News
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Submitted by // K Bowers, Partner / Solicitor Advocate; P Yeung, Senior Associate
15 March 2017

 

EMPLOYMENT AGENCIES BEWARE!

Introduction

On 13 January 2017, the Labour Department published a new Code of Practice for Employment Agencies ("Code"). The Code is particularly relevant to employment agencies engaging in the placement of foreign domestic helpers. Significantly however, it also applies to all "businesses operated for the purpose of obtaining employment for another person or to supply the labour of another person to an employer" ("Employment Agency").

Statutory requirements relating to Employment Agencies

Chapter 3 of the Code conveniently sets out the statutory requirements that an Employment Agency should review from time-to-time. For example:

(1) Employment Agencies must make sure that they hold a valid licence prior to commencing any operations. A duplicate licence must be obtained for each office from the Commissioner of Labour, as licences are only valid for the place of business specified in the licence.

(2) Employment Agencies must ensure that they do not, directly or indirectly, receive any extra payment or advantages from job-seekers with the exception of the prescribed commission. For Employment Agencies dealing with foreign job-seekers (including foreign domestic helpers), this includes fees for visa processing. The maximum commission is set at an amount not exceeding 10% of the job-seeker's first month's wages after he/she is successfully placed in employment. This commission cannot be charged in advance of a job placement.

(3) The address at which an Employment Agency carries on business cannot be used for any other purposes without prior approval from the Commissioner of Labour. This includes providing boarding facilities or living spaces for foreign job-seekers.

(4) Employment Agencies are prohibited from aiding or abetting employers in offering foreign domestic helpers a wage that is lower than the prevailing minimum allowable wage. Although the current statutory minimum wage is HK$32.50 per hour, it will be raised to HK$34.50 with effect from 1 May 2017. Any person (including an Employment Agency) found guilty of this offence is subject to a maximum penalty of a fine of HK$150,000 and imprisonment of up to 14 years upon conviction on indictment.

Standards expected of Employment Agencies

The Commissioner for Labour has the discretion to refuse or revoke the issue of a licence if the Employment Agency is not "fit and proper". Before the Code was issued, it was unclear what would be deemed as "fit and proper". The minimum expectations are now set out in Chapter 4 of the Code, which does not restrict the Commissioner's discretion to examine all other relevant factors, but does provide guidance as to what would be good practice.

Chapter 4 starts off with the expectation that the management of an Employment Agency must closely supervise its staff. The management will be held accountable for all misconduct and failure to meet statutory requirements and/or the standards of the Code. The Employment Agency is expected to perform due diligence in ensuring the accuracy of information provided by both the employer and the job-seeker. If there are reasonable grounds to suspect the accuracy or completeness of any information provided (e.g. information provided that is inconsistent with the facts made known by the job-seeker), such information should not be used before it is clarified.

The Code also requires separate service agreements between the Employment Agency and the employer and job-seeker respectively. The scope of service and any related service fees should be clearly set out in the agreement. The expectation is that service agreements should be signed at the beginning of the job placement process and/or before any payment is made. In relation to the placement of foreign domestic helpers, the Code provides a more specific list of items that must be incorporated into the service agreement.

Conclusion

The Labour Department's Employment Agencies Administration will closely monitor the Employment Agencies' compliance with the Code and will conduct regular inspections. It may also issue warning letters to Employment Agencies which fail to meet the statutory requirements and/or standards set out in the Code.

In view of the newly published guidelines in the Code, Employment Agencies should:-

(1) assess whether current service agreements and work processes adhere to the standards in the Code;

(2) carry out internal training for management and employees and in relation to the statutory requirements and standards set out in the Code;

(3) provide regular updates and training to management and employees for other employment-related legislation (e.g. anti-discrimination ordinances, Employees' Compensation Ordinance and Personal Data (Privacy) Ordinance); and

(4) prepare user-friendly publications for both employers and job-seekers, which set out their respective rights and duties under employment-related legislation.

The penalties for infringing the Code are harsh and could well have a devastating impact upon the businesses of Employment Agencies which do not run and operate their businesses in compliance with the mandatory provisions of the Code.


About Us

Howse Williams Bowers is an independent law firm which combines the in-depth experience of its lawyers with a forward thinking approach.

Our key practice areas are corporate/commercial and corporate finance; commercial and maritime dispute resolution; clinical negligence and healthcare; insurance, personal injury and professional indemnity insurance; employment; family and matrimonial; property and building management; and financial services/corporate regulatory and compliance.

As an independent law firm we are able to minimise legal and commercial conflicts of interest and act for clients in every industry sector. The partners have spent the majority of their careers in Hong Kong and have a detailed understanding of international business and business in Asia.

Disclaimer: The information contained in this article is intended to be a general guide only and is not intended to provide legal advice.  Please contact pr@hwbhk.com if you have any questions about the article.

