.
Ralf Lindbäck, Managing Counsel – Dispute, Insurance and Trade Management
Tel: +358 40 830 7706
Ralf Lindbäck specialises in legal matters relating to the energy sector as well as the maritime and offshore industry. He has extensive experience as in-house counsel for Wärtsilä Corporation, a stock-listed international company. This work has given Ralf considerable involvement in structuring international transactions, including long-term services agreements. Working with foreign administrations and global clients has further broadened his understanding of different legal systems, while also enhancing his reputation and track record in international dispute prevention and resolution.
Ralf’s curriculum includes postgraduate studies in maritime law as well as North Sea oil and gas law (University of Oslo, Norway), management (IMD, Switzerland) and international dispute resolution (University of Geneva, Switzerland). He is a regular speaker at conferences and an internationally qualified/accredited mediator (IMI, CEDR, CIArb and SCCM). Ralf Lindbäck continues to work with ICC in its Task Forces on ADR and arbitration introducing, amongst others, recommendations how to enhance early resolution to avoid escalation of multi-party conflicts related to international transactions, sustainability and climate change. International recognitions of his merits include the Financial Times Innovative Lawyers Award - Europe (2018). Ralf Lindbäck is a Board Member of Woima Corporation, Finland.
Antonis Gkiokas, Senior Manager at M. Psylla - V. Vizas - G. Katrinakis Law Firm (PwC Greece’s legal practice), offers us a look at the Greek distressed assets market and the firm's own offerings for organisational insolvency and restructuring in his jurisdiction.
The onset of the pandemic shifted the corporate focus from investment to crisis management. Especially for companies already in financial distress, this has meant a shift from complex restructuring solutions to ‘survival’ mode, further supported by government backed financing incentives and subsidies. However, while the impact of the COVID-19 pandemic is receding, the coming months present a fresh set of challenges.
Nonetheless, distressed transactions in Greece are currently on the rise, with several notable announcements over the past year – a trend which we believe will continue, especially given the challenges looming ahead.
Transactional activity is currently shaped by (a) the Greek financial institutions, which will continue the offloading of their NPLs, (b) the loan sales in the secondary market, which has begun, and (c) sale of businesses or assets of distressed companies. Further investment opportunities are also expected through the recovery fund program (RRF).
The Greek government has also contributed to the build-up of the momentum by engaging in several complex business rescue transactions for distressed companies or the disposal of their viable business segments, especially in sectors of high public interest significance such as defence, shipbuilding, industrial minerals, and energy.
The onset of the pandemic shifted the corporate focus from investment to crisis management.
Another recent trend is the acquisition of business assets by investors through forced auction processes. Notable recent cases include luxury hotels, industrial sites, and office buildings and complexes. This follows the recent improvements to the enforcement and electronic auctions framework along with more aggressive marketing strategies employed by banks and NPL Servicing Companies.
The Greek government, in implementing its strategic action plan to address the Greek private debt issue while also incentivising distressed M&A activity, revamped its collective enforcement framework with the enactment of the new insolvency framework, which is expected to shape the transactional activity trends.
The new legislation harmonised the Greek framework with Directive (EU) 2019/1023 (Restructuring Directive) but also introduced significant changes and procedural improvements aiming towards a holistic, uniform, comprehensive and efficient set of rules, further bolstered by procedural and tax incentives to enhance its attractiveness. It introduces a toolkit of processes divided into two broad categories, the first aiming to prevent insolvency and the second to manage bankruptcy, with the concept of business rescue having a central role.
The preemptive/rehabilitation process tools envisage sustainable business turnarounds and rescues by way of debt and corporate restructurings, business transformations or business and asset transfers, even without debtor consent in certain limited instances.
The new bankruptcy liquidation process incorporates both tested and new features, aiming to facilitate the quick release of tied-up distressed assets back to productive use, streamlined through an efficient, structured, and transparent public auction process via the e-auction platform. Especially for the disposal of entire businesses, business segments or groups of assets, the relevant auction process does not require a minimum price.
Successful restructurings are complex exercises, especially when they entail debt rescheduling arrangements combined with corporate or operational reorganisations. An important factor is that distressed companies are usually faced with severe difficulties in finding financing from Greek financial institutions, even for working capital purposes, however, the latter are more willing to provide funding to investors seeking to engage in restructuring schemes and distressed transactions.
Successful restructurings are complex exercises, especially when they entail debt rescheduling arrangements combined with corporate or operational reorganisations.
Therefore, an essential ingredient for reaching a successful restructuring is the timely and active engagement of key stakeholders such as the company management, shareholders, potential investors, institutional lenders, bondholders, and other creditors with material exposures. Restructurings need also to factor-in the socio-economic impact, with special interest to the rights of employees, local economies and supply ecosystems, especially when they include financially vulnerable social groups.
We believe that successful business recoveries generate sustainable businesses, contribute to economic stability and bolster business sustainability indexes, while releasing human resources and capital tied up in distressed situations.
Our dedicated Insolvency and Business Recovery practice has been steadily developing, growing, and expanding to transactional work with substantial exposure in the corporate and financial sector industry, working in diverse roles and mandates with a significant track record in seminal transactions in the distressed assets and NPL sectors. Our transaction credentials include landmark acquisitions of distressed businesses via formal pre-insolvency restructuring tools, navigating international investors to implement their strategic growth plans, maximising their benefits and incentives from the relevant framework.
