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On 9 February 2022, the Hong Kong International Arbitration Centre (“HKIAC“) has published its dispute resolution data for 2021.
Compared with the statistics in 2020, although the number of arbitrations submitted to HKIAC has returned to the 10-year average level after reaching its 10-year peak in 2020, there is an upward trend with the total number of dispute resolution cases submitted last year. In particular, there is a drastic 51% increase in the number of domain name disputes submitted last year.
The percentage of international arbitrations (where at least one party was not based in Hong Kong) amongst all arbitrations submitted has also seen an increase of around 10%, from 72.3% in 2020 to 81.6% in 2021. Despite the influence of the COVID-19 epidemic, the data demonstrates that Hong Kong remains and continues to be a favourable destination for resolution of international disputes.
The effectiveness of conducting arbitration in Hong Kong has also been strengthened by its tightened connection with mainland China through the implementation of the “Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings by the Courts of the Mainland and of the Hong Kong Special Administrative Region”. Last year, the HKIAC has handled almost twice as many applications for the preservation of evidence, assets or conduct in the mainland made under the above arrangement than in 2019.
The Law Reform Commissions’ recommended in its report in December 2021, that the existing legal rules be amended to allow lawyers to charge in “outcome related fee structures” in arbitration taking place in and outside Hong Kong. This is envisaged to bring Hong Kong in line with other major arbitral seats and further enhance Hong Kong’s competitiveness as international dispute resolution centre.
Please refer to the HKIAC’s website for the full statistics of 2021 here.
The article is a Q&A guide to joint venture laws in Hong Kong. It gives a high-level overview of joint venture laws, including regulation of joint ventures, permitted types of joint ventures, formation formalities , and a broad spectrum of other legal issues relating to joint ventures in Hong Kong.
For further information, the full article can be found here.
On 28 January 2022, the Securities and Futures Commission (“SFC”) has reprimanded and fined Citigroup Global Markets Asia Limited (“CGMAL”) HKD $348.25 million for providing mislabeled Indications of Interest (“IOIs“) to its clients and for executing IOIs without making proper prior disclosure from 2008 to 2018.
An IOI expresses a buyer’s non-binding interest in buying a security in the stock market. Broadly speaking, there are two types of IOIs. The first type of IOI is issued by a client of a licensed corporation. The execution of such IOI is known as an agency trade. A licensed corporation may only represent that an IOI is issued by its client if the IOI is backed by reasonable expectation of interest from a specific client. The second type of IOI is issued by the licensed corporation itself. The execution of such IOI is known as a facilitation trade. Conflict of interest may arise in facilitation trades, and the SFC requires licensed corporations to, amongst other things, disclose such conflict of interest to the client prior to executing the trade.
During the relevant period, CGMAL represented to its clients that the IOIs in question were backed by reasonable expectation of interest from a specific client. However, the SFC determined that CGMAL’s senior management knew or must have known that such representations were not true. When the CGMAL traders could not find clients willing to act as the buyers of the IOIs in question, the traders would execute the IOIs with CGMAL without making the required prior disclosure to the clients who are the sellers of the IOIs (“Improper Facilitated Trades”).
The SFC believes that CGMAL’s failure to correctly label the trades and failure to make proper disclosures prior to executing the Improper Facilitated Trades exposed “a culture within CGMAL which encouraged chasing revenue at the expense of basic standards of honesty and clients’ interests”. The SFC aimed to deter other licensed corporations from permitting similar failures to occur by handing CGMAL the heavy fine. The SFC has indicated that it will commence disciplinary proceedings against the senior managers responsible for permitting the failures to occur.
Licensed corporations are advised to review whether their compliance policies provide for effective monitoring in respect of its trading activities in view of the SFC disciplinary action against CGMAL.
On 30 December 2021, the Hong Kong Court of First Instance (CFI) handed down a judgment in Tam Sze Leung & Ors v Commissioner of Police HCAL 191/2021, in which it held that the longstanding practice of the Commissioner of Police to issue “Letters of No Consent” (LNC) was unconstitutional.
