Litigation and enforcement in Hong Kong: overview

A Q&A guide to dispute resolution law in Hong Kong.

The country-specific Q&A gives a structured overview of the key practical issues concerning dispute resolution in this jurisdiction, including court procedures; fees and funding; interim remedies (including attachment orders); disclosure; expert evidence; appeals; class actions; enforcement; cross-border issues; the use of ADR; and any reform proposals.

To compare answers across multiple jurisdictions visit the Litigation and enforcement Country Q&A tool.

This Q&A is part of the global guide to dispute resolution. For a full list of jurisdictional Q&As visit www.practicallaw.com/dispute-guide.

Simon Powell and Chi Ho Kwan, Latham & Watkins
Contents

Main dispute resolution methods

1. What are the main dispute resolution methods used in your jurisdiction to resolve large commercial disputes?

The main dispute resolution methods used in Hong Kong to resolve large commercial disputes are litigation and arbitration. These are largely adversarial processes. The use of alternative dispute resolution methods, particularly mediation, has increased since the implementation of the Civil Justice Reforms (CJR) in 2009. For a claim to succeed, the party who makes an allegation must prove, generally on a balance of probabilities (or more likely than not), that such an allegation is factually true.

Litigation

Litigation involving large commercial disputes is generally commenced in the Court of First Instance of the High Court (CFI).

The civil litigation process and procedure in the CFI is governed by the Rules of the High Court (RHC).

The civil litigation process was overhauled in 2009 with the introduction of the CJR. The main aim of the CJR was the reduction of the expense, delay and complexity of the civil litigation system. The RHC now expressly provides, as part of its underlying objectives, the promotion of a cost effective, fair and swift civil procedure. It encourages the courts to exercise their powers actively to manage cases, to:

  • Help lower the costs of accessing justice.

  • Ensure that cases are dealt with quickly and efficiently.

Arbitration

Arbitration has long been the preferred method for resolving shipping, insurance and construction disputes in Hong Kong. It has also become an increasingly popular choice for resolving multi-jurisdictional commercial disputes in recent years (see Question 30).

Mediation

The CJR strongly encourages the use of mediation to resolve disputes. Since the CJR's introduction in 2009, the Hong Kong courts have encouraged the use of mediation and will readily impose cost sanctions if a party unreasonably refuses to attempt mediation (see Question 30).

 

Court litigation

Limitation periods

2. What limitation periods apply to bringing a claim and what triggers a limitation period?

The Limitation Ordinance sets out the limitation periods for commencing various proceedings, including:

  • Contract: six years from the date of the breach.

  • Tort: six years from either the date of the wrongful act or when damage occurs as a result of the wrongful act.

  • Deeds: 12 years from the date of the breach.

  • Actions to recover land: 12 years from the date when the right accrued (60 years if the claim is brought by the government).

  • Fraudulent breach of trust: no limitation period.

Special rules apply where:

  • An action is based on fraud or seeks relief from the consequences of a mistake.

  • There has been deliberate concealment by the defendant of facts relevant to the claimant's cause of action.

In those cases, the limitation period does not begin to run until the claimant has discovered the fraud, concealment or mistake or could with reasonable diligence have discovered it.

 

Court structure

3. What is the structure of the court where large commercial disputes are usually brought? Are certain types of dispute allocated to particular divisions of this court?

Large commercial disputes are usually brought in the Court of First Instance of the High Court (CFI).

The CFI has unlimited jurisdiction over all civil matters. Common types of civil proceedings in the CFI include:

  • Admiralty.

  • Breach of contract.

  • Tort.

  • Bankruptcy and company winding-up.

  • Construction.

  • Intellectual property.

  • Real property and mortgage actions.

Within the CFI, certain specialist lists are provided for specific types of disputes, including the:

  • Commercial List for insurance, banking and general financial disputes.

  • Construction and Arbitration List for construction disputes or arbitration issues requiring the supervisory jurisdiction of the CFI.

Certain proceedings are specifically assigned to particular judges allocated to hear those proceedings, such as probate proceedings, bankruptcy and winding-up proceedings, and admiralty proceedings.

The answers to the following questions relate to procedures that apply in the CFI.

 

Rights of audience

4. Which types of lawyers have rights of audience to conduct cases in courts where large commercial disputes are usually brought? What requirements must they meet? Can foreign lawyers conduct cases in these courts?

Rights of audience/requirements

Hong Kong has a "split" legal profession, divided between solicitors and barristers. Barristers admitted to the Hong Kong bar and solicitor-advocates (see below) have full rights of audience in all courts in Hong Kong, including the Court of First Instance of the High Court (CFI), the Court of Appeal and the Court of Final Appeal.

All solicitors who have been admitted to practise in Hong Kong and who hold practising certificates have rights of audience in the lower courts, and can appear in Chambers before judges of the CFI.

Solicitors who have practised for at least five years, two of which must have been in Hong Kong, either as a solicitor, barrister or a "legal officer" can apply for the right to appear as advocates in open court in the CFI, Court of Appeal and Court of Final Appeal under the Legal Practitioners (Amendment) Ordinance 2010, which came into operation on 22 June 2012 (solicitor-advocates).

Litigant in person

Generally, an individual can appear before the Hong Kong courts to represent himself. However, a body corporate cannot carry on any proceedings in the Hong Kong courts otherwise than by a solicitor, unless permission is granted by the court for it to be represented by one of its directors.

Foreign lawyers

Generally, foreign lawyers do not have rights of audience in the Hong Kong courts. Overseas barristers may be granted limited rights to conduct a specific case in certain circumstances.

In-house counsel

Generally speaking, there is no prohibition against in-house counsel with a valid practicing certificate appearing in courts per se. However, if an in-house solicitor would like to appear on behalf of the company for which he works, the position is somewhat limited.