The Insolvency and Business Recovery practice is part of the core PwC Legal Transactional Practice currently consisting of 15 legal professionals. We cover the broader universe of corporate and financial law advice, with a focus around three key pillars: (i) insolvency and restructurings (involving contentious and non-contentious work); (ii) acquisition transactions of listed and non-listed companies in Greece and abroad and iii) transactional banking and finance projects.
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Our transactional teams are further complemented by our Labour Law, Real Estate Transactions and Regulatory practices, which provide support in transactional and regulatory and compliance issues (including capital markets, regulatory compliance, takeover bids, AML and GDPR). The transactional practice combines its offering with structuring services together with the PwC tax practice, as well as our PwC International network of legal partners leveraging our presence in more than 95 jurisdictions, and also complemented by the offerings of our PwC Deals-Business Recovery Services practice.
Antonis Gkiokas, Senior Manager, Insolvency Practice Leader
M. Psylla - V. Vizas - G. Katrinakis Law Firm (PwC legal network)
268 Kifissias Avenue | 15232 | Athens | Greece
Phone: +30 210 687 4012 | Mobile: +30 694 164 2853
Antonis Gkiokas is the leader of PwC’s Insolvency practice in Greece. He is a seasoned legal practitioner with a track record on distressed M&A transactions, insolvency law, corporate law and restructurings. Furthermore, he advises financing institutions in formulating their portfolio recovery strategies. His exposure further extends to NPL and ordinary M&A transactions.
Antonis’s clientele and mandates are diverse, including distressed assets investors, financing institutions and NPL servicers. He also serves clients from industries such as manufacturing, defence, energy and construction, retail, food and beverages. He was one of the select few insolvency experts mandated by the Greek government to be part of the ad hoc drafting committee which prepared the new insolvency framework for Greece.
Veteran maritime lawyer Renato Pezoa Huerta offers his thoughts.
The ’globalisation’ of problems now seems to be the general rule for shipping. The most important of these is undoubtedly the stress caused by the COVID-19 pandemic, which, although it has shown a remarkable recovery of normal life in most countries of the world, is an issue that has a strong impact on shipping. The same is true of the conflict between Russia and Ukraine, which has also caused dilemmas not only in the supply chain and in the safety of ships sailing in the conflict zone, but also in the application and integration of legal rules of maritime law, as well as in the invocation of certain clauses in charter parties and marine insurance contracts.
In accordance with what I have just mentioned, we can also point to the enormous traffic jam that occurred in the Port of Shanghai until June, after its closure as a measure coming from the Asian authority as part of its ‘Zero COVID’ strategy, and which is instrumentalised through the confinement of the population after an outbreak of coronavirus. This has greatly affected Latin America and indeed the whole world. We understand that Shanghai is one of the largest and most important ports for international trade, and the delay in shipping was brutal for our customers and indeed for all ‘mainland’ trade.
Regarding the Russia-Ukraine belligerence, the attacks on the ships of various shipowners is a critical issue. In this regard, I have advised my clients, who are major shipping companies, on very specific legal disputes, such as: will a shipowner be in breach of a charterparty without liability if they refuse to call at a port that is blockaded? On the same point, in the context of charters, is an official declaration of war necessary or is a threat of war sufficient to invoke a war clause? And clearly the biggest problem: can a charterer claim damages from the shipowner if the master of the ship decides to unload in a port other than the one agreed in the charter?
The ’globalisation’ of problems now seems to be the general rule for shipping.
In my case, I chair the shipping law portfolio of Allievi Larre-Marins & Pezoa, a law firm exclusively dedicated to international trade law. As you can see, shipping law is only one link in the immense supply chain. Thus, all the lawyers who make up this boutique firm are dedicated to various branches of the commercial business. Thus, there is a branch of maritime law, a branch of customs law, a branch of banking law and a branch of international law. In this way, our advice and representation are comprehensive and enable trade players to rely on lawyers in all segments of the supply chain. The firm's lawyers are the most prominent in their disciplines and in their respective countries.
But what is perhaps most relevant is the fact that all the lawyers reside in different countries and we have offices in the main cities of South America: Santiago de Chile, Buenos Aires, Lima, Asunción, Santos, Caracas, Valparaíso and Huasco Port. Thus, our coverage is total in the Pacific, Atlantic and Caribbean oceans. Together with this, we maintain a wide network of correspondents in Central America, mainly in Panama, and a consolidated team of non-legal professionals, such as accountants, auditors, experts in foreign trade and even a ship's captain for technical or expert matters. All this consolidates us as a leading law firm in South America, with a huge and powerful presence in all latitudes.
Our way of working is joint and we make use of new information technologies to serve our clients. We hold meetings mainly by telematic means using modern digital platforms, which allows all partners in the various countries to be present in front of the client, and the latter has the convenience of not having to travel from their country of origin to one or more South American cities.
This makes us the only law firm in Latin America to implement a technological system to serve our clients and has been very well accepted by those who trust in our work. In some cases, such as when a maritime claim occurs or when it is necessary to activate a maritime insurance or a specific contractual clause, as in charters, the client does not need to travel to one of our offices and lose the valuable and short time that maritime law provides. The same means maximum experience and convenience in that the client does not have to leave their busy schedules to get in touch with us.
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We have also implemented different communication channels to deal with maritime, customs and insurance emergencies, with telephones available 24 hours a day and exclusive e-mails by subject. All these aspects have allowed us to reach a high standard of quality and professionalism, and to position ourselves as a leading law firm in a short period of time.
