3rd UK-China Rule of Law Roundtable

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GBCC and the China Law Society hold 3rd UK-China Rule of Law Roundtable

Executive Summary

On 15th November 2018, the Great Britain China Centre (GBCC) and the China Law Society (CLS) jointly held the third annual UK-China Rule of Law Roundtable in Haikou, Hainan Province.

The Roundtable initiative provides leading legal academics, practitioners and policy makers in the UK and China with a forum to discuss key legal issues in the context of rule of law principles.

As in previous years, the Bar Council of England and Wales, the Law Society of England and Wales, and the Law Society of Scotland supported the roundtable, joined by local supporter, the Hainan Law Society.

This year’s event revisited the theme of the November 2016 inaugural roundtable on international commercial dispute resolution (CDR). The roundtable provided experts with an opportunity to engage in in-depth discussion about the major global trends, and recent developments in the UK and China.

Participants highlighted the need to better understand users and focus dispute resolution systems on their needs, and the need for increasing enforcement capabilities and developing a pro-arbitration environment. Perceptions and cultural differences remain a significant barrier in cross-border dispute settlement. Participants also highlighted innovations in alternative dispute resolution methods, as well as the opportunities that digital innovation offers broader dispute resolution processes.

 The Roundtable reinforced the need to share experience and best practice to overcome misperceptions and pool knowledge to generate solutions and raise international standards for CDR.

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Roundtable delegates at the 3rd UK-China Rule of Law Roundtable

Detailed Report

The roundtable was an opportunity for international and Chinese participants to see first-hand initial reform efforts and challenges in Hainan province. Hainan is seeking to construct a hi-tech, environmentally and business friendly environment. This policy is in line with President Xi Jinping’s ambition for the province to become a free trade zone and free trade port with Chinese characteristics.

Legal practitioners at the roundtable were eager understand the local opportunities, but also highlighted the need for business to have confidence and certainty in the market if they are to invest in Hainan. Officials and the courts agreed that effective dispute resolution mechanisms and related issues such as insolvency procedures are an important tool to achieve these goals. They are exploring localised court reforms to attract FDI and expand cross-border trade, and the central government’s recently established law-based governance committee is also undertaking initial research as announced by Chinese Minister of Justice, Fu Zhenhua.

Steven Thompson QC, Barrister at XXIV Old Buildings and chair of the China Interest Group at the Bar Council, led the 13-person UK delegation. He was joined by top legal academics, solicitors, barristers, mediators and representatives of the Bar Council and Law Societies of England & Wales and Scotland. Delegation members had experience in a range of jurisdictions, including England & Wales, Scotland, China, Hong Kong, Singapore, Dubai, the US, and Germany, adding a valuable diverse perspective to the roundtable.

The delegation included:

  • Eric Chan, Legal Director for Addleshaw Goddard (Hong Kong) LLP and Law Society of England and Wales Representative
  • Susan Finder, Distinguished Scholar in Residence, School of Transnational Law of Peking University (Shenzhen)
  • Barry Hembling, Partner, Fladgate LLP
  • Colin Hutton, Partner, CMS Cameron McKenna Nabarro Olswang LLP and Law Society of Scotland Representative
  • Sarah Lawrenson, Barrister, Kings Chambers
  • Danny McFadden, Lawyer and Mediator, Director of the Centre for Effective Dispute Resolution (CEDR), Managing Director of CEDR Asia Pacific
  • Dr Natalie Mrockova, Law Fellow at St John’s College, Lecturer in Private Law at Law Faculty, Law & Finance Associate at China Centre, University of Oxford
  • Anita Phillips, Foreign Legal Consultant (England & Wales), Hong Kong, Herbert Smith Freehills
  • Helen Tang, Partner, Shanghai Office, Herbert Smith Freehills
  • Christian Wisskirchen, Head of Policy: International, Bar Council
  • Professor Xi Chao, Professor and Outstanding Fellow of the Faculty of Law, The Chinese University of Hong Kong
  • Zhang Ruiqiao, Lecturer in Corporate Finance, Corporate and Commercial Law, Deputy Director of Internationalisation, University of Edinburgh Law School

Vice-president of the China Law Society, Mr Zhang Mingqi, welcomed the delegation. He has warmly supported the development of UK-China cooperation on rule of law since the founding of the CLS and GBCC partnership.