A body corporate cannot begin or carry on any such proceedings in the High Court otherwise than by a solicitor except either (Order 5, rule 6, Rules of the High Court):

  • As expressly provided by or under any enactment.

  • Where leave is given by the High Court for it to be represented by one of its directors.

Therefore, a body corporate cannot carry on any proceedings in the High Court unless it is represented by a solicitor or with the Court's permission, one of its directors. Although the word “solicitor” is not clearly defined, it appears that it does not include in-house counsel in this context. The reason for this is that to permit a body corporate to pursue proceedings without legal representation, at no financial risk to its shareholders and directors, is considered inherently unfair to the other parties to the litigation. Therefore, body corporates in Hong Kong are customarily represented by solicitors’ firms.

Under this rule, an in-house solicitor will only be able appear on behalf of the company for which he works if all of the following applies:

  • He is also a director of the company.

  • An application by the company for leave to be represented by one of its directors is made ex parte to the Court supported by an affidavit made by the in-house solicitor/director verifying the reasons why leave should be given for the company to be represented by him.

  • A board resolution of the company authorising the in-house solicitor/director to appear on behalf of the company is exhibited to the affidavit.

The Rules of the District Court are also largely consistent with the above.

 

Fees and funding

5. What legal fee structures can be used? Are fees fixed by law?

Legal fees are generally charged on the basis of the amount of time spent on a matter by individual lawyers and the respective hourly rates of those lawyers.

Conditional or contingent fee arrangements, where a lawyer takes a share of any compensation received or receives a fee payable only in specified circumstances, usually in the event of success, are generally not permitted in Hong Kong in respect of contentious business. These agreements are illegal at common law and punishable under section 101I of the Criminal Procedures Ordinance.

Legislative changes in other common law jurisdictions have modified these principles to permit alternative fee structures in contentious matters in certain circumstances. In 2013, the Law Reform Commission of Hong Kong (Law Reform Commission) established a sub-committee to review the current position relating to third party funding for arbitration for the purposes of considering whether reform is needed, and, if so, to make such recommendations for reform as appropriate (www.hkreform.gov.hk), but no changes have yet been implemented (see Question 35).

 
6. How is litigation usually funded? Can third parties fund it? Is insurance available for litigation costs?

Funding

Parties usually fund their own legal costs. Awards of costs are in the discretion of the Court of First Instance of the High Court (CFI), although the general rule is that the successful party will recover a proportion of its legal costs from the unsuccessful party.

Third party funding of commercial disputes is generally not permitted. Third party funding arrangements are sometimes permissible in insolvency proceedings to enable liquidators to pursue various claims and where persons with a legitimate common interest in the outcome of the litigation are justified in supporting the litigation being conducted by another.

Insurance

There is no established practice of insuring for litigation costs.

 

Court proceedings

7. Are court proceedings confidential or public? If public, are the proceedings or any information kept confidential in certain circumstances?

Court proceedings are generally held in public for commercial disputes. There are certain statutory exceptions, and hearings relating to the following are often held in private:

  • Intellectual property.

  • Without notice (ex parte) applications for injunctions or orders of a restraining or compulsory nature (see Question 12).

  • Trusts.

  • Obtaining evidence for foreign courts.

  • Some bankruptcy and company winding-up applications.

Arbitration-related court proceedings (except for Court of Appeal hearings) are heard in private, although the court may order these proceedings to be heard in open court on the application of a party or if it is satisfied that those proceedings ought to be heard in open court.

Except for the writ of summons filed in a civil action (a copy of which can be obtained from the Court of First Instance of the High Court (CFI) Registry by any person), pleadings and other documents filed in court proceedings remain private and confidential, unless or until they are referred to in open court.

 
8. Does the court impose any rules on the parties in relation to pre-action conduct? If yes, are there penalties for failing to comply?

There are currently no specific rules imposed on the parties in relation to pre-action conduct. However, the Civil Justice Reforms (CJR) grants the Court of First Instance of the High Court (CFI) the power to consider the parties' pre-action conduct when assessing costs. If the CFI considers a party to have acted unreasonably it may order that party to pay the other party's costs on an indemnity basis (see Question 22).

 
9. What are the main stages of typical court proceedings?

Starting proceedings

Civil proceedings are generally commenced in the Court of First Instance of the High Court (CFI) by the claimant issuing and serving on the defendant one of the following:

  • A writ of summons (where the main facts of a case are in dispute).

  • An originating summons or motion (where the main issues are points of law, and the court is not required to investigate the facts in detail).

  • A petition (which is required for particular matters, such as certain applications concerning companies and patents).

In a writ action, if a statement of claim is not endorsed on the writ, then the claimant must serve a statement of claim on the defendant before the expiry of 14 days after the defendant has given notice that it will defend the claim.

Notice to the defendant and defence

The claimant is responsible for serving the originating process on the defendant before it expires (generally within 12 months from the date of its issuance). Generally, there are three ways to serve process on a defendant within Hong Kong:

  • Personal service.

  • Service by registered post addressed to the addressee at the addressee's usual or last known address (or, where the defendant is a limited company, by posting it or leaving it at its registered office address).

  • Service by insertion through the letter box of the addressee.

Once process has been duly served, the defendant must:

  • Acknowledge service within 14 days, stating whether it intends to defend the action.

  • File a defence within the later of 28 days:

    • after the time prescribed for acknowledging service of the writ;

    • from receipt of the statement of claim.

Subsequent stages

If the defendant files and serves a defence, the claimant may file and serve a reply to that defence within 28 days, setting out additional facts in answer to the defence.

