Arbitration procedures and practice in Hong Kong: overview

A Q&A guide to arbitration law and practice in Hong Kong.

The country-specific Q&A guide provides a structured overview of the key practical issues concerning arbitration in this jurisdiction, including any mandatory provisions and default rules applicable under local law, confidentiality, local courts' willingness to assist arbitration, enforcement of awards and the available remedies, both final and interim.

To compare answers across multiple jurisdictions visit the Arbitration procedures and practice Country Q&A Tool.

This Q&A is part of the global guide to arbitration. For a full list of jurisdictional Q&As visit www.practicallaw.com/arbitration-guide.

Peter Murphy and Fergus Saurin, Holman Fenwick Willan
Contents

Use of arbitration and recent trends

1. How is commercial arbitration used and what are the recent trends?

Use of commercial arbitration and current trends

The importance of arbitration in Hong Kong is demonstrated by the significant number of arbitrations handled annually by the Hong Kong International Arbitration Centre (HKIAC). In 2015, a total of 520 new dispute resolution matters were referred to the HKIAC, consisting of:

  • 271 new arbitration cases (116 administered arbitrations).

  • 227 domain name disputes.

  • 22 mediation disputes.

The HKIAC continues to build on its global reach, and parties from 41 different jurisdictions used its dispute resolution services in 2015. The value of arbitration claims handled continued to rise reaching a total of US$6.2 billion in 2015. The HKIAC has also reported growth in intellectual property-related disputes and private equity matters in its administered arbitration matters in recent years.

The HKIAC has also been recognised for its innovative approach, winning a Global Arbitration Review (GAR) award for innovation in February 2015, for the introduction of a tribunal secretary service and also for amending the HKIAC model arbitration clause to prompt parties to expressly designate a law to govern the arbitration agreement. The HKIAC also updated its procedures for the administration of arbitration under the UNCITRAL Arbitration Rules. These are a different set of rules to the HKIAC's own set of administered rules (HKIAC Administered Arbitration Rules 2013). The HKIAC also achieved top rankings in the latest GAR 2016 survey, being ranked first for location, value for money, helpfulness of staff and IT services.

The HKIAC's continued focus on ongoing improvement was recently demonstrated in the results of the sixth International Arbitration Survey, produced by the Queen Mary University of London, in conjunction with White & Case, and released on 6 October 2015. The survey ranked the HKIAC as the third best arbitral institution worldwide, and the most preferred arbitral institution outside of Europe. The HKIAC was also described as the world's most improved institution over the past five years. Reflecting the importance of Hong Kong as an arbitral seat, the survey also found Hong Kong to be the third most preferred seat worldwide, following London and Paris, and the most preferred seat overall outside of Europe.

In addition to the HKIAC, other arbitration institutions also have a strong presence in Hong Kong, such as the International Court of Arbitration of the International Chamber of Commerce (ICC) and the China International Economic and Trade Arbitration Commission (CIETAC). CIETAC introduced revised arbitration rules (the 2015 rules) which came into force on 1 January 2015. The 2015 rules bring the CIETAC rules closer to other institutional rules, and include emergency arbitrator provisions and provisions for the consolidation/joinder of arbitrations. Special provisions also cover arbitrations administered by the CIETAC Hong Kong Arbitration Centre.

Further, many disputes are referred to arbitration on an ad hoc basis, that is, the arbitration agreement does not provide for the involvement of an arbitral institution.

In June 2011, the new Hong Kong Arbitration Ordinance (Cap.609) (Ordinance) came into effect. The introduction of this new legislative framework was the result of a long-running consultation and has further strengthened Hong Kong's position as a leading centre of international arbitration.

The Ordinance has almost entirely adopted the provisions of the UNCITRAL Model Law on International Commercial Arbitration 1985 (UNCITRAL Model Arbitration Law) into Hong Kong law, bringing it into line with international best practice. Before the introduction of the Ordinance, Hong Kong ran two separate arbitration regimes, one for domestic and one for international arbitrations. The domestic regime was governed solely by the now repealed Arbitration Ordinance (Cap.341) (Previous Ordinance), while international arbitrations were governed by the Previous Ordinance as well as the UNCITRAL Model Arbitration Law. The Ordinance has unified the previous dual regime into a single regime. Since 2011 minor amendments have been introduced to maintain and further improve the Ordinance, and the Hong Kong Government recently published a consultation paper seeking views on further IP related amendments to Cap.609 (see Question 37).

Debate also continues on whether third party funding for arbitration proceedings should be permitted in Hong Kong. In Hong Kong the doctrines of maintenance and champerty prohibit third party funding of litigation except in certain limited situations. The Hong Kong Court of Final Appeal leading decision in Unruh v Seeberger, [2007] 10 HKCFAR 31, intentionally did not determine the question of whether these doctrines also apply to prohibit third party funding of arbitrations taking place in Hong Kong.

The Law Reform Commission of Hong Kong Consultation Paper, released on 19 October 2015, firmly recommended a reform of Hong Kong arbitration law to expressly permit third party funding for arbitrations taking place in Hong Kong. The extended public consultation period for the proposed review ended in February 2016, and further developments are expected.

Advantages/disadvantages

Hong Kong is one of the world's leading arbitration centres. Modern, reliable infrastructure, excellent transport facilities and an easily accessible world class airport complement an effective and robust statutory framework for arbitration and alternative dispute resolution.

In addition, Hong Kong's prominence as a regional centre for financial, legal and commercial business provides an experienced network of skilled professionals to assist in international dispute resolution proceedings, notably:

  • Over 1,275 barristers of whom 93 are Senior Counsel (www.hkba.org).

  • 8,508 local practising lawyers and over 1,299 registered foreign lawyers (www.hklawsoc.org.hk).

  • Over 31,000 members of the Hong Kong Institution of Engineers (HKIE) (www.hkie.org.hk).

  • In excess of 37,000 accountants (www.hkicpa.org.hk).

  • Over 9,330 members of the Hong Kong Institute of Surveyors (www.hkis.org.hk).

  • More than 3,500 members of the Hong Kong Institute of Architects (www.hkia.net).

The HKIAC maintains a list of several hundred arbitrators experienced in arbitration practice, many of whom are drawn from the above professions. Nevertheless, parties are free to choose arbitrators from anywhere in the world and, unlike court proceedings in Hong Kong, can choose to be represented by lawyers qualified in jurisdictions outside Hong Kong.

Awards made in Hong Kong are enforceable outside Hong Kong in those countries which are signatories to the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention) and in Mainland China through the Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and the Hong Kong Special Administrative Region. As at February 2016, there were 156 signatory states. There were three new signatory states in 2015: Palestine, Comorros and Andorra (in comparison, the UN has 193 member states

The main advantage of arbitration proceedings over court litigation is the flexibility granted to the parties to determine the proceedings. This can lead to great savings in time and cost (although this is not necessarily always the case). In addition, arbitration proceedings are generally confidential, which can also be an advantage over court proceedings.

Arbitration is a well understood and popular form of ADR in Hong Kong. The generally accepted advantages and disadvantages of resolving disputes through arbitration, as opposed to litigation, apply equally to arbitration in Hong Kong. As such, it is not suitable for all disputes and before agreeing to arbitration, parties should carefully consider which dispute resolution procedure would best serve their needs.

 

Legislative framework

Applicable legislation

2. What legislation applies to arbitration? To what extent has your jurisdiction adopted the UNCITRAL Model Law on International Commercial Arbitration 1985 (UNCITRAL Model Law)?

The Ordinance, which took effect on 1 June 2011, governs the arbitration regime in Hong Kong. It is largely based on the UNCITRAL Model Arbitration Law (with the amendments adopted into the UNCITRAL Model Arbitration Law in 2006). Like many other UNCITRAL Model Arbitration Law jurisdictions, it aims to provide a framework for arbitrations, rather than a comprehensive code. It also contains supplemental provisions specific to Hong Kong.

Before the introduction of the Ordinance, there were separate statutory regimes for domestic and international arbitrations. The Ordinance has unified the two regimes and has also created an opt-in procedure for certain provisions from the domestic regime of the earlier legislation. The opt-in provisions are listed in Schedule 2 to the Ordinance and cover:

  • Appointment of a sole arbitrator.

  • Consolidation of arbitrations.

