CHINA (HONG KONG BAR): An Introduction to Commercial Dispute Resolution: The Bar

Background 

Despite the easing of COVID-19 restrictions in 2023, the pace of economic recovery in Hong Kong and the Greater China Region has been slower than expected due to a combination of internal and external factors. The commercial dispute resolution sector has been affected as well, with clients becoming more cost-conscious and less willing to embark on uncertain litigation. Nevertheless, recent developments in respect of the Chinese Mainland and regulation of virtual assets give cause to believe that better times are not too far away.

Economy 

The lifting of the mask mandate on 1 March 2023 marked an end to social distancing measures and a return to normality for the general public in Hong Kong. Although unemployment fell overall and certain industries such as tourism and transport saw significant growth, economic recovery as a whole has been rather muted due to a combination of weak external demand, high interest rates and geopolitical tensions. This was reflected in the poor performance of the Hong Kong IPO market, where funds raised were the lowest in 20 years. Many economists have a conservative outlook for 2024, predicting a GDP growth of 2.5% to 3%.

These economic headwinds are felt across the Greater China Region. The Chinese Mainland is in the midst of tackling low domestic consumption and a slow export market. The liquidity crunch in its property sector has led to many property developers being unable to pay their creditors on time, with several private wealth management companies that invest heavily in real estate projects being caught up in the crisis as well.

Hong Kong’s legal sector saw significant numbers of lay-offs and hiring freezes in 2023, which may be in part a correction to over-hiring during the pandemic. The state of the Hong Kong economy means that this state of affairs is likely to continue into 2024, with transactional lawyers bearing the brunt of the impact as many companies seek to postpone or reconsider large deals. Litigators will face more of a mixed bag – on one hand, there may be a greater amount of work in relation to commercial disputes and insolvencies. On the other hand, lay clients are likely to be more cost-sensitive, which means that both solicitors and counsel alike must be willing to do more for less. Flexibility and adaptability would be key in such market conditions.

However, the outlook is not entirely pessimistic. Mainland China’s GDP growth in 2023 still outpaced global growth. Further, an anticipated end to the US rate hike cycle by Q2 2024 is likely to bring more liquidity to the Greater China Region. Some analysts are hopeful that a combination of listing interest from international and Chinese Mainland companies coupled with regulatory reforms by the Hong Kong authorities will result in a rebound for the Hong Kong IPO market in 2024.

Three Key Developments 

Three key developments are likely to exert a positive impact on commercial dispute resolution in Hong Kong and the Greater China Region in 2024, although their full effects may take more time to be felt.

Reciprocal enforcement of Hong Kong and Mainland judgments

The Hong Kong government recently announced that the Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance (Cap. 645) (the “New Ordinance”) will come into force on 29 January 2024. The New Ordinance gives effect to the “Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the Hong Kong Special Administrative Region”, which seeks to establish a more comprehensive mechanism for reciprocal enforcement of Hong Kong and Mainland judgments as compared to the existing statutory regime contained in the Mainland Judgments (Reciprocal Enforcement) Ordinance (Cap. 597) (the “Existing Ordinance”).

From the perspective of a litigant seeking to enforce a Mainland judgment in Hong Kong, three changes should be noted in particular. Firstly, the judgment no longer needs to be underlain by a commercial contract. Instead, subject to some exceptions, judgments pertaining to civil and commercial matters generally (including torts) can now be enforced.

Secondly, there no longer needs to be an exclusive jurisdiction clause between the parties in favour of the Mainland courts. Rather, the jurisdictional requirement can be satisfied by a broader range of circumstances, such as the fact that the defendant was resident in the Mainland or (for contractual disputes) that the place of contractual performance was the Mainland. It is for the person against whom enforcement is sought to apply to set aside the registration of the judgment and prove that the jurisdictional requirement is not satisfied.

Thirdly, a wider range of remedies can now be enforced. Under the Existing Ordinance, the judgment must order the payment of a sum of money. In contrast, the New Ordinance allows for judgments requiring the performance of an act to be enforced as well. This will include remedies such as specific performance.

These changes make it easier for Mainland judgments to be enforced in Hong Kong and vice versa, increasing confidence in both legal systems and promoting cross-border economic activity.

Enabling Hong Kong enterprises in the Greater Bay Area to choose Hong Kong law

The general position under Mainland law is that only parties to a contract with foreign-related elements can choose the law that governs disputes arising from the contract. Likewise, in the absence of such foreign-related elements, contracting parties cannot validly submit their contractual disputes to arbitration seated outside the Chinese Mainland. Wholly owned Hong Kong enterprises and joint ventures set up by Hong Kong investors in the Chinese Mainland are regarded as Mainland legal persons and are subject to the aforesaid restrictions.