If the defendant counterclaims, the claimant must file and serve a defence to the counterclaim within 28 days, if the claimant wishes to dispute it.

The pleadings are deemed to be closed 14 days after service of the reply or the defence to counterclaim, or, if neither a reply nor a defence to counterclaim is served, 28 days after service of the defence. No pleading subsequent to a reply or a defence to counterclaim can be served except with the leave of the CFI.

The proceedings will then proceed as follows:

  • Discovery (see Question 16).

  • Directions: directions for the future conduct of the proceedings will be sought from and provided by the court. The parties will attempt to agree directions and submit a joint timetabling questionnaire to the court. If the parties are unable to agree, the claimant should take out a case management summons to request the court to give directions.

  • Exchange of witness statements and (if applicable) the filing of experts' reports.

  • Listing for trial: after the court has given directions for setting down, the parties should file an application to set the case down for trial and a notification of setting down.

 

Interim remedies

10. What actions can a party bring for a case to be dismissed before a full trial? On what grounds must such a claim be brought? What is the applicable procedure?

Summary judgment

In appropriate cases, a party can obtain judgment summarily on its claim or counterclaim without proceeding to trial.

A claimant seeking summary judgment on its claim can apply after the defendant has given notice of intention to defend and the statement of claim has been served. The application is made by summons supported by affidavit. The defendant opposing the application must file an affidavit showing the merits of its defence.

If the defendant fails to satisfy the court that there is an issue or question in dispute which ought to be tried, or that for some other reason there ought to be a trial, judgment can be granted summarily.

Striking out

At any stage of the proceeding the court can, either of its own motion or on application by a party, order a pleading to be struck out on the ground that it:

  • Discloses no reasonable cause of action or defence.

  • Is scandalous, frivolous or vexatious.

  • May prejudice, embarrass or delay the fair trial of the action.

  • Is otherwise an abuse of the process of the court.

The court can stay or dismiss the action, and enter judgment accordingly.

An application to strike out a pleading should be made promptly, and usually before pleadings are closed. The application is made by summons. No evidence is required if the basis of the application is that the pleading discloses no reasonable cause of action or defence.

Other applications

A party can also apply for a case to be dismissed before a full trial in other circumstances, such as:

  • Disposal of case on point of law. The court can, on the application of a party or of its own motion, determine any question of law or construction of any document at any stage of the proceedings.

  • Default judgment. If a defendant fails to give notice of intention to defend or serve a defence within the prescribed time limit, the claimant can seek judgment in default.

  • Failure to comply with the rules and orders. The action can be dismissed or judgment entered without proceeding to trial if a party:

    • breaches or fails to comply with the rules or an order of the court; or

    • engages in conduct which amounts to an abuse of process or makes a fair trial impossible.

 
11. Can a defendant apply for an order for the claimant to provide security for its costs? If yes, on what grounds?

A defendant can apply for security for costs if the claimant:

  • Is normally resident outside the jurisdiction.

  • Is a nominal claimant suing on behalf of another, and it appears to the court that this claimant will not have sufficient funds to pay the defendant's costs.

  • Has failed to state or has incorrectly stated its address in its originating process.

  • Has changed its address during the proceedings with a view to evading the consequences of the litigation.

  • Is a limited company incorporated in Hong Kong or a company incorporated outside Hong Kong (whether limited or unlimited), and there is reason to believe that the company will be unable to pay the costs of the defendant if successful in his defence.

If one or more of these grounds is established, the court will consider whether in all the circumstances of the case it is just to require security to be given. Factors the court will take into account when exercising its discretion include:

  • The claimant's prospects of success.

  • Whether the claimant's claim would be stifled by the defendant's application.

  • Whether the claimant is using its lack of funds to put pressure on the defendant.

  • The timing of the application.

 
12. What are the rules concerning interim injunctions granted before a full trial?

Availability and grounds

The Court of First Instance of the High Court (CFI) has discretionary power to issue interim injunctions, and it may do so if both:

  • There is a serious issue to be tried.

  • The balance of convenience lies in favour of granting an injunction.

In deciding where the balance of convenience lies, the court must consider whether, if the claimant succeeds at the trial, it would be adequately compensated by damages. If not, the court must then consider whether, if the claimant fails in the action, the defendant would be adequately compensated by the claimant providing an undertaking as to damages.

Prior notice/same-day

In cases of urgency, or where there is a need for confidentiality, an application can be made ex parte (that is, without notice to the defendant) supported by an affidavit. An injunction can be granted on the same day. In cases of emergency or real urgency, an injunction can be granted prior to an action commencing, subject to the claimant undertaking to:

  • Issue the originating process.

  • File the necessary evidence.

Where the application is made ex parte, the claimant must ensure that it makes full and frank disclosure of all material matters within its knowledge.

Unless there is a compelling reason not to do so, a respondent should be given notice of the ex parte injunction application, which is then said to be ex parte on notice, so that it might appear and make submissions on the application.

Mandatory injunctions

The CFI can also grant a mandatory interim injunction to compel a party to do something, as well as prohibitory interim injunctions (forbidding the commission or continuance of an act).

Right to vary or discharge order and appeals

Generally, if an order has been made without notice to the respondent, the respondent can apply to the court to vary or discharge the order at a full/on notice hearing. Interim orders are appealable, with leave of the court. In most cases, an application for leave should be made within 14 days of the interim decision.

 
13. What are the rules relating to interim attachment orders to preserve assets pending judgment or a final order (or equivalent)?

Availability and grounds

The Court of First Instance of the High Court (CFI) can grant Mareva injunctions, that is, interim injunctions to restrain a defendant from dealing with its assets for the purpose of preserving assets pending final judgment or a final order.