The overall picture will not be without complexities. However, we are far from an economic slowdown for shipping companies at present, despite disruptions and port congestion. Spot prices have started to decline, although they are still well above pre-pandemic levels. Despite all these circumstances, I believe that we are a long way from a decline in consumer demand that could affect shipping. At the beginning of the pandemic only two shipping companies qualified as large-cap companies, yet as of June this year that number has increased to six. Notwithstanding this, the IMF has warned that onshore, high inflation and the war between Russia and Ukraine are having a material effect that could push the world economy into a complex recession. For now, however, maritime law is sailing smoothly.
Renato Pezoa Huerta, Founding Partner
Avenida Vitacura 2939, Piso 10, Las Condes Santiago de Chile, RM, Chile
Tel: +56 9860 04916
Renato Pezoa Huerta is a Chilean lawyer (LLB Hons) specialising in maritime law. He is the author of several books and scientific legal articles on maritime law and is a professor of maritime law and marine insurance. He is recognised as one of the most important and prominent maritime lawyers in Chile.
Allievi Larre-Marins & Pezoa (ALM&P) is a boutique law firm focused exclusively on international commercial law. With headquarters in Santiago, Buenos Aires and Lima, it is a leading source of expertise for the maritime and transport market across South America and overseas.
Parties may jointly appoint a mediator from the list of certified mediators empanelled with the Malaysian Mediation Centre (MMC), the Asian International Arbitration Centre (AIAC) or any other mediator agreed to by both parties. Firstly, it begins with an introduction by the mediator who explains the nature and process of mediation. In the first joint session, the mediator will identify the issues at hand and acknowledge the concerns, needs and interests of the respective parties.
After the first joint session, each party will have a private session with the mediator. During this session, each party can individually discuss the confidential and sensitive issues pertaining to the dispute with the mediator. The mediator will then invite both parties to attend the second joint session where alternative solutions will be discussed between parties, focusing on their needs and interests.
In the event that parties are able to resolve their dispute, parties would be advised to enter into a written settlement agreement or a consent order which would bind both parties. This is not subject to an appeal. If either party breaches any term in the settlement agreement or consent order, the aggrieved party may sue the defaulting party for its breach. However, if mediation is unsuccessful, parties have the option to resolve the dispute by way of litigation, or they may even choose arbitration.
The Mediation Act 2012 was passed to promote and encourage mediation by providing for the process of mediation, thereby facilitating the parties in disputes to settle disputes in a fair, speedy and cost-effective manner. Parties are typically given an opportunity to appoint any person as their mediator, but if they are unable to come to an agreement, they may apply to the MMC or AIAC to appoint a qualified mediator.
If a matter is filed in court, under Practice Direction No. 4 of 2016, the Chief Justice of Malaya has directed that all judges of the Sessions Court – as well as magistrates and their assistant registrars – at the pre-trial case management stage may direct the parties to facilitate the settlement of their dispute before the court by way of mediation as stipulated under Order 34 Rule 2 of the Rules of Court 2012. Mediation can be suggested at any stage of the court proceeding even after trial has commenced or even at the appeal stage.
If either party breaches any term in the settlement agreement or consent order, the aggrieved party may sue the defaulting party for its breach.
Under the Practice Direction, mediation can be conducted in three modes. These are judge-led mediation, AIAC and mediation conducted by other mediators agreeable by both parties. When the parties agree on mediation, each party is to complete the mediation agreement provided in Form 1 of this Practice Direction. All communications made during mediation are ‘without prejudice’, thus confidential unless expressly waived by the parties. The parties are also required to report the progress of the mediation or the outcome of the mediation to the court. If mediation fails, the court may give any other direction at its discretion.
For mediation to be successful, all decision makers must be present during mediation and should enter the mediation process with the desire and ability to engage in negotiations that may lead to settlement. Furthermore, effective mediation requires listening to what is being communicated, as this will yield understanding, and from understanding we may come to an agreement. It is important to note that listening does not mean you must agree with your opponent, but simply that you must be patient and non-judgmental in taking in what the opponent is communicating.
Parties should enter the mediation process with the idea that the case can be settled. If their attitudes are negative and expectations low, mediation does not have much of a chance to succeed. Hence, we need to ensure that before mediation begins, parties should evaluate their emotions and remain calm throughout the mediation process.
Poor preparation prior to mediating or failure of the decision-makers to attend mediation will cause mediation to fail. It would be advisable for parties to ensure that prior to mediating, thorough preparation is done and that decision-makers should be compelled to attend the mediation process. If they are unable to attend, parties should reschedule the mediation.
Another factor that may cause mediation to fail is when the mediation process is abused – when parties attend but refuse to cooperate, or when parties fish for information while only intending to litigate. Prior to mediation, solicitors and mediators should communicate with the parties and advise them to act bona fide. However, if parties refuse to cooperate or have the intention to act mala fide, then mediation should not be encouraged.
There may also be instances where parties would be discouraged to mediate because their lawyers generally tend towards overconfidence in their case. Some parties prefer to tell their story to a Judge because they have a romanticised view of court, believing they will win a huge settlement. Parties should be advised on the reality of litigating their matter in court, including the pros and cons. Solicitors should ensure that the best interest of the parties are taken care of and not conduct a case for their own benefit.
