Download Trusting the Deals - The Federation of Hong Kong Business

Hong Kong Forum 2002
Putting Deals Together –
Trusting the Deals
Raymond C.K. Ho
LL.B.(HK), M.Soc.Sc. (HK), LL.M. (London), F.C.I.Arb.
Chairman, Mainland Legal Affairs Committee,
The Law Society of Hong Kong
Partner, Fred Kan & Co., Solicitors & Notaries
E-mail: [email protected]
12 November 2002
Ten Reasons
why your deals can be trusted
if done in Hong Kong
Ten reasons why Hong Kong can be trusted
1. “Hong Kong Co., Ltd.” is a widely accepted
corporate vehicle in doing business in HK,
across the border in Mainland China and
throughout the world
2. Commercial law and practice in HK are
commonly regarded as comprehensive,
predictable and enforceable in Courts
3. The HK Judiciary is independent and is the
impartial arbiter of the rule of law
Ten reasons why Hong Kong can be trusted
4. Domestic and international commercial
arbitration in HK is an accepted alternative
mode of dispute resolution
5. HK lawyers are not merely legal advisers but
professional intermediaries to their clients
in the business community
6. The Government is efficient and its policy of
positive non-intervention to the market
promotes free trade and free market
economy
Ten reasons why Hong Kong can be trusted
7. HK’s infrastructures and services facilitate
regional business operation in Asia
8. HK has a world class banking and financial
industries
9. Opportunities of partnering with
entrepreneurs possessing the requisite
knowledge and experience of doing
business in the region and world-wide are
ample in HK
10.Geographically and culturally, HK is close to
the market in Mainland China
“Hong Kong Co., Ltd.”
• Over 500,000 HK companies on register
• Simple incorporation procedures and minimal
requirements – no approval, no residence
requirement, corporate directors permissible
• HK company law is similar to the Anglo-American
model : separate corporate entity, “a company = a
natural person”, limited liability, management by
board of directors, indoor management rule,
minority protection, order for buy out in case of
deadlock, accounts to be audited, only listed
companies required to publish accounts in the public
records
“Hong Kong Co., Ltd.”
• Hong Kong Co. is regarded as a foreign entity in
Mainland China – HK is the major source of
foreign direct investments (FDI) in the Mainland
• Hong Kong Co. may be used to set up
representative office (RO), wholly foreign-owned
enterprise (WFOE), equity joint venture (EJV)
and cooperative joint venture (CJV) or to
undertake processing trade/manufacturing in the
Mainland
“Hong Kong Co., Ltd.”
• Overseas companies may use wholly owned HK
subsidiaries or registering a branch in HK as
their regional offices or headquarters
• HK tax rates are low – 16% profits tax for
corporations on profits “located” in HK – no tax
on dividend – salaries tax at progressive rate but
subject to a maximum rate of 15%
Hong Kong Commercial law and practice
• The root of HK commercial law and practice is
the English common law and rules of equity –
generally known to, and accepted by the
business and financial communities
• The Basic Law preserves HK’s common law
system and rules of equity beyond 1997
• Only Mainland laws under Annex III of the Basic
Law apply to HK such as laws on National
Anthem and National Flag, nationality law,
diplomatic privileges and immunities, garrisoning
of HKSAR and consular privileges and
immunities
Hong Kong Commercial Law and Practice
• Comprehensive – HK laws regulate all
commercial deals, banking and finance
transactions, dealings in movable and
immovable properties, intellectual property
rights, insurance, trade, sales of goods and
services, shipping, transportation and carriages,
etc.
• Predictable – certainty of the law ensures
commercial deals can be trusted. HK courts have
been consistently upholding the importance of
certainty and predictability in business
transactions.
Hong Kong Commercial Law and Practice
As illustrations there are two recent examples :
• (1) the rule that part payment of a debt is not
consideration for a discharge of the entire debt: the
Pinnel’s Case (1604) 5 Co Rep 117 was recently applied
in a 2000 HK case of Ng Shing Nam t/a Artland
Decoration Co.[2000] HKCFI 753
• (2) the rule that a carrier's claim for freight is to be
paid in full on delivery of the cargo and cannot be
subject to any deduction established in Dakin v Oxley
(1864) 15 CB (NS) 949 was recently applied in a 1998
HK case of RAF Forwarding (H.K.) Ltd. [1998] HKCFI 838
Hong Kong Commercial Law and Practice
• Availability of judicial remedies such as
monetary compensation, damages,
specific performance, injunctive reliefs
such as Anton Pillar Order (Inspection
Order), Mareva Injunction (World-wide
freezing order)
Independent Judiciary
• Judges have security of tenure and are of the
highest degree of integrity
• HK judiciary is separate from the Mainland
judiciary under “One Country Two Systems”
• The power of final adjudication is in the Court of
Final Appeal in HK composing of local judges
and judges from other common law jurisdictions
Independent Judiciary
• HK Courts exercise judicial power independently
(separation of powers)
Two recent illustrations of HK’s judicial
independency :-
• (1) Taiwan bankruptcy court order is
enforceable in HK not withstanding that such
court in Taiwan is a “non-recognised court”
under the sovereignty of the People’s Republic
of China as ruled by the HK Court of Final
Appeal in 2000 in the case of Chen Li Hung [2000]
1 HKLRD 252
Independent Judiciary
• (2) civil judgment from the Supreme People's
Court is not enforceable in HK courts because it
is not final and conclusive under the laws of the
PRC since it is subject to the scrutiny or retrial
by the Supreme People's Procuratorate as
decided in the 1998 HK case of Wuhan Zhong
Shuo Hong Real Estate HCA 14325 of 1998
• Foreign judgments are enforceable in HK under
the common law if such judgment is final and
conclusive; or under the provisions of the
Foreign Judgments (Reciprocal Enforcement)
Ordinance (Cap.319)
Independent Judiciary
• Interface between HK Judiciary & the Standing
•
•
Committee of the National People’s Congress
(NPCSC): Basic Law Article 158 (BL 158)
Power of interpretation of the Basic Law (BL)
vested in NPCSC.