  • Decision of preliminary questions of law by the court.

  • Challenging arbitral awards on the grounds of serious irregularity.

  • Appeals against arbitral awards on questions of law.

Mandatory legislative provisions

3. Are there any mandatory legislative provisions? What is their effect?

The guiding principle of the Ordinance is that, subject to the observance of safeguards necessary in the public interest, the parties to a dispute should be free to agree on how the disputes should be resolved (section 3(2)(b), Ordinance).

The Ordinance therefore contains relatively few mandatory provisions (that is, provisions that cannot be excluded by the parties, as opposed to provisions that apply in the absence of the parties' agreement). The mandatory provisions include, among others:

  • The application of the Limitation Ordinance (Cap.347) (Limitation Ordinance) or any other limitation enactments (section 14, Ordinance) (see also Question 5 ).

  • The requirement for the arbitration agreement to be in writing (section 19, Ordinance). See Question 8 for the formal requirements).

  • The court's power to order a stay of court proceedings in favour of arbitration proceedings unless it finds that the arbitration agreement is null and void, inoperative or incapable of being performed (section 20, Ordinance).

  • The competence of the arbitral tribunal to rule on its own jurisdiction (section 34, Ordinance).

  • The requirement that parties must be treated with equality, including the requirement that the arbitral tribunal, when conducting the arbitral proceedings or exercising any of the powers conferred on it, must be independent and must act fairly and impartially between the parties, giving them a reasonable opportunity to present their case and deal with their opponent's case, and to use procedures that are appropriate to the particular case, avoiding unnecessary delay and expenses (section 46, Ordinance).

  • The court's power to extend agreed time limits to begin arbitral proceedings, or to begin any other dispute resolution procedure that must be exhausted before arbitral proceedings can be commenced (section 58, Ordinance).

  • The court's power to order recovery of the tribunal's fees (section 62, Ordinance) and the tribunal's power to withhold an award for non-payment of the arbitrators' fees and expenses (section 78, Ordinance).

  • The court's power to set aside an award (section 81, Ordinance).

  • The arbitral tribunal's or mediator's liability for certain acts and omissions, and the liability of persons who appoint the arbitral tribunal, mediator, or who administer arbitration proceedings (sections 104 to 105, Ordinance).

There are, in addition, certain types of dispute that are not capable of being determined by arbitration (see Question 4) :

  • Actions in rem against ships.

  • Criminal cases.

  • Competition and anti-trust disputes.

  • Disputes relating to intellectual property (for example, patents, trade marks, copyright and registered designs), subject to certain exceptions. See Question 4.

  • Divorce proceedings.

  • Guardianship applications.

  • Matters reserved for resolution by state agencies and tribunals (for example, taxation, immigration and national welfare entitlements).

 
4. Does the law prohibit any types of disputes from being resolved via arbitration?

Unless the parties agree otherwise, where Hong Kong is the seat of the arbitration, Hong Kong law will be applied to determine the arbitrability of a dispute. Generally, arbitration, as a method of dispute resolution, is most suitable for commercial disputes between private parties. However, the Hong Kong Ordinance does not adopt Article 1 of the Model Law which limits the scope of arbitration to "commercial" disputes. Instead, arbitration is to be more broadly available, provided that there is agreement between the parties.

There are, however, many types of disputes that are fundamentally unsuitable for arbitration and are not capable of being determined by an arbitration tribunal. These include:

  • Criminal cases.

  • Competition and anti-trust disputes.

  • Divorce proceedings.

  • Guardianship applications.

  • Taxation.

  • Immigration and any matters specifically reserved for resolution by state agencies and tribunals.

These exceptions fall under the general principle in section 3 of Cap.609 which requires the "observance of safeguards necessary in the public interest" in the parties' determination of how the dispute is to be resolved

Intellectual property

Disputes relating to intellectual property rights such as contractual disputes concerning the transfer and licensing of IP rights, or IP infringement claims can be referred to arbitration. The HKIAC provides a special online dispute resolution process for domain name disputes. Some intellectual property disputes however, can only be appropriately dealt with by the courts where criminal sanctions are involved, or by the appropriate registry where issues of validity/registration arise. For example, disputes relating to the registration of a trade mark will be dealt with by a Hearing Officer at the Trade Marks Registry. Amendments to Cap.609 are intended which will clarify the arbitrability of disputes over IP rights, and the effect and enforcement of arbitral awards involving IP rights.

Employment

Whether or not arbitration is available for employment disputes depends on the nature of the dispute. Generally, employment disputes are arbitrable, but there are some restrictions and exceptions. Where there is an arbitration agreement between the parties, the Labour Tribunal may, at the request of the parties, refer the matter to arbitration but has the discretion to refuse to do so (section 20 (2), Arbitration Act). Claims under the Employees Compensation Ordinance cannot be referred to arbitration and fall under the exclusive jurisdiction of the District Court.

Actions in rem against ships

The Hong Kong Court retains the exclusive jurisdiction for actions in rem to arrest ships in Hong Kong. A related issue is that an action in rem for arrest cannot be brought based on the enforcement of an arbitration award, but must be brought on the basis of the underlying maritime claim.

Limitation

5. Does the law of limitation apply to arbitration proceedings?

The Limitation Ordinance (which is Hong Kong's principal piece of legislation relating to limitation), as well as other limitation enactments, apply to arbitrations (section 14, Ordinance Cap.609).

Generally, in contract and tort claims, the relevant limitation period is six years from the date that the cause of action accrued (section 4(1)(a), Limitation Ordinance).

Therefore, contractual claims must be brought within six years from the date the contractual breach occurs, and tortious claims must be brought within six years from the date the damage occurs.

The exception to the rule that the limitation period starts to run from the date contractual breach occurs, or in tort cases, the date the damage occurs, is in instances of fraud or mistake. When there is fraud or mistake, the limitation period starts to run from the time the fraud or mistake was, or could with reasonable diligence have been, discovered (section 26, Limitation Ordinance).

The application of the Limitation Ordinance does not prevent the parties from contractually agreeing that no arbitration proceedings will be brought after the expiration of a shorter period than that prescribed by the Limitation Ordinance or any other limitation enactments (see Kanson Crane Service Co Ltd v Bank of China Group Insurance Co Ltd [2003] HKEC 1139).

However, where there is a contractually agreed time limit and it expires, the arbitration tribunal or, where no tribunal has been constituted, the court, has the power to extend the time limit if either:

  • The circumstances are such as to be outside the reasonable contemplation of the parties when they entered into the arbitration agreement, and it would be just to extend the time period (section 58(4)(a), Ordinance).

  • The conduct of any party makes it unjust to hold the other party to the strict terms of the agreement (section 58(4)(b), Ordinance).

  • The time allowed cannot however exceed the relevant limitation period set down in the Limitation Ordinance.

 

Arbitration organisations

6. Which arbitration organisations are commonly used to resolve large commercial disputes?

Hong Kong International Arbitration Centre

The Hong Kong International Arbitration Centre (HKIAC) was established in 1985. It was initially funded by private business and the Hong Kong Government, however, the HKIAC is now financially self-funded and operates as an independent institution promoting dispute resolution in Hong Kong. The HKIAC is a non-profit company limited by guarantee with charitable status.

The HKIAC provides for disputes to be administered under the HKIAC Rules, the latest edition of which was issued in 2013 and includes emergency arbitrator provisions. The HKIAC also offers its services and facilities to parties using other institutional rules and for ad hoc arbitrations. Other sets of rules (for example, the HKIAC Domestic Arbitration Rules) can be found on the HKIAC website (www.hkiac.org/en). Under the Ordinance, the HKIAC is the statutory appointing authority. The HKIAC maintains a panel of experienced arbitrators and mediators and 193 arbitrators were appointed by the HKIAC in 2013.

The HKIAC is becoming increasingly involved in administered arbitrations. Of the 260 new arbitration cases referred to the HKIAC in 2013, 81 were fully administered by the HKIAC. This is a 20% increase from 2012. The majority of the cases referred to the HKIAC arbitration are international (75%). For administered arbitrations, 91% are international. This reflects the HKIAC's international standing as a well-respected institution for dispute resolution.

