International arbitration as a mechanism for dispute resolution, especially for cross-border disputes, has gained impetus and prominence as an alternative to traditional court litigation.

Parties to commercially significant disputes, such as the $500 million arbitration between North Luzon Railways Corporation (Northrail) and China National Machinery and Equipment Corporation (Sinomach) in Hong Kong and PT First Media and Astro Nusantara International BV (ANI) in Singapore, elected for their disputes to be resolved by arbitration rather than litigation.

International arbitration's advantages over litigation are well documented: arbitral awards are enforceable in 150 countries and territories worldwide (all 1958 New York Convention signatories); relative speed and efficiency; confidentiality; expertise and specialized knowledge of the arbitral tribunal; and often, lower costs.

In Asia, Hong Kong has long been a beacon of success and preferred seat of arbitration for users of international arbitration.

This is because of a combination of factors: a strong legal framework supportive of arbitration and sufficiently flexible for pro-arbitration revisions; a pre-eminent, independent judiciary - conversant in arbitration law and willing to support arbitration; excellent connectivity with the rest of the world; ample supply of excellent facilities for hearings, a pool of legal talent (arbitrators and lawyers conversant in a number of languages including English and Putonghua) and other ancillary support services essential for arbitration, such as interpreters and transcription service providers.

The Hong Kong International Arbitration Centre (HKIAC) has diligently maintained its lead. For example, the HKIAC in 2013 introduced new Administered Arbitration Rules making HKIAC procedures compliant with international best practice. This included introducing an emergency arbitrator. These rules contain such innovations as the empowerment of the HKIAC to consolidate two or more arbitral proceedings where all parties can agree and specific procedures allowing for adding parties to a pending arbitration. The new rules accord tribunals greater flexibility, while retaining the signature "light touch" of the HKIAC - emphasizing party autonomy and cost-effectiveness. In addition, the HKIAC was the first leading arbitral institution to introduce specific wording to prompt parties to designate an appropriate law to govern their arbitration agreement into its model arbitration clauses.

In addition to the HKIAC, Hong Kong is home to numerous important international arbitration institutions. The International Chamber of Commerce (ICC) established its Secretariat - accepting arbitration cases - in Hong Kong in 2008, this was the first outside its Paris headquarters to do so.

China International Economic and Trade Arbitration Commission, the best-known arbitral institution of the country, opened its Hong Kong Centre in 2012. This has attracted much interest from lawyers and clients.

All these developments further enhance Hong Kong's status as an international arbitration forum. In 2012, Hong Kong's status was bolstered by the expansion of the Official Gazette in India to include China. Arbitration awards rendered in the mainland and Hong Kong will now be recognized and enforced by Indian courts.

The enforcement system has also been improved by measures such as the arrangement for reciprocal enforcement of arbitral awards entered into in 1999 by the mainland and Hong Kong, alongside a similar arrangement between Hong Kong and Macao agreed in 2013.

So, what distinguishes Hong Kong from other leading centers of arbitration such as London, Paris, Geneva or Singapore? Hong Kong's culture is the key. Until the handover in 1997, the population of the British colony of Hong Kong was predominantly Chinese. A unique feature was the two distinct linguistic groups - English speakers mainly British expatriates and English-speaking local professionals, and local Chinese Cantonese speakers. Following the handover Putonghua came to the fore. Consequently Hong Kong is highly cosmopolitan, while retaining strong Chinese bilingual - i.e. Cantonese and Putonghua - culture and traditions, furthermore it is the gateway to the mainland. These characteristics make Hong Kong a highly attractive arbitration forum for resolving China-related disputes. The pool of arbitrators and lawyers practising in Hong Kong are familiar with Chinese language and culture, while also being steeped in common law tradition, with a high level of English language proficiency, thus offering a good balance between foreign and Chinese parties.

Hong Kong's attraction as an arbitral seat does not end there. The SAR's highly entrepreneurial, laissez faire business culture, with minimal government interference and regulation, greatly benefits arbitration culture which sees only a light touch from the courts or even the HKIAC (should one choose to arbitrate under HKIAC rules). Thus, many of the arbitrations seated in Hong Kong were and are still ad hoc arbitrations or arbitrations conducted under UNCITRAL Rules. Ad hoc arbitrations used to form the bulk of international arbitration, well before the growth of institutional arbitrations. Notable recent cases such as Grand Pacific Holdings Ltd v Pacific China Holdings Ltd and X Chartering v Y have also given assurance to commercial parties that the Hong Kong courts will not readily interfere with arbitral awards rendered elsewhere.

The author is a partner at international law firm Latham & Watkins.

(HK Edition 10/13/2014 page9)