Over the past few years, the HKSAR Government and the Central government have been exploring the possibility of enabling Hong Kong-invested enterprises in the Greater Bay Area (GBA) to choose Hong Kong law as the governing law of their contracts and Hong Kong as the seat of arbitration for contractual disputes even in the absence of foreign-related elements. To this end, the central government has implemented pilot schemes permitting Hong Kong-invested enterprises in Qianhai to do the former, and Hong Kong-invested enterprises in the China (Guangdong) Pilot Free Trade Zone to do the latter. The HKSAR Government now seeks the support of the Central Government to extend these measures to the entire GBA in 2024. Doing so will likely attract more investment to the GBA, create more work for Hong Kong and GBA lawyers, and promote the collaborative development of the GBA as a whole.

Regulation of virtual asset trading platforms 

The collapse of cryptocurrency exchange FTX and its USD8 billion shortfall in customer assets is a sobering reminder of what can happen if virtual asset exchanges are not properly regulated. Such incidents damage investor confidence and hamper the growth of the industry as a whole.

In June 2023, Hong Kong implemented two new licensing regimes for operators of virtual asset trading platforms (VATPs). One regime comes under the Securities and Futures Ordinance (Cap. 571) (SFO) and permits VATP operators to engage in Type 1 (dealing in securities) and Type 7 (providing automated trading services) regulated activities. The other regime comes under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615) (AMLO) and allows for the provision of other VA services. The two regimes operate in tandem and VATP operators are encouraged to be licensed under both regimes to ensure business continuity in light of the evolving nature of VAs.

The regulations imposed by the licensing regimes are extensive, specific and robust. By way of example, VATP operators must conduct rigorous and continuing due diligence on all VAs they offer for trading, which includes consideration of their innovative value and/or the novel use cases they facilitate. Further, only large-cap VAs (ie, VAs that are included in at least two acceptable indices issued by two different index providers) can be made available for trading by retail clients. Finally, client assets must be held on trust through a wholly owned subsidiary of the VATP operator that conducts no other business beyond receiving or holding client assets. Client assets must be segregated from those of the operator and subsidiary, and the relevant seeds and private keys must be securely stored in Hong Kong.

The licensing regimes are much welcomed as they support Hong Kong’s aspirations to establish itself as a leading virtual asset hub. It is hoped that investors will be encouraged to invest in VAs knowing that Hong Kong imposes strict regulations on VATP operators. These developments will likely lead to more litigation with VAs as their subject matter and speed up the development of the law in this area, where Hong Kong is currently lagging behind jurisdictions such as the UK and Singapore.

Conclusion 

While a lacklustre economy may spell some tough times ahead for the commercial dispute resolution sector in Hong Kong and the Greater China Region, recent legislative and regulatory developments indicate that new opportunities are on the way. What remains is for lawyers to hone their skill sets, bolster their networks and take proper advantage of these opportunities.

2024大中华区法律指南：商事争议解决领域概览（香港大律师篇） 

引言 

自2023年起，尽管疫情防控措施已经逐步放宽，多种内外因素仍然制约整体经济的全面恢复，大中华地区的经济复苏步伐亦相较预期缓慢。在商事争议解决领域，客户对于成本控制日益关注，对不确定性较大的诉讼案件持谨慎态度。不过，得益于中国内地在商事争议解决领域的最新发展，以及香港证监会对于虚拟资产交易平台的监管明朗化，我们有理由相信，经济好转的曙光就在眼前。

经济情况 

2023年3月1日，香港政府全面撤销强制佩戴口罩的要求，此举不仅标志着社会隔离措施的结束，亦象征香港市民已逐步恢复正常生活。虽然失业率整体呈现下降，部分行业如旅游业及运输业亦取得显着增长，但是受到外部需求疲软、利率走高以及地缘政治紧张局势等多重因素影响，整体经济复苏乏力。香港首次公开募股（IPO）市场的低迷表现也反映了这一点。许多经济学家对 2024 年经济前景持保守态度，预测国内生产总值仅增长 2.5% 至 3%。

大中华区地区整体经济同样面对不利因素。国内消费市场低迷、出口市场放缓是内地目前面临的挑战。房地产行业流动性的收紧，导致众多房地产开发商无法按时偿还债务。一些大量投资房地产项目的私人财富管理公司也被卷入这场危机。

2023年，香港法律行业出现了大规模裁员和冻结招聘的现象，部分原因可能是对新冠疫情期间过度招聘后的调整。加上现在的经济状况，这种情况可能会持续到2024年。首当其冲受到影响的将会是交易律师，因为现在许多公司都倾向于推迟或重新考虑大型交易。而诉讼律师则将面临更复杂的局面：一方面，商事纠纷和破产领域的案件可能会增加；另一方面，由于非专业客户可能对成本更加敏感，这意味着律师和法律顾问都必须愿意以更少的成本做更多的事情。在这种市场条件下，灵活性和适应性是关键。

不过，前景并非是一面倒的悲观。2023 年，中国内地的国内生产总值增长仍然超过全球增长。此外，美国加息周期预期将在2024年第二季度结束，这可能会为大中华地区带来更多流动性。一些分析人士预测，结合国际及内地公司逐渐恢复对上市集资的兴趣以及香港当局对于监管规则的改革，2024年香港首次公开招股(IPO)市场出现反弹。