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Mediation has numerous areas of specialisation and there is no one right way to mediate. Learn from every theory of mediation. If you have an interest in alternative dispute resolution and a passion for negotiating conflicts, you might find working as a mediator rewarding. Skilled mediators are masters of communication. They know how to ‘read’ people, defuse tension, manage their own emotions and facilitate open discussions.
Nishantel Kaur Balvinder Singh, Senior Legal Assistant
1st Floor, No. 2 Beach Street, 10300 Penang, Malaysia
Tel: +44 60174 142635
E: nkr@presmat.com | nishantel@hotmail.com
Nishantel Kaur has been a legal assistant of Presgrave & Matthews since 3 August 2009, specialising in civil litigation. She was admitted as an advocate and solicitor of the High Court of Malaya on 31 July 2009 and possesses a Bachelor of Laws degree from the University of Northumbria in Newcastle upon Tyne. She has also completed a postgraduate course known as the Certificate of Legal Practice from the Legal Profession Qualifying Board, Malaysia.
In 2019, Nishantel completed the Professional Diploma in International Arbitration programme and was accredited as an Affiliate Member by The Malaysian Institute of Arbitrators (MIArb). In 2022, she was accredited as an Associate by the Chartered Institute of Arbitrators (CIArb).
As of August 2022, she also holds a Master of Laws (Applied Law), majoring in ASEAN+6 Legal Practice and Malaysian Legal Practice from The College of Law, Sydney, Australia.
Presgrave & Matthews was established in Malaysia in 1898 and stands today as one of the oldest legal firms in the Straits Settlements. In addition to its historic legal library, the firm boasts 25 fully qualified advocates and solicitors qualified to practice law in West Malaysia.
Kevin Attrill, Managing Director at Ankura, shares his sector insights on ESG and its implications for construction in this feature.
Environmental, social and governance (ESG) captures a broad range of issues, such as climate change, emissions and waste disposal (environment), human rights and community relations (social), business ethics and executive pay (governance). While each of the three disciplines or ‘pillars’ of ESG has its own set of standards and practices, together they indicate an organisation’s dedication to achieving a positive effect on society – or at least not cause harm – in addition to generating a financial return for investors.
ESG investing’s beginnings were largely based on exclusion, i.e. avoiding the asset classes and sectors deemed to have a negative effect on society, thereby denying them access to capital. However, in recent years it has extended to activism, where investors directly intervene to enact positive change.
The cost of failing to appreciate the significance of ESG are high, potentially including fines, criminal prosecution, loss of market capitalisation and access to finance, reputational harm, damage to recruitment capabilities and disruption from activists. Conversely, successful ESG strategies are typically viewed as an indicator of focused and effective management and the long-term prospects of the company as a whole. From my experience of construction disputes, it is not unusual for claims related to non-compliance with ESG rules and regulations to exceed the value of the claims that concern the quality and/or performance of the works constructed.
Given the nature of construction and development projects, it is unsurprising that they consistently engage the three pillars of ESG, albeit to varying degrees. The applicable ESG considerations and metrics will change depending on the nature of the project (new build or retrofit), the stage of the project (design, construction or operation and maintenance) and whether it is the producers or the product being considered (the project team or the materials involved). As with the projects themselves, there is therefore no universal approach for ESG in the construction industry.
The environmental impacts of the construction sector are wide-reaching, encompassing climate change and instability, pollution, biodiversity and natural resources alike. These cause uncertainty that, in turn, increases corporate risk and delays investment in construction projects. Though the challenges are broad, they present many opportunities for improvement and durable positive impact. Measures to address the challenges encompass the entirety of the construction ecosystem, from managing waste and carbon emissions across supply chains, designing buildings with more efficient credentials and driving technology towards more sustainable products and methodologies.
The cost of failing to appreciate the significance of ESG are high
Climate change has most commonly led to improved operational efficiency in buildings, with the focus on energy use reductions. However, decarbonisation is a particular concern, as commonly used construction materials such as cement account for a significant percentage of carbon emissions.
Social factors concern a company’s engagement with its workers, customers, supply chain and the community. It covers human rights, diversity and inclusion, health and safety and its impact on the communities in which it operates, particularly those in developing economies where environmental and labour standards may be less robust.
Infrastructure and built assets are generally considered to improve the local community by providing spaces and amenities. However, the public perception of projects during construction must also be considered. Prolonged construction projects may impact local communities, attract negative media attention and have harmful consequences. Given the hazardous nature of activities on a construction site, workplace safety is paramount both during construction and in the use of built assets. Inattention to social factors can cause reputational damage and bring legal and regulatory penalties.
Governance factors concern how a company uses policies and controls to inform business decisions, manage risk, comply with the law and meet moral obligations to stakeholders as well as promote transparency and accountability by management. Governance failures like tax avoidance, bribery and corruption, excessive executive pay, or lobbying cause reputational harm and loss of trust.
The construction industry has above average exposure to governance issues due to the inherent complexity of projects, which exposes companies to contingent liabilities and litigation risks. An area of high vulnerability is the supply chain. A lack of transparency into supply chains often exposes construction companies to hidden and uncontrollable risk that negatively affects ESG such as depletion of natural resources, human rights abuses, corruption, and more. In fact, the greatest exposure to falling out of ESG compliance can occur in the supply chain. Therefore, businesses should not only look at their own ESG credentials but also those of their supply chain.
