The battle of the seats: Hong Kong

Hong Kong has long emerged as an international arbitration hub, especially as regards China-related disputes. The city benefits from the perception that local arbitrators are more culturally attuned to the practice of business in mainland China, while still retaining the characteristics of international cities, with easy accessibility and (relatively) close proximity to Chinese parties.

Government support is crucial to erect a successful arbitration hub. The market of international arbitration is not only appealing due to its economic impact but also, and perhaps even more, because of the reputation associated with hosting international arbitrations. Governments worldwide recognise that hosting international arbitrations is not only a way to attract business but also to build prestige. In a press release issued this week, Hong Kong’s Secretary for Justice Rimsky Yuen argues that Hong Kong is an ideal neutral arbitration venue for Mainland and foreign enterprises. The main advantages mentioned are the continued use of the common law system, a rich legal experience in international business law, its tradition as a dispute resolution hub, and the enforceability of arbitral awards rendered in Hong Kong. An extended version of the same press release can also be accessed here.

The expansion of international trade and the propagation of international commercial arbitration led to the emergence of multiple arbitral institutions throughout the world. These institutions compete fiercely to attract arbitration proceedings, both at the regional and international level. Competition between arbitral institutions can take a variety of forms. Arbitration providers certainly compete on price. After all, they provide arbitration services against the payment of fees. Arbitral institutions also compete with each other by reviewing their arbitration rules to make them more attuned to their clients’ needs. Many arbitral institutions have been insistently promoting their services by keeping their institutional rules on the cutting edge of market changes and needs. The Hong Kong International Arbitration Centre (HKIAC) has amended its Administered Arbitration Rules in 2008 and 2013 in an effort to be the leading centre for the resolution of international commercial disputes in the region.

As arbitral institutions are devoted specifically to the arbitration business, they compete ferociously to attract more and more arbitration proceedings. To improve their market share, they seek governmental support, namely by lobbying officials in their jurisdiction to improve the legal framework. In the global ‘battle of the seats’, success is measured by how effective arbitral institutions are in transforming their jurisdiction into a hub for arbitration, where parties are willing to go in case any dispute arises. The video below, entitled ‘How to resolve disputes in Hong Kong’, is a good example of how cities and arbitral institutions engage in marketing techniques to promote their work and build prestige. You can read more in this report by Hong Kong Trader. I discuss the different tools used by governments and arbitral institutions to attract arbitration proceedings on chapter 2 of my book Commercial Arbitration between China and the Portuguese-speaking World (Kluwer Law International, 2014).

gLAWcal newsletter – new issue

gLAWcal

The latest newsletter of gLAWcal – Global Law Initiatives for Sustainable Development is out. This issue focuses on ‘UK Air Pollution; UK Environmental Policy; A Worldwide Overview on Shale Gas’. You can access it here. For past issues click here.

The battle of the seats, Miami and other contenders

Miami

In an article published last week in The New York Times, entitled ‘Cities compete to be the arena for global legal disputes’Elizabeth Olson discusses a phenomenon we have been referring to recurrently in this blog: the ‘Battle of the seats’. This concept refers to the competition between different cities to be considered as ‘arbitration hubs’. In the arbitration parlance a hub is a place known for its reputation in hosting arbitration proceedings. International arbitration is very mobile, as by its own nature it can take place anywhere. Countries and cities all over the world compete to be chosen by the parties as suitable venues for international arbitration. The boom in the market of international arbitration has created a sort of undeclared competition where each competitor is struggling for a larger share of the market. In this legal industry competition is ferocious: competition between arbitration venues, between the arbitral institutions, between arbitrators, and even between the periodicals on international arbitration. Arbitral institutions compete for their market share of disputes, legislatures enact arbitration-friendly rules to attract business, several conferences and workshops are held year round, and a class of essentially full-time arbitrators has surfaced. An authentic ‘arbitration industry’ has developed.

The article focuses on the case of Miami, but several other cities all over the world aspire to be recognized as contenders. The battle of the seats is no longer limited to the traditional heavy-weights. As international arbitration becomes a global business, the market of international commercial arbitration expands and many cities and jurisdictions are positioning themselves to collect a share of that market. Arbitral institutions play a decisive role in the success of arbitration. They prosper only if the number of proceedings they administer flourishes. They actively market and promote arbitration in the hope of attracting more cases and increasing their revenues. The multiplication of arbitral institutions further stimulates the global battle of the seats.

