Closing remarks by Justin D'Agostino at "Why Use Hong Kong Law" webinar (31 May 2021)
Thank you to the Secretary for Justice, to the Chief Judge Mr Justice Poon, and to all the panellists for an afternoon of stimulating discussion here in Hong Kong.
The range of points discussed, the quality of the debate, and the expertise of each of the speakers illustrate perfectly how robust and vibrant Hong Kong's law and legal community are.
It is my task to close this excellent day of debate.
Hong Kong is one of the world's great commercial and financial centres. And its law is fundamental to the conduct of business.
For shippers, traders, financiers, entrepreneurs, and tech giants, Hong Kong remains an ideal base for local commerce, as well as trade with mainland China, Asia, and the rest of the world.
This is not a new observation. Nor is it a new state of affairs. Hong Kong has been a centre of trade and finance for hundreds of years. It has long been the primary base for parties doing deals with the mainland and far beyond. It is home to an international and outward-facing community, drawn to Hong Kong by its business-friendly environment, and keen to make the most of it.
Over the years, Hong Kong has developed a strong and sophisticated infrastructure that facilitates both trade and finance. That infrastructure includes everything from a favourable tax regime, to a thriving stock exchange, a sophisticated regulatory landscape, and world-class professional services. And of course, an absolutely vital pillar of that infrastructure, underpinning all the rest, is Hong Kong's legal system.
Some of you may have attended the first event in this webinar series, "Why Hong Kong is irreplaceable". If so, you will have heard the excellent keynote address by Eddie Yue, the Chief Executive of the Hong Kong Monetary Authority. Mr Yue pointed out that Hong Kong has weathered a lot in its history, from the Second World War to the Asian Financial Crisis of the late 1990s, to the Global Financial Crisis of 2008, and the events of the last 2 years, yet its resilience is undiminished. He went on to lay out that, in his view, Hong Kong's status as a great financial centre looked secure and ever more promising. I agree.
You only need to look around this city to see just how much commercial activity is going on. Stand just about anywhere in Hong Kong and you will see skyscrapers that house bankers, lawyers and head offices; busy container ships; and constant construction. Pre-COVID, you would also have seen planes landing in Lantau every minute or so: Hong Kong is one of the world's principal aviation hubs for passengers and cargo.
And so let us look to the future.
Hong Kong is a "core city" in China's Greater Bay Area initiative, which is driving innovation and development in everything from tourism to technology, supporting Hong Kong businesses in accessing mainland markets.
The Belt and Road Initiative has been described as the "super-connector" between Mainland China and the rest of the world, and it offers a wealth of opportunities for Hong Kong. We have heard some really interesting details today about infrastructure projects governed by Hong Kong law, many of which are, of course, linked to the Belt and Road Initiative. Plans have also been announced to establish Hong Kong as a platform for investment and financing serving the Belt and Road Initiative. The sheer scale of the Belt and Road, and Hong Kong's strategic position as the "gateway to China", mean the city is ideally placed both to facilitate, and to benefit from, this initiative.
On the capital markets side, we have heard about the listing boom that is going on at the moment. Hong Kong IPOs raised funds exceeding US$51 billion last year, a jump of 26% over the previous year, with some notable "homecoming listings" contributing to the success. And we heard today of the aim to make Hong Kong a hub for new economy company listings. The HK Exchange is already the number one fundraising venue in Asia for the biotech sector; number two worldwide. HKEX ranked second globally in terms of IPO proceeds last year, behind only the NASDAQ. Overall, 2020 saw the Hong Kong Exchange break more than a dozen of its own records, despite the effect of the COVID pandemic.
M&A activity is also continuing, with Hong Kong attracting US$16 billion in inbound investment just in the second half of 2020 both from Mainland China and further afield.
All of these activities are underpinned by Hong Kong law. If you run a business in Hong Kong, list a company here, invest or simply work here, Hong Kong law will affect, regulate and be relevant to you.
