Hong Kong Forum 2002 Putting Deals Together – Trusting the Deals Raymond C.K. Ho LL.B.(HK),...

Hong Kong Forum 2002Hong Kong Forum 2002

Putting Deals Together – Putting Deals Together –

Trusting the DealsTrusting the Deals

Raymond C.K. Ho Raymond C.K. Ho LL.B.(HK), M.Soc.Sc. (HK), LL.M. (London), F.C.I.Arb.LL.B.(HK), M.Soc.Sc. (HK), LL.M. (London), F.C.I.Arb.

Chairman, Mainland Legal Affairs Committee,Chairman, Mainland Legal Affairs Committee,The Law Society of Hong KongThe Law Society of Hong Kong

Partner, Fred Kan & Co., Solicitors & NotariesPartner, Fred Kan & Co., Solicitors & Notaries E-mail: E-mail: [email protected]@fredkan.com

12 November 200212 November 2002

mailto:[email protected]

Ten ReasonsTen Reasons why your deals can be why your deals can be trusted if done in Hong trusted if done in Hong

KongKong

Ten reasons why Hong Kong can be Ten reasons why Hong Kong can be trustedtrusted

1.1. ““Hong Kong Co., Ltd.” is a widely Hong Kong Co., Ltd.” is a widely accepted corporate vehicle in doing accepted corporate vehicle in doing business in HK, across the border in business in HK, across the border in Mainland China and throughout the worldMainland China and throughout the world

2.2. Commercial law and practice in HK are Commercial law and practice in HK are commonly regarded as comprehensive, commonly regarded as comprehensive, predictable and enforceable in Courtspredictable and enforceable in Courts

3.3. The HK Judiciary is independent and is The HK Judiciary is independent and is the impartial arbiter of the rule of lawthe impartial arbiter of the rule of law


4.4. Domestic and international commercial Domestic and international commercial arbitration in HK is an accepted arbitration in HK is an accepted alternative mode of dispute resolutionalternative mode of dispute resolution

5.5. HK lawyers are not merely legal advisers HK lawyers are not merely legal advisers but professional intermediaries to their but professional intermediaries to their clients in the business community clients in the business community

6.6. The Government is efficient and its The Government is efficient and its policy of positive non-intervention to the policy of positive non-intervention to the market promotes free trade and free market promotes free trade and free market economymarket economy


7.7. HK’s infrastructures and services HK’s infrastructures and services facilitate regional business operation in facilitate regional business operation in AsiaAsia

8.8. HK has a world class banking and HK has a world class banking and financial industriesfinancial industries

9.9. Opportunities of partnering with Opportunities of partnering with entrepreneurs possessing the requisite entrepreneurs possessing the requisite knowledge and experience of doing knowledge and experience of doing business in the region and world-wide business in the region and world-wide are ample in HKare ample in HK

10.10.Geographically and culturally, HK is Geographically and culturally, HK is close to the market in Mainland Chinaclose to the market in Mainland China

““Hong Kong Co., Ltd.”Hong Kong Co., Ltd.”

• Over 500,000 HK companies on registerOver 500,000 HK companies on register

• Simple incorporation procedures and minimal Simple incorporation procedures and minimal requirements – no approval, no residence requirements – no approval, no residence requirement, corporate directors permissiblerequirement, corporate directors permissible

• HK company law is similar to the Anglo-HK company law is similar to the Anglo-American model : separate corporate entity, “a American model : separate corporate entity, “a company = a natural person”, limited liability, company = a natural person”, limited liability, management by board of directors, indoor management by board of directors, indoor management rule, minority protection, order for management rule, minority protection, order for buy out in case of deadlock, accounts to be buy out in case of deadlock, accounts to be audited, only listed companies required to audited, only listed companies required to publish accounts in the public recordspublish accounts in the public records


• Hong Kong Co. is regarded as a foreign Hong Kong Co. is regarded as a foreign entity in Mainland China – HK is the major entity in Mainland China – HK is the major source of foreign direct investments (FDI) in source of foreign direct investments (FDI) in the Mainlandthe Mainland

• Hong Kong Co. may be used to set up Hong Kong Co. may be used to set up representative office (RO), wholly foreign-representative office (RO), wholly foreign-owned enterprise (WFOE), equity joint owned enterprise (WFOE), equity joint venture (EJV) and cooperative joint venture venture (EJV) and cooperative joint venture (CJV) or to undertake processing (CJV) or to undertake processing trade/manufacturing in the Mainlandtrade/manufacturing in the Mainland