To obtain a Mareva injunction, the claimant must show that:

  • It has a good arguable case on a substantive claim over which the court has jurisdiction.

  • The defendant has assets within the jurisdiction, or in the case of a worldwide injunction, that there are no or insufficient assets within the jurisdiction but there are assets outside the jurisdiction.

  • The balance of convenience lies in favour of granting the injunction.

  • There is a real risk that the defendant may dissipate or remove those assets before judgment can be enforced.

Prior notice/same-day

Applications are generally made ex parte and can be obtained without prior notice, and immediately in cases of real emergency. Accordingly, the claimant must comply with the strict duty of full and frank disclosure on the application.

Main proceedings

Mareva injunctions can be granted in relation to proceedings which:

  • Have been or are to be commenced in a place outside Hong Kong.

  • Are capable of giving rise to a judgment which may be enforced in Hong Kong.

Preferential right or lien

A Mareva injunction does not give the claimant any preferential right or lien over the assets frozen. The defendant can apply to the court to vary the injunction to release particular assets for payment of its business, living and legal expenses and other bona fide debts.

Damages as a result

Where a claimant succeeds in obtaining a Mareva injunction, it will generally be required to provide an undertaking to pay damages to the defendant for any loss sustained by reason of the injunction if it subsequently transpires that it ought not to have been granted.

Security

The court may require the claimant to reinforce its undertaking by providing security in certain circumstances, for example, where:

  • There is a likelihood of a significant loss arising as a result of the injunction.

  • A sound basis for believing that the undertaking will be insufficient.

 
14. Are any other interim remedies commonly available and obtained?

Other interim remedies commonly available and obtained include:

  • Interim payments. The court can require a party to make an interim payment into court on account of the damages, debts or other sums which it might be held liable to pay the other party.

  • Anton Piller orders. To preserve the subject matter of a cause of action and related documents, the court can grant a mandatory injunction requiring a defendant to provide access to its premises to allow documents and materials to be removed and preserved pending trial.

  • Appointment of receiver. When it appears just and appropriate to do so, the court can appoint a receiver to:

    • receive and preserve property;

    • restrain other parties from taking such property pending the trial.

  • Appointment of provisional liquidator. In company winding-up proceedings, the court can appoint a provisional liquidator at any time after the presentation of a winding-up petition to preserve the assets of the company pending the hearing of the petition.

 

Final remedies

15. What remedies are available at the full trial stage? Are damages just compensatory or can they also be punitive?

The remedies generally available in large commercial disputes include:

  • Damages.

  • Specific performance.

  • Injunctions.

  • Declarations.

  • Orders for an account of profits.

  • Orders for tracing and recovery of property from a trustee or a third party that was applied, transferred or received in breach of trust.

  • Orders for the restitution of property in unjust enrichment claims.

Damages are generally compensatory in nature. To persuade the court or the arbitral tribunal to award damages, the claiming party must prove that his loss is not too remote. Generally, a loss is not too remote if it was within the reasonable contemplation of both parties at the time of entering into the contract. Damages in a contract claim are generally intended to place the claimant in the same position as if the contract has been performed. Damages in tort are awarded generally to place the claimant in the position in which he would have been had the tort not taken place. Exemplary or punitive damages are only awarded rarely and in very extreme circumstances.

 

Evidence

Disclosure

16. What documents must the parties disclose to the other parties and/or the court? Are there any detailed rules governing this procedure?

Each party has a continuing duty throughout the proceedings to disclose to the other parties all documents (whether favourable or unfavourable) in its possession, custody or power that are relevant to the issues in dispute in the proceeding. This obligation covers paper writings and also anything on which evidence or information is recorded in a manner intelligible to the senses or capable of being made intelligible with the aid of equipment. It includes computer databases, insofar as they contain information capable of being retrieved and converted into readable format.

The Rules of the High Court (RHC) set out detailed procedures for documentary disclosure. There are two main categories of discovery:

  • Automatic discovery. Each party must prepare and submit a list of all documents relevant to the issues in dispute which are, or have been, in its possession, custody or power (including privileged documents, see Question 17). Copies of the non-privileged documents must be provided on request and/or they must be made available for physical inspection. Privileged documents are not required to be produced.

  • Specific discovery. The court may also order a party to disclose specific documents or classes of documents on the application of another party, if those documents are relevant and discovery is necessary for either disposing fairly of the cause or matter, or saving costs.

Where a party fails to meet their discovery obligations the court can make such order as may be just. The court may go as far as to dismiss the action, strike out the defence or even make an order for committal for contempt.

 

Privileged documents

17. Are any documents privileged? If privilege is not recognised, are there any other rules allowing a party not to disclose a document?

Privileged documents

Some documents are privileged, and are not subject to production and inspection, including:

  • Documents protected by legal professional privilege (see below).

  • Without prejudice correspondence created for the purpose of settling the dispute.

  • Documents tending to incriminate or expose to a penalty the party who would produce them.

  • Documents privileged on the ground of public policy.

  • Documents which are sent by one party to another, where the parties have a common interest in the subject matter of the document or litigation.

There are two main categories of legal professional privilege:

  • Legal advice privilege. This applies to communications between clients and their lawyers that have come into existence for the dominant purpose of giving or receiving legal advice. The same privilege attaches to communications with in-house lawyers (local and foreign) provided that such communications relate to legal as distinct from administrative matters. Legal advice privilege also protects internal confidential documents of the client organisation that are produced for the dominant purpose of obtaining legal advice.

  • Litigation privilege. This applies to communications passing between lawyers, clients and third parties, made for the dominant purpose of obtaining legal advice or collecting evidence in respect of existing or contemplated litigation.

Other non-disclosure situations

Documents are not privileged from production and inspection purely on the basis that they are confidential. However, the confidentiality of the communication may be relevant to other types of privilege, such as public interest privilege.