Hong Kong law is equally relevant to parties who resolve their disputes here. Where there are deals, there are, inevitably, disputes. Hong Kong remains one of the world's leading hubs for international dispute resolution. We have also heard today about the innovations in the IP and insolvency regimes in Hong Kong.
Whether these parties refer disputes to arbitration, or to mediation or to the Hong Kong courts, the territory offers world-class adjudication of even the most complex commercial cases.
As we have heard, arbitration is thriving in Hong Kong. HKIAC reported a record caseload last year, and global users recently voted Hong Kong one of the top three arbitral seats in the world in the 2021 Queen Mary University of London survey.
For the last five years, well over 50% of HKIAC's arbitrations have involved contracts where the parties had selected Hong Kong as the governing law.
Hong Kong offers everything that successful arbitration requires, from specialist lawyers to state-of-the-art hearing facilities, along with world-class institutions with operations here including the ICC, CIETAC and HKIAC of course.
Most importantly, Hong Kong has an excellent record of enforcing arbitral awards, so parties who arbitrate here can actually recover what they are awarded.
As the principal seat for mainland-related disputes, Hong Kong works closely with Mainland China to support and develop the arbitral infrastructure in both places, and ensure that awards are fully enforceable across the border.
At the end of the day, efficiency and enforceability are what users of arbitration value most in an arbitral seat, and that is what Hong Kong consistently delivers.
Parties who opt to litigate here are equally well served. As well as a very active Bar, Hong Kong is one of the few common law jurisdictions to offer Solicitor Advocates, with rights of audience in the High Court.
Hong Kong is also known for the independence of its judiciary and for the quality of its court decisions. There is of course a three-tier court system, which facilitates robust scrutiny of decisions and ensures rigorous judicial oversight. Hong Kong's Court of Final Appeal includes not only the territory's own top judges, but Non-Permanent Judges drawn from other leading common law jurisdictions. As far as I'm aware, this is unique in the common law world.
That also makes a material, positive, impact on the development of Hong Kong law, by ensuring that the decisions of our highest court benefit from the views of senior jurists who are also making law in England, Australia, Canada and beyond. In turn, those jurisdictions benefit from their judges' interactions with the Hong Kong bench.
At every level, Hong Kong judges are receptive to arguments based on international jurisprudence and persuasive authority from the other common law jurisdictions. But they are not afraid to diverge from those other jurisdictions where they feel it right to do so. On certain issues, such as the scope of legal professional privilege – and as we heard today around IP rights and remedies – the Hong Kong courts have struck out in a different direction from the English courts where they believed the English jurisprudence was not the most appropriate approach here.
This is the sign of a mature legal system: Hong Kong's judges are skilled and open to comparative law analysis and to guidance from comparable commercial law, but do not feel obliged to follow those systems if they feel that another path is more appropriate for Hong Kong. Nor are they afraid of innovating in their own right and creating new law for Hong Kong.
Moreover, Hong Kong judges take pride in their duty to uphold the rule of law.
For all of these reasons it is clear to me that, from deal to dispute, Hong Kong has retained a healthy, sophisticated legal system that effectively facilitates business. That has long been the case and, in my view, that has not changed.
Nevertheless, we have to acknowledge that there are other views. The events of 2019 and 2020, culminating in the introduction of the National Security Law which we heard about from our panellists today, have undoubtedly affected international perceptions of Hong Kong, its laws, and its legal system.
While acknowledging these perceptions, and the challenges they pose, it is equally important to separate them from the business reality on the ground. That reality, as we have heard from all of today's speakers, is that Hong Kong is a thriving commercial and financial centre, as it was before 2019. Moreover, its strength, and the opportunities for further growth, could not be clearer. That commercial and financial activity depends on Hong Kong law, which more than meets the challenge of supporting it.
I think the ongoing challenge for Hong Kong is something quite different.