As a new initiative from 2014, the HKIAC has provided a "Tribunal Secretary Service" to assist parties in conducting arbitrations. Recent developments also include the opening of a representative office at the China (Shanghai) Pilot Free Trade Zone on 19 November 2015. Notably this is the first representative office set up by an international arbitration institution in Mainland China. The HKIAC has had an overseas office in Seoul since May 2013.

The HKIAC issued a Practice Note on the consolidation of arbitrations which came into effect on 1 January 2016, to supplement the consolidation regime set out in Cap.609. Furthermore in March 2016, the HKIAC announced the introduction of a new Panel of Arbitrators for Intellectual Property (IP) Disputes, which will be the primary source of HKIAC's appointment of arbitrators for IP disputes.

Over recent years the HKIAC has seen an increase in the volume of IP disputes being submitted to HKIAC arbitration. In addition, the HKIAC reports a steady increase in the use of the HKIAC's online dispute resolution service, with an increasing volume of domain name cases being referred to the HKIAC. In 2015 the HKIAC handled 227 domain name cases, and increase of 13% from 2014. The HKIAC has also introduced an arbitrator evaluation system to enable the HKIAC to capture feedback from users of the Centre and monitor to quality of the services provided.

The HKIAC works to support dispute resolution in Hong Kong generally, and provides administrative support to organisations such as the Hong Kong Institute of Arbitrators and the Chartered Institute of Arbitrators (CIArb East Asia Branch). Through the Hong Kong Maritime Arbitration Group, a division of the HKIAC, the HKIAC looks to promote maritime arbitration in Hong Kong.

ICC International Court of Arbitration (Asia Office)

The ICC is a leading international arbitral institution based in Paris. In 2007, about 18% of the parties in new ICC arbitrations were from Asia, and this encouraged the ICC to establish a secretariat branch of the ICC in Hong Kong in November 2008.

The ICC's Asia branch office administers cases in the region under the ICC Rules of Arbitration in the same way as the case management teams of the ICC secretariat in Paris. Increasing demand for arbitration services in China, India, Vietnam and Indonesia suggests that the ICC will increase its already strong international presence.

Hong Kong Institute of Arbitrators

The Hong Kong Institute of Arbitrators (HKIArb) was established in 1996 with the objective of promoting arbitration and other methods of dispute resolution in Hong Kong. The HKIArb holds charitable status and is non-profit making. It is also financially independent and funded by annual membership fees. The HKIArb works to build links with other dispute resolution organisations in Hong Kong, mainland China and in the Asia region. It is a well-respected institution within Hong Kong, providing recommendations and comments to the Hong Kong Government on arbitration and meditation related law reform. In addition, it is also involved in training arbitrators and mediators and setting appropriate standards of conduct for arbitrators and mediators in Hong Kong.

Chartered Institute of Arbitrators (CIArb East Asia Branch)

The Hong Kong branch of the London-based Chartered Institute of Arbitrators (CIArb East Asia Branch) was set up in Hong Kong in 1972. The CIArb East Asia Branch, previously known as the Hong Kong Branch, provides a local organisation for CIArb members resident in the region and covers China (including Mainland China, Hong Kong, Macau and Taiwan) and the greater Asia region. Local offices have recently been established in Thailand and Singapore. CIArb works to promote the use of arbitration and other methods of dispute resolution. The CIArb East Asia Branch is committed to providing training and education on law and practice related to arbitration. Nearly 400 people are recognised as fellows of CIArb out of a total branch membership of 1,714 (statistics current as at March 2015: CIArb Newsletter April 2015).

China International Economic and Trade Arbitration Commission Hong Kong Arbitration Centre (CIETAC Hong Kong Arbitration Centre)

CIETAC Hong Kong Arbitration Centre is the first branch of CIETAC to be established outside Mainland China. The branch was set up in 2012 and intends to support the development of Hong Kong as a leading centre for international arbitration. Under the CIETAC Rules, the CIETAC Hong Kong Arbitration Centre handles cases where the arbitration agreement declares "arbitration in CIETAC Hong Kong Arbitration Centre" or "arbitration in CIETAC Hong Kong".

See box, Main arbitration organisations.

 

Jurisdictional issues

7. What remedies are available where one party denies that the tribunal has jurisdiction to determine the dispute(s)? Does your jurisdiction recognise the concept of kompetenz-kompetenz? Does the tribunal or the local court determine issues of jurisdiction?

Section 34 of the Ordinance, adopts Article 16 of the UNCITRAL Model Law, and provides that an arbitral tribunal has the power to rule on its own jurisdiction, including any objections to the existence or validity of the arbitration agreement. The Ordinance also grants an arbitral tribunal the power to decide on:

  • Whether the tribunal has been properly constituted.

  • What matters have been submitted to arbitration in accordance with the arbitration agreement.

Hong Kong therefore recognises the concept of kompetenz-kompetenz.

However, as with the English courts' application of the concept, the Hong Kong Court of First Instance retains a statutory right to review (and set aside) the tribunal's decisions on jurisdiction (section 34(1)(3), Ordinance). Any arbitration agreement which purports to limit the court's statutory right to supervise will be unenforceable to that extent (E Rotheray & Sons Ltd v Carlo Bedarida & Co [1961] 1 Lloyd's Rep 220).

Where a party challenges the arbitral tribunal's jurisdiction, the tribunal has the option to decide the challenge either as a preliminary issue or at the same time as it determines the merits of the claim (section 34(1)(3), Ordinance). The challenge must be made no later than the submission of the defence (or equivalent), or if a party argues that the tribunal is exceeding its authority, the objection must be raised as soon as the offending issue is raised in the arbitration (section 34(1)(2)). The correct procedure for responding to a tribunal's unfavourable decision on jurisdiction depends on how the tribunal has dealt with the challenge:

  • If the tribunal decides as a preliminary issue that it has jurisdiction to decide a given dispute, a party alleging otherwise must, within 30 days of receiving notice of the decision, request the supervising Court of First Instance to decide the matter (section 34(1)(3), Ordinance). The court's ruling on such a challenge is final and not open to appeal (though the tribunal can continue the arbitral proceedings and proceed to an award while the court's decision is pending).

  • If the tribunal determines at the same time as its award on the merits, that it has jurisdiction to decide a given dispute, a party alleging otherwise can refer the matter to the Hong Kong courts by applying to set aside the award (section 81, Ordinance).

  • If the tribunal has decided, either as a preliminary issue or in its award on the merits, that it does not have jurisdiction to determine a particular matter, that decision is not subject to appeal to the Hong Kong courts (section 34(4), Ordinance), and claimants should consider bringing their claims in some other forum.

The court has power to order a stay of court proceedings in support of arbitration under section 20 which adopts Article 8 of the Model Law. The tribunal cannot therefore be considered to have exclusive authority to determine its jurisdiction. At times, a court can be asked to rule on jurisdiction ahead of the tribunal, and in so doing will bind the tribunal.

Further, litigants must consider very carefully when and how to raise a jurisdictional objection. In Astro Nusantara International BV and ors v PT Ayunda Prima Mitra and ors HCCT 45/2010, a defendant failed to challenge a Singaporean tribunal's preliminary award on jurisdiction in the supervising Singapore courts, and instead kept its jurisdictional point in reserve to be deployed at the enforcement stage. The defendant engaged with the tribunal and (believing it had no assets in Hong Kong) did not initially challenge the claimant's application for enforcement in Hong Kong of an award in its favour. Subsequently the claimant attached receivables due to the defendant in Hong Kong, and the defendant applied for an order to set aside the enforcement.

Although grounds for refusal to enforce the award were otherwise made out, the Hong Kong court exercised its discretion to allow enforcement on the basis that the defendant (and award debtor) had breached a principle of good faith in its failure to pursue its jurisdictional point while the SIAC arbitration was ongoing, and also due to the deliberate delay in the defendant's decision to contest enforcement in Hong Kong. This long-running saga prompted much debate in Hong Kong in 2015 which has continued over recent months. On 8 December 2015, Chow J granted leave to the defendant to appeal against the Hong Kong decision to refuse to extend time to contest the enforcement proceedings. The debate over the 'transnational' nature of arbitration law continues to run.

