Hong Kong's new Arbitration Ordinance was passed by the Legislative Council in November 2010 and is expected to come into force early this year. The reform of the arbitration legislation has been much anticipated and the new legislation is a culmination of years of review and public consultation. The new legislation largely adopts the structure of the UNCITRAL Model Law on International Arbitration ("Model Law") as its framework but contains some provisions which are unique to Hong Kong. The reforms will create an arbitration regime which accords with widely accepted international practice and maintain Hong Kong's position as a premier venue for arbitration. It would be timely to highlight some features of the new legislation.
The most striking change introduced by the new Arbitration Ordinance is the abandonment of the split regimes for domestic and international arbitration. Previously, the Model Law was applicable only to international arbitration whilst domestic arbitration was governed by the previous Arbitration Ordinance which was largely based on the United Kingdom arbitration legislation. The new law creates a unified regime in which the Model Law applies to all arbitrations. This streamlines the process of arbitration in Hong Kong and provides greater efficiency and certainty to parties choosing Hong Kong as the seat of their arbitration.
The immediate impact of applying the Model Law is the reduction of the scope of judicial intervention in respect of domestic arbitration. However, the new arbitration ordinance provides for "opt-in" provisions similar to parts of the old regime and parties to an arbitration agreement may expressly provide for these provisions to apply. Schedule 2 of the new Arbitration Ordinance sets out such provisions which include arbitration by a single arbitrator in the absence of an agreement, the court's power to consolidate arbitrations, determine preliminary questions of law, hear appeal on a point of law and setting aside an award on grounds of misconduct.
In the meantime, within the first 6 years of the new regime coming into effect, these opt-in provisions will automatically apply to an agreement that provides that the arbitration is to be treated as a "domestic" arbitration. This will address the concerns of users of standard form contracts in the construction industry who are more familiar with the "domestic" provisions under the old regime. There is also a deeming provision that all opt-in provisions would automatically apply to an arbitration agreement contained in every contract down the line of a subcontracting process.
The new Arbitration Ordinance also imports the 2006 amendments to the Model Law, namely, the important provisions on the power of the arbitral tribunal to order interim measures (such as an order for the preservation of assets and other injunctive orders). A party may make an ex-parte request for an interim measure together with an application for a preliminary order directing a party not to frustrate the purpose of the interim order requested. The tribunal may modify, suspend or terminate such interim measure or preliminary order, and require the party requesting the interim measure or preliminary order to provide security in respect thereto.
Powers of Tribunal in conduct of arbitration
Whilst the New Ordinance permits parties to agree on the procedure to be followed by the tribunal in the conduct of the arbitration, in the absence of such agreement the tribunal has the power to make certain orders in respect of the conduct of arbitration including an order requiring a claimant to provide security for costs and directing discovery of documents and interrogatories. These are provisions not found in the Model Law but are taken from the previous Ordinance. They set out in greater detail the powers the tribunal have in respect of the conduct of arbitration and are reflective of the common law heritage of Hong Kong and civil proceedings before a court.
The new Ordinance contains provisions which allow an arbitrator to act as a mediator after the arbitral proceedings have commenced provided the parties have consented in writing. The arbitral proceedings would then be stayed to facilitate the conduct of the mediation. In the event that the mediation fails, no objection may be made against the person acting as arbitrator or his conduct of the arbitral proceedings, solely on the ground that he had acted as a mediator in respect of the matter.
Similar provisions can found in the previous legislation although the word "conciliaton" is used which is defined to "include mediation". The express reference to mediation in the new Ordinance reflects Hong Kong's acceptance of mediation as a preferred alternative mode of dispute resolution under the Civil Justice Reforms.
Enforcement of Awards
The new Ordinance does not adopt the Model Law provisions in relation to enforcement of arbitral awards and retains the provisions under the previous regime in respect of enforcement in Hong Kong of awards made in a New York Convention state and Mainland China. In the case of an award made outside Hong Kong which is not a Convention award nor a Mainland award, a new provision is added in the new Ordinance setting out in detail the evidence required for its enforcement and the grounds for refusal of enforcement which mirror the provisions in respect of Convention awards.
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