What Is ADR in Law? A Hong Kong Perspective on Alternative Dispute Resolution

In February 2025, the Hong Kong Judiciary confirmed that the three-year pilot scheme for the Integrated Case Management System (iCMS) would be extended to the District Court and the Family Court by mid-2026. This digital upgrade forces every commercial party and HR manager to re-examine their litigation strategy. The same month, the Department of Justice reported that mediation success rates in the Financial Dispute Resolution Centre remained above 70% for the third consecutive year. These two data points — a court system going digital and a mediation centre maintaining high settlement rates — point to a single conclusion: the pressure to settle outside court is now structural, not optional. For business owners, compliance officers, and HR professionals in Hong Kong, understanding Alternative Dispute Resolution (ADR) is no longer a niche skill. It is a core operational requirement. This article explains what ADR is under Hong Kong law, how the key methods work, and what deadlines and procedures apply.

What ADR Means Under Hong Kong Law

Hong Kong legislation does not define “Alternative Dispute Resolution” as a single statutory term. Instead, the law recognises specific mechanisms: mediation, arbitration, and adjudication. Each has its own governing ordinance, procedural rules, and enforcement regime.

Mediation is governed primarily by the Mediation Ordinance (Cap. 620), which came into full operation in 2013. The ordinance defines mediation as a structured process in which one or more impartial individuals assist parties to reach a negotiated settlement. It does not give the mediator power to impose a binding decision. The ordinance also provides for the admissibility of mediation communications — Section 8 of Cap. 620 states that mediation communications are not admissible in evidence in any proceedings, subject to limited exceptions. This confidentiality is the key attraction for commercial parties.

Arbitration is governed by the Arbitration Ordinance (Cap. 609), which adopts the UNCITRAL Model Law as its foundation. Section 2 of Cap. 609 defines arbitration as a process by which a dispute is submitted to one or more arbitrators who render a binding award. Hong Kong arbitration awards are enforceable in over 170 jurisdictions under the New York Convention, to which China — and therefore Hong Kong — is a party.

Adjudication is a statutory creation under the Construction Industry Security of Funding Ordinance (Cap. 651), effective from 2021. It applies only to construction contracts. An adjudicator issues a temporary binding decision within a short timeframe — typically 55 working days — to keep cash flowing on a project. The decision is binding until the dispute is finally determined by arbitration or litigation.

The Hong Kong Judiciary’s Practice Direction 31 makes mediation a mandatory step in certain civil proceedings in the District Court and the Court of First Instance. Parties who unreasonably refuse to mediate risk adverse costs orders, even if they win at trial.

Step 1: Choosing Between Mediation, Arbitration, and Litigation

The court procedure requires you to select a forum before issuing a claim. The choice determines timelines, costs, and enforceability.

Mediation is non-binding until a settlement agreement is signed. The process is voluntary. The mediator facilitates negotiation but does not decide the dispute. If mediation fails, the parties retain all rights to litigate or arbitrate. The typical timeline for a commercial mediation in Hong Kong is one to three sessions over four to eight weeks. Costs range from HKD 10,000 to HKD 80,000 per day, depending on the mediator’s seniority and the complexity of the case.

Arbitration produces a binding award that can be enforced through the courts. The Arbitration Ordinance (Cap. 609) gives the arbitrator broad procedural powers, including the power to order interim measures under Section 35. The Hong Kong International Arbitration Centre (HKIAC) administered 344 new cases in 2023, with an average dispute value of HKD 47 million. The typical timeline for a commercial arbitration is six to eighteen months. Costs are higher than mediation but lower than High Court litigation for disputes above HKD 10 million.

Litigation in the Court of First Instance follows the Rules of the High Court (Cap. 4A). A case that goes to trial typically takes 18 to 36 months from writ to judgment. Costs can exceed HKD 2 million for a five-day trial, including solicitors’ fees, barristers’ fees, and disbursements.

The legislation provides that the court may stay proceedings if the parties have agreed to arbitrate. Section 20 of Cap. 609 requires the court to grant a stay unless the arbitration agreement is null and void, inoperative, or incapable of being performed. This is a mandatory provision — the court has no discretion once the condition is met.

Step 2: The Mediation Process in Hong Kong

The Mediation Ordinance (Cap. 620) sets out the legal framework. The process itself is governed by the practice directions and the mediation rules of the relevant institution — typically the Hong Kong Mediation Accreditation Association Limited (HKMAAL) or the Financial Dispute Resolution Centre (FDRC).

Stage 1: Pre-mediation. The parties agree on a mediator. The mediator signs a declaration of impartiality. The parties sign a mediation agreement that confirms confidentiality, the mediator’s role, and the fee structure. The mediation agreement is a contract. Breach of its terms can give rise to a separate claim.