 

Arbitration agreements

Validity requirements

8. What are the requirements for an arbitration agreement to be enforceable?

Substantive/formal requirements

An arbitration agreement must be in writing (section 19, Ordinance). An arbitration agreement is considered to be in writing if its content is recorded in any form, whether or not the arbitration agreement or contract has been concluded orally, by conduct or by other means. This expressly includes (section 19, Ordinance):

  • Electronic communications provided that the information contained is accessible so as to be useable for subsequent reference.

  • An agreement in an exchange of statements of claim and defence in which the existence of an agreement is alleged by one party and not denied by the other.

  • A reference in a contract to any document containing an arbitration clause, provided that the reference is such as to make that clause part of the contract.

An agreement is in writing if (section 19, Ordinance):

  • The agreement is in a document, whether or not the document is signed by the parties to the agreement.

  • The agreement, although made otherwise than in writing, is recorded by one of the parties to the agreement, or by a third party, with the authority of each of the parties to the agreement.

  • The New York Convention also requires an arbitration agreement to be in writing, and it can be recorded in any form (Article II (2), New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958).

Separate arbitration agreement

The arbitration agreement can take the form of an arbitration clause in a contract or a separate agreement (section 19, Ordinance).

Unilateral or optional clauses

9. Are unilateral or optional clauses, where one party has the right to choose arbitration, enforceable?

Unilateral or optional clauses where one party has the right to choose arbitration are permissible as a matter of Hong Kong law, as are arbitration clauses that provide for arbitration at the election of either party. See, for example, William Co v Chu Kong Agency Co Ltd [1995] 2 HKLR 139.

However, special care must be taken when drafting these types of clauses to ensure that they are expressed with sufficient clarity to be enforceable. In particular, these types of clauses can give rise to complications where the electing party is the respondent, and that party fails to choose arbitration. In these circumstances, the claimant is likely to need to seek the direction of the court.

 
10. In what circumstances can a party that is not a party to an arbitration agreement be joined to the arbitration proceedings?

Arbitration is a consensual process, and a party must consent to the dispute in question being referred to arbitration. There is no direct equivalent to the "third party notice" in arbitration, that is, where a third party can be required to participate in litigation.

With regards to consolidation, the consolidation of arbitrations remains as an opt-in provision (Schedule 2, Ordinance). When section 2 of Schedule 2 to the Ordinance applies, on the application of any party to the arbitration, the court can order the consolidation of arbitration proceedings. By bringing together two or more arbitration proceedings, potentially a party is required to arbitrate issues which it did not expressly agree to refer to its own arbitration. The court will generally only order consolidation when a common question of law or fact arises in the proceedings (section 2, Schedule 2, Ordinance). When section 2 Schedule 2 does not apply, the court does not have power to order consolidation.

Both consolidation and joinder (where a third party is added to arbitration proceedings) can be provided for under arbitral institution rules, such as the HKIAC Administered Arbitration Rules 2013. The HKIAC's Practice Note on the Consolidation of Arbitrations came into effect on 1 January 2016. This sets out what information a request for consolidation must contain, and supplements that set out in Cap.609 Article 28. Under the HKIAC Administered Arbitration Rules 2013, for joinder, the parties, including the third party, must be bound (or agree to be bound) by an arbitration agreement to which the rules apply (see Question 15). However, such arbitral institution rules only apply by agreement of the parties.

 
11. In what circumstances can a party that is not a party to an arbitration agreement compel a party to the arbitration agreement to arbitrate disputes under the arbitration agreement?

In very limited circumstances, where an inter-pleader action arises in the context of competing claims subject to an arbitration agreement, the court must refer the dispute to arbitration (section 15, Ordinance). This applies only to the extent that the court considers that the matter is subject to arbitration (section 15.2, Ordinance). In effect, the third party to the arbitration agreement, the inter-pleader, therefore compels the arbitration of the issue between the contracting parties.

As a general rule, an arbitral tribunal does not have the power to make an order against someone who is not party to the arbitration agreement. It follows that a third party can generally only be joined to an arbitration by consent (that is, the third party must have agreed to be bound by the arbitration agreement, or otherwise agreed to become a party to the arbitration proceedings).

This is reflected in the HKIAC's Administered Arbitration Rules, which provide that, on the application of one of the parties, the tribunal can join a third party to the arbitration, provided that the applicant party and the third party have consented to that joinder in writing.

With respect to the binding effect of an arbitration award, an award will not only bind the parties, but also any person claiming through or under the parties (section 73, Ordinance).

Further, in appropriate circumstances, following the coming into force of the Contracts (Rights of Third Parties) Ordinance (Cap.623) on 1 January 2016, a third party can enforce a term of the arbitration agreement, and in such circumstances the third party will be held to be a party to the arbitration agreement (see section 12. Cap.623).

Separability

12. Does the applicable law recognise the separability of arbitration agreements?

Under Hong Kong law, an arbitration clause is treated as an agreement independent of the other terms of the contract (section 34(1), Ordinance). A decision by the arbitral tribunal that the underlying contract is null and void will not ipso jure invalidate the arbitration clause (section 34(1), Ordinance).

Breach of an arbitration agreement

13. What remedies are available where a party starts court proceedings in breach of an arbitration agreement or initiates arbitration in breach of a valid jurisdiction clause?

Court proceedings in breach of an arbitration agreement

If a party brings court proceedings in Hong Kong in breach of a valid arbitration agreement (whether for arbitration in Hong Kong or elsewhere), if a party so requests, the court must refer the parties to arbitration and stay the court proceedings unless the arbitration agreement is either (section 20, Ordinance):

  • Null and void.

  • Inoperative.

  • Incapable of being performed.

Arbitration in breach of a valid jurisdiction clause

If a party commences or pursues arbitration proceedings in breach of a valid jurisdiction clause, the tribunal can, on a party's application, rule on its own substantive jurisdiction and dismiss the arbitration proceedings (section 34, Ordinance).

Alternatively, the party who has not started arbitration proceedings can start court proceedings in accordance with the jurisdiction clause, and seek a declaration from the court that there is no arbitration agreement (see Kenon Engineering Ltd v Nippon Kokan Koji Kabushiki Kaishia [2004] HKEC 542). However, unless the point is clear, the court is likely to stay those proceedings and remit the matter to the arbitral tribunal for determination instead (although the court is not required to do this) (see PCCW Global Ltd v Interactive Communication Service Ltd [2007] 1 HKLRD 309). The Hong Kong Court of First Instance has confirmed that a party who unsuccessfully challenges an arbitration agreement is, in the absence of any special circumstances, liable to pay costs on an indemnity basis (see Chimbusco International Petroleum (Singapore) Pte Ltd v Fully Best Trading Ltd (HCA 2416/2014)).

 
14. Will the local courts grant an injunction to restrain proceedings started overseas in breach of an arbitration agreement?

The Hong Kong court can, in appropriate circumstances, prohibit parties over whom it has jurisdiction from pursuing or continuing proceedings in another jurisdiction through an anti-suit injunction (section 21L and 21M, High Court Ordinance).

Further, the Hong Kong court also has power to grant interim injunctions (section 45, Ordinance). Although the position is arguably not entirely certain, recent developments do support the view that this would include the power to grant an injunction against a court action that had been started in a foreign jurisdiction in breach of an arbitration agreement (sections 45(2) and (3) of the Ordinance read with section 35(1), and Report on the Working Group on the Arbitration on the Work of its 40th Session, New York, 23-27 Feb 2004, A/CN.9/547).

In 2015, the Hong Kong Court of First Instance issued its first anti-suit injunction under Cap.609 to restrain court proceedings began in Turkey in breach of agreement to arbitrate in Hong Kong (Ever Judger Holding Company Limited v Kroman Celik Sanayii Anonim Sirketi, unreported, HCCT6/2015, 17 April 2015). There is however ongoing concern as to the risk of parallel proceedings and inconsistent decisions in circumstances where not all issues in dispute fall to be determined by arbitration (see CPC Construction Hong Kong Limited v Harvest Engineering (HK) Limited, and another (HCA 2096/2013)).

As an anti-suit injunction has an indirect effect on a foreign court, Hong Kong courts exercise this discretion with caution. Factors that the court considers when deciding to issue an anti-suit injunction include:

  • Whether Hong Kong is the appropriate forum.

  • Whether the foreign action has been brought in bad faith.