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News //
Submitted by // K Bowers, Partner / Solicitor Advocate
14 March 2017


Third Party Funding of Arbitration: Forthcoming Changes

Introduction

In October 2016, the Law Reform Commission ("LRC") released a report recommending proposed amendments to the current law in Hong Kong to expressly permit third party funding of arbitration and associated proceedings under the Arbitration Ordinance (Cap. 622), with appropriate safeguards and regulations in place to ensure ethical standards are maintained and to prevent abuse.

In a nutshell, third party funding is where a third party (i.e. someone who is not directly involved in or a party to the arbitration or other associated proceedings) provides funds to a party to that arbitration or proceedings in return for an agreed percentage of the arbitral award / judgment / other financial benefit from the recovery in the proceedings (if successful).

Current Position in Hong Kong

Under the common law principles of maintenance and champerty, third party funding of litigation is prohibited (both as a tort and as a criminal offence) except (1) where the third party has a legitimate interest in the outcome of the litigation, (2) where it enables the party to have access to justice and (3) in a miscellaneous recognized category of proceedings (including insolvency proceedings). The underlying rationale is simple: to prevent third parties profiting from litigation in which they have no legitimate interest, which may result in frivolous or vexatious litigation.

Nevertheless, it is currently unclear whether the principles also apply to third party funding for arbitrations taking place in Hong Kong. Indeed, in Unruh v Seeberger (2007) 10 HKCFAR 31, the Court of Final Appeal expressly left open the question of whether third party funding for arbitration is lawful.

Impetus for Change

Over the last decade, third party funding of arbitration has become increasingly prevalent in various jurisdictions including Australia, the United States and England & Wales. More recently, in Singapore (being a major rival competing for the title of Asia's leading international dispute resolution centre), legislation allowing third-party funding for international arbitration and related proceedings before the Singapore courts has been enacted.

Against that backdrop, there have also been sweeping changes in attitudes towards third party funding in Hong Kong. The LRC pointed out that a party with a good case in law should not be deprived of the financial support it needs to pursue its case by arbitration and associated proceedings under the Arbitration Ordinance.

Moreover, the Government also expresses the need to follow suit and "…keep up with the latest development in the dispute resolution sector". The Secretary for Justice, Hon Rimsky Yuen SC, commented that "…we (the Government) believe that the Bill, when enacted, will further enhance Hong Kong's position as a leading centre for international legal and dispute resolution services in the Asia Pacific region."

LRC's Recommendations

After an extensive consultation, the LRC made various recommendations, including:-

1. Reform expressly permitting third party funding for arbitration conducted in or outside Hong Kong, so long as the third party-funded legal services are provided in Hong Kong.

2. Clear ethical and financial standards for third party funders operating in Hong Kong should be developed.

3. A "light touch" approach to the regulation of third party funding should be adopted for an initial period of three years of its implementation.

4. Third party funders should be required to comply with a Code of Practice ("Code") issued by an authorized body under the Arbitration Ordinance, which should set out the standards and practices with which they will ordinarily be expected to comply, generally and in their arbitration funding agreements. For instance, the funding agreements should set out and explain the key features, risks and terms of the agreement, and third party funder must take reasonable steps to ensure that the funded party receives independent legal advice on the terms of the funding agreement before signing it.

5. An advisory body should monitor the conduct of third party funding for arbitration and the implementation of the Code, and issue a report reviewing its operation and make recommendations as to the updating of the ethical and financial standards set out in the Code after the conclusion of the initial three years of operation.

6. Consideration should be given as to whether the non-application of common law principles of maintenance and champerty should be extended to mediation within the scope of the Mediation Ordinance (Cap. 620).

7. There is no need at this stage to give an arbitral tribunal the express power to award costs against third party funders or power to order security for costs against a third party funder.

Comment

Unsurprisingly, the LRC's proposals have received overwhelming support from the public and the legal profession in Hong Kong. An amendment bill to the Arbitration Ordinance and the Mediation Ordinance was put forward to the Legislative Council for review in January 2017.

With the anticipated legislative reforms on the horizon, parties will soon benefit from a new tool for financing claims and managing risks. These forthcoming (and long overdue) changes will undoubtedly enhance Hong Kong's competitive position as one of the major centres for international arbitration and attract more international arbitration cases to the city. Indeed, this is in line with the spirit of the Civil Justice Reform (which came into effect on 2 April 2009) by encouraging the settlement of disputes and facilitating arbitration. Parties, however, should be reminded to keep a close eye on the details of the legislative amendments to come (in particular, any regulatory requirements imposed) and seek independent legal advice before engaging in third party funding of arbitration.

 

About Us

Howse Williams Bowers is an independent law firm which combines the in-depth experience of its lawyers with a forward thinking approach.

Our key practice areas are corporate/commercial and corporate finance; commercial and maritime dispute resolution; clinical negligence and healthcare; insurance, personal injury and professional indemnity insurance; employment; family and matrimonial; property and building management; banking; financial services/corporate regulatory and compliance.

As an independent law firm we are able to minimise legal and commercial conflicts of interest and act for clients in every industry sector. The partners have spent the majority of their careers in Hong Kong and have a detailed understanding of international business and business in Asia.

