Hong Kong: An Introduction to Hong Kong Arbitration

Last Updated: 3 October 2012
Article by Robert Clark

Hong Kong as an arbitration venue

Hong Kong is a popular arbitration venue for many reasons, including the following:-

  • Hong Kong's Arbitration Ordinance, provides a user-friendly, legal framework for arbitrations which, having largely adopted the UNCITRAL Model Law, cements Hong Kong as a leading arbitration venue.
  • Arbitration awards made in Hong Kong are enforceable in over 140 jurisdictions under the New York Convention and in Mainland China under the "Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and the Hong Kong Special Administrative Region."
  • Hong Kong is a common law jurisdiction, which preserves the rule of law, administered by an independent judiciary.
  • Hong Kong Courts are supportive of arbitration, but take a "hands off" approach.
  • Hong Kong is conveniently located for Mainland China-related disputes and easily accessible from anywhere in the world. Its highly efficient airport, a 20 minute ride away on the "Airport Express, from the Central business district makes it an easy place to travel to and from.
  • Hong Kong is one of the world's leading financial centres, with a highly developed transportation network, excellent accommodation and telecommunications.
  • There are minimal language difficulties, as English and Chinese are both official languages.
  • There is a huge pool of multi-lingual professionals available to act as arbitrators, although parties are free to choose arbitrators from anywhere in the world.
  • There are excellent facilities and support services provided by Hong Kong International Arbitration Centre ("HKIAC").

Hong Kong's New Arbitration Ordinance

Arbitrations in Hong Kong are governed by the Arbitration Ordinance (Cap 609) ("the Arbitration Ordinance"), which came into force on 1 June 2011. It replaced the old Arbitration Ordinance (Cap 341) ("the Old Arbitration Ordinance"). Under the Old Arbitration Ordinance, there were two distinct arbitration regimes, namely one for domestic arbitrations and the other for international arbitrations, the latter being governed by the UNCITRAL Model Law ("the Model Law"). Under the new Arbitration Ordinance, that distinction is basically abolished and there is a single regime, governed by the Model Law, subject to modifications and supplements. Arbitrations commenced before 1 June 2011 are still governed by the Old Arbitration Ordinance.

The Arbitration Ordinance is extremely user friendly, being divided into fourteen parts, which largely follow the sequence of an arbitration. Entire Articles of the Model Law are inserted into the body of the relevant section, followed by details of any modification or addition to it, so that readers can easily see whether and to what extent that Article applies in Hong Kong.

Opt-in and automatic provisions

Although the Arbitration Ordinance is largely governed by the Model Law, it does (as mentioned above) contain some additional provisions which supplement or modify the Model Law. These include, for example, provisions in Schedule 2 (which allow greater court intervention), provisions on confidentiality and provisions on arb-med.

Schedule 2 retains some of the provisions under the old domestic arbitration regime, which parties (in both domestic and international arbitrations) may opt into or which (in some circumstances) will automatically apply, unless the parties opt-out. These provisions were retained as a result of lobbying, particularly from the construction industry, which wanted to keep some of the features of the old regime. The Schedule 2 provisions will automatically apply (unless the parties expressly opt-out) to an arbitration agreement entered into before or within 6 years from commencement of the Arbitration Ordinance, if the arbitration agreement provides that it is a domestic arbitration.

The Schedule 2 provisions relate to arbitration by a sole arbitrator, consolidation of arbitrations, decisions of preliminary questions of law by the court, challenging an arbitral award on the ground of serious irregularity and appeals against arbitral awards on a question of law.

Confidentiality

Hong Kong is one of the relatively few jurisdictions which includes express provisions on confidentiality in its arbitration legislation. There are no provisions on confidentiality in the Model Law and they were included as a section in the Arbitration Ordinance because one of the main reasons parties choose to arbitrate is confidentiality. The Arbitration Ordinance prohibits the disclosure, communication or publishing of any information relating to the arbitral proceedings or award (unless otherwise agreed by the parties), except in certain limited circumstances, for example for the purpose of challenging or enforcing the arbitral award in court or communications between the parties and their professional advisors.

