International arbitrations take place within a complex and important international legal framework. International conventions, national arbitration legislation, and institutional arbitration rules all provide a specialized regime for most international commercial arbitrations. This article outlines the arbitration institutions and rules that are most commonly used in Asia and comments on some of their differences.
Arbitration is a consensual process. In other words, there must be an agreement between the parties to arbitrate a dispute. If there is no agreement, then the parties cannot arbitrate and must instead litigate their dispute in the relevant courts. The arbitration agreement is usually found in the contract between the parties and is commonly called the "arbitration clause."
The parties are largely free to draft their arbitration agreements in whatever terms they wish, and in practice, like other contractual clauses, the terms of arbitration agreements are largely a product of the parties' interests, negotiations, and drafting skills.
International arbitration agreements ordinarily address a number of critical issues: the agreement to arbitrate; the scope of the disputes submitted to arbitration; the use of an arbitral institution and its rules; the seat of the arbitration; the method of appointment, number, and qualifications of the arbitrators; the language of the arbitration; and a choice of law clause.
Another issue to consider is that international arbitrations may be either "institutional" or "ad hoc." There are vitally important differences between these two forms of arbitration. Institutional arbitrations are conducted pursuant to institutional arbitration rules, almost always overseen by an appointing authority (such as an arbitration commission or institution) with responsibility for various issues relating to constituting the arbitral tribunal, fixing the arbitrators' compensation, and similar matters. In contrast, ad hoc arbitrations are conducted without the benefit of an appointing and administrative authority, and therefore are subject only to the parties' arbitration agreement and applicable national arbitration legislation. In other words, the parties run the arbitration themselves together with the arbitrator(s).
In terms of institutions, over the past several years, the three busiest (and most well-known) arbitration institutions in Asia have been:
- China International Economic and Trade Arbitration Commission ("CIETAC")
- Hong Kong International Arbitration Centre ("HKIAC")
- Singapore International Arbitration Centre ("SIAC")
There are other centers (e.g., Tokyo, Kuala Lumpur, Seoul, Bangkok, etc.), but the three mentioned above tend to dominate the region. In addition to these specific centers, ad hoc arbitration under the United Nations Commission on International Trade Law ("UNCITRAL") rules is widely recognized in Asia and in fact is the cornerstone of both the HKIAC and SIAC rules.
Before we compare the various rules, it is worth explaining a little about each of these four institutions.
CIETAC is the leading arbitration institution in China. Its headquarters are in Beijing, but it also has Sub-Commissions in Shanghai, Shenzhen, Tianjin, and Chongqing (the Shanghai and Shenzhen sub-commissions are currently suspended ). CIETAC uses a panel system for the appointment of arbitrators, and presently there are 998 arbitrators on CIETAC's panel of arbitrators. Of that total, 716 arbitrators are from mainland China, accounting for 72 percent of the total; 44 arbitrators are from Hong Kong SAR; one arbitrator is from Macau SAR; and 18 arbitrators are from Taiwan. The remaining 218 are foreign arbitrators, accounting for 28 percent of the total. The foreign arbitrators are domiciled in more than 30 countries from around the world. CIETAC's Arbitration Rules were revised in 2012.
As one of the busiest arbitration centers in the world, CIETAC has administered more and more arbitrations over the years. Starting in 1990, there were only 203 cases, but by 2011 CIETAC administered 1,435 cases. Arbitration is growing in popularity in China, and at a conference of arbitration practitioners in Guiyang on July 26, 2011, it was reported that nearly 80,000 arbitration cases were heard by 209 arbitration commissions in 2011, among which only 1,219 were foreign-related. Therefore, cases involving Hong Kong, Macao, and other foreign-related cases represent less than 2 percent of the total case volume.
Hong Kong updated its Arbitration Ordinance in June 2011, and it is largely based on the UNCITRAL Model Law and the UK Arbitration Act. Over the past five years, HKIAC has increased its caseload from 281 to 624 disputes, many of which are ad hoc arbitrations.
The HKIAC Administered Arbitration Rules took effect on September 1, 2008, and typically apply to international arbitrations conducted by HKIAC. They are based on the UNCITRAL Arbitration Rules and are inspired by the "light touch" administered approach of the Swiss International Rules of Arbitration. HKIAC is a popular choice with Chinese and foreign parties because of its proximity to China as well as its long-established reputation and Hong Kong's strong legal support for arbitration.
SIAC was established in 1991 and is located at Maxwell House, which is located in Singapore and backed by the Singapore government. The SIAC Arbitration Rules were most recently revised in July 2010. SIAC handled 198 arbitration filings in 2010 and 188 in 2011, compared to 99 in 2008.
In contrast to HKIAC, most of SIAC's arbitrations are administered arbitrations, and also unlike Hong Kong, many of the arbitrations at SIAC do not involve local parties, so some would say that Singapore is a more neutral venue. Singapore is also seen as being in a geographically convenient location and is supported by a physical, legal, and political infrastructure that, like Hong Kong, is sophisticated, skilled, and of high integrity.
UNCITRAL's business is the modernization and harmonization of rules on international business, and to this end it has issued the UNCITRAL Model Law on International Commercial Arbitration and the UNCITRAL Arbitration Rules, which were most recently revised in June 2010. The UNCITRAL Arbitration Rules apply to ad hoc international arbitrations where parties execute their own particular arrangements, without being bound by a specific arbitral institution to administer the arbitration. Institutions such as HKIAC and SIAC allow the UNCITRAL Arbitration Rules to be adopted in proceedings brought to them, and parties are free to choose to use the UNCITRAL Arbitration Rules at their convenience.
Comparison of Arbitration Rules among CIETAC, HKIAC, SIAC, and UNCITRAL
Having set out the background to the various institutions and arbitration rules, we now pose some specific questions relating to arbitration and then identify the different answers that will apply depending on which rules you select.
How are Proceedings Commenced?
CIETAC. Claimant submits a Request for Arbitration to CIETAC and pays the arbitration fee. CIETAC sends a copy of the Notice of Arbitration to both parties.
HKIAC. Claimant submits a Notice of Arbitration to HKIAC and pays the registration fee. HKIAC Secretariat provides a copy of the Notice of Arbitration to the Respondent.
SIAC. Claimant submits a Notice of Arbitration with the SIAC Registrar and pays the filing fee. Claimant sends a copy of the Notice to the Respondent and notifies the Registrar of this.
UNCITRAL. Claimant submits a Notice of Arbitration to the Respondent.
Who Appoints the Arbitrators?
CIETAC. Arbitrators must be appointed from CIETAC's Panel of Arbitrators, unless agreed otherwise by the parties. Each party appoints one arbitrator within 15 days, and the two sides jointly appoint the presiding arbitrator.
HKIAC. Each party appoints one arbitrator within 30 days after it receives notice of the other party's designation, or within an agreed time. The two arbitrators select the presiding arbitrator within 30 days.
SIAC. One arbitrator unless the parties have agreed otherwise or the SIAC Registrar decides that a three-member tribunal is warranted.
UNCITRAL. Each party appoints one arbitrator. The two arbitrators choose the presiding arbitrator; if they do not do so within 30 days after the appointment of the second arbitrator, the appointing authority shall do so.
CIETAC. Respondent must file its Statement of Defense within 45 days from receipt of Notice of Arbitration (domestic cases have a 20-day limit).
HKIAC. Respondent must file its Statement of Defense within 30 days from receipt of Notice of Arbitration.
SIAC. Respondent must file its Statement of Defense within 14 days from receipt of Notice of Arbitration.
UNCITRAL. Respondent must file its Statement of Defense within 30 days from receipt of Notice of Arbitration.
CIETAC. The tribunal shall hold oral hearings and may adopt an adversarial or inquisitorial approach. Each party must produce evidence, and the tribunal may collect evidence. The tribunal may appoint experts for clarification on specific issues.