Disclaimer: The information contained in this article is intended to be a general guide only and is not intended to provide legal advice.  Please contact pr@hwbhk.com if you have any questions about the article.

 

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News //
Submitted by // K Bowers, Partner / Solicitor Advocate
14 March 2017


Worldwide Mareva Injunctions: The Law's Nuclear Weapon

Background

Under Hong Kong's legal regime, the Courts may restrain a defendant from dealing with or removing any of its assets pending a prospective judgment. Such an order by the Courts is known as a Mareva Injunction and serves to prevent a defendant from dissipating its assets with the intention or effect of frustrating enforcement of a prospective judgment. The Hong Kong Courts' discretion to grant this formidable interim relief can be exercised in respect of litigation and arbitration proceedings brought in Hong Kong or overseas. A Mareva Injunction may also be domestic or granted on a worldwide-basis. Whilst a domestic Mareva Injunction restrains the defendant from disposing of its Hong Kong assets, a worldwide Mareva Injunction aims to prevent the defendant from disposing of its assets which are located outside of Hong Kong. The recent case of CSSC Huangpu Wenchong Shipbuilding Co Ltd v Dry Bulk Services Ltd [2016] HKCU 3097 ("Huangpu v Dry Bulk Services") sets out the approach taken by Hong Kong Courts in assessing an application for a worldwide Mareva Injunction in aid of foreign proceedings.

In Huangpu v Dry Bulk Services, there was a dispute over two guarantees issued by the defendant (a Hong Kong company) to the plaintiff (a PRC state-owned enterprise). When the principal creditor defaulted on payment, the plaintiff issued a demand to the defendant requiring it to honour its guarantees. In response, the defendant denied liability to pay under the guarantees. Subsequently, the plaintiff referred the disputes to arbitration in London pursuant to the arbitration clauses in the two guarantees. The plaintiff then applied to the Hong Kong Court of First Instance for a worldwide Mareva Injunction to freeze the assets of the defendant. Upon hearing the application, the Hong Kong Court granted the worldwide Mareva Injunction over the assets of the defendant, in aid of the London arbitrations.

When will Hong Kong Courts freeze a defendant's worldwide assets in aid of foreign proceedings?

In arriving at this decision, the Hong Kong Court first considered whether the plaintiff had shown that: (i) there is a good arguable case against the defendant; (ii) the defendant has no or insufficient assets in Hong Kong to satisfy the claim; and (iii) the refusal of the Mareva Injunction would involve a real risk of dissipation of the defendant's assets in such a way that a judgement in favour of the plaintiff would go unsatisfied. Having established these questions in the affirmative on the facts of the case, the Hong Kong Court then went on to consider whether it was just and convenient to grant the Mareva Injunction. The defendant argued that it was neither just nor convenient to grant the Mareva Injunction because the plaintiff's application for the injunction short-circuits the procedural protections available at the London arbitrations. The Hong Kong Court however found to the contrary and determined that an injunction would not contain an element of short-circuiting. The defendant further argued that the injunction should not be granted without the permission of the London arbitral tribunals or the consent of both parties unless the application was one of urgency. To this end, the Hong Kong Court held that the plaintiff's application was urgent and therefore concluded that neither the consent of the London arbitral tribunals nor the agreement of the defendant was required.

Not a punitive measure

It should be noted that the defendant was not prohibited from using some of the 'frozen' assets towards its ordinary and proper business expenses (in this case, it was allowed to spend a maximum of HK$25,000 per week) and to satisfy its legal expenses in relation to the London arbitrations. This goes to show that Mareva Injunctions, whilst a high-stakes exercise (and thus referred to as the law's "nuclear weapon"), are not intended to be a punitive measure against the defendant. Rather, Mareva Injunctions are granted to protect the efficacy of litigation or arbitration proceedings. In essence, the goal of a Mareva Injunction is to preserve the defendant's assets, so that it will be able to satisfy a judgment that may later be made against it.


About Us

Howse Williams Bowers is an independent law firm which combines the in-depth experience of its lawyers with a forward thinking approach.

Our key practice areas are corporate/commercial and corporate finance; commercial and maritime dispute resolution; clinical negligence and healthcare; insurance, personal injury and professional indemnity insurance; employment; family and matrimonial; property and building management; banking; financial services/corporate regulatory and compliance.

As an independent law firm we are able to minimise legal and commercial conflicts of interest and act for clients in every industry sector. The partners have spent the majority of their careers in Hong Kong and have a detailed understanding of international business and business in Asia.

Disclaimer: The information contained in this article is intended to be a general guide only and is not intended to provide legal advice.  Please contact pr@hwbhk.com if you have any questions about the article.

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Publications //
Submitted by // K Bowers, Partner/Solicitor Advocate; M Withington, Partner
08 March 2017

 

ILO AIA tightens health insurance reimbursement policy

Click here to see the International Law Office Article

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