Arb-Med

Again, there are no provisions on arb-med in the Model Law, but these have been included as a section in the Arbitration Ordinance. Mediation has gained prominence in Hong Kong, since introduction of Hong Kong's Civil Justice Reforms on 2 April 2009, which encourages mediation. The Arbitration Ordinance allows an arbitrator to act as a mediator after the arbitration proceedings have commenced (if all parties agree in writing) in order to facilitate settlement. The arbitral proceedings must be stayed during the mediation and, if the mediation fails, before resuming the arbitral proceedings, the arbitrator must disclose to all parties all information obtained during the mediation, which he considers material to the arbitral proceedings. A party cannot challenge the arbitral proceedings solely on the ground that the arbitrator previously acted as mediator in accordance with these provisions.

Court support but minimal intervention

The Hong Kong Government's policy has been to encourage arbitration as an alternative dispute resolution method and the Arbitration Ordinance states that its purpose is to facilitate the fair and speedy resolution of disputes by arbitration without unnecessary expense.

There is a specialist list in the Court of First Instance called the Construction and Arbitration List which deals with applications under the Arbitration Ordinance.

One of the purposes of the Arbitration Ordinance and adoption of the Model law was to reduce court supervision and intervention and it does this by giving the arbitral tribunal as much power as possible. The Arbitration Ordinance is stated to be based on the principles that, subject to safeguards necessary in the public interests, parties are free to agree on how a dispute should be resolved and that the court should only interfere in the arbitration as expressly provided in the Ordinance.

The arbitral tribunal is empowered to grant interim measures pending determination of disputes, including injunctions to maintain or restore the status quo and preserve assets and evidence.

The Arbitration Ordinance also includes a section setting out general powers exercisable by the arbitral tribunal (unless otherwise agreed by the parties), which include:-

  • Requiring a claimant to give security for costs of the arbitration.
  • Directing the discovery of documents or delivery of interrogatories.
  • Directing evidence to be given by affidavit.
  • Directing inspection, photographing, preservation, custody, sale or sample-taking, observation or experiments on any relevant property.

What is the court's role?

The Arbitration Ordinance states that the court cannot intervene in arbitration proceedings, except as provided for in the Ordinance. The court's role is basically limited to the following:-

  • Staying court proceedings in favour of arbitration where the matter is subject to an arbitration agreement.
  • Ruling on challenges to the appointment of an arbitrator.
  • Granting interim protective measures, such as injunctions (although the court may decline to do so where the interim measure is currently the subject of arbitral proceedings or considers it more appropriate for the interim measure to be granted by the arbitral tribunal).
  • Assisting in the taking or evidence, for example, by ordering a witness to attend arbitration proceedings to give evidence or produce documents.
  • Determining the arbitral tribunal's fees in the event of a dispute.
  • Granting an extension of time to commence arbitration proceedings (where an arbitral tribunal has not already been appointed).
  • Determining matters under the Schedule 2 opt-in provisions (referred to above).
  • Setting aside arbitral awards.
  • Enforcing arbitral awards.

Challenging Arbitration Awards

The Arbitration Ordinance provides the limited circumstances in which an arbitral award may be set aside by the court, namely incapacity of a party, invalidity of the arbitration agreement, a party not given proper notice of the appointment of an arbitrator of the arbitral proceedings or otherwise being unable to present his case, the award not falling within the terms or scope of the submission to arbitration, the composition of the arbitral tribunal or the arbitral procedure not being in accordance with the parties' agreement or Hong Kong law or the award not yet binding on the parties or the subject matter of the dispute not being capable of settlement by arbitration under Hong Kong law or the award being in conflict with Hong Kong's public policy.

The Schedule 2 opt-in provisions (referred to above) also provide for applications to the court to challenge an award on the ground of serious irregularity and for appeals to the court on questions of law.

Enforcement of Arbitration Awards

The Arbitration Ordinance provides that an arbitral award, whether made in or outside Hong Kong, may (with the court's leave) be enforced in the same manner as a court judgment. An application for enforcement is made by issuing an ex parte originating summons with the court, together with a supporting affidavit setting out the factual background of the award and confirming the outstanding liability. These applications are simple and straightforward and mostly dealt with by the Court of First Instance on paper without a hearing. They are usually approved very quickly. After obtaining the court's approval, the applicant serves the court order on the respondent who can apply to the court to set aside the order within 14 days of such service.

