As the world economy continues to globalize, business transactions increasingly involve multiple countries and cultures. This development fostered an exchange of cultural thought, perceptions and beliefs, thus making individuals more aware of the areas where their culture converges with others and also areas where it differs. This phenomenon is present in all kinds of relationships and international arbitration is not an exception. In our article “Cultural Issues in International Arbitration”, we compare the cases of the Hong Kong Special Administrative Region and mainland China to address cultural differences in the conduct of international arbitration proceedings as well as some areas in international arbitration where there exists some form of convergence.
In the field of international arbitration, constant networking among major parties and players (this includes regulators, legal practitioners, disputants and arbitrators) from countries with diverse cultures and legal systems who are involved in the entire arbitration process has promoted the unification of legal procedures, thus leading to legal convergence. With the adoption of the 1985 UNCITRAL Model Law on International Commercial Arbitration (the “Model Law”), a suggested pattern for the conduct of arbitration proceedings is created. It was adopted (in full or in part) by lawmakers in 85 states out of 118, and incorporated into their domestic legislation on arbitration proceedings.
However, despite this level of legal convergence in international arbitration, there remain notable differences, largely relating to the cultures of the parties involved. The differences highlighted in this article between international arbitration conducted in Mainland China and Hong Kong Special Administrative Region (SAR) relate most strongly to the difference in legal traditions. Based on the principle of “one country two systems”, Hong Kong SAR operates a common law system modelled after the English common law, while Mainland China on the other hand mainly operates a civil law system. Differences include the presentation of witness testimony, as well as the involvement of arbitrators in the arbitral proceeding, among others.
With respect to the arbitrator’s involvement in the arbitral proceedings, we find that arbitrators in Mainland China tend to actively participate in the settlement of dispute, thus playing a dual role of mediator and arbitrator. This may be attributed to the Confucian culture of mediation that stresses social relationsas well as the Chinese legal structure which recognizes and gives legal protection to such med-arb arbitral awards. On the contrary, arbitration conducted in Hong Kong SAR takes a more technical legal approach, stressing due process and neutrality, thus preserving the legal boundaries of arbitrators in arbitral proceedings.
We further find that arbitrators in Hong Kong SAR attach more importance to witness testimonies and cross-examination than their counterparts in mainland China who give priority to documentary evidence. This strong reliance on documentary evidence in arbitration has its roots in the legal culture of Mainland China, as Chinese courts attach significant importance to documentary evidence. In addition to the notion that relying on documentary evidence makes litigation faster, courts believe that testimonial evidence can be manipulated and has a likelihood of change when put to test. This litigation practice therefore influenced how evidence is obtained and evaluated in arbitration conducted in Mainland China.
We conclude by pointing out the significant role that culture plays in arbitral proceedings, especially in transnational arbitration which involves disputants, litigants, law makers and arbitration from two or more diverse jurisdictions. Hence, in order to have a smooth and effective arbitral process, it is necessary to further identify and study the areas of convergence and difference in various legal cultures across the globe.
Shahla Ali is Professor of Law and Associate Dean at the University of Hong Kong Faculty of Law and Director of the LLM Program in Arbitration and Dispute Resolution. Her work centers on questions of governance, sustainable development and cross-border dispute resolution in the Asia Pacific region. She also serves as a bilingual arbitrator (English/Chinese) with CIETAC, HKIAC, KCAB and SIAC.
Chinwe Alli is the Project Manager for the global team of Jumia Group and also a mentee of the WIA program of the HKIAC. She is a Lawyer licensed to practice law as a Barrister and Solicitor in Nigeria and she holds a master’s degree in international law from Peking University. She is currently based in China and engages in global compliance, legal advisory, contract management, business development and international arbitration.
Investors increasingly diversify their investment portfolios by investing in cryptocurrencies. Cryptocurrencies however are not a safe haven for investors. Bitcoin is extremely volatile and can bring both exceptionally high profits and terrible losses, seemingly due to market manipulations. The question of how cryptoassets should be regulated is approached differently by jurisdictions. This paper compares the current regulatory frameworks for cryptoassets of Mainland China, Hong Kong, Macau and Taiwan.