Hong Kong courts have jurisdiction to grant interim protective measures to assist foreign arbitral proceedings (section 45(5), Ordinance).

 

Arbitrators

Number and qualifications/characteristics

15. Are there any legal requirements relating to the number, qualifications and characteristics of arbitrators? Must an arbitrator be a national of, or licensed to practice in your jurisdiction in order to serve as an arbitrator there?

Parties are free to determine the number of arbitrators or to authorise a third party, including an institution, to make that determination (section 23(1) and (2), Ordinance).

If the parties fail to agree on the number of arbitrators, the number of arbitrators must be either one or three as decided by the HKIAC in the particular case (section 23(3), Ordinance) Earlier , if section 1 of Schedule 2 of the Ordinance (one of the opt-in provisions) applied, a sole arbitrator determined the dispute. Following the Arbitration (Amendment) Ordinance 2015 coming into force on 17 July 2015, parties can now decide on the number of arbitrators in respect of domestic arbitrations in Hong Kong (or other arbitrations when Schedule 2 of the Ordinance is expressly applied by the parties).

In the absences of provisions in the arbitration agreement, in respect of an arbitration seated in Hong Kong, the HKIAC is the nominated appointing authority in Hong Kong. The procedure for seeking a decision on the number of arbitrators is set out in Rule 8 of the Arbitration (Appointment of Arbitrators and Mediators and Decision on Number of Arbitrators) Rules (Cap.609C) (Rules). Before deciding on the number of arbitrators, the HKIAC must allow the parties an opportunity to submit brief written reasons in support of their preference on the number of arbitrators appropriate to their dispute (Rule 9(2) of the Rules). The HKIAC also takes into account the following factors (Rule 9(1) of the Rules):

  • The amount in dispute.

  • The complexity of the claim.

  • The nationalities of the parties.

  • Any customs of the trade, business or profession relevant to the dispute.

  • The availability of appropriate arbitrators.

  • The urgency of the case.

The parties can stipulate that arbitrators must possess certain characteristics, for example, professional qualifications, expertise in a particular field or nationality.

However, unless otherwise agreed by the parties, an arbitrator cannot be prohibited from being appointed purely on the grounds of nationality (section 24, Ordinance).

Independence/impartiality

16. Are there any requirements relating to arbitrators' independence and/or impartiality?

When conducting arbitral proceedings or exercising any of the powers conferred by it, the arbitral tribunal is required to (section 46, Ordinance):

  • Be independent.

  • Act fairly and impartially as between the parties, giving them a reasonable opportunity to present their case and to deal with their opponent's case.

  • Use procedures that are appropriate to the particular case, avoiding unnecessary delay or expense, so as to provide a fair means for resolving the dispute to which the arbitral proceedings relate.

These requirements are mandatory. As such, they cannot be varied to the contrary by the parties.

Appointment/removal

17. Does the law contain default provisions relating to the appointment and/or removal of arbitrators?

Appointment of arbitrators

Under the Ordinance, the parties are free to agree on the procedure for appointing the arbitrator or arbitrators (section 24(1), Ordinance). If the parties fail to agree on the number of arbitrators, the number of arbitrators must be either one or three as decided by the HKIAC in the particular case (section 23(3), Ordinance) (see Question 16).

However, in the absence of any other agreement on procedure, the Ordinance sets out the following default provisions relating to the appointment of arbitrators:

  • In an arbitration with three arbitrators, each party will appoint one arbitrator, and those two arbitrators appointed will appoint the third arbitrator (section 24(1), Ordinance).

  • In an arbitration with a sole arbitrator, if the parties are unable to agree on the arbitrator, he will be appointed, on a party's request, by the HKIAC (section 24(1), Ordinance).

  • In an arbitration with an even number of arbitrators, each party is to appoint the same number of arbitrators (section 24(2), Ordinance).

  • In an arbitration with an uneven number of arbitrators greater than three, the following provisions apply (section 24(3), Ordinance):

    • each party will appoint the same number of arbitrators;

    • the HKIAC will appoint the remaining arbitrator or arbitrators.

Further, where under an appointment procedure agreed by the parties (including a default appointment procedure prescribed by the Ordinance) a party fails to make an appointment under that procedure, the HKIAC can make the necessary appointment, subject to the parties having been given the requisite notice (sections 24(1) to (4), Ordinance).

Removal of arbitrators

Under the Ordinance, the parties are free to agree on the procedure for challenging the arbitrator or arbitrators (section 26(1), Ordinance). This freedom is subject to two restrictions:

  • The Hong Kong court will have the last word in determining the challenge (section 26(1), Ordinance).

  • The procedure for challenge must not contravene the principle that the parties must be treated with equality (section 46, Ordinance).

However, in the absence of any agreement on procedure, the Ordinance sets out the following default provisions relating to the challenge of the arbitrator or arbitrators:

  • A party who intends to challenge an arbitrator must, within 15 days after becoming aware of the constitution of the arbitral tribunal or after becoming aware of any circumstances giving rise to a ground for challenge under in section 25 of the Ordinance, send a written statement of the reasons for the challenge to the arbitral tribunal.

  • Unless the challenged arbitrator withdraws from his office or the other party agrees to the challenge, the arbitral tribunal will decide the challenge.

  • If the challenge under the above procedure is unsuccessful, the challenging party can request the court to decide on the challenge. The challenging party must make this request within 30 days after having received the notice of the decision rejecting the challenge.

An arbitrator can be challenged only if circumstances exist that either (section 25, Ordinance):

  • Raise justifiable doubts concerning the arbitrator's impartiality or independence.

  • Show that the arbitrator does not possess the qualifications agreed to by the parties.

If an arbitrator becomes unable to perform his duties, or for other reasons fails to act in a timely manner, the parties can remove the arbitrator by agreement. If the arbitrator refuses to withdraw, or the parties are not able to agree, the arbitrator can be removed by court order (section 27, Ordinance).

 

Procedure

Commencement of arbitral proceedings

18. Does the law provide default rules governing the commencement of arbitral proceedings?

Unless otherwise agreed by the parties, the arbitral proceedings for a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent (section 49, Ordinance).

Applicable rules and powers

19. What procedural rules are arbitrators bound by? Can the parties determine the procedural rules that apply? Does the law provide any default rules governing procedure?

Applicable procedural rules

Parties are free to agree on the procedural rules (section 47, Ordinance). If the parties fail to agree, the arbitral tribunal can conduct the arbitration in the manner that it considers appropriate, subject to the provisions of the Ordinance. This principally refers to the requirement that the arbitral tribunal act fairly and impartially, which cannot be overridden (see Question 13).

Default rules

There are certain procedural matters that the UNCITRAL Model Arbitration Law expressly gives the parties freedom to agree. These are set out in Articles 22 to 26 and are given effect by sections 50 to 54 of the Ordinance, which essentially grant the tribunal discretion to decide on those matters if the parties fail to agree.

Evidence and disclosure

20. If there is no express agreement, can the arbitrator order disclosure of documents and attendance of witnesses (factual or expert)?

The arbitrator has the powers conferred by the arbitration agreement and the applicable arbitration rules as agreed by the parties.

The tribunal is also granted general powers to (section 56, Ordinance):

  • Require a claimant to give security for the costs of the arbitration. Although the tribunal cannot order the claimant to give security based only on the reason that the claimant is a foreign national or entity.

  • Direct the discovery of documents or the delivery of interrogatories. However, section 56(9) of the Ordinance confirms that a party can resist production of privileged documents on the same grounds as in Hong Kong court proceedings.

  • Direct evidence to be given by affidavit.

  • Direct the inspection, photographing, preservation, custody, detention or sale of any relevant property.

  • Direct samples to be taken from, observations to be made of, or experiments to be conducted on, any relevant property.

  • Initiate the determination of facts and law relevant to the proceedings. The tribunal must not in doing so breach its duties under section 46 of the Ordinance, including the duty to treat the parties with equality, to act fairly and to give each party a reasonable opportunity to present its case. If the tribunal breaches its duties, any subsequent award can be set aside (see, for example, Apex Tech Investment Ltd v Chuang's Development (China) Ltd [1996] 2 HKLR 155).

  • Administer oaths and take affirmations.

  • Examine witnesses and parties under oath or affirmation.

  • Direct the attendance of witnesses in order to give evidence, or to produce documents or other material evidence.