• Overseas companies may use wholly owned Overseas companies may use wholly owned HK subsidiaries or registering a branch in HK HK subsidiaries or registering a branch in HK as their regional offices or headquartersas their regional offices or headquarters

• HK tax rates are low – 16% profits tax for HK tax rates are low – 16% profits tax for corporations on profits “located” in HK – no corporations on profits “located” in HK – no tax on dividend – salaries tax at progressive tax on dividend – salaries tax at progressive rate but subject to a maximum rate of 15%rate but subject to a maximum rate of 15%

Hong Kong Commercial law and Hong Kong Commercial law and practicepractice• The root of HK commercial law and practice The root of HK commercial law and practice

is the English common law and rules of is the English common law and rules of equity – generally known to, and accepted equity – generally known to, and accepted by the business and financial communitiesby the business and financial communities

• The Basic Law preserves HK’s common law The Basic Law preserves HK’s common law system and rules of equity beyond 1997 system and rules of equity beyond 1997

• Only Mainland laws under Annex III of the Only Mainland laws under Annex III of the Basic Law apply to HK such as laws on Basic Law apply to HK such as laws on National Anthem and National Flag, National Anthem and National Flag, nationality law, diplomatic privileges and nationality law, diplomatic privileges and immunities, garrisoning of HKSAR and immunities, garrisoning of HKSAR and consular privileges and immunitiesconsular privileges and immunities

Hong Kong Commercial Law and Hong Kong Commercial Law and PracticePractice• Comprehensive – HK laws regulate all Comprehensive – HK laws regulate all

commercial deals, banking and finance commercial deals, banking and finance transactions, dealings in movable and transactions, dealings in movable and immovable properties, intellectual immovable properties, intellectual property rights, insurance, trade, sales of property rights, insurance, trade, sales of goods and services, shipping, goods and services, shipping, transportation and carriages, etc.transportation and carriages, etc.

• Predictable – certainty of the law ensures Predictable – certainty of the law ensures commercial deals can be trusted. HK commercial deals can be trusted. HK courts have been consistently upholding courts have been consistently upholding the importance of certainty and the importance of certainty and predictability in business transactions.predictability in business transactions.

Hong Kong Commercial Law and Hong Kong Commercial Law and PracticePracticeAs illustrations there are two recent examples :As illustrations there are two recent examples :

• (1) the rule that part payment of a debt is not (1) the rule that part payment of a debt is not consideration for a discharge of the entire consideration for a discharge of the entire debt: the debt: the Pinnel’s Case (1604) 5 Co Rep 117Pinnel’s Case (1604) 5 Co Rep 117 was was recently applied in a 2000 HK case of recently applied in a 2000 HK case of Ng Shing Ng Shing Nam t/a Artland Decoration Co.[2000] HKCFI 753Nam t/a Artland Decoration Co.[2000] HKCFI 753

• (2) the rule that (2) the rule that a carrier's claim for freight is a carrier's claim for freight is to be paid in full on delivery of the cargo and to be paid in full on delivery of the cargo and cannot be subject to any deduction cannot be subject to any deduction established in established in Dakin v Oxley (1864) 15 CB (NS) 949Dakin v Oxley (1864) 15 CB (NS) 949 was recently applied in a 1998 HK case of was recently applied in a 1998 HK case of RAF RAF Forwarding (H.K.) Ltd. [1998] HKCFI 838Forwarding (H.K.) Ltd. [1998] HKCFI 838

Hong Kong Commercial Law and Hong Kong Commercial Law and PracticePractice

• Availability of judicial remedies such Availability of judicial remedies such as monetary compensation, as monetary compensation, damages, specific performance, damages, specific performance, injunctive reliefs such as Anton Pillar injunctive reliefs such as Anton Pillar Order (Inspection Order), Mareva Order (Inspection Order), Mareva Injunction (World-wide freezing Injunction (World-wide freezing order)order)

Independent JudiciaryIndependent Judiciary

• Judges have security of tenure and are of Judges have security of tenure and are of the highest degree of integrity the highest degree of integrity