 More than 80 Chinese participants attended the roundtable, drawn from the China Law Society; Supreme People’s Court and Hainan provincial courts; national and provincial government departments and Party bodies, such as the Ministry of Justice and the Political and Legal Affairs Commission; academic institutions,  including Renmin University, Sun Yat-Sen University and Yunnan University; and legal and arbitration institutions, such as the All-China Lawyers Association, Hainan Law Society, China International Economic and Trade Arbitration Commission (CIETAC), Shanghai International Arbitration Commission (SHIAC), and Hainan International Arbitration Court; and law firms including Globe-Law and Dechert LLP.

Over the course of four panels, participants shared their experience and expertise, covering: global trends in international commercial dispute resolution; regional innovations and developments in alternative dispute resolution; international commercial dispute resolution in practice; building a supportive legal and policy environment to attract high quality legal services; and improving enforcement to build investor confidence in cross-border and international dispute resolution mechanisms.

One of the significant conclusions of the roundtable was that competition and collaboration must go hand in hand. Participants stated that diversity and innovation is welcome if it leads to raising international standards for CDR. Greater collaboration and willingness to innovate is necessary if concerns around enforcement, confidentiality and ethics, and confidence in the fairness of systems are to be addressed. The UK is a leading global centre for commercial dispute resolution – its success is firmly tied to the UK’s traditions of rule of law and an open economy – but it has an active interest in supporting other systems of CDR emerge.

This year’s roundtable was also the first activity in the next stage of a British Embassy funded programme that GBCC is managing, which will support Chinese reform efforts to improve the consistency, effectiveness and quality of commercial and alternative dispute resolution in China.

GBCC’s Chinese partners for this programme include the Supreme People’s Court, the Ministry of Justice, and academic institutions including the Centre for Common Law at Renmin University Law School. The programme will also include mechanisms such as the GBCC-facilitated UK-China joint judicial expert working group on commercial dispute resolution, which works to develop effective international commercial courts in line with international best practice.

Some of the key points raised in the conference include:

Perceptions and cultural differences remain a significant barrier in cross-border dispute settlement

  • After bad experiences in the shipbuilding sector during the global financial crisis, Chinese parties are still wary of London as a centre for commercial dispute resolution centre, despite its world-class reputation. Chinese officials continued to quote an incorrect figure that Chinese parties lose 90% of cases in London, despite representatives of the Bar Council and experienced barristers providing evidence disproving this perception.
  • Arguments the adversarial system does not suit Chinese parties are not well founded. Of large Chinese state-owned enterprises, 90% choose international dispute settlement venues, according to statistics from the State Owned Assets Supervision and Administration (SASAC) quoted by a Chinese expert attending the event. Common law jurisdictions, such as Singapore and Hong Kong, remain destinations of choice for Chinese parties.
  • Familiarity with common law jurisdictions is important for Chinese parties investing overseas, as 27% of the world’s jurisdictions practice common law. Experimentation in establishing local commercially-oriented common law jurisdictions, such as those in Qatar, Dubai and more recently Kazakhstan, is also on the rise.

Understanding User Needs

  • An effective dispute resolution system puts the users’ needs at the centre. It is important to understand business perspectives about what they want and lawyers, courts and ADR systems need to listen and adapt effectively. Anita Phillips, foreign legal consultant and mediation expert at Herbert Freehills Smith, presented on findings from the recent Global Pound Conference Series on Redefining Commercial Dispute Resolution, of which she was a key organiser.
  • Results indicated that globally, efficiency is the greater driving motivation for parties when choosing a dispute mechanism, more so than predictability, confidentiality and industry practice. While businesses want greater collaboration and more consensual approaches, advisors strongly believe in their role as advocates. In Asia, results indicated enforceability was more important than efficiency and technological developments.
  • The benefits of disclosure versus non-disclosure-based systems were rigorously debated. Some Chinese experts challenged what they felt were onerous, unfair and inefficient disclosure requirements that led to lengthy and expensive procedures. English lawyers agreed that inefficiencies need to be reduced, and there have been several reform efforts in England & Wales to address this. At the same time, disclosure plays an important role in providing parties with a fair hearing.
  • Colin Hutton, partner at CMS and representing the Law Society of Scotland at the roundtable, pointed out that Scotland does not have disclosure requirements in its dispute resolution system. This is considered a valuable asset, and potentially makes Scotland an attractive alternative to London, as it also benefits from the expertise and neutrality of the UK legal system.
  • Legal practitioners in China were keen to see developments in the establishment of civil rules of evidence and encouraged institutions to experiment with a mixed-model approach. In this approach, parties would have a menu of options where they agree in advance the rules of evidence that will apply, but basic standards still need to be established.