China is among the world’s leaders in e-commerce and FinTech, but despite this fact the Peoples Bank of China (PBOC) banned cryptocurrencies and initial coin offering (ICO). From 2013-2021 the PBOC issued several notices which obliged financial institutions not to provide transactions of digital financial assets. The People’s Republic of China also proclaimed that Bitcoin and ICO’s are tools for illegal fundraising, money-laundering, and scamming, and that therefore all activities using them violate national laws and regulations. The worries are not unfounded: In one case tried before the Heilongjiang High Court, the defendant had exchanged illegal gains money from RMB into 1,200 Bitcoins and transferred them to Macau, there converted the Bitcoins into Hong Kong Dollar and consequently exchanged them for RMB to transfer the money back to mainland China.
In addition, PRC authorities have pointed out that cryptocurrency production requires a lot of electricity. At the same time, energy is needed by organizations that produce goods and suffer from a shortage of electricity. Therefore, the second reason for prohibition is energy efficiency and concern for the environment. In order to discourage citizens from investing in projects based on digital tokens, Mainland Chinese courts do not protect the rights of investors, indicating that investors themselves are violators who expect to receive illegal income.
Macau’s authorities closely cooperate with mainland China to prevent money laundering through digital financial assets and therefore prohibited transactions with Bitcoin and banned ICO. It reduces opportunities for illegal activities and protects investors from investing in projects that exist as a pyramid scheme. In comparison with Mainland China and Macau, Taiwan has a more liberal approach to cryptoassets regulation and restricts only financial institutions from dealing with Bitcoin. Other companies may sell and buy goods for Bitcoins.
In Hong Kong, cryptocurrency and tokens are only strictly regulated by the Hong Kong Securities and Exchange Commission (SEC) if they have the characteristics of securities, bonds or futures. The SEC doesn’t regulate Bitcoin because it is neither a means of payment nor any other regulated asset. Hong Kong’s authorities pay most attention to digital platforms, which provide opportunities for ICO’s and cryptofundraising. In this regard, the SEC has issued some standards that clarify the licensing procedure for cryptocurrency exchanges and organizations that manage digital financial assets.
Thus, although Hong Kong does not create a liberal haven for crypto business, an entire segment of Hong Kong’s digital assets market is in a regulatory “gray” area. As a result, both Taiwan and Hong Kong de facto serve as bridges from the market of digital financial assets to the PRC. Mainland investors may use them as a “crypto-hub”. For the case of Hong Kong, this situation fully fits the principle of “one country – two systems.”
Find Dr. Aleksandr Alekseenko’s paper, published with the China and WTO Review, here. Dr. Aleksandr Alekseenko is an Associate Professor in the Faculty of Law of the Saint-Petersburg State University, with a research focus on Commercial Law, Investment Law and Legal Regulation of digital Financial Assets. He received his LL.M from the Far Eastern Federal University (Vladivostok) and a PhD in laws from the Ural State Law University (Yekaterinburg). He studied Chinese language at the Linyi Normal University and is the principal investigator and participant of scientific project of Russian Foundation for Basic Research on the topic of e-commerce legal regulation and new technologies in the sphere of investments.
Hong Kong’s Court of Final Appeal (CFA) typically sits as a five-member panel composed of the Chief Justice, three ‘permanent’ judges, and a fifth member that may be drawn from one of two panels. The non-permanent ‘local’ panel is composed of retired members of the CFA or of the Court of Appeal. The non-permanent ‘overseas’ panel is composed of senior jurists drawn from other common law jurisdictions, in practice primarily but not exclusively from the United Kingdom and Australia.
The possibility of inviting judges from overseas to serve on the CFA was agreed to in the Sino-British Joint Declaration governing the transition of sovereignty over Hong Kong, and is codified in Hong Kong’s quasi-constitution, the Basic Law. The Basic Law, however, provides only that the CFA “may as required” invite such overseas members to serve, with no further specifics.
Hong Kong’s first Chief Justice, Andrew Li, chose to draw the fifth member from the overseas panel to join whenever possible, rather than alternating between the two non-permanent panels. This in essence became a constitutional convention and for the first twenty years of the CFA’s existence nearly every substantive case was heard by a panel that included an overseas member. They serve on renewable three-year contracts, but are not actually present in Hong Kong for that entire period – they typically fly in for a month each year to hear the cases to which they have been assigned (during COVID they have continued to participate remotely via video conference).
It is unusual that a wealthy, well-developed jurisdiction continues to import judges from overseas. While importing judges remains common in the microstates of the South Pacific, Hong Kong in no way lacks local legal talent in the same way that might justify a need to import judges. While Singapore also invites overseas judges to serve, it limits them to sitting only on a commercial court. In contrast, Hong Kong places no restrictions on the roles that the overseas judges take – when sitting they are treated as a full member of the bench.