• HK judiciary is separate from the Mainland HK judiciary is separate from the Mainland judiciary under “One Country Two judiciary under “One Country Two Systems” Systems”

• The power of final adjudication is in the The power of final adjudication is in the Court of Final Appeal in HK composing of Court of Final Appeal in HK composing of local judges and judges from other local judges and judges from other common law jurisdictionscommon law jurisdictions


• HK Courts exercise judicial power independenHK Courts exercise judicial power independently (separation of powers)tly (separation of powers)

Two recent illustrations of HK’s judicial Two recent illustrations of HK’s judicial

independency :-independency :-

• (1) (1) Taiwan bankruptcy court order is Taiwan bankruptcy court order is enforceable in HK not withstanding that enforceable in HK not withstanding that such court in Taiwan is a “non-recognised such court in Taiwan is a “non-recognised court” under the sovereignty of the court” under the sovereignty of the People’s Republic of China as ruled by the People’s Republic of China as ruled by the HK Court of Final Appeal in 2000 in the HK Court of Final Appeal in 2000 in the case of case of Chen Li Hung [2000] 1 HKLRD 252Chen Li Hung [2000] 1 HKLRD 252


• (2) civil judgment from the (2) civil judgment from the Supreme Supreme People's Court is not enforceable in HK People's Court is not enforceable in HK courts because it is not final and courts because it is not final and conclusive under the laws of the PRC since conclusive under the laws of the PRC since it is subject to the scrutiny or retrial by the it is subject to the scrutiny or retrial by the Supreme People's Procuratorate as Supreme People's Procuratorate as decided in the 1998 HK case of decided in the 1998 HK case of Wuhan Zhong Wuhan Zhong Shuo Hong Real Estate HCA 14325 of 1998Shuo Hong Real Estate HCA 14325 of 1998

• Foreign judgments are enforceable in HK undeForeign judgments are enforceable in HK under the common law if such judgment is final and r the common law if such judgment is final and conclusive; or under the provisions of the Foreconclusive; or under the provisions of the Foreign Judgments (Reciprocal Enforcement) Ordiign Judgments (Reciprocal Enforcement) Ordinance (Cap.319)nance (Cap.319)

Independent JudiciaryIndependent Judiciary• Interface between HK Judiciary & the Interface between HK Judiciary & the

Standing Committee of the National Standing Committee of the National People’s Congress (NPCSC): Basic Law People’s Congress (NPCSC): Basic Law Article 158 (BL 158)Article 158 (BL 158)

• Power of interpretation of the Basic Law (BL) vePower of interpretation of the Basic Law (BL) vested in NPCSC.sted in NPCSC.

• NPCSC authorizes the courts of the HK to interNPCSC authorizes the courts of the HK to interpret on their own, in adjudicating cases, pret on their own, in adjudicating cases, (1) provisions of the BL which are within the limi(1) provisions of the BL which are within the limits of the autonomy of HK; and ts of the autonomy of HK; and (2) provisions of the BL concerning affairs whic(2) provisions of the BL concerning affairs which are the responsibility of the Central People's h are the responsibility of the Central People's Government (CPG), or concerning the relationsGovernment (CPG), or concerning the relationship between the Central Authorities and HK (colhip between the Central Authorities and HK (collectively, “CPG Provisions”)lectively, “CPG Provisions”)

Independent JudiciaryIndependent Judiciary• If the interpretation of the CPG Provisions affectIf the interpretation of the CPG Provisions affect

s the judgments on the cases, the HK courts shas the judgments on the cases, the HK courts shall, before making their final nonappealable judgmll, before making their final nonappealable judgments, seek an interpretation of the relevant CPG ents, seek an interpretation of the relevant CPG Provisions from NPCSC through the Court of FinProvisions from NPCSC through the Court of Final Appeal.al Appeal.