As for all world-class legal systems, the challenge is how to remain relevant. What do I mean by a "relevant" legal system? Well I mean a system of law that is not only fit for purpose now, but keeps evolving and developing to meet the changing needs of its users.
As we all know, user needs – in all areas of our lives – are changing faster than ever before. Principally, this is driven by rapid and continuing developments in technology, which are changing the way we live and work in more ways than we can count.
To stay relevant, and indeed to stay ahead, Hong Kong must continue to keep abreast of these developments, and innovate to address them.
Hong Kong's legal and business communities have already driven many significant innovations. Often, these involve close collaboration with their mainland counterparts. In 2014, HKEX worked with the Shanghai and Shenzhen exchanges to develop Stock Connect, which allows Hong Kong and Mainland Chinese investors to trade securities in each other's markets through the trading and clearing facilities of their home exchange. This was followed by Bond Connect in 2017.
More recently, Hong Kong and the mainland collaborated to enhance their regimes for mutual enforcement of arbitral awards and for obtaining interim relief in support of arbitration. As we heard earlier, the resulting Arrangements have materially enhanced Hong Kong's attractiveness as an arbitral seat.
Hong Kong has also recognised the growing demand for alternatives to resolving disputes in person. When COVID restrictions made travelling to hearings impossible, the arbitration community quickly and comprehensively embraced remote hearings: HKIAC was one of the first institutions in the world to offer a fully-equipped virtual hearing room, which has been hugely popular.
Even before the pandemic, the Department of Justice was actively developing online dispute resolution in Hong Kong, notably via the eBRAM platform. eBRAM offers a convenient, low cost and efficient way for parties to resolve their disputes without the time, cost and effort of preparing a case for a court or tribunal. It is now up and running successfully for COVID-related disputes, with plans to expand from there.
In the Chief Executive's recent policy address, the government expressly recognised the need "to enhance the capability of its legal profession by harnessing modern technology in the provision of legal and dispute resolution services". This is timely. One of Hong Kong's roles in the Greater Bay Area is to develop itself as an international innovation and technology hub. This will inevitably drive innovation in the legal sector, as it rises to the challenge of addressing the new issues, new products and new technologies of the digital space. Lawyers and legislators must also embrace new ways of conducting the business of law, from "smart legal contracts" to automated drafting.
I see many legal systems worldwide embracing this trend, and it is essential that Hong Kong continues to keep pace.
The Department of Justice has committed to explore the development of the "Hong Kong Legal Cloud", a state of the art online facility equipped with advanced information security technology, which would provide secure data storage services for the local legal and dispute resolution sector. This is billed as another way to promote the overall long-term development of Hong Kong’s legal and dispute resolution services and is very exciting.
There is always more to be done. Hong Kong's courts remain largely paper-based, for example, as does the Companies Registry. There is a need to update their technology and payment systems to support their substantive work more effectively. The courts must also embrace, and invest in, effective virtual hearing technology. Legislation must be regularly reviewed, to ensure that it remains relevant and fit for purpose. We heard today of the exciting changes to the rules around fund formations and the importance to Hong Kong of the suppliers of private capital and the opportunities for further developments in the Companies law regime.
Moreover, with the opportunities afforded Hong Kong from the Greater Bay Area and from the Belt & Road initiative, Hong Kong should continue to ensure that its legal system evolves and innovates to best realise those opportunities.
For Hong Kong to remain the world-class legal hub it is today, its innovation must be ongoing, wide-ranging, and habitual. Hong Kong must continue to consult internally, and look outwards to other legal systems, to identify best practice.
Given Hong Kong's strong legal foundations, its position at the heart of the Greater Bay Area's tech boom, and as a major business hub, we have the ecosystem in which to create a legal system for the rest of the century.
Against that background, I am confident that Hong Kong is both willing, and well-placed, to stay at the forefront, and that Hong Kong law remains a safe, sound choice for commercial parties transacting with the Mainland, the rest of Asia and beyond.