Hong Kong Legal Cloud – From the Perspective of an Arbitration Practitioner

In 1 April 2021, I was invited to share my views on the development of the Hong Kong Legal Cloud in a webinar, co-organised by the Department of Justice and the Law Society of Hong Kong.

The COVID-19 pandemic has led to a high degree of digitisation and subsequent changes for many industries. Within the legal industry, the use of Law Tech has become inseparable to the practice. Particularly, the Hong Kong Legal Cloud, a user-friendly facility situated in Hong Kong, which is aimed at providing secure and reliable data storage services for the local legal and dispute resolution sector, has become the latest hot topic.

This article will explore the developments of the Hong Kong Legal Cloud, particularly in the context of arbitration.

WORKING FROM HOME

One of the most immediate impacts of the pandemic was the shift to remote working conditions. While convenient, a key issue of working from home is the ability to access client folders and firm resources, such as precedents and research databases. To accommodate these new challenges, law firms have been galvanised to bolster their tech infrastructure. Particularly, having a secured cloud platform in place, i.e. Legal Managed Services (“LMS”), has become an essential capability to the profession. LMS allows legal professionals to overcome logistical difficulties and practise law with increased efficiency and lowered costs.

According to a research article published by EY Law in 2020 titled “Realising the benefits of legal managed services”, LMS are applicable in the context of contract management, legal management and compliance, employment law, due diligence, document retention and records management. The implementation of LMS offers many advantages, particularly (1) cost-efficiency in delivering services, (2) ability to respond to geopolitical and regulatory changes, (3) internal communications and management, and (4) offering better positioning to attract and retain talent.

Given its wide array of benefits, the Department of Justice’s initiative of the Hong Kong Legal Cloud (the “Legal Cloud Initiative”) is undoubtedly a welcome innovation, providing support and benefit to the legal profession, as well as LMS providers. There will expectedly be more competition amongst LMS providers whilst more customised models for different law firms are developed. Ultimately, this trend will drive more law firms to adapt the LMS into practice. Further, it could assist smaller and medium-sized firms in upgrading and catching up to modern practices.

ONLINE DISPUTE RESOLUTION

With Hong Kong courts having halted its operations due to the pandemic, many were pushed to consider alternatives to traditional practices. Currently, Online Dispute Resolution (“ODR”), which allows disputes to be resolved through electronic communications, has become widely embraced by the industry due to its convenience. Particularly, ODR’s rise in popularity can be seen from its expansion from merely dealing with small disputes to larger, high-profile cases.

As an old saying goes, “not only must justice be done, it must also be seen to be done.” Thus, if legal practices are to be switched onto the Cloud, several key principles that guide arbitration proceedings must be followed. Namely, the same level of integrity and principal of natural justice in arbitration proceedings must be maintained and upheld. Second, it must be ensured that the parties’ right to be heard and to be treated equally should never be undermined.

Given the highly confidential and private nature of ODR proceedings, it is essential that information used and presented are properly encrypted to avoid any interference and hacking. As such, data protection and cyber risks are emerging as important considerations in the arbitration community to offer enhanced security and to protect parties’ interests.

E-BUNDLES SUBMISSION

Arbitration proceedings often involve the exchange of a large number of documents. This may include submissions, along with supporting documents and evidence, which are presented to the arbitral tribunal by the respective parties. Parties and lawyers have traditionally relied heavily on email platforms for communications. Unfortunately, email attachments are subject to size limits, making it relatively inconvenient for groups of documents to be exchanged all together at once. Nowadays, some law firms, particularly international law firms, have enhanced their cloud data storage and sharing system to alleviate this issue. Nonetheless, arbitrators, as well as the parties involved, may be reluctant to use the opposing parties’ cloud system because of integrity concerns.