• NPCSC shall consult its Committee for the NPCSC shall consult its Committee for the Basic Law before giving an interpretation Basic Law before giving an interpretation on the Basic Law provisionson the Basic Law provisions

• The interpretation of the NPCSC on the The interpretation of the NPCSC on the CPC provisions shall be binding on HK CPC provisions shall be binding on HK courts (but judgments previous rendered courts (but judgments previous rendered shall not be affected)shall not be affected)


• The new constitutional order of HK after The new constitutional order of HK after 1997 is manifested in BL 1581997 is manifested in BL 158

• BL 158 is modelled on “uniformity of BL 158 is modelled on “uniformity of interpretation of EU Community law in its interpretation of EU Community law in its application by the national courts in the application by the national courts in the EU (Article 177 of the ECC Treaty, now EU (Article 177 of the ECC Treaty, now article 234 of the EC Treaty)article 234 of the EC Treaty)

• Occasion for interpretation by NPCSC shall Occasion for interpretation by NPCSC shall be exceedingly rare - The only case that be exceedingly rare - The only case that has given rise to such interpretation is the has given rise to such interpretation is the “right of abode case”“right of abode case”

Domestic and International Domestic and International

Commercial ArbitrationCommercial Arbitration • HK International Arbitration Centre – an HK International Arbitration Centre – an

established centre in Asia that supports established centre in Asia that supports arbitration services in HK arbitration services in HK

• HK arbitration laws adopt the United HK arbitration laws adopt the United Nations Commission on International Nations Commission on International Trade Law (UNCITRAL) Model Law on Trade Law (UNCITRAL) Model Law on international commercial arbitrationinternational commercial arbitration

• Under the New York Convention, HK Under the New York Convention, HK arbitral awards are enforceable in all the arbitral awards are enforceable in all the Convention States all over the worldConvention States all over the world

Domestic and International Domestic and International

Commercial ArbitrationCommercial Arbitration • Under the arrangement for the Mutual Under the arrangement for the Mutual

Enforcement of Arbitral Awards between Enforcement of Arbitral Awards between HKSAR and Mainland China, HK arbitral HKSAR and Mainland China, HK arbitral awards are enforceable in most provinces in awards are enforceable in most provinces in the Mainlandthe Mainland

• With the choice of arbitration in a deal for With the choice of arbitration in a deal for dispute resolution, proceedings in court will dispute resolution, proceedings in court will be stayedbe stayed

• HK arbitrators possess expertises in HK arbitrators possess expertises in handling domestic and cross-border handling domestic and cross-border commercial disputes, shipping, building and commercial disputes, shipping, building and construction contract disputesconstruction contract disputes

Hong Kong LawyersHong Kong Lawyers

• HK lawyers follow the British tradition of HK lawyers follow the British tradition of the divided branches of solicitors (5235 the divided branches of solicitors (5235 practising; and 438 non practising) and practising; and 438 non practising) and barristers (786 practising)barristers (786 practising)

• HK solicitors are direct providers of HK solicitors are direct providers of professional legal services and advice to professional legal services and advice to their local and international clients. their local and international clients. Barristers must be briefed by solicitors Barristers must be briefed by solicitors when circumstances of a case requireswhen circumstances of a case requires

• HK lawyers must act in the best interest of HK lawyers must act in the best interest of their clientstheir clients


• Each solicitors firm in HK provides their Each solicitors firm in HK provides their clients with a professional indemnity cover clients with a professional indemnity cover to the extent of HK$10 million per to the extent of HK$10 million per transaction. In exceptional cases, some transaction. In exceptional cases, some firms may offer top-up professional firms may offer top-up professional indemnity covers for some of their clients or indemnity covers for some of their clients or for specific transactionsfor specific transactions

• Solicitors and barristers are subject to strict Solicitors and barristers are subject to strict professional rules of ethics and conduct, professional rules of ethics and conduct, such as client confidentiality and the such as client confidentiality and the maintenance of separate clients’ accountsmaintenance of separate clients’ accounts


• Given the wide-ranging exposure of the Given the wide-ranging exposure of the work entrusted to HK lawyers generally, work entrusted to HK lawyers generally, they are able to effectively meet the they are able to effectively meet the specific needs of their clientsspecific needs of their clients

• Solicitors in HK often assist their clients by Solicitors in HK often assist their clients by making referrals to potential financiers, making referrals to potential financiers, investors, business partners as well as investors, business partners as well as other advisers for their clientsother advisers for their clients


• HK solicitors have adopted the open door HK solicitors have adopted the open door policy to their counterparts outside HK. policy to their counterparts outside HK. Foreign legal firms from countries such as Foreign legal firms from countries such as the U.S., U.K., Canada, Singapore, Japan, the U.S., U.K., Canada, Singapore, Japan, Philippines, Australia, France and Germany Philippines, Australia, France and Germany (711 registered foreign lawyers and 37 (711 registered foreign lawyers and 37 registered foreign law firms)registered foreign law firms)