The Court of First Instance of the High Court (CFI) can impose certain conditions on the inspection of documents containing confidential information such as technical secrets.

 

Examination of witnesses

18. Do witnesses of fact give oral evidence or do they just submit written evidence? Is there a right to cross-examine witnesses of fact?

Oral evidence

In general, all facts must be proved by a witness attending trial to give evidence, with the parties exchanging written statements of the witnesses of fact on whose evidence they intend to rely at trial beforehand. A witness will not be allowed to give evidence at trial where a witness statement has not been served beforehand, without the court's leave.

In some circumstances, written evidence is in the form of an affidavit sworn by the witness rather than a witness statement.

Right to cross-examine

The Court of First Instance of the High Court (CFI) will generally direct that the witness statement will stand as the witness's evidence in chief. The opposing party can then cross-examine the witness at the trial. While the trial judge will be mostly guided by the parties' counsel and should not abandon his proper role and assume that of an advocate, he can assist counsel's examination by rephrasing questions in manners more readily comprehensible to the witness so as to facilitate the cross-examination process and to ensure the questions properly elicit the facts from the witness.

After cross-examination, the witness can be re-examined by the party calling him on matters arising out of the cross-examination.

 

Third party experts

19. What are the rules in relation to third party experts?

Appointment procedure

Where expert evidence is required, the parties generally each appoint their own, individual experts. No expert evidence can be adduced without the Court of First Instance of the High Court's permission or the parties' agreement.

Parties are entitled to agree on the appointment of a single joint expert. This remains rare in large commercial cases. Where parties do agree to appoint a single joint expert but cannot agree on who should be appointed, the court may assist by selecting the expert from a list prepared by the parties or by directing that the expert be selected in a particular manner.

A court expert may also be appointed. This is rare in practice. The court expert must, if possible, be a person agreed between the parties, failing which the expert will be nominated by the court.

Role of experts

The experts' role is to assist the court on matters within their expertise. Expert witnesses owe an overriding duty to the court to act impartially and independently. They owe no duty to the party from whom they have received instructions or by whom they are paid.

Right of reply

Expert reports are usually exchanged after the exchange of witness statements with a round of supplemental or reply reports. The court normally directs that there be a "without prejudice" meeting of experts to identify those parts of their evidence that are not in issue. The experts may prepare a joint statement specifying the matters agreed and not agreed and the reasons for non-agreement. Experts are usually called to give oral evidence and be cross-examined at trial.

Fees

The party retaining the expert is liable to pay the expert's fees. The costs of court-appointed experts are fixed by the court and the parties are jointly and severally liable to pay them. However, an expert's fees may form part of the costs that a successful party may recover from the unsuccessful party.

 

Appeals

20. What are the rules concerning appeals of first instance judgments in large commercial disputes?

Which courts

Appeals from judgments of the Court of First Instance of the High Court (CFI) are to the Court of Appeal. Generally, no leave is required where the appeal is against a final judgment of the CFI. Leave is generally required for appeals against interlocutory decisions of the CFI.

Grounds for appeal

Appeals can be lodged against CFI judgments on matters of law or fact, or relating to the CFI's exercise of a discretion.

The appellate courts are generally reluctant to reverse CFI judgments that are based on findings of fact, particularly where those findings depended on the judge's view of the credibility of the witnesses who gave oral evidence.

Time limit

The time limit for filing a notice of appeal against a final judgment of a CFI judge is 28 days from the date of the judgment. For most interlocutory decisions of a CFI judge the time limit is 14 days from the decision.

 

Class actions

21. Are there any mechanisms available for collective redress or class actions?

Representative proceedings

Where numerous persons have the same interest in any proceedings, one or more of them can, as representatives, represent all the persons (or all of them with one or more exceptions). Representatives can bring proceedings or act as a defendant in proceedings. A judgment in representative proceedings is enforceable against a party to the proceedings. However, the Court of First Instance of the High Court's leave is required to enforce the judgment against a represented person who is not a party to the proceedings.

Class actions

The sole mechanism for dealing with multi-party proceedings is the rule on representative proceedings (see above, Representative proceedings). There is otherwise no mechanism available for class actions in Hong Kong at present. The Law Reform Commission has however recommended the introduction of a comprehensive class action regime (see Question 35).

 

Costs

22. Does the unsuccessful party have to pay the successful party's costs and how does the court usually calculate any costs award? What factors does the court consider when awarding costs?

Costs awards are discretionary. Generally, however, the unsuccessful party will be ordered to pay the successful party's costs. Costs includes legal fees and court fees. In the absence of agreement, the amount of costs payable is determined through the taxation process, which involves the Court of First Instance of the High Court (CFI) assessing the costs claim of the successful party.

Costs are commonly assessed on a party-and-party basis, which means that the successful party recovers from the unsuccessful party all costs which were necessary to pursue or defend the action. Any doubt as to the costs' reasonableness is resolved in favour of the paying party.

In certain circumstances, the CFI can order that costs be assessed on a more generous basis (such as the common-fund basis, where a reasonable amount in respect of all costs reasonably incurred will be allowed, or the indemnity basis, where all costs will be allowed except insofar as they are of an unreasonable amount or have been unreasonably incurred), when the successful party should recover a greater proportion of the costs it has incurred.

The CFI has unfettered discretion on costs. One of the key aims of introducing the Civil Justice Reforms (CJR) is to reduce litigation costs as much as is practicably possible. Increasing the cost effectiveness of proceedings before the court is one of the express ''underlying objectives'' of the CJR, which is furthered by the court exercising active case management under rule 4 of Order 1A of the High Court Rules, and the court's general powers of management set out in Order 1B.

