HKIAC Arbitration in Hong Kong – A Case Illustration
27 March 2014
Joe Liu, Assistant Managing Counsel, HKIAC
Setting the scene …
* The Contract and Sub-Contract each provides for HKIAC arbitration seated in Hong Kong.
* Each Bank Guarantee provides for HKIAC arbitration seated in London.
Payment Request
C
China
Three On-demand
Bank Guarantees
in favour of A
Sub-Contract
CONTRACT
Temporary
close down
A
Mongolia
Jet Builder
Date of delivery:
27 April 2024
D
India
B
HK
Tour Operator
Court
proceedings
against D
Applicable arbitration law and rules
– What is the applicable arbitration law?
The Arbitration Ordinance (Cap. 609) (“AO”) – modern and userfriendly
» Commenced on 1 June 2011, subsequently amended in 2013
» Based on UNCITRAL Model Law, as amended in 2006
» One legislation applies to international and domestic arbitrations
– What are the applicable arbitration rules?
2013 HKIAC Administered Arbitration Rules (“HKIAC Rules”) –
one of the best developments of 2013, nominated by GAR
» Came into force on 1 November 2013
» Effective control of time and costs
» Well catered to high-value and complex international arbitrations
The supervisory courts and arbitral institution
– Which courts have the supervisory jurisdiction?
The Hong Kong courts – long-established reputation for supporting arbitration
»
Judicial independence
»
»
»
»
»
Ranked 4th out of 148 countries in the index of judicial independence in the
World Economic Forum’s “Global Competitiveness Report 2013-2014”
Retained the common law system since 1841
Specialist judge under the “Construction and Arbitration List”
Extremely supportive of arbitration and reluctant to intervene
Excellent track record in enforcement of arbitral awards
– Which institution administers the arbitral proceedings?
HKIAC – a leading arbitral institution in the world
»
»
»
»
»
Established in 1985
Independent and non-profit organisation
Multilingual and experienced Secretariat, featuring “light touch” approach
One-stop services, including arbitration, mediation, and domain name
dispute services
State-of-the-art facilities located in the centre of Hong Kong
Division of responsibilities between HKIAC and the HK courts
– Examples of HKIAC’s functions under the AO:
»
»
Determining the number of arbitrators
Appointing arbitrators and mediators
– Examples of the HK courts’ functions under the AO:
»
»
»
»
»
»
»
Deciding challenge of an arbitrator if such challenge was rejected in the first
instance
Reviewing an arbitral tribunal’s decision that it has jurisdiction over a
dispute
Issuing interim relief in support of arbitration
Assisting in taking evidence
Enforcing orders and directions of an arbitral tribunal and emergency relief
of an emergency arbitrator
Enforcing arbitral awards and deciding challenge to arbitral awards
Opt-in functions, including:
» Consolidating arbitral proceedings and ordering concurrent hearings
» Deciding challenge to awards based on serious irregularity
» Deciding appeal against awards on question of law
Turning to the case …
–
What HKIAC arbitration in Hong Kong can offer?
The dispute between A and B
–
Arbitral proceedings & awards and related court proceedings are confidential
(Sections 16 to 18 of the AO; Article 42 of the HKIAC Rules)
–
A wide range of interim relief by the arbitral tribunal and courts available, including:
»
»
»
»
Various forms of interim measures, including injunctive relief
Preliminary orders
Security for costs
Court-ordered interim relief in support of foreign arbitrations which have been or are
to be commenced
(Part 6 and section 56 of the AO; Articles 23 and 24 of the HKIAC Rules)
–
Emergency relief available (Articles 23.1 and Schedule 4 of the HKIAC Rules)
–
Expedited procedures available, provided that:
» the amount in dispute does not exceed HK$ 25 million;
» the parties so agree; or
» in cases of exceptional urgency
(Article 41 of HKIAC Rules)
The dispute involving C
– Consolidation of multiple arbitrations
»
A, B or C may apply to HKIAC to consolidate the arbitration between A and B
and the arbitration between A and C, provided that:
» A common question of law or fact arises in both arbitrations
» The relief claimed arises out of the same or series of transactions
» The arbitration clauses in both contracts are compatible
» The Hong Kong Court of First Instance can consolidate the arbitrations or
order concurrent hearings, if the parties opted in the relevant provisions of
the AO in writing
(Article 28 of the HKIAC Rules; section 2 of Schedule 2 of the AO)
– Med-Arb and/or Arb-Med procedures available (sections 32 and 33 of
the AO)
The dispute involving D
–
Single arbitration under multiple contracts (Article 29 of the HKIAC Rules)
»
–
Joinder of an additional party, i.e. B (Article 27 of the HKIAC Rules)
»
»
»
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A may commence a single arbitration against D under the three bank guarantees,
provided that:
» A and D are bound by each arbitration agreement giving rise to the arbitration
» A common question of law or fact arises under each arbitration agreement
giving rise to the arbitration
» The relief claimed arises out of the same or series of transactions
» The arbitration agreements under which the claims are made are compatible
An additional party may be joined if, prima facie, it is bound by an arbitration
agreement under the HKIAC Rules giving rise to the arbitration
The arbitral tribunal has the power to join an additional party on a prima facie basis
HKIAC has the power to join an additional party on a prima facie basis, before the
constitution of the tribunal
Enforceable emergency relief or interim relief available to restrain B from
pursuing the court proceedings in India
»
Emergency relief and interim relief issued outside Hong Kong are enforceable in Hong
Kong (sections 22B and 61 of the AO)
What are the costs?
