Joint RAA/HKIAC Russia – Hong Kong Business Summit 2017

22.05.2017 Joint RAA/HKIAC Russia – Hong Kong Business Summit 2017

The first Russia – Hong Kong Business Summit took place in Hong Kong on 11 May, at the Hong Kong International Arbitration Centre (HKIAC). The event, organized jointly by RAA and HKIAC, began with an opening address by Joe Liu, Managing Counsel, HKIAC.

Teresa Cheng, outgoing Chairperson, HKIAC then welcomed all participants and informed all present that this was a summit organized as part of the memorandum of understanding signed btw RAA and HKIAC in 2016 at the St. Petersburg International Legal Forum. Teresa then talked about the significant number of agreements signed between Russia and China, which include deals in the oil and gas sector. Hence, she said, it makes sense to view Hong Kong as a place of arbitration, particularly, given its many advantages, including "The one country - two systems" principle, which has allowed the legal system work successfully in Hong Kong, and seen the business community prosper. 

Consul-General Alexander Kozlov then gave a welcome address on behalf of the Consulate General of the Russian Federation in Hong Kong.  He talked about strengthening cooperation with Asian countries. A goal not based on current geopolitical matters, but national interest and long term goals in terms of international development, this has led to Russia’s unrelenting commitment to developing and strengthening economic ties with Asia. This includes the development of special economic zones and open ports in far east Russia that share borders with Asian countries. Touching on the Belt and road initiative, he pointed out that this was a very important initiative supported by the Russian government, saying that it will become the backbone for Russia China interactions. “Hong Kong, being an important financial center is the most likely bridge connecting Russia to China and playing a vital role in the belt and road initiative.” -  said Mr. Kozlov.

Wesley Wong, Solicitor General, Department of Justice, spoke next, talking about HKSAR’s commitment and respect to the rule of law. The confidence, Mr. Wong stated, which Hong Kong courts command is world known, with it being the only Asian jurisdiction in the top 10 courts, globally. He then proceeded to mention several landmark cases, referred to by other highly acknowledged courts. The government, Mr. Wong stated, will work with legal centers including arbitration and dispute resolution associations to strengthen the judicial system in Hong Kong. The Hong Kong Department of Justice, Mr. Wong said will continue to encourage arbitration and mediation in HK. The Solicitor General then talked briefly about the new Hong Kong Arbitration law that came out in 2011 and was based on the 2006 UNCITRAL commercial arbitration law. The current Hong Kong Arbitration law, he said, was developed to promote Hong Kong as a place of arbitration: subsequent amendments, including that in 2016 have only increased its attractiveness in terms of it being used as an alternative means of dispute resolution, with recent amendments touching on IP rights and third party funding.

The first session focused on the impact of the Belt and Road initiative on Russia and Hong Kong. Chin Leng Lim, Barrister, Keating Chambers, London; Professor of Law, University of Hong Kong and Choh-ming Li Professor-elect, The Chinese University of Hong Kong moderated the session. Following a brief introduction to the session, Chin Leng Lim went ahead to point out that the Belt and Road initiative is not preclusive of its commercial importance, as it links almost 80 Chinese provinces to the rest of the world by both land and sea. This translates to investment, trade, infrastructure, energy among others. From a legal standpoint, Professor Lim stated, this means treaties, sectoral treaties, agreements, international law and contracts, including those in the areas of investment and construction.
Hannah Cao, Deputy General Counsel, Silk Road Fund then spoke about belt road initiative. She mentioned the four sectors the Silk Road Fund is focused on - infrastructure, resource development, industrial cooperation, and financial cooperation. The Silk Road Fund, she said, is primarily an equity investor, but it also but to a smaller extent looks into other forms of investment. Russia’, the Deputy General Counsel said, is a strategically important country to the initiative. She then went ahead to mention the current strategic energy cooperation with Russia – Yamal (Integrated LNG Project), where the Silk Belt Fund is a financial investor, and Sibur, where the Silk Road Fund is an equity investor. Ms. Cao then spoke about Hong Kong’s unique role in Belt and Road initiative, including it being a major financial center and its arbitration provisions. Nicolas Kwan, Director of research, Hong Kong Trade Development Council brought the session to a close, talking about China’s globalisation initiative. Hong Kong, he said, is focused on six areas, with regard to the Belt Road initiative. These include infrastructure (rail, airport, port, power, telecom), logistics, international finance, cross border investment (Hong Kong is the 4th largest investment center in the world),  professional services (including world class legal, accounting, risk management services), regional trade and commerce.

The second session focused on operating a business in a new economic order. Moderated by Ashley Galina Dudarenok, Managing Director, Alarice International, the session began with a brief introduction of the session’s speakers. The session drew together representatives of a B2B company, a law firm and a noncommercial organisation promoting investment in Hong Kong. Following the brief introductions, the session then took on an interactive format in which each speaker addressed questing such as -Why Hong Kong?  What are the practical tools businesses need to navigate in the new economic order? - again Arbitration in Hong Kong was sighted as a main reason for both. Other legal advantages pointed out, where ease of company registration and subsequent financial implications, including the double taxation treaty. Philip Kung, Head of Business and Professional services, Invest Hong Kong also pointed out that Hong Kong, rated in the top 5 startup locations, is a favourable environment for startups, entrepreneurs and SMEs. Talking about big trends coming in the future Joanne Li, Vice President – Asia & Pacific, AirBridgeCargo Arlines talked about e-commerce. She pointed out that Hong Kong is a major platform for e-commerce because of its infrastructure. Dafei Chen, Partner, Han Kun Law Offices seconded that trend, stating that indeed the opportunities in e-commerce are huge. He also mentioned Artificial Intelligence as an upcoming trend. Philip Kung agreed that technology innovation is a force to be reckoned with, in the future. Reindustrialisation Mr. Kung said, is also on the menu for future development strategies for Hong Kong, as it will create new opportunities for multinational companies and maximise return on investment. He then mentioned that the new Hong Kong legislature includes a 50% off corporate tax, which already at this point is 16%

