Hong Kong: Hong Kong Cements Its Place in International Arbitration — Recent Developments in Hong Kong

Last Updated: 21 August 2009
Article by Nicholas J. Longley
Most Read Contributor in Hong Kong, October 2018

Originally published August 10, 2009

Keywords: Hong Kong, international arbitration, ICC, secretariat, HKIAC Rules, Administered Arbitration, A v. R, new rules

For a number of years, Hong Kong has battled with Singapore and other regional centres to be the dominant arbitration centre in Asia. Hong Kong's position has benefited from a number of occurrences, such as the establishment by the ICC of a secretariat there. However, two recent developments will help to cement Hong Kong's position as a leading arbitration centre. These are the adoption of the HKIAC Rules for Administered Arbitration and the court decision in A v. R.

HKIAC Rules for Administered Arbitration

In September 2008, the Hong Kong International Arbitration Centre (HKIAC) adopted the new Administered Arbitration Rules (Rules). Until the adoption of these Rules, arbitrations in Hong Kong were generally "ad hoc," meaning that they were not administered by any authority. In ad hoc arbitrations, the HKIAC's role is normally limited to the appointment of an arbitrator (if the parties cannot agree on the arbitrator) and the provision of a venue for the arbitration hearing.

However, it was perceived that certain parties, particularly from Mainland China, would prefer to engage in an arbitration that was administered by an overriding authority. There are two perceived reasons for this: first, that Chinese parties are accustomed to administered arbitrations, and second, that lingering doubts remain about the enforceability of ad hoc arbitrations in the Mainland despite the confirmation provided by the Supreme People's Court of the PRC in October 2007 that "ad hoc" arbitration awards obtained outside the Mainland are recognisable and enforceable in the Mainland.

Approach of the New Rules

The overall approach of the new Rules is to provide "light touch" administration. They are generally based on the UNCITRAL arbitration rules and are said to be inspired by the Swiss Arbitration Rules. The HKIAC's primary roles are:

  • The appointment of arbitrators if the parties cannot agree or refuse to appoint them within the specified time limit;
  • To determine challenges to arbitrators' independence and impartiality; and
  • To determine fees of the arbitration tribunal in conformity with its own schedule.

The HKIAC does not have a role in vetting any arbitration award, and in that way, the service offered differs from the ICC. Some aspects of the Rules are highlighted below.


Once the Notice of Arbitration has been issued, the Respondent is obliged to provide a written Answer to the Notice of Arbitration within 30 days of receipt. However, unlike the ICC Rules, there is no obligation on the parties to agree to the Terms of Reference.
Once the arbitration has commenced and the arbitral tribunal appointed, the Rules provide for a formal written Statement of Claim and Statement of Defence to be served. These statements shall be accompanied with the documents on which the party shall rely.

It should be noted that Article 19 provides a formal right to amend the Statement of Claim or Defence. However, this right is expressly limited. An arbitral tribunal can refuse amendments if the tribunal considers them inappropriate—after considering the party's delay in proposing them, the prejudice to the other party or any other circumstances. This contrasts with the general practice in Hong Kong, which is that amendments are often accepted by arbitral tribunals at a late stage.


Article 38 of the Rules provides for an expedited arbitration procedure for claims not exceeding US$250,000. The Rules, unfortunately, do not set out timing for submissions but instead set out a general requirement that the arbitral proceedings shall be conducted in a "shortened time" determined by the HKIAC. The expedited arbitration will proceed as a documents-only arbitration unless the tribunal decides that it is necessary to hold a hearing.


Of course, the HKIAC charges a fee to administer arbitrations. This fee is established based on a sliding scale that depends upon the amount in dispute, subject to both minimum and maximum fees. The minimum fee for sums in dispute up to US$50,000 is US$1,500, and the maximum fee payable to the HKIAC for sums in dispute over US$50 million is US$26,850.

Both the claim and the counterclaim are taken into account in assessing the sum in dispute. Interest is not taken into account unless the amount claimed for interest is more than the principal sum. In such circumstances, the principal sum is excluded from the determination and only the interest amount is taken into account in assessing the fee.

In perhaps a sensible compromise, the Rules allow the parties to be able to choose whether the arbitrator(s) themselves are paid a fee in accordance with any agreement between the parties and the arbitrator(s) or pursuant to fees established by the HKIAC.