What is an LNC? To put it simply, under sections 25(1) and 25A(1) of the Organised and Serious Crimes Ordinance (Cap 455) (OSCO), once a bank knows or suspects that the money in a bank account is connected in some way to an indictable offence, it must not deal with the account and must file a Suspicious Transaction Report (STR) to the Joint Financial Intelligence Unit of the Hong Kong Police (JFIU). In response, the JFIU may either give its consent to the bank to deal with the said account, or issue an LNC to the bank stating that it does not have the requisite consent to do so. With the necessary consent, under section 25A(2), the bank may deal with the account in question and will not contravene the OSCO. Without the consent, the bank is at risk of money laundering.
Over the years, the LNC regime has slowly become a tool for the Police to “informally freeze bank accounts”– it is a quick and cost-effective administrative measure for which no court order is required.
Nonetheless, the decision in Tam Sze Leung seems to have put the regime to an end. In that case, the JFIU issued LNCs which ultimately resulted in the freezing of certain bank accounts for some 10 months. The CFI decided that the LNC regime as operated was not constitutional for the following reasons:-
The CFI noted that a similar challenge had been brought in 2015 in the case of Interush Limited v Commissioner of Police, HCAL167/2014 before the Court of First Instance and in CACV 230/2015 before the Court of Appeal, where the LNC regime in that case was nevertheless held constitutional. What makes Tam Sze Leung different from Interush is the change of the Police’s purpose in utilising the LNC regime – In Interush, the regime provided the banks with consent in appropriate cases to deal with the account and let them decide whether or not to do so in spite of having an LNC in place; On the contrary, the LNC regime as operated in Tam Sze Leung has become an informal freezing regime which mandates the bank to freeze the accounts in question.
It should not be lightly taken from the Tam Sze Leung case that the LNC regime in general is altogether rejected, because the Court only found that the LNC regime as operated in that case was unconstitutional. As the Court has postponed the granting of any relief, the question as to how the Police may operate the current regime constitutionally remains to be seen.
Meanwhile, banks are still under the obligation not to deal with accounts which they reasonably believe hold proceeds of an indictable offence, and file STRs with the JFIU in appropriate cases. Although they would be exposed to the risk of being sued by their customers affected by not having access to their accounts, it remains good practice to keep close communication with the authorities, and to seek proper legal advice so as to make the right decision in relation to dealing with the accounts in question. At all times it is also recommended to keep a good and complete record of all relevant documents and correspondence in the process.
On 20 January 2022, the Competition Commission (“Commission“) commenced an enforcement action in the Competition Tribunal (“Tribunal“) in connection with an agreement to fix the prices of tourist attractions and transportation tickets sold at a number of hotels, in breach of the prohibition against anti-competitive agreements under the Competition Ordinance (Cap. 619) (“First Conduct Rule“) . The participants of the cartel included two competing travel service providers that agreed to fix prices and nine hotel groups and a tour counter operator that facilitated the anti-competitive conduct by passing on pricing information between the travel service providers.
The Commission commenced its investigations into the travel services sector price-fixing cartel following a leniency application, which led to the Commission issuing infringement notices to six hotel groups and a tour counter operator in January 2021, all of whom have subsequently entered into commitments to comply with the infringement notice.
The latest enforcement action commenced in the Tribunal against the remaining participants of the cartel concludes the Commission’s investigations. The Commission is seeking a declaration that the respondents have contravened the First Conduct Rule, pecuniary penalties, costs, a director disqualification order and the adoption of a compliance programme. Of the six respondents named, three have elected to cooperate and as a result the Commission is seeking to dispose of proceedings against the cooperating respondents by consent.
The investigation into the travel services sector price-fixing cartel illustrates the Commission’s regulatory toolkit and the approach it will take to undertakings that cooperate during different stages of its investigations. For further information, the Commission’s guidelines and policy documents can be found here.
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