Alternative Dispute Resolution of Shareholder Disputes in Hong Kong : Institutionalizing Its Effective Use

The landscape of shareholder dispute resolution in Hong Kong has changed vastly since the launch of the Civil Justice Reform in 2009. Key initiatives - the voluntary court-connected scheme and reform of the statutory unfair prejudice provisions - were employed to promote the greater use of alternative dispute resolution (ADR) in shareholder disputes. While the Hong Kong government and judiciary introduced such schemes to prove the legitimacy of extra-judicial over court-based litigation processes, their success is still uncertain. In this book, socio-legal theory and sociological institutionalism are used to develop a theoretical framework for analyzing the key stages of institutionalization. The author analyzes how procedural innovations could acquire legitimacy through different types of legal and non-legal inducement mechanisms within the institutionalization process. Recommendations on codifying and innovating ADR policy in Hong Kong shareholder disputes are also made with comparison to similar policies in the United Kingdom, South Africa and New Zealand. Cover Half-title Title page Copyright information Dedication Table of contents List of figures List of tables Foreword Acknowledgements Part I Introduction, Overview and Methodology 1 Introduction 1.1 Resolution of Shareholder Disputes in a Small Private Company 1.2 Arguments Development: Institutionalizing and Legitimizing ADR Policy in Shareholder Disputes 1.3 Organization of the Book 2 Development and Growth of ADR for Shareholder Disputes in Hong Kong 2.1 Introduction 2.2 Development of ADR in Hong Kong 2.3 The Growth of ADR in Shareholder Disputes 2.3.1 Government Policy Promoting the Use of ADR 2.3.2 Judicial Support for Early and Informal Resolution of Shareholder Disputes Practice Direction 3.1: The Use of Expert Determination on Valuation of Shares at the Stage of Petition Practice Direction 3.3: Voluntary Use of Mediation and Other Alternative Processes for Unfair Prejudice Petition 2.3.3 The Reform of Section 168A of the Companies Ordinance to Increase the Use of ADR 2.4 Conclusion 3 Key Methodology and Methods for Evaluation of Policy Development on ADR in Shareholder Disputes 3.1 Introduction 3.2 Methodology Development for Evaluation of Policy Development on ADR in Shareholder Disputes 3.2.1 Focus of Research: Institutionalizing and Legitimizing of ADR 3.2.2 Using Realistic Evaluation Methodology to Understand the Process... Conditions for the Development of ADR Methods for Shareholder Disputes in Hong Kong Establishing Appropriate Mechanisms to Improve the Understanding and Awareness of ADR Outcome Patterns of the Acceptance of Using ADR to Resolve Shareholder Disputes 3.2.3 The Acceptance of Mixed Research Methods for Conducting a Realistic Evaluation 3.3 Key Research Methods Used in This Book 3.3.1 Doctrinal Approach to the Study of Law 3.3.2 Comparative Approaches in the Study of Law 3.3.3 Empirical Legal Research on Lawyers’ Attitudes Towards the Use of ADR for Shareholder Disputes... Unit of Analysis and the Sampling Frame Mode of Sampling Processes Mode of Data Collection Measuring Hong Kong Lawyers’ Attitudes Towards the Use of ADR Developing Analytical Techniques to Evaluate the Attitudes of Hong Kong Lawyers Towards... 3.4 Conclusion Part II Institutionalizing and Legitimizing ADR Policy in Shareholder... 4 The Role of the Court 4.1 Introduction 4.2 Policy Objectives of a Court-Connected ADR Programme for Shareholder Disputes 4.3 Legitimizing a Judiciary ADR Programme for Shareholder Disputes... 