In the exercise of its discretion on costs, the CFI will take into account factors such as:

  • The underlying objectives of the CJR (such as cost-effectiveness and procedural economy).

  • The conduct of the parties before and during the trial.

  • The relative success of the parties.

  • Any payment into court or settlement offers made (including sanctioned offers and payments).

 
23. Is interest awarded on costs? If yes, how is it calculated?

Interest accrues on costs as from the date of the order for costs at the rate prescribed in the High Court Ordinance, as amended from time to time.

Where an appellate court allows an appeal, reversing an order for costs, it is free to make any order as to the date from which interest will run that it considers just.

 

Enforcement of a local judgment

24. What are the procedures to enforce a local judgment in the local courts?

The most common methods of enforcement of a judgment for payment of money are:

  • Garnishee order: this is an order requiring a third party who owes money to the judgment debtor to pay the debt to the judgment creditor.

  • Charging order: this is a charge on the property of the judgment debtor for the purpose of securing the payment of the judgment debt. It is often obtained over land or securities and can be followed by an application for an order for sale of the charged property and the application of the proceeds of sale to the judgment debt.

  • Writ of Fi Fa: this is an order requiring the bailiff to seize such of the goods, chattels and other property of the judgment debtor as might satisfy the judgment debt.

  • Appointment of a receiver.

  • Winding up or bankruptcy proceedings.

 

Cross-border litigation

25. Do local courts respect the choice of governing law in a contract? If yes, are there any areas of law in your jurisdiction that apply to the contract despite the choice of law?

Generally, the Court of First Instance of the High Court (CFI) will respect the parties' express choice of governing law in a contract, except where:

  • It is contrary to Hong Kong public policy or a rule of Hong Kong law which is mandatory (see below), irrespective of the law otherwise governing the contract. However, domestic public policy, without more, plays only a minimal role, except where it has been codified in specific statutory provisions (for example, contracts relating to certain gambling activities carried out in Hong Kong will be considered unlawful under the Gambling Ordinance by the CFI, even if the contract is governed by a foreign law which otherwise permits those gambling activities).

  • The choice of law is not bona fide and legal under the laws of any jurisdiction.

  • It is made with the intention of evading the law of the jurisdiction:

    • with which the contract has its most substantial connection;

    • which, but for the express choice of law, would have invalidated the contract or been inconsistent with it.

Mandatory provisions apply to certain areas of law, including:

  • The sale of goods and supply of services.

  • Employment.

  • Real estate.

  • Insolvency and bankruptcy.

  • Financial services regulation.

 
26. Do local courts respect the choice of jurisdiction in a contract? Do local courts claim jurisdiction over a dispute in some circumstances, despite the choice of jurisdiction?

Generally, the Hong Kong courts respect the parties' express choice of jurisdiction in a contract.

However, the Hong Kong courts may also claim jurisdiction over a dispute in certain situations, despite the choice of jurisdiction, including where the:

  • Defendant is domiciled or ordinarily resident within Hong Kong.

  • Contract that is the subject of the dispute was made in Hong Kong.

  • Breach of contract took place in Hong Kong.

  • Whole subject matter of the action is land or movable properties situated in Hong Kong.

If another forum has jurisdiction and is more appropriate, the Hong Kong court can:

  • Decline jurisdiction to determine the matter.

  • In certain circumstances, stay or strike out proceedings.

 
27. If a foreign party obtains permission from its local courts to serve proceedings on a party in your jurisdiction, what is the procedure to effect service in your jurisdiction? Is your jurisdiction party to any international agreements affecting this process?

The methods of serving originating process in Hong Kong are:

  • Personal service.

  • Service by registered post.

  • Service by inserting, through the addressee's letter box, a sealed copy of the writ enclosed in a sealed envelope, which is addressed to the addressee.

  • If the defendant is a limited company, service by posting it or leaving it at its registered office (see Question 9).

Originating process can be served in accordance with the provisions of a contract, where that contract:

  • Provides that the Hong Kong courts have jurisdiction to hear and determine any action in respect of the contract.

  • Specifies how an originating process may be served on a party or a person on its behalf (for instance, through a private process agent).

Hong Kong is a party to the HCCH Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil and Commercial Matters 1965 (Hague Service Convention). Service can be effected under the Hague Service Convention in Hong Kong by sending the proceedings together with a written request from the relevant authority in the originating jurisdiction to the Chief Secretary for Administration of Hong Kong Special Administrative Region.

A bilateral arrangement for the service of judicial documents in civil and commercial proceedings between mainland China and Hong Kong provides for the service of originating process between mainland China and Hong Kong. Service under the Arrangement for Mutual Service is effected in a similar way as under the Hague Service Convention.

 
28. What is the procedure to take evidence from a witness in your jurisdiction for use in proceedings in another jurisdiction? Is your jurisdiction party to an international convention on this issue?

There is no impediment to the taking of evidence from a witness in Hong Kong for use in existing proceedings in a foreign court without the intervention of the Hong Kong courts, where the witness is willing to attend to give evidence.

If a witness is unwilling to give evidence voluntarily, the foreign court must issue a letter of request to the Hong Kong courts to require the witness to give evidence. Part VIII of the Evidence Ordinance sets out the circumstances in which the Hong Kong courts will render assistance to foreign courts (including those which are parties to the HCCH Convention on the Taking of Evidence Abroad in Civil and Commercial Matters 1970 (Hague Evidence Convention)) by ordering the taking of evidence within the jurisdiction. The application is made ex parte, and supported by an affidavit exhibiting the letter of request and explaining the issues in the foreign proceedings and the evidence to be sought.