At an institutional level, some arbitral institutions have taken steps to address this concern. For example, institutions like the London Court of International Arbitration (LCIA) and eBRAM have developed centralised online filing portal systems. These systems are specifically designed so that documents can be conveniently exchanged amongst parties and submitted to the tribunal electronically. Time-stamping features are also often included to ensure authenticity. Further, the 2018 HKIAC Administered Arbitration Rules (the “2018 HKIAC Rules”) provides some guidance to the mode in which written documents should be uploaded. Under Article 3.1(e) of the 2018 HKIAC Rules, for written communications to be deemed received by a party, arbitrator, emergency arbitrator or the HKIAC, they must be uploaded to a “secured online repository that the parties have agreed to use” as a recognised means of communication.

REMOTE HEARINGS

Some institutions, such as the eBRAM, have been developing AI transcription software systems to quickly convert audio to text, as well as facial recognition technology to verify the identity of the participating parties and advocates. While virtual arbitration hearings reduce time and costs, unstable internet connections resulting in technical complications could adversely affect the process and outcome. Loss in communication not only affects the parties’ ability to present their arguments but would also set a bad impression on the arbitral tribunal. Therefore, having a stable internet connection and suitable hardware, such as web camera and microphone, is essential to a successful virtual arbitration hearing.

Given this transition towards technology reliance, it is encouraging that the Legal Cloud Initiative may assist law firms in upgrading their setup and equipment. Likewise, users of Law Tech must simultaneously be educated about these changes and adapt to such changes, so as to avoid any major mishaps. For example, as many may have already seen, a Texas lawyer was recently trapped by a cat filter during a virtual civil forfeiture case hearing. While the public’s immediate reaction was hilarity, such mistake reflects an ultimate reality that must be augmented. Members of the legal profession, and also arbitrators, tribunal secretaries, factual and expert witnesses, and even interpreters may lack the necessary skills in navigating technology. Therefore, when Law Tech platforms and tools are being developed, their design should be user-friendly and tech inclusive. Likewise, law firms should ensure that adequate training, technical rehearsals and on-spot IT support for their lawyers are provided.

CODE OF PROFESSIONAL CONDUCTS/ETHICS IN RELATION TO LAW TECH

As already mentioned, arbitral hearings are confidential and private in nature. With this in mind, a video, such as the cat filter incident, should not have been leaked given that it should not have been recorded without permission in the first place. Going forward, professional bodies may need to consider that the attitudes towards the usage of Law Tech are updated and regulated in the relevant Code of Professional Conducts and Ethics.

THE HONG KONG LEGAL CLOUD

The Legal Cloud Initiative was first introduced in the Chief Executive’s 2020 Policy Address, that “the DoJ will actively explore the development of the Hong Kong Legal Cloud, a state-of-the-art online facility equipped with advanced information security technology, to provide secure, reliable and affordable data storage services for the local legal and dispute resolution sector to promote the overall long-term development of Hong Kong’s legal and dispute resolution services”.

Under the Legal Cloud Initiative, the DoJ will provide a sum of around HK$15.7 million (“Fund”) for the development of the Hong Kong Legal Cloud by selected non-profit making non-governmental bodies (NGOs) through Public-Private Partnership (PPP). Qualified subscribers in the local legal and dispute resolution sectors will be subsidised through the Fund, which will, in turn, be used to finance the setup cost, initial operational and promotion costs through disbursement of subscription fees to the selected listed provider(s), for up to three years.

On 20 May 2021, the Secretary for Justice signed a memorandum of understanding with the Asian Academy of International Law (“AAIL”) to administer the Fund (“AAIL MOU”). Under the AAIL MOU, the AAIL will administer the Fund on a pro-bono basis.

It is hoped that the Hong Kong Legal Cloud services could be launched as soon as practicable by the end of 2021. It is expected that by the end of third quarter of 2021, the selected provider(s) of the Hong Kong Legal Cloud will be required to enter into a memorandum of understanding with DoJ, which will set out the terms and requirements to become listed provider(s) of the Hong Kong Legal Cloud. The listed provider(s) of the Hong Kong Legal Cloud will be entitled to funding support equivalent to the actual subscription fees of its services as incurred by its users by way of disbursement from the Fund.