–
Key components of the costs of an arbitration (Article 33 of the HKIAC Rules)
»
»
»
»
»
–
The fees of the arbitral tribunal
HKIAC’s administrative fees
Reasonable costs for legal representation
Reasonable costs of any expert advice and of any other assistance required by the
tribunal
Reasonable travel and other expenses of any witnesses and experts
Twin-track regime for determining the fees of the arbitral tribunal
(Articles 9&10 and Schedules 2&3 of the HKIAC Rules)
»
»
»
–
By hourly rates (default option)
By the amount in dispute
Standard terms and conditions
The arbitral tribunal may limit the recoverable costs to a specified amount
(Section 57 of the AO; Article 33.3 of the HKIAC Rules)
–
The arbitral tribunal may award and allocate the costs of the arbitration
(Section 74 of the AO; Article 33 of the HKIAC Rules)
–
HKIAC determines the costs of the arbitration when the arbitration is
terminated or settled (Article 33.5 of the HKIAC Rules)
Enforceability of arbitral awards (1)
– Arbitral awards made in Hong Kong are enforceable in the locations of
all the parties and over 140 other jurisdictions
»
»
»
Enforceable in all contracting states of the New York Convention, e.g.
Mongolia
Enforceable in mainland China and Macau (the relevant reciprocal
arrangements in 1999 and 2013)
Enforceable in India (HK added to India’s list of gazetted jurisdictions for
enforcement purposes in March 2012)
– The HK courts’ approach to the enforcement of arbitral awards
»
»
»
»
Enforcement should be “as mechanistic as possible”
Narrow construction of grounds for non-enforcement
Residual discretion to enforce an award despite the proven existence of a
valid ground
Indemnity costs principle
Enforceability of arbitral awards (2)
– Statistics of enforcement of awards in Hong Kong from 2008 to July 2013
Year
Leave to enforce
award as judgment
Leave granted
without challenge
Application to set
aside order
Successful
application to set
aside
2008
11
10
1
0
2009
21
17
4
2
(granted ex parte by
consent)
2010
25
23
2
0
2011
23
21
2
0
2012
27
23
4
0
2013 (until July)
9
0
0
0
Mongolia Arbitration Law – areas for improvement
Selected issues to be considered when amending the Arbitration Law of Mongolia
–
Following UNCITRAL Model Law, as amended in 2006
–
Codifying the arbitration law into one legislation
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Reviewing the provisions on arbitrability (Articles 6 & 7)
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Permitting the delivery and receipt of electronic communications (Article 9)
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Reviewing the restrictions on who can act as an arbitrator (Article 15.2)
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Removing Mongolian as the default language of the arbitration (Article 26)
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Clarifying the scope of the confidentiality provisions (Article 32)
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Expressly allowing the Mongolian courts to issue interim relief in support of
foreign arbitrations (Article 13)
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Allowing orders or directions (including interim or emergency relief) issued by an
arbitral tribunal or an emergency arbitrator in or outside Mongolia to be
enforceable in Mongolia
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Affording the arbitral tribunal greater flexibility in allocating costs (Article 41.4)
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Expressly providing that the arbitration law apply to any arbitration agreement to
which the Mongolian government is a party
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Any innovative mechanism particularly suitable for disputes in Mongolia?
Thank You
World’s Prime Location for Dispute Resolution Services
WEBSITE
ADDRESS
TEL
FAX
EMAIL
www.hkiac.org
38th Floor, Two Exchange Square Central, Hong Kong
(852) 2525 2381
(852) 2524 2171
adr@hkiac.org