The Hong Kong courts will ordinarily give effect to such a request insofar as is proper and practicable and to the extent that is permissible under Hong Kong law.

 

Enforcement of a foreign judgment

29. What are the procedures to enforce a foreign judgment in the local courts?

There are two principal methods of enforcing a foreign judgment (other than judgments from mainland China (see below)) in the Hong Kong courts:

  • The Foreign Judgments (Reciprocal Enforcement) Ordinance. This provides for enforcement by a process of registration of judgments from superior courts in designated countries, which have reciprocal arrangements with Hong Kong regarding the enforcement of judgments. Designated countries include Austria, Australia, Belgium, Bermuda, Brunei, France, Germany, India, Israel, Italy, Malaysia, The Netherlands, New Zealand, Singapore and Sri Lanka.

  • At common law. An action must be brought by writ on the foreign judgment. The judgment creditor may apply for summary judgment. The two principal requirements are that the foreign judgment must be:

    • final and conclusive on the merits of the claim;

    • for a definite monetary sum.

Foreign judgments emanating from the UK and the United States must be enforced at common law.

The Mainland Judgments (Reciprocal Enforcement) Ordinance provides a mechanism for enforcing judgments of certain courts of mainland China in Hong Kong and for enforcing Hong Kong judgments in mainland China. Its application is restricted to money judgments obtained from disputes arising from civil or commercial contracts where the parties have agreed in writing that the mainland or Hong Kong courts (as appropriate) have exclusive jurisdiction to resolve any dispute arising out of the contract.

A foreign judgment cannot be enforced or recognised in Hong Kong in circumstances where the restrictions contained in the Foreign Judgments (Restrictions on Recognition and Enforcement) Ordinance apply.

 

Alternative dispute resolution

30. What are the main alternative dispute resolution (ADR) methods used in your jurisdiction to settle large commercial disputes? Is ADR used more in certain industries? What proportion of large commercial disputes is settled through ADR?

Most commonly used ADR methods

The most commonly used ADR methods are:

  • Arbitration. This is a consensual and confidential dispute resolution process where parties agree to submit their dispute to an independent arbitral tribunal to be resolved through an adversarial or inquisitorial process. The arbitral award rendered by the arbitral tribunal is final and binding. The legal framework for arbitration in Hong Kong, the Arbitration Ordinance, was reformed in 2010, and subsequently amended in 2013 and 2015. The Arbitration Ordinance is based on the widely used UNCITRAL Model Law on International Commercial Arbitration 1985 (UNCITRAL Model Arbitration Law) and its internationally recognised principles.

  • Mediation. This is a consensual and confidential dispute resolution process which is facilitated by an independent and unbiased mediator who assists the parties in arriving at a negotiated settlement. If a negotiated settlement is reached, it will become legally binding on the parties once it is put into writing and signed by the parties.

Use of ADR methods in Hong Kong

Arbitration remains the most popular ADR method in Hong Kong. Its popularity originally stemmed from its use as the dispute resolution mechanism of choice for construction and engineering related disputes. In recent years arbitration in Hong Kong has seen significant growth in other important industries such as:

  • Maritime/shipping.

  • Intellectual property (domain name disputes).

  • International trade and investment.

Foreign parties engaged in joint venture enterprises based in mainland China often prefer arbitration in Hong Kong because of:

  • The stability and support offered by its highly developed legal system.

  • The fact that Hong Kong arbitral awards are, subject to very limited exceptions, automatically enforceable in mainland China under the Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and the Hong Kong Special Administrative Region.

Mediation is commonly used in construction and matrimonial disputes in Hong Kong. Since the introduction of the Civil Justice Reforms (CJR) in April 2009, the judiciary has actively encouraged litigants in court proceedings to seek early settlement of their disputes through the use of mediation. As a result, the use of mediation and the number of accredited mediators have steadily increased in recent years.

 
31. Does ADR form part of court procedures or does it only apply if the parties agree? Can courts compel the use of ADR?

ADR does not form a part of formal court procedures in Hong Kong. However, the judiciary encourages parties in existing court proceedings to use ADR (in particular mediation) before proceeding with their case in the courts. Parties must file a Mediation Certificate in the early stages of a court proceeding stating whether they are willing to attempt mediation before proceeding to trial, and, if not, the reasons for refusing to do so. The court may impose cost sanctions if a party unreasonably refuses to attempt mediation.

The Hong Kong courts cannot compel the use of ADR.

 
32. How is evidence given in ADR? Can documents produced or admissions made during (or for the purposes of) the ADR later be protected from disclosure by privilege? Is ADR confidential?

Generally speaking, parties to ADR proceedings must seek to agree the procedures relating to the giving of evidence, unless the procedures are specified in the dispute resolution provision contained in the underlying contractual document between the parties. Frequently, where the parties have chosen arbitration, the contract will refer to the rules and procedures of a body such as the International Chamber of Commerce (ICC) or the Hong Kong International Arbitration Centre (HKIAC) (see Question 34). Failing agreement, directions will be given by the facilitator of the relevant ADR proceeding.

Without prejudice privilege generally protects documents produced for mediation or other non-binding ADR processes, and statements or admissions made during these processes.

The common law principles of privilege apply in arbitration, including legal advice privilege, litigation privilege and without prejudice privilege (see Question 17).

Further, unless otherwise agreed by the parties, no party can publish, disclose or communicate any information relating to arbitral proceedings and awards (save in the particular circumstances provided for in the Arbitration Ordinance).

 
33. How are costs dealt with in ADR?

Arbitration

An arbitral tribunal has an unfettered discretion regarding the costs of arbitral proceedings (including the fees and expenses of the arbitral tribunal and other expenses such as translation and transcription services, if any) (Arbitration Ordinance). The arbitral tribunal is not obliged to follow the scales and practices adopted by the Hong Kong courts on taxation in assessing the amount of recoverable costs.