The system is thus not without controversy. It is fair to argue that judges who make critical decisions about a community or society ought to be drawn from that society, absent good reason – yet there can be no more of an outsider than a well-paid judge flown in for one month each year. The overseas model also has an uncomfortable colonial echo to it – the judges have primarily been drawn from Hong Kong’s former colonial ruler, all have been white, and all but two have been men. There are also fair questions regarding sovereignty that may be raised – though China did agree to the system in the Joint Declaration, the historical context and China’s experience during the 19th and 20th centuries necessarily will make the role a sensitive one.
But despite these issues, for many years the overseas judges have all been regarded as jurists of the highest quality and they have contributed significantly to the CFA’s output. Previous academic work found that in the Court’s first decade they wrote roughly one-quarter of the lead opinions coming out of the CFA. These opinions dealt with an unrestricted range of matters, including some key developments in local constitutional jurisprudence.
My paper updates this research and shows that the role has shifted in the years since, with the overseas judges now accounting for little over 15% of the Court’s output annually. Moreover, they no longer appear to write decisions related to fundamental rights or inter-jurisdictional questions related to the relationship between Hong Kong and the rest of China. I argue that this is a strategic decision by the CFA as a political actor in its own right, in an effort to preserve its institutional role. The paper suggests that the CFA perceives threats to its ability to serve as a check on an executive branch that is becoming more deeply entwined with policy initiatives that come directly from the central government.
I propose that one way in which the CFA is responding to this change is to reduce the prominence of the overseas judges whilst continuing to invite them to serve. The goal appears to be retention of the benefits they bring (in particular the idea that their presence indicates to both the international and local community that Hong Kong’s judicial independence remains intact) whilst minimizing the chance that politically sensitive decisions could be delegitimized through direct association with an overseas member. The CFA may be concerned that such delegitimization may serve to ground subsequent arguments that the concept of judicial neutrality itself is so suspect that ‘judicial independence’ should not extend to anything more than the resolution of disputes between private parties.
It is true that the neutrality or objectivity of judges is often overstated – they are all humans who are the product of cultures, upbringings, educations, environments, and so on. But this is an argument for increasing the diversity of the bench at all levels rather than an argument for curtailing the role of the courts as traditionally understood in Hong Kong. Of course, whether or not reducing the prominence of the overseas members will in fact help preserve the scope of the CFA’s role is an open question. It is unlikely to be enough on its own.
Find Stuart Hargreaves’ paper “Canaries or Colonials? The Reduced Prominence of the ‘Overseas Judges’ on Hong Kong’s Court of Final Appeal”, published in the Asian Journal of Comparative Law, here.
Prof. Hargreaves is an Associate Professor in the Faculty of Law of the Chinese University of Hong Kong, with a research focus on privacy law and constitutional law. He has law degrees from Osgoode Hall Law School (JD), the University of Oxford (BCL), and the University of Toronto (SJD), and qualified as a solicitor and barrister with the Law Society of Ontario.
Hong Kong Tram with National Security Law Government Campaign (Wikimedia Commons)
Hong Kong Between “One Country” and “Two Systems” examines the battle of ideas that started with the June 2019 anti-extradition law protests and ended with the enactment of the National Security and National Anthem Laws a year later. At the center of these battles was the “One Country, Two Systems” principle. By June 2020, the meaning of that principle was highly contested, with Chinese authorities taking decisive steps to implement their own understanding of the principle and its normative foundations, and the international community taking countermeasures. As events progressed between June 2019 and June 2020, the author devised a series of essays that analytically chronicle the discursive battles that were fought, won and lost. Without an underlying political or polemical agenda, the essays retain the freshness of the moment, reflecting the uncertainties of those times as events unfolded. What was won on the streets of Hong Kong from June to December 2019, namely, the public and physical manifestation of a principled internationalist and liberal democratic narrative of self-determination, and of civil and political rights, was lost by June 2020 within a cage of authoritative legality legitimated through the resurgence of the normative authority of the state and the application of a strong and coherent expression of the principled narrative of its Marxist-Leninist constitutional order. Ironically enough, both political ideologies emerged stronger and more coherent from the conflict, each now better prepared for the next one.
