On 4 March 2022, the Chief Justice announced a GAP period between 7 March and 11 April 2022 in response to the ongoing COVID-19 pandemic in Hong Kong.

During the GAP period, the capacity and operations of the judiciary will be substantially reduced, and all hearings of the courts and tribunals originally listed in the GAP period will be generally adjourned, subject to directions from the courts and the exceptions set out in the announcement, which include :

1. hearings for civil and criminal proceedings and appeals that had already commenced and are ongoing,
2. hearings for civil and criminal proceedings scheduled to commence in the GAP period but which are directed by the court to be dealt with remotely,
3. urgent applications to the Duty Judge and Duty Master, and
4. urgent appeals and applications to the Court of Appeal.

In addition, all registries, accounts and other court offices will be closed during the GAP period except for, amongst other things, supporting court business that will continue during the GAP period or filing of urgent applications subject to limitation periods or other time limits imposed by court orders or legislation.

The full list of court business that will continue during the GAP period are set out in the judiciary’s announcement (link).

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:-

1. OSCO does not imply the power to informally freeze the accounts by issuing an LNC;
2. There is no sufficient clarity in law as to the scope of the power and the manner of its exercise, and there is no adequate safeguards against its abuse; and
3. The LNC regime as operated disproportionately interferes with the rights of the applicants, in particular the right to the use of property under the Basic Law.

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.