A fireside chat followed, which focused on Russia – China Dialogue on Infrastructure and Energy: Getting the Deal Done. Held in a semi-formal setting, the session followed the opinion of three representatives of three financial institutions on the current sanctions on Russia. Chaired by Sheila Ahuja, Counsel, Allen & Overy, the session focused on Russia-China relations, from the banking sector’s point of view. Shaun Ansell, Head of Legal and Compliance, GPB Financial Services (a part of Gazprombank) pointed out that these sanctions have no application in Hong Kong and China as a whole. Exceptions, he said, apply to organisations whose countries fall under the jurisdictions imposing the sanctions. Melvin Liao, Head of Compliance, China Everbright Bank backed up this fact, confirming that these do not apply to business between China and Russia. Rollin Chan, past Head of Legal, Deutsche Bank said that with regard to arbitration, Asian jurisdictions – Singapore, Hong Kong, among others gained preference. In the end, everyone agreed that although for China and Hong Kong this was not an issue, sanctions still pose a problem as there is a lot companies need to consider, including due diligence, before choosing to do business with a Russian entity. Moving on to the Belt and Road initiative, equity investment was once again brought up as one of the advantages. In terms of arbitration agreements, arbitrating disputes related to the Belt and Road initiative in Hong Kong is of an advantage, as even entities with immunity as a result of their status, are under obligation to arbitrate or risk having an award made against them.

The next session focused on the Russia – China Dialogue on Infrastructure and Energy. Chairing the session was Paul Starr, Partner, King & Wood Mallesons. Danila Logofet, Senior Registered Foreign Lawyer, Herbert Smith Freehills talked about doing business in Russia, from a legal standpoint. He noted that the bureaucracy and red tape had been significantly reduced. Addressing the elephant in the room – sanctions, he admitted that it made a lot of businesses apprehensive for fear of the so called “secondary sanctions” i.e. the repercussions of doing business with a Russian entity. In his experience, most deals are usually done in a sanctions compliant way. He then went ahead to talk about the legal aspects of investing in Russia. John Yeap, Partner, Pinsent Masons spoke next, talking about doing business in Russia from the Chinese perspective. Current trends, he said, show that Chinese companies now come in not just as contractors, but stake holders. This involves project and investment risk analyses; hence, the need to pay closer attention to policies and the need for greater legal expertise and serious consideration as to means of resolving disputes. One of the areas, where challenges are met are in technical terms. There are terms used and recognized internationally, while others are specific to the country in question, so much so that in some cases, a particular phrase or word may refer to two entirely different concepts.

The final session focused on dispute resolution involving Russia related parties. Olga Boltenko, Counsel, CMS Hasche Sigle, the session’s Chair, opened the session with a brief overview of the impact on sanctions on the number of disputes and jurisdictions for their resolution. Roman Zykov, Secretary General, RAA spoke next, talking about compliance, when doing business with Russia related companies. In his description, he drew an analogy of driving a car on an icy road, pointing out that certain aspects must not be ignored, including – official, legally acceptable, company information, current state of financial and legal affairs (including pending cases in state courts, ongoing investigations, state register of disqualified directors), responsible persons and cross border contracts, among others. He then proceeded to touch briefly on the RAA survey done on sanctions. The survey, RAA’s Secretary General said, clearly shows that following the sanctions placed on Russia, more companies are beginning to consider Asia, including Hong Kong and Singapore, as platforms for arbitration. Anatole Boute, Associate Professor, Chinese University of Hong Kong then talked about the protection of infrastructure investments before Russian courts, from an international perspective, and with regard to the Russian law. He pointed out that having an award is one thing, it’s enforcement is an entirely different matter. Hence, he said, it may make sense to consider Russian arbitration institutions, in some cases involving Russian parties, if one hopes to have the award enforced as well. He commended the work currently being done by Russian courts, for example, regarding non-cost reflective tariffs being imposed by regulatory authorities. Sarah Grimmer, Secretary General, HKIAC then talked about HKIAC’s perspective on arbitration involving Russia related parties. HKIAC, she said, received 262 arbitration filings in 2017, and already 91 in 2017. The top 5 countries that filed these cases are Hong Kong, Mainland China, BVIs, Singapore, USA. Since 2009, she said, HKIAC has provided administrative support in 12 cases regarding Russian parties. In 5 cases they were claimants, in the other – respondents. HKIAC Ms. Grimmer said, is hopeful that more Russian parties will be seen in years to come. Making observations with respect to Chinese parties, the HKIAC Secretary General drew everyone attention to several considerations, which must be taken into account – 1. Nature of the party (extent of government involvement) 2. Language of proceedings (13% of HKIAC cases were in Chinese only. Thus, at time of contracting, provision must be clearly made regarding language of arbitration) 3. Possibility of non-participating respondents (there’s a high proportion of Chinese respondents who choose not to participate in arbitration proceedings. In 2016, this was 15%. Thus, notification should be carried out very carefully to avoid rebuttals).

Vladimir Khvalei, Chairman of RAA’s Board closed the conference by thanking everyone for participating in the conference. In his closing remarks he said that he remained optimistic that in the near future, disputes involving Russian parties will be arbitrated in Hong Kong, and that these will be high profile disputes.

With over 100 participants, the event brought together leading professionals in arbitration, as well as members of the business community with current and future investments into Russia and China.  All agreed that the Summit was a step in the right direction toward successful business relations between Russia and China. 

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