The essays written between June 2019 and June 2020 are compiled in Hong Kong Between “One Country” and “Two Systems” with little change to how they were originally written. The book is presented as a diary with essays as diary entries. This is to mark an intellectual progression that matches the development of Hong Kong’s political turmoil. The object is to capture not just the strategic and normative developments that produced Hong Kong’s new order from June 2020, but also to give a sense of the uncertainties and anticipations that existed leading up that moment. The process of ideological genesis from June 2019 to June 2020 is most immediately captured from a state of anticipation without the benefit of foresight. It is that immediacy that adds a layer of analysis to the usual post facto accounting and examination of events. That layering, anyway, is the aim. The essays in Hong Kong Between “One Country” and “Two Systems”, then, do not look back on events after the fact, but speculate, discover, and capture moments that from June 2020 look inevitable but which from the perspective of June 2019 appeared far less so. By doing so the book aims to retain the freshness of the moment. It is, thus, both a journal of events, and a journey. For its readers it may serve as a record of how the way of thinking about the situation of Hong Kong changed radically over such a short period of time. It is also, in part, a chronicle of the way in which larger events—the US-China trade war, and the COVID19 pandemic—can have a substantial effect on what would otherwise be a localized affair.
The focus of the book is on discourse. The essays follow events as they unfolded through the rhetoric of the parties involved–their statements, their gestures, their performances on the streets, and ultimately the memorialization of these discourses in the landmark laws of the Hong Kong after June 2020–the National Anthem Law and the National Security Law. To some extent this discursive focus owes a debt to and might be comfortably embedded within analytic traditions that owe much to the insights of Guiguzi (鬼谷子) and its rhetoric,[1] which makes its appearance throughout the essays and perhaps binds them together into something more coherent. These insights frame some of the analysis, as do the insights of critical thinkers from the Western tradition.
Hong Kong Between “One Country” and “Two Systems” is organized into six parts. Part I (Epilogue as Introduction) starts at the end of the story. It uses a rare statement endorsed by a substantial majority of the representatives of the United Nations Human Rights special procedures calling for the development of decisive measures to protect human rights in the face of the enactment by Chinese authorities of the National Security Law for Hong Kong. This is to situate the story of Hong Kong between June 2019 and June 2020 from the perspective of the international community–perhaps among the actors most adversely affected by the story of Hong Kong.
Part II consists of eleven chapter essays. These essays take the reader from the beginning of the protests in June 2019 to the end of August 2019. The essays serve as an analytical witness to the development of the initial phase of the Hong Kong protests. Step by step, as it occurred, Part II considers the escalations of ambitions and tactics of the protesters, the growing intransigence of local officials, and the start of what would become an elaborate and largely effective counter position of the Chinese central authorities. Much of what occurred during these early weeks provided the foundation for everything that developed thereafter.
Part III consists of seven essays. The essays chronicle critical events taking place from the beginning of September to the end of November 2019. These take the reader through the next phase of development, one in which initial positions are fully developed and hardened. Here one sees fully developed the ideological position of the central authorities that in retrospect were faithfully memorialized in the National Anthem Law, the National Security Law, and recent amendments to the Election rules in the Hong Kong Basic Law in March 2021. At the same time, one encounters here the maturing of an aligned position of the various groups of protesters that sought to deepen the internationalization of their movement and preserve efforts to permanently protect a measure of liberal democratic order in Hong Kong. Lastly, the international response also developed in this period: grounded first in the narrow strictures of the Sino-British Joint Declaration and thereafter in general fundamental principles of self-determination and the international civil and political rights of coherent political communities.
Part IV then considers two stalemates. Firstly, three essays cover the relatively short period of stalemate between December 2019 and April 2020 which includes the apex of protester power in December 2019 and January 2020. Secondly, the stalemate imposed by the realities of the worldwide COVID-19 pandemic. One moves here from the unabated storm of protest to the opportunity that the pandemic provides local and national authorities to break the stalemate in their favor. It was during this period that the stakes around the proper conceptualization of the One Country Two Systems principle became clear. On one side were central authorities who now fully developed the construct of the principle as a means of permitting autonomy within the discretionary authority of the state. On the other were the protesters and the international community who now saw in One Country Two Systems a principle of divided sovereignty in which the political choices of the Hong Kong community could be protected against encroachment by the central authorities, one based on international liberal democratic and human rights principles.