Other ADR methods

Legal costs are generally dealt with as part of any settlement agreed between the parties, although typically the parties agree to share the fees of the mediator (or evaluator or expert) and other expenses. If the ADR is carried out within the framework of existing legal proceedings, the successful party may be able to claim the ADR costs from the unsuccessful party as part of the costs of the action.

 
34. What are the main bodies that offer ADR services in your jurisdiction?

The Hong Kong International Arbitration Centre (HKIAC)

The HKIAC administers arbitrations and other dispute resolution activities, including mediation and adjudication. The HKIAC manages these activities through the Centre's Secretary General, the chief executive and registrar.

The Hong Kong Mediation Council is a division of the HKIAC.

The HKIAC can be contacted at adr@HKIAC.org.

The International Chamber of Commerce (ICC)

The ICC has a representative office in Hong Kong and offers an array of both binding and non-binding ADR methods including mediation and expert determinations.

A list of the ICC Arbitration and ADR contact details by jurisdiction can be seen at www.iccwbo.org/products-and-services/arbitration-and-adr.

 

Proposals for reform

35. Are there any proposals for dispute resolution reform? If yes, when are they likely to come into force?

Class actions

In November 2009, the Law Reform Commission launched a consultation entitled "Class Actions" proposing a new mechanism for multi-party litigation in Hong Kong (see Question 21).

The Commission recommended a "class action" regime with an "opt-out" approach. The Commission published its report on 28 May 2012, proposing that a mechanism for class actions should be adopted in Hong Kong. The Commission recommended phasing in the implementation of a class action regime by starting with consumer cases to avoid the risk of unduly encouraging litigation and to allow the court system and the community to gain more experience with the new mechanism.

The Department of Justice has established a cross-sector Working Group and a sub-committee to study and consider the proposals of the report.

Third party funding for arbitration

In June 2013, the Law Reform Commission (LRC) set up a sub-committee to review the current position relating to third party funding for arbitration for the purposes of considering whether reform is needed, and, if so, to make such recommendations for reform as appropriate. In October 2015, the LRC released a consultation paper proposing that third party funding for arbitration taking place in Hong Kong should be permitted under Hong Kong law. In particular, the LRC recommended that the Arbitration Ordinance should be amended to permit third party funding for arbitrations taking place in Hong Kong, and that clear ethical and financial standards should be developed for third party funders providing third party funding for parties to arbitrations taking place in Hong Kong.

 

Online resources

Department of Justice – Bilingual Laws Information System (BLIS)

W www.legislation.gov.hk/eng/home.htm

Description. BLIS is a website established and updated by the Department of Justice of the Hong Kong Special Administrative Region (HKSAR) government. It contains, among others, statute laws of Hong Kong in English and Chinese (Laws). The Laws in the system are up-to-date as at today's date, except provisions against which a pencil edit mark has been inserted. New laws or amendments to existing Laws are incorporated into the system within an average of three weeks after the new laws or amendments have come into operation.

Legislative Council of the HKSAR (LegCo) – Database on Legislative History of Bills

W http://app.legco.gov.hk/Bills/english/index.aspx

Description. The website of LegCo contains a database of Bills in current form considered by the Council since 1906.

Law Reform Commission Reports

W www.hkreform.gov.hk/en/publications/introduction.htm

Description. The website of the Law Reform Commission contains, among others, a database of reports the Law Reform Commission has published together with details of any legislation which implements the Law Reform Commission's recommendations.

Judiciary – Judgments and Legal References

W www.judiciary.gov.hk/en/legal_ref/judgments.htm

Description. The website of the judiciary of the HKSAR contains, among others, judgments which are of significance as legal precedents on points of law, practice and procedure of the courts and of public interest from various courts delivered between 1946 and 1948, and from 1966 onwards.



Contributor profiles

Simon Powell

Latham & Watkins

T +852 2912 2500
F +852 2912 2600
E simon.powell@lw.com
W www.lw.com

Professional qualifications. England and Wales, 1989; New South Wales, Australia, 1990; Hong Kong, 1992; New York, US, 2002

Areas of practice. Commercial litigation; arbitration; mediation; white collar defence and investigations; anti-trust and competition; communications; restructuring, insolvency and workouts; securities litigation and professional liability.

Recent transactions

  • Acting for a US venture capital fund in international arbitration proceedings involving a claim against a PRC entity for its refusal and/or failure to convert the VC fund's investment into shares.
  • Acting for a US energy company in an ICC arbitration seated in Singapore against an Indian company relating to the breach of a licence agreement.
  • Representing a US private equity firm in relation to a dispute arising from the breach of the terms of a convertible note by a PRC entity and its failure or refusal to pay interest and other sums due to the PE firm under the terms of that note.

Chi Ho Kwan

Latham & Watkins

T +852 2912 2500
F +852 2912 2600
E chiho.kwan@lw.com
W www.lw.com

Professional qualifications. Hong Kong, 2013

Areas of practice. Commercial litigation; arbitration; white collar defence and investigations.

Recent transactions

  • Acting for a US energy company in an ICC arbitration seated in Singapore against an Indian company relating to the breach of a licence agreement.

  • Acting for a Myanmar company in a dispute with an international hotel management group concerning the construction and management of a hotel project in Myanmar. The arbitration is administered by the HKIAC in Hong Kong.

  • Acting for a US-based company carrying on the business of distributing hardware and electromechanical products to the global aerospace industry in its court action against a HK defendant in relation to a wire fraud.

  • Acting for an international software company in a potential HKIAC arbitration against a Hong Kong company relating to an alleged breach of a license agreement.


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