In addition, the Ordinance confers procedural powers on the arbitral tribunal to:

  • Appoint experts and assessors (section 54, Ordinance).

  • Require the parties to provide the experts with relevant materials (section 54, Ordinance).

  • Require the expert to participate in the hearing (section 54, Ordinance).

  • Request the assistance of the court in taking evidence (section 55, Ordinance).

 
21. What documents must the parties disclose to the other parties and/or the arbitrator? How, in practice, does the scope of disclosure in arbitrations compare with disclosure in domestic court litigation? Can the parties set the rules on disclosure by agreement?

Scope of disclosure

The parties are free to agree on the terms and the mode of discovery and inspection of documents concerning the dispute. If there is no agreement, the matter is left to the tribunal's discretion (section 47, Ordinance), which must be exercised in a manner consistent with section 46 of the Ordinance, including the duty to treat the parties with equality, to act fairly and to give each party a reasonable opportunity to present its case.

The Ordinance gives the tribunal wide discretion with regard to discovery, and the tribunal is under no obligation to require discovery and inspection of documents. Where the tribunal orders the disclosure of documents, it cannot require a person to produce any document or other material evidence that they would not be required to produce in civil proceedings before a court (section 56(9), Ordinance).

Generally speaking, the practice in Hong Kong is for voluntary disclosure as a first stage, with a second stage involving requests for specific documents. In line with international practice, parties to international arbitrations sometimes agree to apply the International Bar Association (IBA) Rules on Evidence, rather than following the practices for discovery in court litigation, although this is by no means a rule.

Validity of parties' agreement as to rules of disclosure

The parties are free to agree on the terms and the mode of discovery and inspection of documents concerning the dispute.

 

Confidentiality

22. Is arbitration confidential? If so, what is the scope of that confidentiality and who is subject to the obligation (parties, arbitrators, institutions and so on)?

Arbitration proceedings and awards are confidential with certain exceptions (section 18, Ordinance), primarily relating to disclosure of awards in the context of court proceedings in Hong Kong and abroad or regulatory matters.

Court proceedings relating to arbitration are heard in closed court, with hearings in open court only on an exceptional basis (section 16, Ordinance).

 

Courts and arbitration

23. Will the local courts intervene to assist arbitration proceedings seated in its jurisdiction?

The Hong Kong court will in certain circumstances intervene to assist in arbitration proceedings. This is consistent with Hong Kong's generally pro-arbitration stance. The powers of the court in respect of arbitration include the power:

  • To stay court proceedings brought before it in a matter that is the subject of an arbitration agreement (section 20, Ordinance).

  • To determine a challenge to the appointment of an arbitrator (section 26, Ordinance).

  • To grant interim measures, including injunctions (section 45, Ordinance).

  • To assist in the taking of evidence (section 55, Ordinance).

  • To order a person to attend proceedings before an arbitral tribunal to give evidence or to produce documents or other evidence (section 55, Ordinance).

  • To extend the time to commence arbitration proceedings, or to dismiss a claim for unreasonable delay (sections 58 and 59, Ordinance).

  • To make an order (section 60, Ordinance):

    • directing the inspection, photographing, preservation, custody, detention or sale of any relevant property by the arbitral tribunal, a party to the arbitral proceedings, or an expert; and

    • directing samples be taken from, observations made of, or experiments conducted on any relevant property.

  • To set aside an award (section 81, Ordinance).

  • To enforce an award (sections 84 and 87, Ordinance).

Under the opt-in provisions, the court can confer on the Hong Kong court the power to determine:

  • A preliminary question of law (Schedule 2, section 3, Ordinance).

  • A challenge to an award on the grounds of serious irregularity (Schedule 2, section 4, Ordinance).

  • An appeal against an award on a point of law (Schedule 2, sections 5 and 6, Ordinance).

 
24. What is the risk of a local court intervening to frustrate an arbitration seated in its jurisdiction? Can a party delay proceedings by frequent court applications?

Risk of court intervention

The Ordinance supports arbitration and restricts court intervention in the arbitral process. Hong Kong courts have consistently complied with their obligation to support, rather than interfere with, the arbitral process.

Delaying proceedings

While bringing frequent court applications can delay arbitration proceedings, this is likely to result in adverse costs orders against the party employing these tactics. In addition, if the parties exclude the opt-in provisions contained in Schedule 2 to the Ordinance, this will further reduce the scope for court applications.

 

Insolvency

25. What is the effect on the arbitration of pending insolvency of one or more of the parties to the arbitration?

Unlike many other jurisdictions, the insolvency regime in Hong Kong does not extend to include corporate rescue procedures. In the absences of such protection, in appropriate circumstances, a creditor can use legal proceedings including arbitration as a means of debt recovery. A liquidator in turn is tasked to investigate the affairs of the insolvent company and to identify and pursue any claims which can increase the company's pool of realisable assets. A situation of pending insolvency will however give rise to significant practical concerns regarding the costs of the arbitration and eventual recovery. Issues of arbitrality may also arise. Winding up proceedings are not an action, and the court is not therefore required to refer parties to a petition to arbitration under section20 (Cap.609).

 

Remedies

26. What interim remedies are available from the tribunal?

Interim remedies

The tribunal has the power to order interim measures (including injunctions) to (section 35, Ordinance):

  • Maintain or restore the status quo pending determination of the dispute.

  • Take action that will prevent, or refrain from taking action that is likely to cause, current or imminent harm or prejudice to the arbitral process itself.

  • Provide a means of preserving assets out of which a subsequent award can be satisfied.

  • Preserve evidence that may be relevant and material to the resolution of the dispute.

The tribunal can, unless otherwise agreed by the parties (section 56, Ordinance):

  • Direct the discovery of documents or the delivery of interrogatories.

  • Direct evidence to be given by affidavit.

  • Direct the inspection, preservation, custody, detention or sale of any relevant property.

  • Direct samples to be taken from, observations made of, or experiments conducted on any relevant property.

Ex parte

In circumstances where prior disclosure of the request for an interim measure can risk the party against whom it is directed thwarting the interim measure, a tribunal can grant a preliminary order on an ex-parte basis (section 37 Ordinance). It is subject to a strict time limit of 20 days, and is limited, while it is binding on the parties, it is not subject to enforcement by the court. Notice of the preliminary order must also be given to all parties and the tribunal must give the party against whom the order is made given an opportunity to present its case at the earliest practicable time (section 38 Ordinance).

Security

Unless otherwise agreed by the parties, the arbitral tribunal can require a claimant to give security for the costs of the arbitration (section 56, Ordinance). However, an order requiring security for costs must not be made solely on the ground that the claimant is either:

  • A natural person who is ordinarily resident outside Hong Kong.

  • A body corporate or association incorporated outside Hong Kong or with central management and control exercised outside Hong Kong.

 
27. What final remedies are available from the tribunal?

Unless otherwise agreed, an arbitral tribunal can award the same remedy or relief that can be ordered by Hong Kong courts, including (section 70, Ordinance):

  • Damages.

  • Specific performance.

  • Declarations.

  • Injunctions.

  • Restitution.

  • Rectification of a contract.

  • Interest.

  • Costs.

 

Appeals

28. Can arbitration proceedings and awards be appealed or challenged in the local courts? What are the grounds and procedure? Can parties waive any rights of appeal or challenge to an award by agreement before the dispute arises (such as in the arbitral clause itself)?

Rights of appeal/challenge

Section 73 of the Ordinance provides that unless agreed by the parties, an award made by an arbitral tribunal under an arbitral agreement is final and binding both on the parties and on any person claiming through or under any of the parties.

There is no general right of appeal against the merits of an award (section 81, Ordinance). However, a party can seek redress against an award in the limited circumstances set out in section 81 of the Ordinance (which are mandatory), or under the relevant opt-in provisions in Schedule 2 to the Ordinance (assuming these provisions have been adopted).

With respect to section 81 of the Ordinance, the Hong Kong court can set aside an award on the following grounds:

  • The arbitration agreement is invalid.

  • The applicant was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings, or was otherwise unable to present its case.

  • The award deals with a dispute not contemplated by, or not falling within, the terms of submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration.

  • The composition of the tribunal or the arbitral procedure was not in accordance with the parties' agreement or Hong Kong law.