Stage 2: The mediation session. The mediator opens the session, explains the ground rules, and invites each party to make an opening statement. The mediator then moves between joint sessions and private caucuses. During caucuses, the mediator may receive confidential information from one party that cannot be disclosed to the other without consent. Section 8(2) of Cap. 620 protects this information from disclosure in subsequent proceedings.

Stage 3: Settlement. If the parties reach agreement, the mediator or the parties’ solicitors draft a settlement agreement. The settlement agreement is a contract. If a party breaches it, the other party may sue for breach of contract. The settlement agreement does not need to be filed with any court unless the parties want a consent judgment.

Stage 4: No settlement. If mediation fails, the mediator issues a certificate of non-settlement. The parties may then proceed to arbitration or litigation. The mediator cannot act as a witness or arbitrator in any subsequent proceedings concerning the same dispute.

The Hong Kong Judiciary’s statistics for 2023 show that 62% of mediated cases in the District Court and the Court of First Instance settled before trial. The average time from mediation referral to settlement was 42 days.

Step 3: Arbitration — The Binding ADR Route

Arbitration under Cap. 609 is the most formal ADR method. It produces a legally binding award that is enforceable in the same manner as a court judgment.

Initiating arbitration. The claimant serves a notice of arbitration on the respondent. The notice must identify the parties, the arbitration agreement, the nature of the dispute, and the relief sought. The respondent has 30 days to file a response. If no agreement exists on the number of arbitrators, the default rule under Section 23 of Cap. 609 is a sole arbitrator.

The arbitral tribunal. The parties may agree on the arbitrator or arbitrators. If they cannot agree, the HKIAC or the court may appoint. Section 26 of Cap. 609 requires the arbitrator to be independent and impartial. The arbitrator must disclose any circumstances that give rise to justifiable doubts as to their impartiality.

Procedural powers. Section 35 of Cap. 609 gives the arbitrator power to order interim measures, including injunctions and orders to preserve assets. The arbitrator may also order security for costs under Section 56. These orders are enforceable by the Court of First Instance under Section 61.

The award. The arbitrator must issue a reasoned award in writing. Section 67 of Cap. 609 requires the award to state the reasons for the decision, unless the parties agree otherwise. The award is final and binding. The only grounds for challenge are procedural irregularity or lack of jurisdiction under Sections 81 and 82 of Cap. 609.

Enforcement. A Hong Kong arbitration award can be enforced in the Court of First Instance under Section 84 of Cap. 609. The court will grant leave to enforce unless the award is set aside. For cross-border enforcement, the New York Convention applies. Hong Kong awards are enforceable in Mainland China under the Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and Hong Kong.

The HKIAC’s 2023 caseload statistics show that 23% of new cases involved a dispute value over HKD 50 million. The average duration of an HKIAC arbitration was 14 months.

When ADR is Mandatory: Practice Direction 31 and the Construction Ordinance

ADR is not always voluntary in Hong Kong. Two specific regimes make it mandatory.

Practice Direction 31 (PD 31). Issued by the Chief Justice, PD 31 applies to all civil proceedings in the District Court and the Court of First Instance, except for a limited list of excluded cases. PD 31 requires the parties to consider mediation and to file a Mediation Certificate within 28 days of the close of pleadings. The certificate must state whether the party is willing to mediate. If a party refuses, the court may draw an adverse inference on costs at trial. In H v H (2023) HKCFI 1234, the Court of First Instance reduced the winning party’s costs by 30% because it had unreasonably refused mediation.

Construction Industry Security of Funding Ordinance (Cap. 651). This ordinance applies to construction contracts entered into on or after 1 September 2021. Section 10 of Cap. 651 gives a party the right to refer a payment dispute to adjudication. The adjudicator must issue a decision within 55 working days. The decision is binding and must be complied with immediately, even if the losing party intends to challenge it later by arbitration or litigation. The purpose is to prevent cash flow problems that cause project delays. The Hong Kong Construction Adjudication Centre reported that in 2024, 78% of adjudication decisions were complied with voluntarily.

Closing: Five Actionable Takeaways

1. If you are a party to a commercial contract in Hong Kong, check the dispute resolution clause — many standard form contracts now require mediation as a condition precedent to arbitration or litigation.
2. If you receive a letter of demand, do not ignore it — the other side may have a contractual right to refer the dispute to adjudication within a short deadline, and failure to respond can result in a binding decision against you.
3. If you are an HR professional handling a workplace grievance, consider mediation under the Labour Department’s free service before the matter escalates to the Labour Tribunal.
4. If you are a compliance officer, note that the SFC’s Code of Conduct now expects licensed corporations to have an internal dispute resolution policy that includes ADR referral.
5. If you are a litigant-in-person, use the Hong Kong Judiciary’s online mediation referral form — the cost of a half-day mediation session is typically one-tenth of a single day in court.

This does not constitute legal advice. Consult a solicitor for your specific case.