Meaningful ESG-related innovations and improvements can be most effective when developed in the early phases of project planning and design, so it is likely that this stage will take longer and require new capabilities and technologies. At Ankura, we observe that the implementation of new and untested technologies on renewable energy projects such as wind and solar plants is proving to be a fertile ground for disputes as ESG regulations and standards continue to evolve.
Construction faces particular difficulty in demonstrating its ESG credentials. ESG metrics are constantly evolving and differ across regions and countries, with transparency varying greatly by firm. Identifying which standards to follow, what to measure and which metrics to compile is not a straightforward task. Currently it remains largely up to individual construction companies to identify both their ESG baseline and the mix of areas that they will measure and report. Nonetheless, companies should explain the basis and importance of the metrics and topics reported.
The construction industry has above average exposure to governance issues due to the inherent complexity of projects, which exposes companies to contingent liabilities and litigation risks.
At project level, several organisations provide measurable achievement and independent ratings for the design and construction of buildings that allow those involved to demonstrate their ESG credentials. Such certification organisations include BREEAM, WELL, LEED and WiredScore.
Certification programs offer clear metrics that construction companies can use to measure performance and simplify the process. Monitoring systems can measure the outcomes of, for example, air quality and energy usage. Weak ESG credentials might result in the development being considered a distressed asset.
As one of the world’s largest polluters, the global construction industry has become a particular focus for change in respect of its ESG impact. In late 2021, COP26 brought greater focus to climate issues – as did the increasing incidence of extreme weather events. Public awareness of sustainability and ESG factors is increasing, as is the potential for ESG related disputes to occur more frequently.
Areas where ESG’s influence can expect to be felt in the construction sector going forward include:
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In the next 10 years it is clear that ESG-related disputes will increase and come in a variety of forms due to the broad spectrum of ESG issues. Construction companies that can demonstrate that they perform well against ESG metrics will be in a better position to avoid or mitigate the impact of these disputes.
Kevin Attrill, Managing Director
460 Alexandra Road, #22-05 mTower, Singapore 119963
Tel: +44 07918 194297
Kevin Attrill is a Managing Director at Ankura and a Chartered Quantity Surveyor with over 25 years’ experience in major construction and engineering projects across the public and private sectors. Based in Singapore, he provides advice to employers, specialists and contractors on a wide range of quantum issues.
Ankura is a global consulting firm providing services in construction disputes and advisory, data and technology, forensics accounting, and financial investigations as well as turnaround and restructuring.
Career mediator Caryl Lashley offers her thoughts on the state of mediation in The Bahamas and internationally – why is it so crucial to modern business relationships?
There is no set process for mediation in The Bahamas. Although I did a 40-hour mediation training course in 1995 and was involved with mediation since the late 1990s as counsel, the process of mediation is still not a common way to resolve disputes in The Bahamas. In the processes with which I was involved in the late 1990s, the mediator was in those cases a Canadian citizen who came to The Bahamas to conduct the process each time. I welcomed the process, and in the first several matters, the parties making the claim refused the offers made during the process and obtained nothing during the court process.
Since that time, however, while there is a great need for public education on the process, there are persons who avail themselves of it. Unfortunately, there are still too many people who want to ‘win’! The idea of a creative successful outcome in a dispute remains a difficult concept for many litigants to accept. Many see mediation as weakness rather than strength. Despite it all, many persons do now avail themselves of the process, if for no other reason than to get a quicker resolution. The majority of persons in The Bahamas trained in mediation are trained through the Chartered Institute of Arbitrators, Stitt Feld Handy, or ADR Bahamas. The facilitative model is still the preferred model.
Negotiation is a part of mediation and the process of negotiation is a necessary component of mediation. Parties can negotiate themselves, without the assistance of a mediator or anyone else. Negotiation is an appropriate process when we are prepared to act in good faith, when we are prepared to be vulnerable, and when we are prepared to engage fully in the process. The mediation process requires everything the negotiation process does and more; it requires a (preferably well-trained) third party neutral to facilitate and manage the process. The negotiation process is always appropriate, even during the course of the mediation.
The idea of a creative successful outcome in a dispute remains a difficult concept for many litigants to accept.
The restoration and maintenance of a relationship is one of the many beneficial aspects of mediation. To my mind, this is the most beneficial aspect; it ensures that we move forward in peace and with positivity. Certain factors like cross-cultural issues and other highly inflammatory matters which involve illegality or other third-party biases make mediation difficult. Even our own biases make mediations difficult. We need to be aware of our biases and we need to articulate and own them; people are people, and we are all the same when it comes to emotions and weaknesses. Some of us have the strength to recognise and acknowledge those biases and weaknesses – that is what separates us and makes some of us better mediators than others.
A mediator who demonstrates curiosity and builds rapport early on in the process usually has a successful mediation. Parties want to be heard and they want encouragement to continue. My favourite technique is to remind the parties to keep the future in sight – a bright future with the restoration, maintenance and retention of the relationship, in whatever form that may come. We need to speak to the BATNA and the WATNA during the course of the mediation process; we need to know that we can change things.
Virtual mediations are difficult, but I love them. There is hardly ever the problem of bad conduct and mean-spirited language. In a virtual mediation, we have to work hard to ensure that we are paying attention to every detail. It is difficult to ensure the maintenance of eye contact and to properly gauge the emotional effect, if any, which certain aspects of the dispute might have on the disputants. It is also difficult in virtual mediations to ask the parties to speak directly to each other, and for the emotions to be appropriately and perfectly felt. The body language is less clear and less visible in a virtual setting.
