As with the construction of Hong Kong's international airport in the 1990s, the round of new construction projects launched by the Hong Kong Government in the last few years seem destined to result in more grievances and, therefore, delays with some of these projects. This will result in more construction disputes and, as a result, more arbitrations in Hong Kong. With that in mind, the coming into force of the new Arbitration Ordinance (Cap. 609) (the Ordinance) on 1 June 2011 could not be timelier. The Ordinance replaces the previous Arbitration Ordinance and is a major reform of the arbitration law in Hong Kong. In this article we take a brief look at some of the Ordinance's key provisions. Background The Ordinance will apply to arbitrations and related proceedings that are commenced on or after 1 June 2011.
Under the previous Ordinance there was a distinction between two separate systems which governed domestic and international arbitrations. While international arbitrations were regulated by rules based on the UNCITRAL Model Law on International Commercial Arbitration (the Model Law), domestic arbitrations were arbitrated under a different regime. This "dual-track" arbitration system was regarded as unnecessarily complicated, often giving rise to problems over which regime would govern a particular dispute. The Ordinance abolishes this distinction and replaces it with a unified system in which the Model Law (with certain specified adaptations) applies to all arbitrations. Hong Kong has thereby become a "Model Law jurisdiction".
Some of the Ordinance's key Provisions
The Ordinance effectively codifies many of the articles of the Model Law, which are recognised as the standard for commercial arbitrations. An attractive feature of the Ordinance is its organisation insofar as it (generally) follows the order and chapter headings of the Model Law, making it easier to follow than the previous Ordinance.
Four of the key provisions of the Ordinance are as follows:
- Reduced judicial intervention – one of the main principles of the Ordinance is to minimise the court's powers to intervene in the arbitration of a dispute. Under the previous Ordinance the court's powers in respect of domestic arbitrations included (for example): the power to consolidate arbitral proceedings, to decide a preliminary question of law, to review any determination of law made by an arbitral tribunal and to hear an appeal on a question of law arising out of an arbitral award. Removing these powers represents a significant change consistent with the Model Law.
- Opt-in provisions – Part 11 of the Ordinance allows parties to an arbitration agreement to "opt-in" to the provisions that were applicable to domestic arbitrations under the previous Ordinance (including the greater scope for judicial intervention). Subject to agreement to the contrary (either expressly in the arbitration agreement or as between the parties in writing) the Ordinance automatically applies these "opt-in" provisions to arbitration agreements which provide that an arbitration is a domestic arbitration and which are entered into within a period of six years after the commencement of the Ordinance. Subject to agreement to the contrary the opt-in provisions also apply to arbitration agreements which provide that an arbitration is a domestic arbitration and which are entered into before the commencement of the Ordinance.
These "opt-in" provisions are an important acknowledgement that domestic arbitration procedures are tried and tested in some important commercial sectors in Hong Kong (such as the construction industry) and should be preserved if the parties want this.
In light of these "opt-in" provisions parties may wish to take this opportunity to review their contractual arbitration clauses and consider whether going forward they would like to "opt-out" if the provisions would otherwise apply automatically.
As for the drafting of arbitration agreements for arbitrations seated in Hong Kong, it is no longer necessary to differentiate international from domestic arbitrations, unless that is the intention of the parties. If parties to international arbitrations intend to incorporate the "opt-in" provisions this should be clearly stated.
- Confidentiality – the Ordinance contains an express duty to keep confidential both the information disclosed during arbitral proceedings and the arbitral award itself, subject to certain limited exceptions; for example, where the disclosure is agreed between the parties, required to protect a party's legal rights, required by a regulatory body, court or tribunal or required to enforce an arbitral award. In conjunction with this express duty, the Ordinance goes one step further than the previous Ordinance; namely, to provide that all arbitration-related court proceedings are to be conducted in private unless the court, in its discretion, on the application of any party or on its own initiative, orders the proceedings to be heard in open court.
- Mediator-arbitrators – the Ordinance permits an arbitrator to act as a mediator after arbitral proceedings have commenced where the parties consent in writing (and for so long as no party withdraws their consent in writing). The Ordinance also prevents a party from challenging the arbitrator solely because the arbitrator previously acted as a mediator. If confidential information was communicated to the arbitrator, while the arbitrator was acting as mediator and the mediation does not result in settlement, the Ordinance requires the arbitrator to disclose to all other parties as much of that information as he/she considers is material to the subsequent arbitration. This is different to usual procedures governing mediations, where a mediator is bound to keep confidential information that is communicated to him/her by one party and that the mediator is not authorised to disclose to the other side.
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.