  • The subject matter cannot be settled by arbitration under Hong Kong law.

  • The award conflicts with Hong Kong public policy.

An award can also be set aside following a successful challenge to an arbitrator who participated in the proceedings resulting in the award (section 26, Ordinance).

For the Schedule 2 opt-in provisions, if these are adopted, an award can be the subject of a challenge for serious irregularity or appealed on a question of law (see below,Grounds and procedure, and Question 32).

Grounds and procedure

An application to set aside an arbitral award, or to appeal it on a question of law (under the opt-in provision), must be made by originating summons to the Judge in charge of the Construction and Arbitration List (Order 73 Rules 1 and 6, Rules of the High Court). However, in order to appeal against an arbitral award on a question of law, the Hong Kong court must give leave, or all the parties to the arbitral proceedings must agree (section 6 of Schedule 2, Ordinance).

The application to set aside an award under section 81 of the Ordinance must be made within three months of the date on which the applicant received the award or, if a request is made to correct or interpret the award, from the date on which that request has been disposed of by the arbitral tribunal (section 81, Ordinance).

The three-month period is usually strictly applied, although a party may apply for an extension of time in appropriate circumstances (Order 3, Rule 5, Rules of the High Court). In deciding whether to extend time the court may consider factors such as the length of the delay in applying, the reasons for it, the prospects of the application to set aside succeeding and the degree of prejudice to the other party if the extension is granted.

The application to set aside an award for serious irregularity under section 4 of Schedule 2 of the Ordinance must be made, and the originating summons must be served, within 30 days after the award is delivered (Order 73, Rule 5(1), Rules of the High Court).

The application for leave to appeal against an arbitral award on a question of law must be made, and the originating summons or summons must be served, within 30 days after the award is delivered (Order 73, Rule 5(2), Rules of the High Court).

The court, when asked to set aside an award, can, where appropriate and where requested by a party, suspend the setting aside proceedings for a period of time determined by it to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take other action that will, in the arbitral tribunal's opinion, eliminate the grounds for setting aside (section 81(1), Ordinance).

Where a challenge to an arbitrator is upheld by the courts, the award can be set aside as part of the challenge to the arbitrator (section 26(5), Ordinance) (see above, Rights of appeal/challenge).

Waiving rights of appeal

The default position is that the parties do not have the right to appeal an award on a question of law, or to challenge an award on the grounds of serious irregularity. In order to confer this right, the parties must opt-in to these rights (section 99, Ordinance).

 
29. What is the limitation period applicable to actions to vacate or challenge an international arbitration award rendered?

Interim award on jurisdiction

If by an interim award the tribunal has determined that it has jurisdiction to decide a given dispute, a party wishing to challenge the tribunal's ruling must within 30 days of receiving notice of the ruling request the supervising Court of First Instance to decide the matter (section 34(1)(3), Ordinance) (see Question 7). The court's decision on such a challenge is final and not open to appeal (though the tribunal can continue the arbitral proceedings and proceed to an award while the court's decision is pending).

For an explanation of the various grounds on which an arbitral award on the merits can be challenged, and the applicable time limits, see Question 28.

Final award

An international award can only be challenged on the limited grounds in section 81 of the Ordinance. The application to set aside an award under section 81 of the Ordinance must be made within three months of the date on which the applicant received the award or, if a request is made to correct or interpret the award, from the date on which that request has been disposed of by the arbitral tribunal (section 81, Ordinance) (see Question 28).

If the court grants leave to enforce the award under section 84, the other party can apply to set aside this order under RHC Order Rules 10(6), within 14 days of service of the order or within such other time as the court may fix. While a section 26(2) challenge to an arbitrator is pending, the court can refuse leave under section 84 for the enforcement of any award made during that period by the arbitral tribunal, including the challenged arbitrator. See Question 30.

 
30. What is the limitation period applicable to actions to enforce international arbitration awards rendered outside your jurisdiction?

An international arbitration award is enforceable in the same manner as a judgment of the court and has the same effect, but only with the leave of the court (section 84, Ordinance) (see Question 35). As relates to all judgments, the time limits set out in the Limitation Ordinance (section 4(4), Cap 347) do not apply to an application to enforce a judgment by execution. This is seen as a matter of procedure. The prescribed limitation periods do however apply to the right to take substantive action on a judgment.

 

Costs

31. What legal fee structures can be used? Are fees fixed by law?

The tribunal can include in its award directions relating to the costs of the arbitral proceedings (including fees and expenses of the tribunal) (section 74, Ordinance). It can specify to whom, by whom, and in what manner the costs of arbitration proceedings must be paid. Further, costs are a matter of discretion, although the award of costs generally follows the practice in the Hong Kong courts where a successful party is able to recover the arbitration costs from the unsuccessful party.

The Ordinance does not define arbitration costs (although many institutional arbitration rules do), though in practice they include:

  • The costs of the parties' professional advisors and experts.

  • The tribunal's fees and expenses.

  • Other costs of the hearing, including those of any arbitral institution concerned.

The arbitral tribunal is not obliged to follow the scales and practices adopted by the Hong Kong court on taxation when assessing the amount of costs (section 74(6), Ordinance). The tribunal must only allow costs that are reasonable and can allow (in the absence of agreement between the parties to the contrary) costs incurred in the preparation of the arbitral proceedings before the start of the arbitration (section 74(7), Ordinance).

In addition, in determining the costs, the tribunal can have regard to all the circumstances (section 74(2), Ordinance), including the fact that a written offer of settlement has been made.

The parties can agree that the costs of arbitral proceedings are to be taxed by the court (section 75(1), Ordinance). If they do, then unless the arbitral tribunal otherwise directs, the award is deemed to have included the tribunal's directions that the costs (other than the fees and expenses of the tribunal) are to be taxed by the court and to be paid on any basis on which the court can award costs in civil proceedings. On taxation by the court, the arbitral tribunal must make an additional award of costs reflecting the result of the taxation (section 75(2), Ordinance).

Unless the parties have agreed to the contrary, an arbitral tribunal can direct that the recoverable costs of arbitration proceedings are limited to a specified amount (section 57, Ordinance).

 
32. Does the unsuccessful party have to pay the successful party's costs? How does the tribunal usually calculate any costs award and what factors does it consider?

Cost allocation

Tribunals generally apply the principle that costs follow the event, with the unsuccessful party paying the successful party's reasonable costs, including its legal costs and the tribunal's costs.

The tribunal can refuse to award costs to the successful party, or may not award some of its costs if it has incurred unnecessary costs and expenses, or has failed on certain claims or issues. However, there is no general rule and the matter is at the tribunal's discretion.

A provision of an arbitration agreement that the parties must pay their own costs of the arbitral proceedings is void unless the dispute had arisen before the arbitration agreement was made (section 74(8) and 74(9), Ordinance).

Cost calculation

Under the rules of the HKIAC (Article 33), costs include:

  • Only reasonable fees for legal representation.

  • Fees and expenses of the tribunal (including costs of experts).

  • Witness and other assistance required by the tribunal.

  • The fees of the HKIAC.

Factors considered

The tribunal must only allow costs that are reasonable having regard to all the circumstances (section 74(7), Ordinance). This gives the tribunal wide discretion in relation to the award of costs. It is also expressly stated that a written offer of settlement should be taken into account, if appropriate (section 74, Ordinance).

 

Enforcement of an award

Domestic awards

33. To what extent is an arbitration award made in your jurisdiction enforceable in the local courts?

An arbitral award, whether made in or outside Hong Kong, is enforceable in the same manner as a judgment of the court that has the same effect, but only with the leave of the court (section 84, Ordinance). Leave is not given as a matter of right, but it will only be refused in unusual cases (for example, where there are real grounds for doubting the validity of the award). If the court does not give leave, a party can still enforce the award under the common law, by bringing an action on the award.

While section 84 applies to all awards, the ordinance distinguishes between local awards, New York Convention awards and Mainland awards with separate, albeit similar, provisions covering matters of enforcement.

The party seeking to enforce a local arbitral award must produce (section 85, Ordinance):

  • The duly authenticated original award or certified copy.

  • The original arbitration agreement or certified copy.

  • A certified translation of the award or agreement, if necessary.