HKIAC. The tribunal may hold oral hearings and may require the parties to produce evidence within a time period specified by the tribunal. Any person may be a witness or expert witness.
SIAC. Unless the parties have agreed on documents-only arbitration, the tribunal shall hold a hearing. Any witness who gives oral evidence may be questioned by each of the parties and the tribunal in such manner as the tribunal determines.
UNCITRAL. The tribunal may hold oral hearings. Witnesses may be heard and examined in such manner as the tribunal determines. The tribunal may appoint independent experts.
When is the Award Due?
CIETAC. An award must be made within six months from when the arbitral tribunal was formed. This deadline is often extended. The award shall include the reasons on which the award is based, the result of the award, and the allocation of the arbitration costs.
HKIAC. No time limit is stated for arbitral awards that are made normally (i.e., not expedited). The award shall contain reasons.
SIAC. The tribunal must submit a draft award (containing summarized reasons) to the Registrar within 45 days of the close of proceedings. The Registrar shall transmit certified copies of the final award to the parties upon the full settlement of the costs of arbitration.
UNCITRAL. No time limit is stated for arbitral awards. The award shall contain reasons.
In many ways, the HKIAC, SIAC, and UNCITRAL approaches are quite similar. This is not surprising because both the HKIAC and SIAC rules are largely based on the UNCITRAL Arbitration Rules. CIETAC in many ways is the outlier; therefore, if your experience is largely with CIETAC arbitrations, you will find HKIAC, SIAC, and UNCITRAL arbitrations quite different, particularly if you choose to adopt an ad hoc approach (which is not permitted in China).
Concluding Thoughts on Arbitration in Asia
The most important consideration is to ensure that you have an enforceable arbitration agreement, which contains all (or most of) the elements mentioned in the introduction. Generally, if there is no arbitration agreement, then there can be no arbitration.
If institutional arbitration is desired, the parties' arbitration agreement must select and refer to an arbitral institution and its rules (this is essential in China). In general, every arbitral institution provides its own model arbitration clause; parties wishing to invoke the institution's rules should ordinarily use this clause as the basis for their agreement, departing from it only with care and for considered reasons. In cases where the parties do not wish to agree to institutional arbitration, they will sometimes select a preexisting set of procedural rules designed for ad hoc arbitrations (such as the UNCITRAL Rules). Arbitration clauses frequently accomplish this result by references such as "all disputes shall be settled by arbitration in accordance with the UNCITRAL Arbitration Rules."
Many international arbitration agreements also contain other provisions, in addition to the essential elements discussed above. The existence and nature of these provisions vary from case to case, depending on the parties' negotiations, drafting, and commercial interests. The most common additional elements include: (i) costs of legal representation; (ii) interest and currency of an award; (iii) disclosure or discovery powers of tribunal; (iv) fast-track or other procedural rules; (v) state/sovereign immunity waivers; and (vi) confidentiality.
International arbitration has come a long way in Asia, as the increasing number of cases administered by these institutions demonstrates. As well as the arbitrations run by CIETAC, HKIAC, and SIAC, there are many International Chamber of Commerce and London Court of International Arbitration arbitrations based in Asia. In addition, there are a significant number of ad hoc arbitrations throughout the region.
The support of the governments of Hong Kong and Singapore provides a political, social, and commercial environment conducive to the settlement of commercial disputes, and the legal regime in these two countries supports the enforcement of international arbitration awards. In many ways, Hong Kong and Singapore have now emerged as two of the leading venues for international arbitration, alongside traditional locations such as London, New York, Paris, and Geneva.
1 There is a small, but important, category of cases in which international investment arbitrations may result without a consensual agreement, by virtue of provisions in international investment protection or other conventions or legislation.
2 See Jones Day Commentary, "CFTC Approves Conforming Amendments to Commodity Pool Advisor and Commodity Trading Advisor Regulations," August 2012.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.