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, November 2017

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”

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
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

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