See equivalent provisions at section 88 and section 94 for New York Convention Awards, and Mainland awards respectively.

The application for leave is normally made ex parte, supported by:

  • An affidavit evidencing the arbitration agreement.

  • The award.

  • Other supporting documents.

The applicant must make full and frank disclosure of all relevant information in support of the application. The respondent then has 14 days to challenge the order if it has been served within the jurisdiction. If the order has been served outside the jurisdiction, the court will set the response period. The award must not be enforced until after that period or, if the respondent challenges the application, until after the application has been finally disposed of (Rules of the High Court O.73).

The grounds on which enforcement of a local award can be refused include the following (section 86, Ordinance):

  • A party to the arbitration agreement was under some incapacity.

  • The arbitration agreement was not valid.

  • The applicant:

    • was not given proper notice of the appointment of an arbitrator;

    • was not given proper notice of the arbitral proceedings; or

    • was otherwise unable to present its case.

  • The award:

    • deals with a dispute not contemplated by, or not falling within, the terms of submission to arbitration; or

    • contains decisions on matters beyond the scope of the submission to arbitration.

  • The composition of the tribunal, or the arbitral procedure, was not in accordance with the parties' agreement, or Hong Kong law.

  • The subject matter cannot be settled by arbitration under Hong Kong law.

  • The award conflicts with Hong Kong public policy.

  • Any other reason the court considers just.

For local awards, section 86(2)(c) allows the court to refuse to enforce an award "for any other reason the court considers just". This ground is not included in the equivalent provisions in respect of the enforcement of Convention Awards (section 89, Ordinance) and Mainland awards (section 95, Ordinance).

Hong Kong courts have interpreted "contrary to public policy" as meaning the award is "contrary to the fundamental conceptions of morality and justice of the forum in which enforcement was sought", and the public policy ground is narrowly construed and applied. Examples would include where an award has been procured by fraud, corruption or otherwise unconscionable behaviour. Where only part of an award is contrary to public policy, the part of the award that is enforceable can be severed and enforced.

Foreign awards

34. Is your jurisdiction party to international treaties relating to recognition and enforcement of foreign arbitration awards, such as the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention)?

The UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention) extends to Hong Kong because China is a contracting state to the New York Convention. Arbitral awards made in Hong Kong can therefore be enforced in other New York Convention states.

Following Hong Kong's return to Chinese sovereignty, the New York Convention does not apply to the enforcement of Hong Kong awards in Mainland China, and vice versa, as Hong Kong awards are not considered by Mainland China to be awards made in the territory of other New York Convention states.

Reciprocity with the mainland is covered by the Arrangement, which was signed on 21 June 1999.

The Arrangement provides that Hong Kong awards are enforceable in Mainland China and vice versa, on similar terms as under the New York Convention. Further, the Supreme Court of the People's Republic of China has expressly recognised the enforceability in the People's Republic of China of ad hoc (as opposed to institutional) awards rendered in Hong Kong.

The Ordinance also allows for the enforcement of awards from non-New York Convention states and territories, which can be summarily enforced in Hong Kong by way of a common law action (see Question 32).

 
35. To what extent is a foreign arbitration award enforceable?

An arbitral award, whether made in or outside Hong Kong, and whether made under the auspices of an arbitration institution or by an ad hoc arbitration tribunal, is enforceable in the same manner as a judgment of the court and has the same effect, but only with the leave of the court (section 84, Ordinance).

An award made in a New York Convention state is enforceable in Hong Kong either by action in the court (section 87(1)(a), Ordinance), or through the procedures set out in section 84 of the Ordinance (section 87(1)(b), Ordinance).

The procedures for enforcement under section 84 are set out above (see Question 32). If the court refuses to grant leave to enforce an award under section 84 of the Ordinance, the claimant party can still enforce the award under the common law. The proceedings will normally be based on the breach of an implied promise of the parties to comply with the award.

The same applies in respect of arbitral awards made in the People's Republic of China, provided they are made by a recognised arbitral authority in accordance with the Arbitration Law of the People's Republic of China (section 92, Ordinance).

Length of enforcement proceedings

36. How long do enforcement proceedings in the local court take, from the date of filing the application to the date when the first instance court makes its final order? Is there an expedited procedure?

Hong Kong courts take a pro-enforcement approach and have an exemplary record for enforcing arbitral awards. The length of enforcement proceedings is generally reasonable, although time frames vary depending on whether or not the other party contests the enforcement. Uncontested proceedings can take as little as two to three months. However, once enforcement proceedings have concluded the local court's judgment must still be enforced. There is no expedited procedure.

 

Reform

37. Are any changes to the law currently under consideration or being proposed?

The Ordinance came into effect on 1 June 2011 after a long-running review. The Hong Kong Government is taking a proactive stance to updating Cap.609. It is expected that there will be changes to the arbitration law framework to permit third party funding, and to clarify the arbitrability of IP disputes.

The following minor amendments have been introduced since 2011:

  • Arbitration (Amendment) Ordinance 2013:

    • the Arrangment concerning the reciprocal recognition and enforcement of arbitral awards between Hong Kong and Macau was implemented. An arbitral award made in Macao will be recognised and enforced in Hong Kong with leave of the court (section 98A and section 84);

    • emergency arbitrator provisions were introduced. Emergency relief granted by an emergency arbitrator (acting before an arbitral tribunal is constituted) in or outside Hong Kong can be enforced in the same manner and will have the same effect as an order or direction of the court, but only with leave of the court (sections 22A and 22B);

    • the default position under section 75(1) where the parties have agreed that the costs of the arbitral proceedings are to be taxed by the court. Unless the tribunal directs otherwise in an award, the award will be deemed to include directions that costs are to be taxed by the court on the "party and party basis" (see rule 28(2), Order 62, Rules of the High Court).

  • Arbitration (Amendment) Ordinance 2015. An amendment to clarify rules applicable to domestic arbitration (opt-in provisions) relating to the number of arbitrators.

The Arbitration (Parties to the New York Convention) Order was also amended to update the list of parties to the Convention, adding four new state parties.

 

Main arbitration organisations

Hong Kong International Arbitration Centre (HKIAC)

Main activities. The HKIAC administers arbitrations and other dispute resolution activities, including mediation and adjudication. It is the statutory appointed body under the Ordinance.

W www.hkiac.org

Hong Kong Institute of Arbitrators (HKIArb)

Main activities. Actively promotes arbitration and the training of arbitrators and mediators, and consults on law reform and standards of conduct.

W www.hkiarb.org.hk

ICC International Court of Arbitration (Asia Office)

Main activities. Is involved with the administration of arbitrations under the ICC Rules of Arbitration.

W www.iccwbo.org/court

China International Economic and Trade Arbitration Commission Hong Kong Arbitration Center (CIETAC Hong Kong Arbitration Center)

Main activities. Involved in the administration of arbitrations under the CIETAC Rules of Arbitration.

W www.cietachk.org

Chartered Institute of Arbitrators (CIArb) (East Asia Branch)

Main activities. Involved in the promotion of, and education concerning, arbitration.

W www.ciarbasia.org



Contributor profiles

Peter Murphy

Holman Fenwick Willan

T +852 3983 7700
F +852 3983 7766
E peter.murphy@hfw.com

W www.hfw.com

Professional qualifications. England and Wales, 1995; Hong Kong, 1997

Areas of practice. International trade; commodities and shipping litigation and arbitration.

Fergus Saurin

Holman Fenwick Willan

T +852 3983 7693
F +852 3983 7766
E fergus.saurin@hfw.com
W www.hfw.com

Professional qualifications. England and Wales, 2011; Hong Kong, 2014

Areas of practice. International trade; banking; commodities and shipping litigation and arbitration; environmental regulatory.

Edward Beeley

Holman Fenwick Willan

T +852 3983 7737
F +852 3983 7766
E edward.beeley@hfw.com
W www.hfw.com

Professional qualifications. England and Wales, 2014

Areas of practice. Dispute resolution, commodities and shipping litigation.

Siân Knight

Holman Fenwick Willan

T +852 3983 7675
F +852 3983 7766
E sian.knight@hfw.com

W www.hfw.com

Professional qualifications. England and Wales, 1995; Hong Kong, 2012

Areas of practice. International trade; commodities and shipping litigation and arbitration.


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