Some of the subtle nuances of language are not communicated in virtual sessions, no matter how much reframing or reality checking a mediator does. Yet, in virtual mediation sessions, all present must be fully engaged at all times. We have to be clear in our questioning; we have to be clear when we seek deliverables; we have to prompt people and remind ourselves to be precise. Virtual mediations are always physically safe and there is less opportunity for theatrics.
A mediator who demonstrates curiosity and builds rapport early on in the process usually has a successful mediation.
Technology enables parties to meet with the mediator at non-conventional times that are convenient to everybody. The ability to have a caucus virtually saves time and expense; there is no need for appropriate spaces to be reserved. There is no need for refreshments to be provided.
Technology requires parties to rely on the trustworthiness of the disputants. The downside is that when you expect one person in the room, sometimes others are present who ought not be; confidentiality can then be compromised. Likewise, the issue of good faith.
Technology makes us deepen and strengthen our substantive skills. We have to make an opportunity out of the need to be mobile, using the various platforms available. We have to be clear-headed. We can record sessions if necessary.
There is no doubt, however, that online mediation is tiring. Being fully engaged for any length of time is tiring!
Relationships matter! The value of relationship building and relationship maintenance cannot be over-emphasised. The win/lose aspect of litigation, or even arbitration, directly and adversely affects relationships. Relationships matter, and the way we communicate affects relationships; we affect them, for better or worse, when we communicate with our families, our friends, our work colleagues, those acquaintances we meet in the store, and those with whom we engage while we travel. Our communication is affected by our attitude, family and economic tensions, exploitations or biases we see or feel, and our general mental state. Our relationships are affected by insensitive remarks we make or our careless and unchecked body language.
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We have more relationships than we realise; we have relationships with the clerk or cashier in the store, the teller in the bank, the security or janitor/janitress in our office building, our children’s friends and their families, and the list goes on. The key is that we must always be conscious that relationships matter! Relationships matter everywhere – because people are all the same. We all have the same needs; we all respond to the same stimulus.
ADR Bahamas | Dupuch & Turnquest
308 East Bay St, Nassau, The Bahamas
Tel: +1 242-357-3574
Caryl A E Lashley is a barrister of more than 40 years' standing with professional memberships including FIDA (International Federation of Women Lawyers), the Society of Trust & Estate Practitioners (STEP), Mediators Beyond Borders International, Mediator Academy, the International Bar Association, the Bahamas Bar Association and the Chartered Institute of Arbitrators (CIArb), of which she has been a Fellow since 2012. She is an approved faculty member of CIArb and a firm believer that relationships matter, always striving for peaceful and amicable resolutions to conflict.
ADR Bahamas was founded by Caryl Lashley in 2016 to provide education and stimulation for non-violent communication and conduct, and to provide accredited professional neutrals to facilitate conflict resolution.
What legislative steps is Hong Kong taking to curb a rise in construction-related litigation? John Lau offers his expert insight on the construction climate in the nation and how ADR is being used to combat these new challenges.
Let me first set the scene by saying a few words about the history of Hong Kong.
Most recently, on 1 July 2022, Hong Kong has marked the 25th anniversary of the city’s handover from British to Chinese rule. For over 150 years, Hong Kong had been a British colony. In 1997, Hong Kong’s sovereignty was transferred back to China under the “One Country, Two Systems” agreement in the 1984 Sino-British Joint Declaration. As such, Hong Kong has retained its pre-existing legal system, making the city the only common law jurisdiction within China. The five bodies of law, namely contract law, tort law, criminal law, the law of restitution and legislations therefore still remain as the basis of construction law in Hong Kong.
The Hong Kong construction industry has long been a fertile breeding ground for disputes due to the nature of its multi-layer chain subcontracting, particularly with an extensive pipeline of new and existing major construction projects – to name a few, the city’s HK$250 billion Ten Major Infrastructure Projects; the HK$140 billion Hong Kong International Airport Third Runway; the HK$200 billion 10-year Hospital Development Plan and the proposed HK$500 billion Lantau Tomorrow Vision.
Most standard forms of private or government contracts, however, only provide for post-project completion arbitration provisions, which tend to prohibit parties from resolving their disputes as and when they arise. This often results in entrenched views, with a damaged relationship leaving both parties, particularly the contractor, without remedy for many years. This is of particular concern as activity likely to cause construction-related disputes is on the rise.
Most recently, on 1 July 2022, Hong Kong has marked the 25th anniversary of the city’s handover from British to Chinese rule.
Typical challenges are the lengthy duration needed for resolving disputes over unfair payment terms, payment delays and others, which generally cause widespread issues on cashflow – described by Denning LJ in Modern Engineering (Bristol) Ltd v Gilbert-Ash (Northern) Ltd (1973) as being the “very lifeblood” of the construction industry. Recognising the fundamental legal principle of “justice delayed is justice denied”, with the delay constituting the entire construction duration and the period of the dispute resolution process, it is advocated that parties to a construction contract should be given the right to have their disputes dealt with as soon as they emerge during the project.
The ADR scene in Hong Kong construction sector traditionally prefers arbitration over litigation because of its time efficiency, costs, confidentiality and worldwide enforcement regime under the New York Convention (1958). This is particularly relevant for disputes involving international parties, such as overseas contractors or clients, in which they can enforce an arbitration award abroad much easier than a local court judgement. Hong Kong’s current Arbitration Ordinance, AO (Cap 609) replaced the previous AO (Cap. 341) in 2011. It applies to all arbitration seated in Hong Kong and is based on UNCITRAL Model Law with its amendment adopted in 2006. It states clearly the role of Hong Kong court in supporting and supervising arbitration.
