D2. Cost of legal services and competitiveness

44.	The implications for loss of work to the legal profession are clear :-

		"...... in areas of commercial litigation where this country is in competition with other jurisdictions, a comparison of the respective costs involved will increasingly deter prospective litigants from using the English courts." (Note 49)

45.	The importance of the federal civil justice system to the Australian economy was also noted by the ALRC :-

		"The Federal Court plays a pivotal role in relation to various sectors of economic activity - a role applauded and supported by corporations and corporate counsel consulted by the Commission. Corporate lawyers and inhouse counsel were of the view that effective judicial management of commercial cases make Australian legal services a key export, and are part of what makes Australia competitive in the Asia-Pacific region and beyond. The Federal Court in its jurisdiction creates and maintains formal and informal rules which keep business transaction costs low, defines and protects rights (for example, intellectual property rights), gives force to contracts, influences private dispute resolution, ensures the security of property, helps to regulate markets and ensure competition, and scrutinises the behaviour of public officials." (Note 50)

46.	The relevance of such comments to Hong Kong is obvious. This was forcefully argued by Mr Martin Rogers, then a litigation partner with the firm of Herbert Smith in Hong Kong, as follows :-

		"Hong Kong's primary reputation is as one of the world's leading financial and international trading centres. The effectiveness of financial and commercial markets' depends on a combination of their transparency, speed, robustness and the consistent application of the same, internationally recognised rules to all participants. It should be obvious that each of these four features will only be properly present if there is an efficient, high-quality and fair legal system. So far as financial markets are concerned, this necessitates a capable system of market regulation: dispute resolution must be dealt with on a day-to-day basis by regulators with direct market-supervision powers. So far as commercial trade is concerned, what is required ideally is a fast efficient arbitration mechanism. Ultimately, however, market participants must be able to have recourse to just Courts who will not only have the power to act as the ultimate appellate body and develop a comprehensive commercial common law, but also regulate the regulators themselves." (Note 51)

47.	Mr Rogers warns of local uncompetitiveness :-

		"Doubts have been expressed internationally about the effectiveness and competitiveness of Hong Kong's legal services, including those provided by the courts. Other jurisdictions, particularly Singapore, London and Stockholm, are attracting litigants to make use of their procedures for international arbitrations. The Hong Kong legal profession in particular should be asking itself: how do we make the system better; how do we make ourselves more competitive so that we can provide a better service to our clients " (Note 52)

48.	He states that in his experience, high legal costs (among other factors) have already had the effect of driving dispute resolution processes away from the SAR, to the detriment of the legal profession's interests. He suggests that currently, Hong Kong may be "losing at least part of the battle to Singapore." (Note 53) In a recent newspaper article, he is reported as stating that "big multinational corporations are not spending a lot of time litigating in Hong Kong" and that, instead "they are conducting disputes by way of arbitration: more often than not in Singapore or London." (Note 54)
49.	This was echoed by Mr Andrew Jeffries, Head of Asian Litigation and Practice at Messrs Allen & Overy :-

		"England is now seen to have a revised and modernised system of civil justice. The reforms are still being refined and will of course take time to bed down, but life is certainly very different to how it was in early 1999 before the rules of civil procedure were introduced. Australia, New Zealand and, to a growing extent North America, are seen by businessmen globally also to have modern and efficient systems of civil justice. Closer to home, Singapore in particular is seen to be at the forefront of technology and efficiency in its court processes. Litigation lawyers in Singapore moan regularly about the pressure they are put under to push cases along by ruthless court efficiency and case management. Litigation colleagues in Bangkok lament their own court system by comparison but, perhaps more tellingly, disclose that clients are now turning more to Singapore than Hong Kong as a place to do business and resolve disputes, in part driven by its civil justice efficiency. ......
		An efficient system of civil justice is an important feature of Hong Kong as an international business centre. People who do business here want to know that disputes arising on their agreements can be dealt with in a time and cost efficient manner. More than that, potential litigants within Hong Kong need to have confidence that, whilst their rights will be upheld, the simplicity and efficiency of the court system will serve their needs." (Note 55)

50.	In an overview of arbitration and mediation in Hong Kong, Mr Christopher To, Secretary General of the Hong Kong International Arbitration Centre, reported market resistance to the level of local barristers' proposed fees as arbitrators and that overseas barristers are sometimes chosen in preference because of fees :-

		"Arbitrators fees range from HK$2,000.00 to HK$6,000.00 per hour. Some arbitrators after persuasion have been requested to reduce their hourly fees and in most cases this has been the result of parties intervention. Arbitrators who have been requested to do so have in fact reduced their fees accordingly to suit market needs. In the majority of cases, local barristers tend to be the ones who are often asked to reduce their fees. This sometimes results in parties choosing overseas barristers as arbitrators instead. Unfortunately this is a true fact of life." (Note 56)

51.	The Director of Intellectual Property, Mr Stephen Selby, is reported to have stated that companies are too afraid of Hong Kong's high legal costs to take court action against counterfeiters. He is quoted as saying :-

		"The civil route is particularly expensive, probably much too expensive in Hong Kong ...... The courts are quite capable of dealing with these things, but people are afraid of the costs." (Note 57)

	Asian Lawyer reported on this as follows :-

"Hong Kong's High Court costs act as a deterrent to companies that would otherwise take court action against counterfeiters, according to Director of Intellectual Property Stephen Selby. For example, to obtain an interlocutory injunction that will put a temporary halt to intellectual property infringements runs a minimum of HK$250,000. With fees like these, company executives often feel it is not cost-effective to take legal action against counterfeiters since the cost of an all-out legal action to stop the counterfeiter will be greater than the revenue lost due to consumers producing fake products." (Note 58)

 

Notes

48	WIR p 12,   §28.  <back>
49	WIR p 12,  §27.  <back>
50	ALRC No 89, p 8.  <back>
51	W&B, Chap 8: Martin Rogers, The Role of Solicitors in Civil Litigation, p 222.   <back>
52	Ibid, p 224.  <back>
53	Ibid, p 223.  <back>
54	SCMP 18 April 2001, "Justice comes with a hefty price tag" by Jane Moir.   <back>
55	Hong Kong Lawyer, August 2001, pp 81-82.  <back>
56	Mr Christopher To, HKIAC, Summarised points on Arbitration and Mediation.  <back>
57	Jane Moir, "High Court costs curb civil action against counterfeiters", SCMP, 5 July 2001.   <back>
58	Asian Lawyer, August 2001, p 8.  <back>