4.4 Evaluating ADR Policy for Shareholder Disputes in Hong Kong: Judicial Acceptance 4.4.1 Improving the Efficiency of Resolving Shareholder Disputes: Judicial Case Management 4.4.2 Enhancing the Quality of Shareholder Dispute Resolution: Proportionality and Freedom... a. Proportionality between the Consensual Nature of Private ADR Processes and the Values Inherent in the Public Courts i. Court Referral of Shareholder Disputes to ADR Is Proportionate to the Nature of Individual Cases ii. Imposing Cost Penalties Are Proportionate to the Issues Involved for Unreasonable Refusals to Mediate b. Offering Greater Opportunities to Access Dispute Resolution Forums 4.5 Conclusion 5 Reforms of Company Law 5.1 Introduction 5.2 The Coexistence of Informal Dispute Resolution Methods and Court-Based Shareholder Proceedings 5.2.1 The Use of ADR to Enhance Effective Enforcement of Shareholders’ Rights 5.2.2 Strategies for Legitimizing the Use of ADR within the Formal Legal System 5.3 Taking ‘Integration’ Seriously: Exploring a Link between ADR and the Unfair Prejudice Proceeding 5.3.1 Relating ADR and the Statutory Unfair Prejudice Proceedings to the Principle of Freedom of Contract 5.3.2 Including ADR in Developing New Procedural Rules 5.4 Improving the Effective Use of ADR to Supplement Unfair Prejudice Proceedings 5.5 Conclusion 6 Diffusion of Procedural Innovations 6.1 Introduction 6.2 Diffusion of ADR Practices among Hong Kong Lawyers 6.2.1 The Critical Role of Key Agents in Articulating the Characteristics of ADR 6.2.2 Integrating Diffusion Models into the Empirical Analysis of ADR Adoption 6.3 Factors Affecting Hong Kong Lawyers’ Attitudes towards the Use of Out-of-Court Processes 6.3.1 Extraction of Key Factors Affecting Hong Kong Lawyers’ Attitudes towards the Use of ADR 6.3.2 Developing a Series of Testable Arguments for Analysing the Behavioural... The Characteristics of Innovative Disputing Resolution Procedures The Compatibility of ADR Process with Court-Based Shareholder Proceedings The Relative Advantage of ADR Potential Barriers to the Use of ADR for Settlement Lawyers’ Personal Experiences with ADR Processes Lawyers’ Familiarity with ADR The Influence of the Judiciary and Legal Professional Bodies on ADR Legal Environment for Resolving Shareholder Disputes Promoting a Culture of Early Settlement in Resolving Shareholder Disputes 6.4 Implications of the Research Findings for ADR Policy 6.4.1 The Compatibility of ADR Process with Court-Based Shareholder Proceedings 6.4.2 The Relative Advantages of ADR 6.4.3 Potential Barriers to the Use of ADR for Settlement 6.4.4 Lawyers’ Familiarity with ADR 6.4.5 The Influence of the Judiciary and Legal Professional Bodies on ADR 6.4.6 Promoting a Culture of Early Settlement in Resolving Shareholder Disputes 6.5 Limitations and Conclusion Part III The Future Development of ADR in Hong Kong: Codification of ADR for Shareholder Disputes in Hong Kong 7 Innovative Approaches to the Future Codification of ADR for Shareholder Disputes in Hong Kong 7.1 Introduction 7.2 Approaches to the Codification of ADR for Shareholder Disputes: Experience... 7.2.1 The United Kingdom: Practical Considerations for the Inclusion of an... a. Arbitrability of the Subject Matter of the Disputes b. Using Pre-dispute Arbitration Agreement as a Condition Precedent to the Issue of Unfair Prejudice Proceedings c. An Implied Waiver of the Right of Access to Courts 7.2.2 New Zealand: Incorporating a Mandatory Arbitration Provision into the Companies... a. Offering Cost-Effective Mechanisms for Determination of Share Valuations b. Clarifying the Scope of Arbitrability of Specific Types of Disputes under the Company Law 7.2.3 South Africa: Recommending the Use of ADR to Deal with Minority... a. Director’s Duty to Promote the Use of ADR b. Facilitating Enforcement of Settlements 7.3 The Future Codification of ADR for Shareholder Disputes in Hong Kong 7.3.1 Building Public Awareness about the Use of Informal Dispute Resolution Processes... 7.3.2 Permissibility of Incorporating an Arbitration Clause in a Shareholders’ Agreement 7.3.3 Expanding the Powers of the Arbitrator to Determine... 7.4 Concluding Comments Conclusion C.1 Summary and Contribution of the Study C.2 Extending the Study for Future Research Appendix 1: Measuring the Dependent and Independent Variables A.1 Measuring the Dependent Variable A.2 Measuring the Independent Variables Bibliography Index The book adopts social-legal theories to theorize the institutionalization of alternative dispute resolution (ADR) with empirical analysis of shareholder disputes in Hong Kong. The book also makes recommendations to codify and innovate such policy by comparing with those in the United Kingdom, South Africa and New Zealand.