It is worth noting that there is also the specialist Construction and Arbitration List of the Hong Kong’s Court of First Instance (CFI), which is a mechanism by which all construction litigation or arbitration-related litigation (such as applications for interim measures, enforcement actions, etc.) are referred to a dedicated judge in charge of the list. The Hong Kong court has since demonstrated itself to be independent and adopted a pro-arbitration approach in its judgements. The pro-arbitration approach is affirmed in the Court of Final Appeal decision Xiamen Xinjingdi Group Co Ltd v Eton Properties Limited & Ors. HKCFA (2020). Arbitration in Hong Kong therefore takes the lion’s share of construction disputes because of the efficacy of arbitration and rule of law in the city.
The ADR scene in Hong Kong construction sector traditionally prefers arbitration over litigation because of its time efficiency, costs, confidentiality and worldwide enforcement regime
The ADR scene in the Hong Kong construction sector also encompasses a range of other ADR methods, such as negotiation, conciliation, mediation, adjudication, expert determination, or a hybrid mode in dealing with construction disputes. Other specific forms, intended for dispute avoidance, are the Dispute Review Boards (DRB) that was piloted for the airport core programme in the 1990s and the Dispute Resolution Advisor (DRA) that is implemented in public projects.
Since the Civil Justice Reform in 2008, followed by the enactment of Mediation Ordinance (Cap. 620) in 2013, mediation of construction disputes has since gained in popularity because mediation is legislated as a process ancillary to the Hong Kong court process. Following the 2018 Singapore Convention, mediation has taken a larger share as a preferred form of ADR for resolving construction disputes prior to instigating the arbitration process. This has been incorporated in dispute resolution provisions in various standard forms of contract.
When considering ADR options, parties should work closely with their legal counsel to prioritise the intended outcome – bearing in mind that, in the commercial world, winning at all costs is not always a real victory, as one could have “won the battle but lost the war”. Sometimes, a sound business judgement may be made through compromising on a dispute. Parties should always keep in mind that the ultimate goal is to resolve the dispute in a quick, efficient, and cost-effective way, to preserve future business relationships, and to be able to focus resources on the core business.
Having been introduced in the UK by the Housing Grants, Construction and Regeneration Act 1996, statutory adjudication has since been legislated by many countries, such as Ireland, Australia, New Zealand, Malaysia, Singapore and Canada. In Hong Kong, there have been voices in the construction sector advocating for the introduction of a similar legislation to improve payment practices and provide rapid resolution of payment disputes. In 2011, an industry-wide survey was conducted, followed by a consultancy study commissioned by the government with establishment of a working group formulating a framework for the construction industry on the proposed legislation, namely security of payment legislation (SOPL). Having received feedback from public consultations conducted in 2015 and the task force for preparing the legislative proposal, the SOPL framework and its scope of application were formulated in a draft SOPL Bill.
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Since 2020, a dedicated working group was also formed to revise the conditions of public works contracts to align with the SOPL framework. In October 2021, the government first rolled out a pilot programme through incorporating the SOPL regime in all new public works contracts going to tender after 31 December 2021, with a view to facilitating swifter introduction of SOPL through the experience collated from public works contracts. The pilot programme is intended to provide both the government and the industry with an opportunity to test the regime and to identify improvements concurrent with the finalisation of the SOPL. This has now paved a way towards the long-awaited legal reform of the Hong Kong construction sector. Watch this space!
The construction industry is very vulnerable to payment problems, with reported total outstanding payments exceeding HK$20 billion. In addressing the known serious issues (such as withheld payments, adversarial working relationships and lengthy and costly dispute resolutions) plaguing the Hong Kong construction sector, statutory adjudication is now the key to SOPL in regulating payment practices by imposing payment rights and providing a system to protect cash flow in the construction industry. It provides an effective means to arrive at an interim binding decision from an independent third party, i.e. an adjudicator, on a construction dispute during the course of the project. Following that is the contractor’s entitlement to be able to suspend or reduce the project’s rate of progress if the adjudicated amount is not paid when due. Any unfair payment provisions (such as “pay when paid”) are also rendered ineffective and unenforceable.
SOPL aims to improve payment practices in the construction industry with a better operating environment and cash flow in the supply chain. It ultimately helps to build up the capacity of the Hong Kong construction industry and enhance competition.
John Lau, Independent Arbitrator, Adjudicator and Mediator
1601, 16/F, Nan Fung Commercial Centre, 19 Lam Lok Street, Kowloon Bay, Kowloon, Hong Kong SAR
John Lau is a Chartered Civil Engineer, a Chartered Structural Engineer, and a Chartered Surveyor with over two decades of experience in the construction sector. He is an independent mediator, adjudicator and arbitrator who is on the panels of various leading alternative dispute resolution bodies. He is a Fellow of the Chartered Institution of Arbitrators, the Institution of Engineers Australia and the Royal Institution of Chartered Surveyors. He holds two masters’ degrees in law, both with distinctions and is active in dispute resolution matters – being conversant with arbitration, adjudication, mediation and other ADR methods – coupled with his solid knowledge in construction law and in-depth engineering practitioner experience.