Cities such as Milan, Madrid, Vienna, Shanghai, Seoul, Kuala Lumpur, and Cairo have stepped into the arena. As more venues refresh and harmonise their legal systems to achieve an international benchmark, parties may feel persuaded to select them as the seat of their arbitration proceedings, looking beyond the ‘traditional’ options. Commercial entrepreneurs increasingly benefit from greater flexibility in their choice of a place of arbitration. The emergence of new arbitral centres enlarges the pool of available institutions, giving parties the possibility to choose institutions with closer cultural affinity and greater geographic or linguistic convenience. With the surfacing of regional economic centres around the world, there has been a trend towards referring disputes to arbitral institutions closer to home. The popularity of not yet fully established and new institutions is growing. Some of them are now joining the ranks of the traditional arbitration institutions as appropriate choices. I discuss the battle of the seats in more detail in my book Commercial Arbitration between China and the Portuguese-speaking World (Kluwer Law International, 2014).

Image: Wikimedia Commons

Nuvens negras sobre o Império do Meio (II)

Ponto Final

Artigo de opinião no “Ponto Final” de 16 de Setembro, página 3.

Ao longo das últimas décadas a China tem experienciado um período de desenvolvimento económico sem paralelo na história da humanidade. Esta revolução surpreendente teve um impacto significativo não só no tecido económico, social e cultural do país mas também no seu equilíbrio ambiental. As autoridades chinesas são agora confrontadas com a delicada questão de saber como lidar com os problemas ambientais sem perturbar o desenvolvimento económico do país.

Para o Partido Comunista da China (PCC) um compromisso entre esses dois objectivos aparentemente contraditórios parece residir na noção de “civilização ecológica” (shengtai wenming). Recentemente adicionado ao vocabulário oficial, este conceito está ligado ao objectivo de alcançar uma sociedade xiaokang (uma sociedade de bem-estar generalizado) e desempenha um papel cada vez mais importante no plano de desenvolvimento do país, juntamente com o desenvolvimento económico, político e cultural. Em 2007 o então presidente Hu Jintao defendeu a Civilização Ecológica pela primeira vez no seu relatório ao 17º Congresso Nacional do PCC. O termo também tem sido traduzido como “Cultura de Conservação” ou “Progresso Ecológico” em documentos oficiais. Cinco anos mais tarde, no seu relatório ao 18º Congresso, Hu Jintao enfatizou que “Promover o progresso ecológico é uma tarefa de longo prazo de vital importância para o bem-estar das pessoas e o futuro da China”. Tal é a importância dada ao conceito de civilização ecológica que este se encontra consagrado na Constituição do PCC.

Muitos dos problemas ambientais mais complexos que afectam a China – e o mundo – resultam directa ou indirectamente de decisões e comportamentos diários dos indivíduos. Actos aparentemente insignificantes, quando multiplicados pela população global, têm um impacto negativo significativo sobre o meio ambiente. Embora as fontes industriais continuem a ser uma das principais causas da poluição, os indivíduos são a segunda maior fonte poluente. Isto também é verdade no caso da China, e em proporções esmagadoras, uma vez que se trata do país mais populoso do planeta. Os comportamentos e estilos de vida individuais estão no cerne dos problemas ambientais e da sua possível solução. Nos últimos anos a formulação de políticas ambientais tem vindo a reduzir o papel do Estado e a colocar cada vez mais ênfase no papel dos cidadãos/consumidores. Os indivíduos são cada vez mais entendidos como agentes de mudança ambiental, e os seus comportamentos cada vez mais sujeitos a apertado escrutínio. A China evidencia cada vez mais os sintomas típicos de uma “sociedade de consumo”, pelo menos se atendermos às suas cidades, fervilhando com uma nova classe média urbana ávida por alcançar um estilo de vida ocidental. A economia do país não está mais focada exclusivamente em servir como “fábrica do mundo”, tendo também de servir um mercado interno de 1,3 biliões de consumidores. A ascensão da classe média representa uma passagem da China para o papel de moderna sociedade de consumo mas também coloca pressão crescente sobre o seu meio ambiente.

Governantes um pouco por todo o mundo têm vindo, desde há décadas, a discutir, projectar e implementar políticas públicas de modo a educar os indivíduos e as famílias, influenciar as suas decisões e reduzir o impacto ambiental dos seus comportamentos. O termo “política ambiental” inclui todas as medidas governamentais destinadas a avaliar o grau de poluição ambiental; a avaliar essa poluição em relação à ameaça que representa tanto para o bem-estar humano (visão antropocêntrica) como para os ecossistemas (visão ecocêntrica); e controlar as actividades poluentes por meio de regulamentos, incentivos económicos e campanhas de informação. O comportamento dos indivíduos e famílias tem um impacto ambiental em diferentes áreas tais como o consumo de água, a produção de resíduos, o consumo de alimentos, a escolhas de meios de transporte, etc. Uma vez que os comportamentos e decisões individuais são uma importante fonte de problemas ambientais, eles devem ser considerados como uma componente chave para encontrar soluções eficientes e duradouras. Os instrumentos de política ambiental tradicional revelam-se insuficientes para lidar com a gravidade e diversidade dos problemas ambientais actuais e assegurar o desenvolvimento sustentável. É necessário olhar além das ferramentas tradicionais como a regulamentação, as campanhas de informação pública, os instrumentos de mercado e as soluções tecnológicas. É necessário reconhecer a importância ambiental dos comportamentos individuais e projectar novas estratégias dirigidas directamente aos indivíduos enquanto fontes de danos ambientais, reduzindo assim o seu impacto sobre o meio ambiente.

Legal dominance and the language of international arbitration

Economist

A thought-provoking piece published a few months ago in the Economist, entitled ‘Exorbitant privilege’, discusses how most international deals are subject to Common Law, namely English and American Law, even when parties come from countries that belong to other legal families; and how most arbitration proceedings take place in English, even when this is not the language of the parties. Naturally, this type of ‘legal dominance’ brings enormous economic advantages for England and the United States. According to this article this situation may change in the future.  There is a special mention to the case of Brazil, one of the emerging economies, who has been effectively promoting its own law. Foreign firms active in Brazil increasingly agree to apply Brazilian law and to rely on local arbitration as an alternative to local courts.

Most of the successful arbitration hubs in the world are located in countries that have English as an official language and belong to the Common Law family. Frequently they are also appealing to foreign parties coming from Civil Law jurisdictions but using English as the language of arbitration proceedings. As a matter of fact, English became a common language for many citizens and businesses throughout the world. The pervasiveness of English has helped to ease communication and to soften cultural barriers because it is currently the universal language of international business. English language has also become the lingua franca of international arbitration. The language used in the arbitration proceedings naturally influences and even dictates the law to be applied, particularly in questions of procedure. The history and development of several arbitration centres suggests that the strong tradition of the Common Law legal system and fluency in the English language have been among their strongest assets.

Law is a kind of language on its own. The legal idiom is a technical language, in the sense that it is for experts only – that is, jurists. Legal language operates as a functional variant of natural language, with its own domain of use and particular linguistic rules. This language is used in specific social roles like pleading and claiming. Legal language is based on ordinary language; however, it is used for special purposes, leading to the existence of legal jargon. In the work of comparative lawyers, language is essential to the process of acquiring knowledge of foreign law. Consequently, law and language are cultural phenomena that must be studied taking into account time and context. The language used is arbitration proceedings is also a legal language, highly sophisticated and specific. It is not sufficient to have a basic knowledge to understand this technical idiom. One needs to manage a specialised vocabulary so as to be able to understand the arguments of the other party, of arbitrators, and witnesses, and express oneself without serious communication issues. The party who is using his or her own native language has an advantage over those who have learned it as a second tongue. Speaking and writing another language sufficiently well for the purpose of arbitration proceedings is very demanding. Not surprisingly, language-related problems have been explicitly raised in an increasing number of disputes in both arbitral and judicial contexts.

Take the example of trade between China and Portuguese-speaking countries. Since most Chinese and Lusophone disputants, arbitrators, and lawyers cannot be said to be truly fluent in English, using this language would not minimise the language barrier, and could even widen the linguistic and cultural gap between the parties. The selection of a ‘neutral’ language as an official business language would be an illogical, unworkable approach. It would require practitioners in the involved countries to carry on commercial activities and draft contracts in a language other than their native tongues. Thus, this approach re-initiates the difficulties posed by the original language diversity problem. It is preferable for the parties, their counsels, and the arbitrators to express themselves using their own language (Chinese or Portuguese) and resort to translation, than to force all parties to use English. On the other hand, China and Portuguese-speaking countries belong to the Civil Law legal family. Using English in arbitration proceedings would submit them to legal English, a technical language to which they are most likely not used to, as their experience with the Common Law tradition is probably little, if not inexistent. Jargon or industry-specific terminology may be so specific that it is almost an entirely different language to itself such as ‘legalese’ in English. In this ‘language’, concepts such as ‘due process’, ‘duty of care’, and ‘consideration’ have specific meanings that result from decades of case law. If this is ignored in translation or if the translator is not aware of such subtleties, legal problems may arise. Using English would submit all participants in the arbitration proceedings to a sort of double translation – both linguistic and legal. Not only would they be using a foreign language, they would also be using a foreign legal language.

 

Image: Satoshi Kambayashi / The Economist

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