Getting the basics right

  • The impact of having the right people with the right expertise should not be overlooked. One of London’s major strengths is the expertise and specialisms. Paying attention to the dispute resolution clause in the contract seems obvious but often plays a secondary role to the business negotiations.

Innovations in ADR

  • Mediation is a fast developing in demand approach to dispute resolution but greater professionalisation of the sector in China is needed. Asian clients often indicate a preference for mediation but as complex cross-border disputes are on the rise, greater professionalisation and confidence in enforcement in necessary – although this should not be required if mediation is successful. Experts also pointed out the need for mediation with cross-border dimensions to be better integrated into international commercial dispute resolution mechanisms, particularly in relation to enforcement issues.
  • Danny McFadden, Asia Pacific representative of the Centre for Effective Dispute Resolution, shared his wealth of experience from providing training for the professionalisation of mediators. Sarah Lawrenson, a Manchester-based barrister from Kings Chambers who specialises in construction disputes, reinforced the notion that mediation is an effective and currently underutilised tool, but more effective escalation procedures are needed. She also emphasised that for a pro-ADR system to work, confidence in the courts to enforce procedures when parties are not showing good faith is essential.
  • International agreements and conventions are an important tool but parties need confidence in their implementation. The Singapore Convention on Mediation is an interesting development in global mediation practice. Participants at the roundtable were confident that China would sign in 2019.
  • Third Party Funding. London has developed a sophisticated system for TPF, and many jurisdictions are following suit, including Singapore and Hong Kong.  Experts recommended that China explore similar initiatives to develop a legal framework that will better appeal to international parties.

CDR in a digital world

  • Commercial dispute resolution needs to adapt to the possibilities offered by technological innovation. Blockchain, smart contracts and e-signatures provide major cost and time saving efficiencies as well as promise new types of approaches to dispute settlement. Dubai International Financial Centre is already trialling such initiatives. Dr Natalie Mrockov, who has led on cross-border enforcement at the Courts of the Future Forum, shared her insights in how these trends are developing. She acknowledged that many lawyers remained hesitant to fully embrace the new developments until they were confident in their use. Dr Mrockov agreed that caution was sensible in the early stages of development, but thought that these new developments would inevitably become mainstream.

Enforcement

  • The role of courts in enabling effective international dispute resolution is growing. Judge Zhang Yongjian, chief judge of the recently established China International Commercial Court and member of the UK-China Joint Judicial Expert Working Group on Commercial Dispute Resolution, gave a presentation on the pilot experiments the commercial court is trialling in a Chinese context. These experiments include accepting evidence in English and removing requirements for notarised legal documents. The court faces challenges in overcoming some of the existing barriers to internationalising dispute settlement in China, but further localised innovation is likely.
  • Experts also identified the need for developments in the recognition and enforcement of foreign judgements in China. This remains a key issue for parties to have confidence in the courts. Participants also identified Belt and Road project related cases in countries with less developed legal systems as a particular risk.

Developing a pro-arbitration environment

  • An effective relationship between the courts and ADR institutions from the start to finish of a dispute settlement procedure is essential if parties are to have confidence in the system. Experts at the roundtable identified this as an area where they would most like to see improvements in China.
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Merethe Borge MacLeod, GBCC's executive director, addresses the roundtable

Date posted: 30 November 2018

Categories: Legal Services, Rule of Law and Business Environment


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