Drafting an Appropriate Administered Arbitration Clause

The Rules do not prevent parties from conducting ad hoc arbitrations in Hong Kong and, given the long-standing practice, it is likely that many arbitrations in Hong Kong will continue to be conducted on an ad hoc basis. However, now both options are available.

If parties would like their arbitration to be administered, then they should ensure that the arbitration clause is drafted to expressly state that the arbitration is to be "administered by the HKIAC."

The Decision in A v. R

The second recent development is the Hong Kong Court's decision in A v. R, handed down in April 2009.


The facts of the underlying case are not in themselves remarkable. The case concerned an application in the Hong Kong courts to enforce an arbitration award issued in Denmark. Arbitration awards issued overseas are enforced in Hong Kong pursuant to the New York Convention. The Respondent sought to oppose the enforcement proceedings. However, under the New York Convention, courts are obliged to enforce arbitration awards other than in exceptional situations. One of those exceptional situations is if the enforcement of the award would be contrary to public policy.

In this case, the underlying claim was for liquidated damages, set at US$1 million per breach, which seemed to be out of proportion to the damages incurred. Counsel for R argued that the liquidated damages were a penalty and were unenforceable under Hong Kong law for public policy reasons.


The judge did not accept this argument. This was for a number of reasons, including that:

  • The argument was not put to the arbitrator. Instead, although R had initially appointed lawyers, it had terminated those instructions. It was not repre­sented and did not attend the arbitration hearing.
  • It was not clear on the information before the Hong Kong court that the liquidated damages were a penalty in any event.
  • Referring to case law from Hong Kong, Singapore and England, the court established the test for refusing to enforce an arbitration award on grounds of public policy as whether "upholding the arbitral award would 'shock the conscience.'" The court did not consider that upholding this arbitration award would "shock the conscience."

The court therefore upheld the award. This in itself is not remarkable. It is rare in Hong Kong for an arbitration award not to be enforced. What is surprising about this case is the award of costs. It would be usual for a winning party to be awarded costs, payable on a "party-to-party basis." As a rough rule of thumb, a winning party can expect to receive about two thirds of its costs under this usual order. In this decision, A was awarded costs on an indemnity basis, which is a much higher basis of assessment. In deciding to award indemnity costs, the court ruled:

  • Applications by a party to appeal against or set aside an arbitral award should be "exceptional events." Where a party unsuccessfully makes such an application, he should in principle expect to have to pay costs on a higher basis.
  • If the losing party pays costs on the usual basis, the winning party would in effect be subsidising the losing party's attempts to frustrate the enforcement of the valid award.

Additional reasoning for the decision was derived from the recent civil justice reforms in Hong Kong, which brought new court rules into effect from April 2009. The new court rules now require parties to assist the Court with the just, cost-effective and efficient resolution of a dispute. The court considered that, in the light of the civil justice reforms, the court ought not to be troubled with an application to appeal or set aside an arbitration award.

The decision, although surprising, is consistent with the hands-off approach Hong Kong courts have adopted to arbitration. This non-interventionist approach is one of the reasons why Hong Kong has attracted international arbitrations over the years.

Although the case concerned an enforcement action under the New York Convention, the reasoning would apply to the enforcement of all arbitral awards in Hong Kong, whether domestic or international. Indeed the final paragraph of the decision reads:

Accordingly, in the absence of special circumstances, when an award is unsuccessfully challenged, the Court will henceforth normally consider awarding costs against the losing party on an indemnity basis.

It is clear that following the civil justice reforms, the courts intend to use the sanction of costs as an incentive for parties not to bring actions without merit. It is possible that the threat of an adverse indemnity costs award may act to reduce the number of challenges to arbitral awards in Hong Kong, which may in turn increase the strength of Hong Kong as an arbitration venue.

Copyright 2008. JSM, Mayer Brown International LLP and/or Mayer Brown LLP. All rights reserved. Mayer Brown is a global legal services organization comprising legal practices that are separate entities ("Mayer Brown Practices"). The Mayer Brown Practices are: JSM, a Hong Kong partnership, and its associated entities in Asia; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales; and Mayer Brown LLP, a limited liability partnership established in the United States. The Mayer Brown Practices are known as Mayer Brown JSM in Asia.

This article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein. Please also read the JSM legal publications Disclaimer.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions