Here, we take a look at market trends and emerging best practices in the dispute resolution space to offer a guide as to what could be top of mind for practitioners in 2019 and beyond
What’s on the horizon? We’ve seen key changes in the evolution of the arbitration arena in Hong Kong, with a host of reforms undertaken to boost efficiency, create clarity, and to align the city’s mechanisms with those of England & Wales, Australia and Singapore. Most notably, the issuance of the Code of Practice for Third Party Funding came into effect on 1 February. This expressly allows for third party funding for arbitration and related matters and this key development irrefutably abolishes the doctrines of champerty and maintenance. What we will expect to see this year is greater clarity and transparency in the Hong Kong panorama as it enables a person or entity who has no interest recognised by law in the arbitration to be a third party funder. The Code, which was published in early December 2018, outlines the practices and standards for third party funders. An advisory body will oversee elements that pertain to funding agreements, confidentiality, conflicts of interest, termination and other related issues.
What you can expect to see: Greater clarity and transparency and a spike in the number of funding agreements as Hong Kong’s landscape aligns itself with forward-thinking jurisdictions. It is likely that these new provisions will make it easier to ensure that strong claims can be pursued; and will allow claimants to hedge their costs. In construction disputes, which are often lengthy and expensive, funding may allow parties to spread risk by not having to bear the whole cost of bringing or defending a claim, and will certainly provide considerable cash flow benefits – the traditional ‘life-blood’ of the construction industry.
For more on recent trends on how third party funding is viewed by the courts in a civil claim, refer to the recent Raafat Imam v. Life (China) Company Limited and Others  HKCFI 1852 case featuring DVC’s Clifford Smith SC, Sabrina Ho and Tommy Cheung. The Mongolian Mining and China Solar cases, are cases of third party funding in the insolvency context.
For more on third party funding in the insolvency domain and the interaction between insolvency and arbitration please see Look-Chan Ho’s overview from 2018’s Arbitration Week and Look-Chan Ho and Tommy Cheung‘s presentation on Controlling Costs.
Belt & Road Initiative
Another prominent change to Hong Kong’s landscape in 2019 includes the Belt & Road Initiative.
The Belt & Road Initiative which is made up of a belt of overland corridors and a maritime road of shipping lanes linking over 60 countries will bring about complex investment opportunities bisecting the transport, logistic, maritime, telecommunications and other sectors. With multiple cross-border investors tied together contractually, this will inevitably (and unavoidably) lead to a myriad of disputes impacting international trade, commercial, company & insolvency, intellectual property, construction, telecommunications and other major sectors. Given that arbitration is the most popular and cost-efficient mechanism used to resolve cross-border disputes, Hong Kong is geographically poised to leverage contentions arising from these ventures. DVC has handled numerous enforcement (and setting aside) of awards.
The proposed Greater Bay Area initiative is potentially another landmark infrastructure project that will link Hong Kong, Macau and nine cities in Guangdong Province in order to establish a trading, logistical, manufacturing and technological axis for commercial activity. Another significant change entailed the implementation of the new administered arbitration rules (‘HKIAC Rules’) enacted in Q4 of last year.
What you can expect to see: 2019 and going forward, due to the HKIAC Rules being implemented, we will likely see many gridlocked parties turn to Hong Kong as a seat for these arbitrations.
- For more on the Belt & Road Initiative, see DVC’s Head of Chambers, John Scott QC, SC, JP’s review from the Middle Temple Amity Visit to Hong Kong.
- Winnie Tam SC, JP also explores these themes in “Strategies & Opportunities under the One Belt One Road Initiative – Leveraging Hong Kong’s Advantages.”
- Similarly, Ellen Pang considered how transparency and efficiency are promoted in international arbitration and how dispute settlements are facilitated between Belt and Road countries at a Conference she spoke at.
Advancements in technology
In the broader legal space, there have been significant developments in technology: as the utility of AI has evolved, advancements have been made in IoT (Internet of Things) and the 5G arena of wireless tech. Moving beyond merely unbundling commoditised tasks such as e-discovery, document review and creating new efficiencies, AI also has the ability to predict the outcome of arbitrations and court cases.
How will this help practitioners?
What you can expect to see: Though much of AI is still shrouded in mystery, AI now has the ability to analyse the decision-making process undertaken by judges and opponents. It also attempts to resolve some of the uncertainty surrounding outcomes. AI tools will also be able to predict the desirability of going to court vs. settling. This is achievable because AI will have access to years of trial data which can be harvested from databases and more comprehensive repositories set up over recent years. Understanding more about settlement prospects with the assistance of AI will provide foresight into and aid client strategy.
- For more on how AI has impacted the Intellectual Property sector and other important changes, please see Benny Lo’s articles on pages 10 and 11.
In the Internet of Things and 5G wireless sphere, in addition to 3D printing and self-driving cars, personalised “smart contracts” will likely be introduced into the legal ecosystem over the course of the next year. Smart contracts are self-executing contracts that may represent game changers in the sense that they are automatically executed once the conditions of the agreement are met. They operate much like vending machines. Once a vending machine has verified that you have inserted sufficient money, it is pre-programmed to dispense your order without the need for anyone to operate it. Smart contracts operate in a similar way. They depend on blockchain technology and were conceived of to decentralise the process and obviate the need for third parties.
What you can expect to see: Smart contracts are designed to sidestep uncertainty and delays however the growth of smart contracts may contribute to new opportunities for legal practitioners given that smart contracts possess inherent risks. Which party should be liable for the losses suffered as a result of e.g. errors in the code of a smart contract? It will therefore be crucial that the drafter recalibrate standard contractual clauses to account for different scenarios.
Today’s commercial contracts use terms like “reasonable” and “best endeavours” to provide flexibility. However these subjective terms cannot be translated into code.
- It will be interesting to see the interplay between the supposed efficiency of smart contracts and how they deal with questions relating to choice of law, termination and breach and indeed no oral modifications (as seen in the case of MWB Ltd v. Rock Advertising  2 WLR 1603 page 30- 32. These issues and more will still require the input of legal practitioners albeit perhaps in a different incarnation.
In addition, the Internet of Things and 5G will enable millions of devices to be connected simultaneously. The result will be a smartphone that can tell the toaster when toast should be ready, contact an ambulance when needed and refill medication from the pharmacy directly; culminating in smart cities.
What you can expect to see: When IoT and 5G wireless technology are unveiled and marketed, a litany of legal issues will arise ranging from data protection and privacy concerns, to cross-border contractual disputes. IP licensing strategies, real estate, competition, telecommunications and commercial outflows will ensue and a multitude of regulatory frameworks will need to be installed to ensure compliance of the revolutionary infrastructure that will eventuate. Monitoring these legal processes will entail a new ecosystem of regulation to ensure compliance as many of the legal matters arising have not been fully contemplated yet. Regulation of these novel issues on a global scale will be extremely complex.
- For more on how thorny global enforceability can be given the advancing digital environment, see the write up to Winnie Tam SC, JP’s plenary as featured in the recent BIP Asia Conference in this edition of A Word of Counsel.
By Aparna Bundro, Director of Practice Development, Des Voeux Chambers.