主要发展 

大中华地区的商事争议解决领域在2024年将有三项重要发展，这些发展将有望在未来产生积极正面的影响。

一、香港与内地相互认可和执行民商事案件判决的安排 

香港政府近日宣布，《内地民商事判决（交互强制执行）条例》（第645章）（下称“新条例”）将于2024年1月29日正式生效。该新条例旨在实施《关于内地与香港特别行政区法院相互认可和执行民商事案件判决的安排》，相较于《内地判决（交互强制执行）条例》（第597章）（下称“现行条例”），新条例将建立一个更加全面的机制，以实现香港与内地判决的相互执行。

从寻求在香港执行内地判决的诉讼当事人的角度来看，有三方面的变化值得特别注意。首先，判决不再需要以商业合同为基础。除了一些例外情况外，涉及一般民商事（包括侵权行为）的判决现在可以强制执行。其次，诉讼双方当事人之间不再需要事先约定由内地法院管辖的专属管辖权条款。相反，有关司法管辖权的规定可以通过更广泛的情境来满足，例如被告人是内地居民，或（就合约纠纷而言）合约履行地是内地。被请求执行内地判决的一方可申请撤销判决的登记，并证明该内地判决不符合关于司法管辖权的规定。

最后，现在可以执行的补救措施范围进一步扩大。根据现行条例，被申请执行的内地判决必须包含支付一定金额的命令。相比之下，新条例则放宽了该要求，对要求履行某种行为的内地判决亦允许强制执行，其中包括特定履行（Specific Performance）等补救措施。

这些改动使内地判决更容易在香港执行，反之亦然，从而增强当事人对两地法律制度的信任度，并进一步推动跨境经济活动。

二、允许大湾区内的香港企业选择香港法律以及香港作为仲裁地 

内地法律的一般立场是，只有当合约有涉外因素时，当事人才能选择解决合同争议的法律。同样，如果没有涉外因素，合约当事人则不能有效地将合约纠纷提交内地以外的仲裁机构进行仲裁。在这一背景下，香港投资者在内地设立的香港独资企业及合资企业均被视为内地法人，并且受到上述规则限制。

过去数年，香港与内地政府一直探讨让粤港两地的港资企业，即使在没有涉外因素的情况下，也可以选择香港法律作为合约的准据法，以及选择香港作为合约纠纷的仲裁地。为此，中央政府已推行试验计划，允许在前海的港资企业选择香港法作为准据法,以及中国（广东）自由贸易试验区的香港企业选择香港作为仲裁��。目前，香港政府正积极寻求内地政府的支持，希望能在 2024 年将此等措施推广至整个大湾区。这一计划不仅有望吸引更多投资进入大湾区，更可以为香港和大湾区法律从业者创造更多工作机会，促进整个大湾区的协同发展。

三、虚拟资产交易平台的监管 

虚拟资产交易所在没有适当监管的情况下可能会引发多么严重的危机呢？此次加密货币交易所FTX的倒闭及其高达80亿美元的客户资金缺口为人们敲响了警钟。此类事件严重打击了投资者的信心，阻碍整个加密货币行业的健康发展。

2023年6月，香港对虚拟资产交易平台（VATP）运营者实施了两个新的发牌制度。其一，根据《证券及期货条例》（第571章），虚拟资产交易平台可以从事第1类受规管活动（证券交易）和第7类受规管活动（提供自动交易服务）。其二，根据《打击洗钱及恐怖分子资金筹集条例》（第615章），运营者可以提供其他虚拟资产服务。这两个发牌制度同时运作。由于虚拟资产的性质不断变化，香港证监会建议虚拟资产服务提供者最好申请该两项牌照，以确保业务可以在不受干扰的情况下持续运作。

发牌制度所规定的条例广泛、具体且健全。举例来说，虚拟资产交易平台运营者必须持续对其平台上交易的所有虚拟资产进行严格的尽职调查，包括考虑其创造的新价值和/或其他创新的便利用途。此外，只有大型虚拟资产（即此虚拟资产应已获纳入由至少两个不同指数提供者所推出的至少两个获接纳的指数当中），才能提供给零售客户交易。最后，客户资产必须通过虚拟资产交易平台运营者的香港全资子公司托管，而该子公司除了接收或持有客户资产外，不开展其他业务。客户资产必须与运营者和子公司的资产分开，相关种子及私人密钥必须安全地储存在香港。

此项新的发牌制度明确了香港当局对虚拟资产运营者实行严格适切监管的决心，为香港实现成为虚拟资产中心的目标提供了坚实的基础，深受业界欢迎。希望这一举措能够鼓励投资者在香港投资虚拟资产。另外，虚拟资产的发展亦会产生更多涉及虚拟资产的诉讼，从而推动这一领域的法律发展。目前，相较于英国和新加坡等司法管辖区，香港在这个领域仍然有一定的发展空间。

结论 

经济下行的风险预示大中华地区的商事争议解决行业或将面临一段艰难时期，但近期在法例与监管方面的进一步发展亦同时为业界带来新的机遇。法律从业者应为此做好充分准备，不断提升自身专业素养，同时积极拓展人际关系网络，迎接新一年的挑战与机遇。