Part V chronicles the end of the protest movement and the emergence of a “new” Hong Kong between May and July 2020. Its seven essays critically chronicle the way that the central authorities drove events from May 2020, in a way that paralleled how protesters drove events between June and September 2019. Part V starts with the announcement of an intention to impose the National Security Law, by first devising the National Anthem Law and then ending with the adoption of the National Security Law itself. The seven essays here consider the importance in developing a patriotic front as a means of dividing and managing the people of Hong Kong, and consider the relatively little opposition that the central authorities faced in realizing their objectives.
The single essay that makes up Part VI serves as the after-word of Hong Kong’s story. Part VI is meant not only to end the story of the protests in Hong Kong but also to begin the story of Hong Kong as a more integrated part of the Pearl River area of China. No longer an international city in the sense of being internationally recognized and having a protected legal autonomy from its territorial sovereign, Hong Kong now rejoins the nation as a Chinese city with substantial international connections. Beyond that, Hong Kong’s future is now far more closely aligned with that of the Chinese heartland and with the vision of China’s central authorities for the nation as a whole.
The publisher, Little Sir Press, will be hosting a book launch author meets reader webinar on 13 July 2021. Registration is required but free. Free chapters and more about Hong Kong Between ‘One Country’ and ‘Two Systems is available here.
Larry Catá Backer is the W. Richard and Mary Eshelman Faculty Scholar, Professor of Law and International Affairs at Pennsylvania State University (B.A. Brandeis University; M.P.P. Harvard University Kennedy School of Government; J.D. Columbia University). He researches in the areas of Marxist Leninist political-economic systems with a focus on China and Cuba, economic globalization, corporate social responsibility, international affairs, global governance, trade and finance, and semiotics. In addition to his own books, Backer has published over one hundred articles and book chapters in journals in the U.S., Latin Americas, China, and Europe. For a list of his publications, please click here. Backer also runs his own blog, Law at the End of the Day.
[1] Guiguzi (鬼谷子), Guiguzi: China’s First Treatise on Rhetoric; A Critical Translation and Commentary (Hui Wu (trans.); Carbondale: Southern Illinois University Press, 2016 (before 220 A.D.))
The Covid-19 pandemic since February 2020 and the Hong Kong National Security Law (HKNSL) passed on June 30, 2020 have set an abrupt end to the protests in Hong Kong, which, according to its mini-Constitution, the Basic Law, enjoys ‘high degree autonomy’ under China’s sovereignty and shall be administered by Hong Kong people. Activating Article 18 (4) of the Basic Law, declaring a state of emergency, and deploying the army to restore order in Hong Kong were under wide and lively discussion in September 2019 (for contributions, see here, here, here, and here). One aim of the HKNSL, as pointed out by Shen Chunyao, head of Beijing’s Basic Law Committee, is to pre-empt the occurrence of the state of emergency provided in Article 18 (4) of the Basic Law, which, Shen stressed, is “a very serious situation”: it is even much worse than Beijing taking over complete jurisdiction and applying Mainland laws in exceptional national security cases (article 55, HKNSL).
What will this “very serious situation” be like? An answer can be found in the Basic Law’s Art. 18 (4), which says,
in the event that the NPCSC … by reason of turmoil within the HKSAR which endangers national unity or security and is beyond the control of the government of the Region, decides that the Region is in a state of emergency, the Central People’s Government may issue an order applying the relevant national laws in the Region.
Fu and Zhai argue that Article 18(4) creates a dual emergency regime: Hong Kong’s own internal one and the NPCSC’s external one. The former is based on the rule of law, where the emergency power is subject to significant legal and political constraints. The latter, however, introduces a state of exception, where an authoritarian state manages a crisis, largely independent of legal rules and without democratic responsibility. In view of this contrast, Fu and Zhai suggest that the HKSAR internalise the responses to states of emergency, so that rights and freedoms be carefully protected, and the rule of law be effectively defended.
Hualing Fu is Dean and holder of the Warren Chan Professorship of Human Rights and Responsibilities, Faculty of Law, the University of Hong Kong. His more recent contributions include: Mediation in Contemporary China (2017); Transparency Challenges Facing China (2018); Socialist Law in Socialist East Asia (2018), and Authoritarian Legality in Asia (2020). Reach out to him at hlfu(at)hku.hk.
Xiaobo Zhai is Associate Professor at Macau University. He co-edited the volumes Bentham’s Theory of Law and Public Opinion (2014) and Bentham Around the World (2020) and is the author of The People’s Constitution (2009) and China’s System of Constitutional Implementation (2009). Reach out to him at xbzhai(at)um.edu.mo.
