In June 2021, worldwide construction industry consultant Arcadis published its 2021 Global Construction Disputes Report.

The report shows that in 2020, an exceptional year for many, the worldwide average value of construction disputes increased significantly to US$54.26m (from US$30.7m in 2019), while the average length of the dispute period continued to drop to 13.4 months (from 15 months in 2019).

More than 60 percent of survey respondents encountered project impact due to COVID-19.  Not surprisingly, force majeure and third-party impacts entered into the top three causes of disputes in 2020, with owners/contractors failing to understand and/or comply with contractual obligations taking the top spot, moving up from third in 2019.  A party’s failure to understand and/or comply with contractual obligations, the report states, has an easy cure: adequate training and effective advice before and during contract performance.

According to the report, the top three most important factors for early resolution of disputes are: (1) owner/contractor’s willingness to compromise, (2) accurate and timely schedules and reviews by project staff or third parties, and (3) transparency of cost data in support of claimed damages.  These are all important considerations to keep in mind as construction activity across the globe continues to increase while there are labour and material shortages worldwide.

Read the full 2021 Global Construction Disputes Report here:https://www.arcadis.com/en/knowledge-hub/perspectives/global/global-construction-disputes-report.

On 22 June 2021, the HKIAC released an updated report as to the average cost and duration of arbitrations conducted under their rules over the past seven years. The headline figures are impressive: the mean average arbitration cost some US$137,000 and concluded within 17 months from commencement. However, when considering these figures, it should be noted that approximately 24% of the arbitrations reviewed were conducted under the HKIAC’s expedited rules, which dramatically increases the speed with which an award is produced, to a mere 9.3 months on average. The costs quoted also omit party costs, i.e. legal fees, counsel fees, witnesses, etc.

While not every case will follow the average, the latest figures provide a useful indication of the timelines and costs to expect when considering whether to arbitrate at the HKIAC.

The full report can be found here: https://www.hkiac.org/news/hkiac-releases-average-costs-and-duration-report

On 2 June 2021, the Court of First Instance granted orders sought by the SFC under section 213 of the Securities and Futures Ordinance against 3 unlicensed entities purportedly based in Hong Kong which defrauded 75 investors. The unlicensed entities solicited investors through cold calls to open trading accounts on their websites (www.broadspansecurities.com ; www.shepherdshillhk.com ; www.richfutureshk.com ) and asked them to deposit funds into 6 Hong Kong bank accounts. None of the investments in securities and/or futures products agreed with the investors were executed on any recognised / licensed exchange.

The recent orders follows injunctions obtained by the SFC in December 2014 to freeze the 6 bank accounts held by the boiler room fraudsters and orders obtained by the SFC in January 2015 restraining them from carrying on unlicensed activities. Administrators have been appointed by the High Court to receive proceeds in the 6 bank accounts in the sum of approximately HK$4.3 million for distribution to the 75 investors on a pro rata basis.

See the judgment of Deputy High Court Judge Maurellet SC:-

https://legalref.judiciary.hk/lrs/common/search/search_result_detail_frame.jsp?DIS=136150&QS=%28HCA%7C2511%2F2014%29&TP=JU

In addition to the review on the profit requirement of new Main Board listing applicants, the Stock Exchange of Hong Kong Limited (“SEHK”) has also recently published its consultation conclusions on its proposed enhanced disciplinary powers.

The SEHK will implement all proposed changes to its disciplinary powers and sanctions with minor modifications. The major changes to the SEHK’s disciplinary powers include:-

1. Extending the scope of a public statement that the retention of office by the director is prejudicial to the interest of investors (“PII Statement”) to include directors and senior management of the relevant listed issuer and any of its subsidiaries;
2. Enhancing the available follow-on actions (in addition to suspension and cancellation) in cases involving more serious conduct to include denial of facilities of the market to that listed issuer for a specified period;
3. Introducing a director unsuitability statement (i.e. a public statement that the director is unsuitable to be a director or senior management member of the named listed issuer) as a new sanction;
4. Imposing secondary liability on relevant parties (including any substantial shareholder, senior management of the listed issuer or their subsidiaries) if they have caused by action or omission or knowingly participated in a contravention of the Listing Rules;
5. Including express obligations on professional advisers to provide complete, accurate and up-to-date information when interacting with the SEHK in respect of its enquiries or investigations.

Copies of the consultation conclusion are available on the SEHK’s website.

On 20 May 2021, The Stock Exchange of Hong Kong Limited (SEHK) published the consultation conclusions on the Main Board Profit Requirement.  On the same day, the Securities and Futures Commission (SFC) and SEHK issued a joint statement (Joint Statement) on IPO-related misconduct and their approach in tackling such issues.

With effect from 1 January 2022, the aggregate profit requirement for the three-year trading record period for a Main Board’s listing applicant will increase by 60% to HK$80 million with a profit spread of 56%:44% (Modified Profit Increase).  SEHK will be prepared to grant a relief from the profit spread on case-specific circumstances to provide flexibility.  Potential applicants seeking or contemplating seeking a Main Board listing should critically assess the potential impacts of the Modified Profit Increase on their eligibility for listing as well as their proposed listing timetable.

The SFC and SEHK have observed an increasing number of suspected “ramp-and-dump” schemes in recent IPOs.  A joint statement was issued highlighting a number of non-exhaustive features of problematic IPOs that may lead to enquiries by the regulators, such as market capitalisation which only barely meets the minimum requirement, high P/E ratio, high underwriting fees or expenses and high shareholder concentration.  It is also set out in the Joint Statement the regulators’ approach in tackling suspected misconduct, including exercising their discretion to object to a new listing, suspending trading or taking appropriate action against the parties involved in the suspected misconduct.

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