• HK solicitors are well connected with the HK solicitors are well connected with the legal profession throughout Mainland China legal profession throughout Mainland China and are able to team up with their and are able to team up with their professional counterparts in Mainland China professional counterparts in Mainland China to provide cross-border legal services to to provide cross-border legal services to their clients in HKtheir clients in HK

Hong Kong GovernmentHong Kong Government

• Efficient civil service, open and transparent Efficient civil service, open and transparent Government Government

• Policy of positive non-intervention to the Policy of positive non-intervention to the market creating an investment friendly and market creating an investment friendly and free trade environment for businesses in HKfree trade environment for businesses in HK

• Simple and low tax systemSimple and low tax system• Low crime rateLow crime rate• Government decisions are amendable to Government decisions are amendable to

judicial reviewjudicial review• Institutional checks on the administration Institutional checks on the administration

and civil service – the Ombudsman and and civil service – the Ombudsman and ICACICAC

Hong Kong’s Hong Kong’s Infrastructures and Infrastructures and

ServicesServices

• Advance telecommunication system, Advance telecommunication system, information technology, efficient and well-information technology, efficient and well-maintained infrastructure facilities and maintained infrastructure facilities and effective serviceseffective services

• Transportation, airport and port facilities Transportation, airport and port facilities servingserving as the centre of the regional hub in as the centre of the regional hub in AsiaAsia

• Logistics infrastructure for international tradeLogistics infrastructure for international trade

Banking & FinanceBanking & Finance

• Virtually all major banks in the world have Virtually all major banks in the world have operations in HKoperations in HK

• World class stock exchange market and World class stock exchange market and venture capital market facilitate corporate venture capital market facilitate corporate finance and fund-raising for established as finance and fund-raising for established as well as emerging businesseswell as emerging businesses

• The policy of linked exchange rate The policy of linked exchange rate (at HK$(at HK$7.80=US$1) since 1983 7.80=US$1) since 1983 provides stability in provides stability in the monetary marketthe monetary market

Banking & FinanceBanking & Finance

• No foreign exchange control allows free No foreign exchange control allows free flow of investments to and from HKflow of investments to and from HK

• Funding to SMEs by commercial providers Funding to SMEs by commercial providers and by the government availableand by the government available

Partnering with Partnering with EntrepreneursEntrepreneurs

• 3 elements that are pre-requisites for 3 elements that are pre-requisites for success in investing in Chinasuccess in investing in China

– Knowledge and understanding of the Knowledge and understanding of the country of China country of China

– Familiarisation with China’s internal Familiarisation with China’s internal operation and business practicesoperation and business practices

– Having the best personnel to run Having the best personnel to run investments in Chinainvestments in China

Partnering with Partnering with EntrepreneursEntrepreneurs

• Certainly HK has the biggest pool of Certainly HK has the biggest pool of entrepreneurs and joint-venture entrepreneurs and joint-venture partners who do not only possess partners who do not only possess knowledge in the market in Mainland knowledge in the market in Mainland China but also in the markets in the China but also in the markets in the region and world-wideregion and world-wide

• They could be your ideal partners in They could be your ideal partners in your business venturesyour business ventures

Proximity with Mainland Proximity with Mainland ChinaChina

• The Pearl River Delta (PRD) across HK’s The Pearl River Delta (PRD) across HK’s border in the north already has a border in the north already has a population of 70 millionpopulation of 70 million

• PRD alone is the world’s largest PRD alone is the world’s largest manufacturing basemanufacturing base

• HK is your gateway to Mainland ChinaHK is your gateway to Mainland China

• Positioning your operation in HK could Positioning your operation in HK could offer you the benefits of both risks offer you the benefits of both risks minimization in your investment deals and minimization in your investment deals and access to the abundant business access to the abundant business opportunities in this region of the worldopportunities in this region of the world

Thank You !Thank You !

Hong Kong Forum 2002 Putting Deals Together – Trusting the Deals Raymond C.K. Ho LL.B.(HK),...

Documents

Transcript of Hong Kong Forum 2002 Putting Deals Together – Trusting the Deals Raymond C.K. Ho LL.B.(HK),...