Some days ago I attended a closed-door meeting. Around the table were mediation and arbitration practitioners from Hong Kong and Macau, people from the insurance industry, and blockchain specialists. The subject was the resolution of cross-border intellectual property disputes. By informal count, more than six million Mainland enterprises are now going overseas, and a good number of them are venturing into foreign markets with no protection at all. One participant described them as walking out naked. Once they are sued abroad, the proportion that lose can run as high as nine in ten. Valuation is my own trade, but what stayed with me from this meeting was something else: how a dispute ought to be resolved.
From a valuer's seat, the way into these companies is often their intellectual property, a sale or a financing. And the first step is not valuation. It is establishing the right. Who owns the intellectual property, what its legal status is, and whether the scope of protection is clear and secure. This is not a piece of legal housekeeping. How wide the rights run, how many years remain, how many jurisdictions are covered, all of it bears directly on which methods a valuer may use and on the value that comes out at the end. Build that foundation properly and the valuation has something credible to stand on, and the financing becomes a conversation worth having. But arriving at a value is only the first half. When the transaction or the right runs into a dispute overseas, whether that value can be held and recovered is the real test. And that turns on how the dispute is resolved.
Why litigation is the wrong instrument
The mediation and arbitration practitioners at the table put it plainly. Litigating abroad is slow and expensive, two or three years as a matter of course. Local law, by its nature, leans towards the local party, so a foreign company starts at a disadvantage. That is the root of why companies going overseas keep losing. Worse, litigation is public from beginning to end. Trade secrets and technical detail are usually laid bare along the way, and even a company that wins may never recover what it was awarded. For a business that stands on its intellectual property, that is close to losing twice.
Mediation and arbitration run on a different logic
Mediation and arbitration run on another logic altogether. They are cheap and they are quick. A case that can be closed locally in a month need not drag on for years. The process is confidential, so trade secrets survive it, and the two sides do not burn the ground they might work on together later. More important is the frame of mind of the parties. A settlement is reached after someone has compared every scenario and chosen the one that serves them best, so the outcome holds. Reneging and appeals are rare. Participants put the success rate of mediation in Hong Kong at about seventy-five per cent, with only a minority of cases going all the way to litigation. Another described the mechanism as putting the law within ordinary reach: a party no longer has to carry heavy representation costs and the risk of exposure in order to arrive at an outcome everyone can accept.
Each has its own strength. An arbitral award binds, which suits the more traditional dispute that needs a final word. Mediation asks for flexibility instead. The outcome need only stay within local law, and it is not bound by precedent. In recent years its use has grown steadily, cross-border and at home alike.
Cross-border enforcement is the dividing line
For international trade, the real dividing line is whether an award can be enforced across a border. Arbitration has a natural advantage here. The New York Convention has more than a hundred contracting states, and an arbitral award made in Hong Kong can be taken to any of them for recognition and enforcement. If a company provides at the outset, in the transaction or investment contract, that disputes go to arbitration and that Hong Kong is the seat, then the machinery is already in place on the day something goes wrong.
Mediation sits differently. The Singapore Convention provides an international framework for enforcing cross-border mediated settlement agreements, but China is at present only a signatory and has not ratified it, and Hong Kong is not covered. For now a cross-border mediated settlement is enforced mainly as a matter of contract, or through mediation-to-arbitration, where the settlement is recorded as an arbitral award and then carried through the arbitration channel. That is why, in a cross-border setting, mediation is so often paired with arbitration. A mediation specialist at the meeting noted that the Mainland's Fifteenth Five-Year Plan also leans on mediation to support its international footprint, with sub-centres established overseas, a direction that sits squarely alongside the commercial mediation route Hong Kong has taken.
One more thing is worth saying. Winning an award is not the same as collecting the money. The meeting heard of companies that won abroad and still recovered nothing. Where the other side's assets are on the Mainland, the mutual enforcement arrangements between Hong Kong and the Mainland have a part to play in getting the money actually recovered. That is often more practical than the win itself.
The view from insurance
An insurance specialist added another angle. For a company going overseas, being accused of infringement and being harassed over it is more or less to be expected. Some Mainland insurers have designed products for exactly this, with the insurer bearing the costs of defending proceedings abroad. The difficulty is that foreign litigation is expensive, so premiums rise with it. If a dispute can instead be closed through mediation and arbitration, at lower cost and greater speed, the payouts and the risk an insurer carries fall sharply, premiums have a chance of returning to a sensible level, and intellectual property and overseas risk finally become a business that can be underwritten. For the insurer, resolving a dispute early and in confidence beats waiting out a court, on the cost of claims and on reputation alike.
Valuation does not serve financing alone. In the resolution of a dispute, quantifying loss and independently testing the amount claimed also need a credible valuation behind them. Connect valuation to mediation and arbitration, and a company going overseas need not end up unable to defend its value and unable to recover its loss. That was what I took away from the meeting.