What is the competitive edge of Hong Kong?
Hong Kong Secretary for Justice Teresa Cheng recently set out the three aspects that persuade her that Hong Kong is still the best place for investment, deal-making and dispute resolution services, thereby reaffirming Hong Kong’s irreplaceable position to the international community.
1. Robust legal infrastructure and financial system
Law and finance are closely intertwined, she wrote. Hong Kong has a strong legal infrastructure and financial system, which offer a business-friendly environment and a level playing field to international business community. Hong Kong’s solid legal foundation includes the well-tested common law system and an open, transparent and independent judiciary.
As the only common law jurisdiction in China, Hong Kong’s judicial independence and rule of law have been highly regarded internationally. Article 85 of the Basic Law stipulates that the courts of the Hong Kong Special Administrative Region shall exercise judicial power independently, free from any interference. Meanwhile, Hong Kong cases are often cited in overseas jurisprudence evidencing the confidence and respect of the global legal community in Hong Kong’s judicial and legal systems.
As pointed out by the Chief Justice of the Court of Final Appeal at the Ceremonial Opening of the Legal Year 2021, “[a]n independent judiciary is essential to the rule of law in Hong Kong and the due administration of justice. It is equally crucial to public and business confidence – whether local or overseas – in our judicial system, as well as to the international reputation of Hong Kong as a society that is governed by the rule of law under the ‘one country, two systems’ arrangement.”
According to the late Chief Justice of the UK, Lord Bingham, the meaning of judicial independence is “independent in the sense that they (adjudicators) are free to decide on the legal and factual merits of a case as they see it, free of any extraneous influence or pressure, and impartial”. Our judicial independence is premised on the solid infrastructure that has been laid down primarily in the Basic Law. Judges discharge their judicial functions in accordance with law and evidence, free from any interference.
I fully agree with the statement made by Lord Sumption, a Non-Permanent Justice of the Hong Kong Court of Final Appeal, published in The Times in March: “The permanent judiciary of Hong Kong is completely committed to judicial independence and the rule of law. Successive chief justices have made this clear in public statements. These statements are not just lip service. They represent the convictions of experienced, courageous and independent-minded judges.”
At the same time, Hong Kong has a robust financial system with independent regulatory bodies such as the Monetary Authority and the Securities & Futures Commission overseeing the normal operation of the financial market.
Financial laws and initiatives in Hong Kong are conducive to business development. For instance, the subsidy schemes launched by the government to capture various emerging opportunities, the Limited Partnership Fund Bill passed in July 2020, the Inland Revenue (Amendment) (Tax Concessions for Carried Interest) Bill 2021 passed this April, and the legislative proposals of introducing a fund re-domiciliation mechanism in Hong Kong, will all help attract more investment funds to set foot in Hong Kong, entrenching Hong Kong’s position as an international financial centre.
2. Hong Kong has professionals equipped with international perspectives
A robust system also needs to be backed by a sufficient amount of professionals and bodies. As a pluralistic and open international hub, Hong Kong has a pool of experienced professionals with international perspectives not just in legal and dispute resolution sectors but also in areas such as financial services, accounting, engineering, shipping and information technology.
In respect of the legal sector, we have about 12,500 barristers and solicitors, and more than 1,525 registered foreign lawyers from different jurisdictions as well as 86 foreign law firms in Hong Kong at the moment, providing services on cross-border and international legal issues.
As a seat of arbitration, Hong Kong is consistently in the top league in the world ranking. Hong Kong is ranked the third most preferred seat for arbitration worldwide by the 2021 International Arbitration Survey released by Queen Mary University of London recently in May. It is a recognition of our long-standing and unwavering commitment to the promotion of arbitral services.
3. Ample business opportunities
Hong Kong offers first-rate professional financial services, providing local, Mainland and overseas companies a sound business environment. The data below fully demonstrates Hong Kong’s position as an international financial centre:
- Hong Kong has one of the world’s most vibrant equity markets. In seven of the past 12 years, Hong Kong has been the number one initial public offering (IPO) venue globally. In 2020 alone, $397.5 billion were raised in the Hong Kong IPO market – the highest amount raised in a single year since 2010.
- Hong Kong is the world’s largest offshore renminbi (RMB) business hub, handling more than 70% of global offshore RMB payments. The total deposits reached RMB788.8 billion at the end of February 2021.
Meanwhile, Hong Kong enjoys distinctive advantages under the ‘one country, two systems’. In the Outline of the 14th Five-Year Plan and the Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area (GBA), the central government explicitly supports Hong Kong to enhance its status in the four traditional sectors – as international financial, transportation and trade centres, as well as a centre for international legal and dispute resolution services in the Asia-Pacific region. Leveraging the unique feature of the ‘one country, two systems and three jurisdictions’ in the GBA, the Department of Justice has been actively implementing new measures, such as:
- Co-operation mechanism for cross border insolvency and debt restructuring – The record of meeting concerning mutual recognition of and assistance to insolvency proceedings between the courts of the Mainland and the Hong Kong SAR was signed with the Supreme People’s Court and, on 14 May, initiating the co-operation between the Mainland and Hong Kong on mutual recognition of and assistance to insolvency and debt restructuring proceedings.This new co-operation mechanism has achieved two major breakthroughs: Hong Kong becomes the only jurisdiction outside the Mainland where mutual recognition of and assistance to insolvency proceedings are allowed; and the mechanism expressly covers bankruptcy compromise and reorganisation in the Mainland as well as debt restructuring in Hong Kong, which is much more extensive and in-depth than the relevant provisions in the UNCITRAL (United Nations Commission on International Trade Law) Model Law on Cross-Border Insolvency issued in 1997.
- Interim measures arrangement for arbitration – With 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 SAR taking effect in October 2019, Hong Kong became the first jurisdiction outside the Mainland where, as a seat of arbitration, parties to arbitral proceedings are able to apply to the Mainland courts for interim measures (such as property freezing and evidence collection). As of 21 May, the total value of assets preserved under the arrangement amounted to approximately US$1.6 billion.
These arrangements are unique to arbitration and legal proceedings in Hong Kong. They facilitate the development of the business and legal sectors in the GBA and then the entire Mainland.