As part of the second round of its unprecedented HK$137.5 billion relief package, the Hong Kong Government has announced its new COVID-19 Online Dispute Resolution (“ODR“) scheme aimed at providing parties with a way to resolve their legal disputes without the need to meet face to face. In this article we’ll explore the details of this giant leap forward in bringing Hong Kong’s legal system into the digital age.
What is the purpose of the ODR scheme?
In anticipation of a wave of disputes arising out of or relating to the COVID-19 pandemic, the scheme’s purpose is to provide parties with a quick, efficient and cost-effective means to resolve such disputes without having to break social distancing guidelines by meeting and negotiating in person, often for hours on end in tight, confined conference rooms.
Are all disputes eligible for the ODR scheme?
In her recent article, Secretary for Justice Teresa Cheng explained that the new ODR scheme is meant to cover COVID-19 related disputes where the amount claimed is HK$500,000 or less. This cap is meant to ensure that the program benefits Hong Kong’s “micro, small and medium-sized-enterprises (MSMEs) that may be adversely affected or hard hit by the pandemic.”
Besides the HK$500,000 claim cap, are there any other requirements or restrictions on who can use the ODR system?
Under the scheme, at least one of the parties (either the claimant or respondent) must be a Hong Kong resident or business in order to qualify for the program. Each party will also be required to pay a HK$200 registration fee. The parties must also enter into a written dispute resolution agreement to formalize their consent to the ODR processes and procedures.
What are the actual steps and procedures of the program?
Secretary Cheng described the process as “a multi-tiered dispute resolution mechanism where the parties will first attempt to negotiate their disputes, followed by mediation and if that does not result in settlement, then subsequently to arbitration for a final and binding award.” This increasingly formal and binding series of procedures is designed to follow the “Mediate First” policy that the government has been advocating under its “Mediate First” Pledge Programmes. The goal of the scheme is to offer “a fast and effective means to resolve disputes among parties.”
Each step (or tier as they’re referred to in the announcement) of the ODR process will be conducted “within a limited time”, though no specifics on the time limits for each tier have yet been announced. The inclusion of time limits for each tier is designed to help prevent the parties’ disputes and disagreements from becoming entrenched and defeating the program’s purpose of resolving disputes in a quick, efficient manner.
The parties will first attempt to resolve their disputes on their own through negotiations. If that fails (which will likely be the case for many, if not most, parties), the stakes are raised as the parties move on to the next tier- mediation. During the mediation phase, the parties are free to nominate and mutually agree on the appointment of any neutral third party to assist them with negotiating settlement terms and analyzing and providing real time feedback on the strengths and weaknesses of their individual positions. While the addition of a neutral mediator will likely increase the chances that the parties are able to reach a settlement agreement (as is the case with traditional mediations), there is no guarantee that the parties will be able to voluntarily resolve their disputes at this tier.
If the parties are still not able to resolve their disputes within the timeframe allotted for the mediation phase, the parties move up the tier system to the arbitration phase. As with the selection of mediators, the parties are free to agree on the appoint of a neutral arbitrator who acts as a sort of judge whose role is to assess the facts and relevant laws at play in the dispute. Just like with the selection of mediators, if the parties are not able to agree on the appointment of an arbitrator, the scheme states that there will be a mechanism for an arbitrator to be appointed by other means. However, the specifics regarding this appointment mechanism have not yet been released.
The arbitration phase is by far the most formal and serious tier of the proposed program as arbitrators, unlike mediators, have the power to issue judgments (referred to as awards) in much the same way judges do during traditional court proceedings. However, unlike traditional court rendered judgments, arbitral awards are generally final and binding on the parties involved in the dispute with very few grounds available for them to appeal or have the award set aside. Parties will want to keep this in mind as they work their way up the tiers of the proposed program, lest they find themselves hit with an outcome after arbitration that could potentially be far less favorable than what they could have agreed to at the negotiation or mediation phases.
What questions about the proposed ODR scheme remain unanswered at this time?
While the proposed ODR scheme has the potential to be a huge step forward in how Hong Kong’s legal system utilizes modern technology to improve efficiency and lower costs, many questions still remain regarding the details of the program. For example, what will be the maximum time allowed for each tier of the program? Will there be exceptions to allow for more time for a particular tier in situations where parties believe they are close to a resolution? What will be the mechanism for the appointment of mediators/arbitrators in cases where the parties are not able to reach consensus on their own?
As the government has announced plans for the program to begin in June (assuming funding can be secured in April), it will be important to see how these issues are addressed to ensure that the scheme is able to successfully launch and provide the much needed relief to parties in need of an alternative method of resolving their disputes during these unprecedented times.
Our team at Hugill & Ip has extensive experience dealing with civil litigation and alternative dispute resolution matters in Hong Kong – so kindly get in touch with us to find out how we can help.
This article is for information purposes only. Its contents do not constitute legal advice and readers should not regard this article as a substitute for detailed advice in individual instances.