NPCSC authorizes the courts of the HK to
interpret on their own, in adjudicating cases,
(1) provisions of the BL which are within the
limits of the autonomy of HK; and
(2) provisions of the BL concerning affairs
which are the responsibility of the Central
People's Government (CPG), or concerning the
relationship between the Central Authorities
and HK (collectively, “CPG Provisions”)
Independent Judiciary
• If the interpretation of the CPG Provisions
affects the judgments on the cases, the HK
courts shall, before making their final
nonappealable judgments, seek an
interpretation of the relevant CPG Provisions
from NPCSC through the Court of Final Appeal.
• NPCSC shall consult its Committee for the Basic
Law before giving an interpretation on the Basic
Law provisions
• The interpretation of the NPCSC on the CPC
provisions shall be binding on HK courts (but
judgments previous rendered shall not be
affected)
Independent Judiciary
• The new constitutional order of HK after 1997 is
manifested in BL 158
• BL 158 is modelled on “uniformity of
interpretation of EU Community law in its
application by the national courts in the EU
(Article 177 of the ECC Treaty, now article 234 of
the EC Treaty)
• Occasion for interpretation by NPCSC shall be
exceedingly rare - The only case that has given
rise to such interpretation is the “right of abode
case”
Domestic and International
Commercial Arbitration
• HK International Arbitration Centre – an
established centre in Asia that supports
arbitration services in HK
• HK arbitration laws adopt the United Nations
Commission on International Trade Law
(UNCITRAL) Model Law on international
commercial arbitration
• Under the New York Convention, HK arbitral
awards are enforceable in all the Convention
States all over the world
Domestic and International
Commercial Arbitration
• Under the arrangement for the Mutual
Enforcement of Arbitral Awards between HKSAR
and Mainland China, HK arbitral awards are
enforceable in most provinces in the Mainland
• With the choice of arbitration in a deal for
dispute resolution, proceedings in court will be
stayed
• HK arbitrators possess expertises in handling
domestic and cross-border commercial disputes,
shipping, building and construction contract
disputes
Hong Kong Lawyers
• HK lawyers follow the British tradition of the
divided branches of solicitors (5235 practising;
and 438 non practising) and barristers (786
practising)
• HK solicitors are direct providers of professional
legal services and advice to their local and
international clients. Barristers must be briefed
by solicitors when circumstances of a case
requires
• HK lawyers must act in the best interest of their
clients
Hong Kong Lawyers
• Each solicitors firm in HK provides their clients
with a professional indemnity cover to the extent
of HK$10 million per transaction. In exceptional
cases, some firms may offer top-up professional
indemnity covers for some of their clients or for
specific transactions
• Solicitors and barristers are subject to strict
professional rules of ethics and conduct, such as
client confidentiality and the maintenance of
separate clients’ accounts
Hong Kong Lawyers
• Given the wide-ranging exposure of the work
entrusted to HK lawyers generally, they are able
to effectively meet the specific needs of their
clients
• Solicitors in HK often assist their clients by
making referrals to potential financiers, investors,
business partners as well as other advisers for
their clients
Hong Kong Lawyers
• HK solicitors have adopted the open door policy
to their counterparts outside HK. Foreign legal
firms from countries such as the U.S., U.K.,
Canada, Singapore, Japan, Philippines, Australia,
France and Germany (711 registered foreign
lawyers and 37 registered foreign law firms)
• HK solicitors are well connected with the legal
profession throughout Mainland China and are
able to team up with their professional
counterparts in Mainland China to provide crossborder legal services to their clients in HK
Hong Kong Government
• Efficient civil service, open and transparent
•
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•
•
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Government
Policy of positive non-intervention to the
market creating an investment friendly and free
trade environment for businesses in HK
Simple and low tax system
Low crime rate
Government decisions are amendable to judicial
review
Institutional checks on the administration and
civil service – the Ombudsman and ICAC
Hong Kong’s Infrastructures
and Services
• Advance telecommunication system, information
technology, efficient and well-maintained
infrastructure facilities and effective services
• Transportation, airport and port facilities serving
as the centre of the regional hub in Asia
• Logistics infrastructure for international trade
Banking & Finance
• Virtually all major banks in the world have
operations in HK
• World class stock exchange market and venture
capital market facilitate corporate finance and
fund-raising for established as well as emerging
businesses
• The policy of linked exchange rate (at
HK$7.80=US$1) since 1983 provides
stability in the monetary market
Banking & Finance
• No foreign exchange control allows free flow of
investments to and from HK
• Funding to SMEs by commercial providers and
by the government available
Partnering with Entrepreneurs
• 3 elements that are pre-requisites for success in
investing in China
– Knowledge and understanding of the country
of China
– Familiarisation with China’s internal operation
and business practices
– Having the best personnel to run investments
in China
Partnering with Entrepreneurs
• Certainly HK has the biggest pool of
entrepreneurs and joint-venture partners
who do not only possess knowledge in the
market in Mainland China but also in the
markets in the region and world-wide
• They could be your ideal partners in your
business ventures
Proximity with Mainland China
• The Pearl River Delta (PRD) across HK’s border
in the north already has a population of 70
million
• PRD alone is the world’s largest manufacturing
base
• HK is your gateway to Mainland China
• Positioning your operation in HK could offer you
the benefits of both risks minimization in your
investment deals and access to the abundant
business opportunities in this region of the world
Thank You !