A. The Scheme
The Hong Kong International Arbitration Centre (HKIAC) will administer a Lehman Brothers-Related Products Dispute Mediation and Arbitration Scheme ("the Scheme").
The mediation process is a confidential, voluntary, non-binding and private dispute resolution process, in which a neutral person (the mediator) helps the parties to reach a negotiated settlement or to narrow the issues in dispute. Successful settlement through mediation will obviate the need for costly and lengthy litigation.
If mediation under the Scheme is not successful, the parties involved may agree to binding arbitration by the HKIAC. A separate person is appointed as arbitrator, using as far as possible a documents-only process. The arbitrator decides the claim and the decision is final.
The service is available for helping resolve questions of compensation between investors in Lehman-Brothers-related products and licensed banks. The HKMA will co-ordinate and pay half of the fee for these services on behalf of
investors whose complaints in relation to the sale of the products have already been referred by the HKMA to the Securities and Futures Commission (SFC) for it to decide whether to take any further action, or
investors whose complaint has resulted in a finding against a relevant individual or executive officer by either the HKMA or the SFC.
The other half of the fee will be borne by the bank.
For cases not subsidised by the HKMA, and where the bank and the customer have both agreed to settle through mediation, the bank and the customer may approach the HKIAC directly to engage its service. The HKIAC has agreed to offer the same fee as charged under the Scheme. This does not include the cost of the venue and any logistical support.
B. The Process
In cases to be subsidised by the HKMA as set out in Part A above, the complainant and the bank will be reminded of the availability of the mediation service and informed of the procedures.
Once the two parties have agreed to mediation, the parties may agree on a mediator from a list to be provided by the HKIAC, or the HKIAC will appoint a mediator from the list, and the mediator once appointed will proceed with mediation.
The mediator will commence and conduct the mediation as soon as possible after appointment and will use best endeavours to conclude the mediation within 21 calendar days of appointment.
If a settlement agreement is agreed, the mediation process will end. The mediation may also be terminated if the mediator considers that further attempts at mediation are no longer justified or if either party gives written notification of the termination of the mediation. If a settlement agreement cannot be reached, the parties may consider whether they agree to engage in the arbitration process under the Scheme.
If they agree to arbitrate, the parties may agree on an arbitrator from a list to be provided by the HKIAC, or the HKIAC will appoint an arbitrator from the list. The arbitrator will conduct a "documents-only" arbitration under the Scheme, i.e. the arbitrator will decide the claim on the basis of the forms and documents submitted. No legal representation is allowed to act on behalf of either party. The arbitrator will use best endeavours to conclude the arbitration within 21 calendar days, and this award will be binding on both parties.
If they do not agree to arbitrate, the option remaining for the parties to seek redress will be through the litigation process in the courts.
C. The Fees
The fees for mediation will be a fixed fee of HK$11,200 per case, including appointment and mediation fees. The fee for a document-only arbitration will be a fixed fee of HK$16,200 per case, including appointment and arbitration fees.
The fee is normally shared between the parties seeking mediation/arbitration but the HKMA will bear the cost for the customer in all cases that meet the criteria set out in Part A above.
Hong Kong Monetary Authority
31 October 2008