Giant port must take up mediation hub role

London rakes in lion's share of maritime dispute business leaving thin pickings

Asia is home to several international finance centers and many of the world's busiest container ports but London is still the undisputed global hub of maritime arbitration and mediation, capturing the high-end of the value-chain in the global shipping industry.

Hong Kong is a typical victim. Despite being one of the largest maritime business clusters in the world with more than 800 shipping-related companies offering a wide range of maritime services, the city is far from being an internationally renowned as a maritime arbitration center.

The city has the world's fourth-largest ship register following Panama, Liberia and the Marshall Islands, with 171 million deadweight tons in registered vessels, or 9.3 percent of the world's total as of October last year, according to Danish Shipping Statistics.

The Hong Kong International Arbitration Center (HKIAC) handled 402 maritime-related arbitration cases from 2011 to 2015. It handled 262 new arbitration cases, with 22 percent involving maritime disputes last year. However, London is still head of the game and grabs the lion's share of the market. According to Henry Li Hai, a partner at Henry & Co Law Firm of Guangdong, London currently handles about 75 percent of global shipping arbitration cases.

Hong Kong-based legal practitioners specializing in maritime arbitration and meditation garnered their views in the Hong Kong Shipping Finance and Arbitration Law Forum 2017 organized at the end of last month to develop blueprints on how to sharpen Hong Kong's competitive edge in this business arena.

"Once Hong Kong can establish itself to become a shipping arbitration center, then it can be the cornerstone for the city to become a maritime center. The virtuous cycle then sets in, and it can bank on the niches to become a commerce and trade center and finally as a financial center, further fortifying Hong Kong as a shipping arbitration center," said Wang Wenying, secretary general of the China International Economic and Trade Arbitration Commission's (CIETAC) Hong Kong Arbitration Centre.

The local CIETAC office was established in September 2012 to resolve cross-border commercial disputes.

Settling cross-border commercial disputes through arbitration proceedings is cheaper for global shipping companies than legal action in courts.

"The Chinese mainland shipping companies would like to conduct maritime arbitration in Hong Kong because of the city's geographical and cultural proximity to the mainland while the city has a British common-law system," said Li Lianjun, a partner at global law firm Reed Smith Richards Butler who is the head of the firm's shipping practice.

Hong Kong faces stiff market competition as Singapore, which also practices common law, is also a potential venue for shipping conglomerates to relocate maritime arbitration activities.

"As Singapore is a sovereign country, the status of being a third-party neutral place may lure international shipping companies to conduct maritime activities there," Li told China Daily. "Whether Hong Kong can have more maritime arbitration activities depends on the negotiation power between the mainland shipping enterprises and the counterparties involved."

Peter Lee Tin-ho, another partner at Reed Smith's Ship Finance and Transactional Department, said: "Market competition is not a zero-sum game. On the contrary, different shipping centers can utilize their best to provide complementary functions to market operators. The essential question to ask is: How Hong Kong can attract shipping firms to operate their business activities here?"

Recently, dark clouds have gathered over the Hong Kong's prospects as a major maritime arbitration center. These unfavorable factors include relocation of maritime finance banks away from Hong Kong, intense competition from Singapore, the inadequacy of industry talents, the unclear Hong Kong advantage in terms of government policies and maritime services that can be rendered, as well as changes in Asian regional economies.

"It is the lack of job opportunities that inhibit the growth of shipping arbitration business in Hong Kong. Firstly, this may be due to the city's relatively high service-fee level compared to Singapore. The other reason is that local in-house lawyers are also lacking practical experiences to handle such cases," said William Wong Ming-fung, vice chairman of the Hong Kong Bar Association's China Practice Development.

Hong Kong must gear up to improve access to maritime litigation professionals to foster industry development, industry experts say.

"The legal departments of local universities should put more emphasis on training young professionals specializing in maritime arbitration laws. Once the city has access to this talent pool at a relatively low cost, it can then help accumulate practitioner experiences and foster more maritime arbitrations to be held in the city," Wong suggested.

"Hong Kong's current niches in shipping arbitration and mediation do not mean these advantages can be endured forever," cautioned Zhou Yinying, general manager of China Merchants Energy Shipping's Legal Department.

The mainland-based shipping company's legal chief recommended Hong Kong should consider the mainland factor when planning to bolster the industry's development.

"Firstly, it should capitalize on the national Belt and Road Initiative and Guangdong-Hong Kong-Macao Greater Bay Area policies to hasten Hong Kong-mainland cooperation. Secondly, it should retain its soft power in its common-law system to lure more maritime industry operators to establish their presence here," Zhou said.

oswald@chinadailyhk.com

(HK Edition 09/15/2017 page8)