The general stages of the mediation procedure are typically governed by the domestic sources of law regulating mediation, such as the Lagos State Multi-Door Court Law 2007 and the accompanying Lagos State Multi-Door Court (LMDC) Practice Directions on Mediation, the Citizens Mediation Centre Law 2007, the Lagos Court of Arbitration's (LCA) Mediation Guidelines 2011, or the parties' walk-in process. On occasion, some state courts may have few regulations on mediation procedure, which encourages the referral of disputes before these courts to mediation and other ADR techniques.
The typical stages are as follows:
The general benefit of mediation to organisations and parties is primarily hinged on the fact that it saves parties’ time and reduces huge attorney’s fees when compared with proceeding with other dispute resolution models. In most instances it preserves and occasionally enhances their business relationships. It also reduces their litigation or arbitration docket for purposes of audit.
The overall benefits of mediation to organisations cannot be overemphasised. It is confidential, as parties sign non-disclosure forms relating to all issues that arise during mediation. As noted above, it saves parties' time and minimises the astronomical attorney's costs associated with other alternative conflict resolution methods. It also enhances parties' business relationships most of the time. I regularly see parties walk out of mediation and continue their business relationship, but I have yet to see that after litigation or arbitration.
The overall benefits of mediation to organisations cannot be overemphasised.
As a party representative who has settled a conflict via mediation in a day, I would strongly suggest that parties initially engage in the mediation process. In this case, we had spent around two years in court exchanging pleadings and other papers. Surprisingly, on the very first day the case was heard in court, the judge, in his great wisdom, ordered the parties to participate in mediation. The conflict was resolved at the conclusion of the first preliminary meeting, which resulted only on the issuance of an apology letter and a refund of a nominal court filing fees.
Likewise, I have served as a mediator to resolve a seven-year-long dispute using the parties' walk-in method. All sides were satisfied and encouraged to explore further business opportunities.
Consequently, I would advise parties to consider mediation first because it is less expensive, informal, confidential, saves time, promotes party autonomy and improves business relationships.
Yes, unquestionably. Parties and attorneys are beginning to take mediation seriously due to its significant beneficial influence in the field of dispute resolution. I have actively engaged in the preparation of a few complex agreements for parties and have observed parties negotiating dispute resolution terms in which mediation was instructed to be included as a first step in a multi-tiered dispute resolution clause. Occasionally, when a conflict crystallises, parties choose mediation above other alternative dispute resolution options.
I would advise parties to consider mediation first because it is less expensive, informal, confidential, saves time, promotes party autonomy and improves business relationships.
Interestingly, the most important ADR legislation in Nigeria is the Arbitration and Conciliation Act, Cap. A18, LFN 2004, which applies countrywide. Arbitration and conciliation are provided for in this Act, but mediation is not particularly emphasised. Now, however, there is a law pending presidential approval that would repeal the aforementioned statute, which now expressly includes mediation. The proposed legislation is the Arbitration and Mediation Act of 2022. In addition, it aims to incorporate the Singapore convention into international settlement agreements emerging from mediation.
In my experience as an ADR-trained practitioner and expert, I have realised that it is more efficient and gratifying if we encourage individuals and organizations to invest more resources in preventing and managing conflicts rather than investing more money and effort in seeking to “win” them. As much as possible, disputes should be avoided rather than be allowed to occur and then settled. This realisation was due to the immense resources required and the repercussions of antagonistic relationships during and after the resolution process. You can only avoid these by recognising the potential sources of conflict and taking the necessary legal precautions to prevent them. There are a lot of seminars and conferences on methods and models to resolve disputes but there are few on conflict avoidance principles. The world would be a better place if we avoided and minimised the volume of disputes in business relationships.
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Consequently, our lawmakers, judiciary, attorneys, and other stakeholders should aid parties in adopting proactive measures in this respect.
Not every conflict can be mediated, just as not every dispute can be arbitrated. Examples of this include disputes involving a) an accusation of a public offence; b) an illegal contract; c) tax-related disagreements. Sometimes, parties specifically insist that they do not want to proceed with mediation. You cannot coerce mediation from parties; it has to be voluntary.
Aside from the foregoing, I believe that mediation may be utilised in suitable situations.
Azubike Okoye
Master of Laws (LL.M.) International Arbitration
University of Miami, School of Law
Coral Gables
Miami, FL 33146
United States
Phone number: +1 786-737-7351
Email: anokoye@miami.edu
Azubike Okoye is an accredited Fellow of the Chartered Institute of Arbitrators, UK; Prime Dispute, UK; the Malaysian Institute of Arbitrators, and the Arbitrators’ and Mediators’ Institute of New Zealand. He also holds a Master of Laws (LLM) degree in International Arbitration from the University of Miami School of Law.
Azubike was awarded an undergraduate merit-based scholarship for his academic standing by the then Federal Government of Nigeria. He was also awarded a Young ICCA (International Council for Commercial Arbitration) full tuition scholarship for his academic and professional credentials in the field of Alternative Dispute Resolution (ADR).
Azubike has previously worked with F.O. Akinrele & Co., a top-tier full-service dispute resolution firm led by three quintessential Senior Advocates of Nigeria (SAN) – the equivalent of Queen’s Counsel – where he rose through the ranks to be become a Senior Associate and team lead in the dispute resolution department of the firm for over a decade. During his master’s program, Azubike worked as a practicum student with an International Arbitration law firm, GST LLP in Miami, Florida.