As Hong Kong is a party to the New York Convention, an arbitral award obtained in Hong Kong is enforceable in other states which are signatories to the New York Convention and Convention awards are enforceable in Hong Kong.

Following resumption of Mainland China's sovereignty over Hong Kong on 1 July 1997, the New York Convention ceased to apply to enforcement of Hong Kong arbitral awards in Mainland China or vice versa. Accordingly, the authorities in Mainland China and Hong Kong signed the "Arrangement Concerning Mutual Enforcement of Arbitral Awards Between the Mainland and the Hong Kong Special Administrative Region" on 21 June 1999 (â€Üthe Arrangement'). The Arrangement mirrors the provisions in the New York Convention and restores the enforcement procedures that were in place prior to the handover.

Under the Arrangement, to enforce an award, a party with a Hong Kong arbitral award may apply to the intermediate people's court of the place where the party against whom the application is filed is domiciled or in the place where the property of the said party is situated. A party with a Mainland China arbitral award may apply to the Court of First Instance of Hong Kong for enforcement of the award. Hong Kong recognises awards issued by many arbitral authorities in Mainland China, including the China International Economic and Trade Arbitration Commission (â€ÜCIETAC') and the local arbitration authorities in the major cities.

Local Arbitration Institutions

HKIAC

While the Arbitration Ordinance provides the basic legal framework for Hong Kong arbitration, the detailed arbitration procedures are governed by the arbitration rules adopted by the parties or as directed by the arbitrators. Unlike Mainland China or other jurisdictions, there is no legal requirement for the parties to conduct arbitration under any recognised institution and parties to the arbitration are free to conduct arbitration on an ad hoc basis.

The Hong Kong International Arbitration Centre ("HKIAC") was established in 1985 to facilitate and promote the development of alternative dispute resolution (particularly arbitration) in Hong Kong, and the Asia Pacific region. It provides information on arbitration, lists of local and international arbitrators and facilities and support services for Hong Kong arbitrations.

Under the Arbitration Ordinance, the HKIAC is authorised to determine the number of arbitrators and appoint arbitrators when the parties are unable to agree the appointment, in the absence of express provisions to the contrary in the arbitration agreement.

The HKIAC has devised various arbitration rules which parties can adopt, such as for example, HKIAC Administered Arbitration Rules, HKIAC Domestic Arbitration Rules, HKIAC Short Form Arbitration Rules, HKIAC Small Claims and Documents Only Procedure and HKIAC Electronic Transactions Arbitration Rules. Parties are free to choose which arbitration rules govern their arbitration. If the applicable rules are not stated in the arbitration agreement, the UNCITRAL Rules of Arbitration or HKIAC-Administered Arbitration Rules are typically applied in international arbitrations conducted in the HKIAC by agreement of the parties or order of the arbitral tribunal.

ICC

In 2008, the ICC International Court of Arbitration ("ICC") opened a branch in Hong Kong, with a case management team to administer cases in the region under the ICC Rules of Arbitration.

Hong Kong Institute of Arbitrators

The purpose of the Hong Kong Institute of Arbitrators is to promote arbitration and other alternative methods of dispute resolution in Hong Kong. It is involved in the training of arbitrators and mediators and setting of standards of conduct for arbitrators and mediators. It is also involved in law reform.

Chartered Institute of Arbitrators (East Asia Branch)

The Chartered Institute of Arbitrators is a London-based organisation and Hong Kong is the headquarters for its largest branch, the East Asia Branch, which covers Mainland China, Japan, Vietnam, Korea, Singapore, Indonesia, the Philippines, Taiwan. Its objective is to advance, promote and facilitate alternative dispute resolution, such as arbitration, education and training on arbitration and alternative dispute resolution and improve the practice and procedure of arbitration and alternative dispute resolution.

The way forward for Hong Kong

Hong Kong's new Arbitration Ordinance is likely to have a significant impact on arbitration in Hong Kong, cementing it as a Model Law jurisdiction. It provides both local and international users with a user-friendly arbitration regime and is likely to make Hong Kong an even more attractive arbitration venue.

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.

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