RISKS AND CHALLENGES OF THE IMPLEMENTATION OF THE HONG KONG LEGAL CLOUD AMONG LAW FIRMS

Under Principle 1.07 of the Solicitors’ Guide to Professional Conduct, “a solicitor using information communication technology should endeavour to ensure within the parameters of technology, information and knowledge available at the time of use, that no Principle in the Guide or a provision in the Practice Directions or applicable law is breached by such use”. To avoid parties later challenging the use of Law Tech in the course of or after the arbitration proceedings, causing unnecessary costs and delays, proper guidelines to the use and good practice of Law Tech must be developed.

Furthermore, under Chapter 8 of the Hong Kong Solicitors’ Guide to Professional Conduct, a solicitor has a legal and professional duty to his clients to hold in strict confidence all information concerning the business and affairs of his clients. It is therefore understandable that some law firms may have some concerns about the use of the Hong Kong Legal Cloud, including data privacy and handling policies, access and security, IP rights, incident reporting and management, and other compliance obligations. Ultimately, under the Personal Data (Privacy) Ordinance (“PDPO”), law firms (being “data users”) are ultimately responsible for protection of personal data collected. In consideration of these, service providers of the Hong Kong Legal Cloud should ensure that the infrastructure and systems in place are safe, secure, encrypted and affordable for the local legal and dispute resolution community. At the same time, the users must carefully fortify its application of the services.

INTERNATIONAL DISPUTE RESOLUTION HUB THAT HARNESSES MODERN TECHNOLOGY

In the past, the adoption of technology has been slowed down due to resistance to change in parts of the legal profession and lack of resources. Essentially, technology has only been able to deliver positive results when supported by adequate resourcing. The Legal Cloud, as a secure and affordable data storage facility, is an important foundation and infrastructure for the further development of ODR and other Law Tech services, including AI translation, AI analysis, video conferencing, e-Bundling and legal office management (essentially, expansion of the functions). We also want to see developments of quality secondary support technologies, such as dedicated case and evidence management systems that allow lawyers to easily and securely share documents with clients and other lawyers remotely. If the Legal Cloud can be linked with the e-filing systems (with courts and arbitral institutions), then it could have significant benefit by reducing the administrative burden on lawyers, judicial officers, registry staff, arbitrators and tribunal secretaries etc., as well as reducing the carbon footprint. All of these will require long-term planning.

Going forward, the Legal Cloud Initiative is expected to further enhance Hong Kong’s competitive edge as an international dispute resolution hub. These innovations should and can be expanded with neighbouring jurisdictions, especially Mainland China, thanks to the Greater Bay Area and the Belt and Road initiatives. Taking into consideration its attractions and benefits, the wave of Law Tech is commendable, and we await to see its advancement in revolutionising the legal industry as a whole.

The author would like to thank Andy Hong, Trainee Solicitor of Hill Dickinson Hong Kong, for his helpful research and assistance in the preparation of this article. 

Legal Director, Hill Dickinson Hong Kong

Edward is qualified as a solicitor in England & Wales as well as a lawyer in P.R. China.  His main area of practice is in commercial and shipping litigation and arbitration. He is extensively experienced in advising and handling international commercial disputes covering areas such as sale of goods/trade and commodities, energy and offshore projects, shareholder and equity-related disputes, and international investment (particularly connected with Belt & Road projects), commercial fraud, worldwide enforcement of judgments and arbitration awards etc.  Edward has been appointed as members of a number of advisory bodies to the Hong Kong government, including Advisory Committee on Promotion of Arbitration, Steering Committee on Mediation, Aviation Development and Three-Runway Advisory Committee, Hong Kong Maritime and Port Board, and an adjudicator of the Registration of Persons Tribunal.  He is also the principal representative of the International Chamber of Shipping (China) Liaison Office.