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Arbitration analysis: Hong Kong is, for many, Asia's destination of choice for the resolution of complex, high value commercial disputes and two recent developments, which we highlighted over the summer of 2013, have cemented Hong Kong's position at the forefront of modern international arbitration practice.
On 12 June 2013, the Hong Kong International Arbitration Centre (HKIAC) announced the release of the 2013 edition of its Administered Arbitration Rules (the HKIAC 2013 Rules). The HKIAC 2013 Rules, which came into force on 1 November 2013, were issued following a major review and after extensive consultation with the international arbitration community. The HKIAC has stressed that many of the changes clarify, but do not modify, the substance of HKIAC administered arbitration, but it is clear that significant changes have been made.
Then, on 19 July 2013, Hong Kong's Legislative Council enacted the Arbitration (Amendment) Ordinance 2013 (the 2013 Arbitration Ordinance). The 2013 Arbitration Ordinance amends Hong Kong's Arbitration Ordinance (Cap. 609) (the Hong Kong Arbitration Ordinance) which came into force on 1 June 2011. Arbitration in Hong Kong is governed principally by the Hong Kong Arbitration Ordinance and it regulates various aspects of arbitration such as the composition and jurisdiction of the arbitral tribunal, the conduct of arbitral proceedings and the recognition and enforcement of arbitral awards. The 2013 Arbitration Ordinance introduces a small number of nonetheless important changes.
The HKIAC 2013 Rules introduce a number of changes, which are likely to be welcomed by the international arbitration community. The HKIAC 2013 Rules reflect similar revisions made to the SIAC and ICC administered arbitration rules in 2013 and 2012 respectively and may give an indication as to the likely changes to the LCIA rules, which are anticipated later in 2013.
The key revisions are summarised below. We also include, where relevant, detail of the changes introduced by the 2013 Arbitration Ordinance.
The HKIAC's suggested model clauses (also known as arbitration agreements) have been amended and expanded by the HKIAC 2013 Rules. For example, the model clauses now cover expressly disputes between the parties regarding non-contractual obligations (eg torts).
In addition, the model clauses provide that the default seat of the administered arbitration will be Hong Kong (which is also reflected in the revised article 14.1 of the HKIAC 2013 Rules).
It is notable that unlike, for example, the LCIA or ICC model clauses, the HKIAC's model clauses do not contain a governing law provision.
The HKIAC 2013 Rules now require explicitly that the notice of arbitration be made in writing (article 4.1). This is one of many clarification amendments, which have been made by the HKIAC 2013 Rules.
In addition to the information, which currently has to be included in the notice of arbitration, it will be mandatory (under article 4.3(h) and 4.3(i) of the HKIAC 2013 Rules) for a claimant to include:
Equivalent mandatory provisions apply to the respondent's answer (article 5.1(f) and 5.1(g)). While these do not amount to burdensome changes, these are important matters for the parties to get right at the start of any arbitration proceedings to avoid delay.
There are a number of important changes in relation to administrative and tribunal fees under the HKIAC 2013 Rules.
Practitioners should be aware that the registration fee will be payable in Hong Kong Dollars (HKD) instead of US Dollars (USD) and has slightly increased to HKD 8,000 (under the HKIAC Rules 2008 the fee was USD 1,000). This currency shift applies across the HKIAC 2013 Rules.
From 1 November 2013, parties will have a choice as to how the tribunal's fees for the arbitration are computed. Under the HKIAC Rules 2008, tribunal fees were based on the sums in dispute, but under the HKIAC 2013 Rules, fees will be calculated either on the basis of the amount in dispute (in accordance with schedule 3 of the HKIAC Rules 2013) or on the basis of agreed hourly rates (in accordance with schedule 2 of the HKIAC Rules 2013) (article 10).
The parties' choice, by agreement, either way is to be notified to the HKIAC within 30 days of the respondent's receipt of the notice of arbitration (article 10.1). If the parties cannot agree, the default position will be on the basis of agreed hourly rates. The tribunal's hourly rates under the HKIAC 2013 Rules will also be capped by the HKIAC (the cap, which will apply post 1 November 2013, is HKD 6,500--see article 9.3 of schedule 2 and the HKIAC fees schedule).
For those practitioners whose clients opt for the schedule 3 fee calculation (ie on the basis of the amount in dispute), the fee bands will move as a result of the currency shift from USD to HKD. Accordingly, any preconceptions as to applicable fee band based on the amount in dispute will have to be carefully examined by practitioners and parties alike.
The HKIAC 2013 Rules include provision for emergency interim or conservatory relief prior to the constitution of the tribunal (article 23 and schedule 4). Under the new provisions, a party may make an application for emergency relief concurrent with or after submission of the notice of arbitration for the appointment of an emergency arbitrator. The new emergency relief procedure is set out in schedule 4 of the HKIAC 2013 Rules. The inclusion of emergency relief provisions reflects a trend amongst many of the major arbitral institutions (including the ICC and SIAC).
The 2013 Arbitration Ordinance, enacted in July 2013 after the release of the HKIAC 2013 Rules, has amended the Hong Kong Arbitration Ordinance so as to provide explicitly for the enforcement of emergency relief granted, in or outside Hong Kong, by an emergency arbitrator in the same manner as an order or direction of the Court of First Instance of the Hong Kong High Court (the Court) that has the same effect (section 22B(1)).
Such enforcement is only possible with leave of the Court (section 22B(1)), which won't grant leave to enforce any emergency relief granted outside of Hong Kong unless the applying party can show that it consists of only one or more temporary measures (including injunctions) by which the emergency arbitrator orders a party to do one or more of the following (section 22B(2)):
The Court's decision to grant or refuse leave under section 22B cannot be appealed (section 22B(4)).
In addition, the interim protection measures under the revised article 23 of the HKIAC 2013 Rules have been expanded significantly. For example, article 23.4 states that when deciding a party's request for an interim measure, the tribunal shall take into account the circumstances of the case, which includes factors such as:
Whereas the HKIAC Rules 2008 provided for joinder of a party to the proceedings only with consent of the party to be joined (article 14.6), the HKIAC 2013 Rules contain much expanded joinder provisions under the new article 27, granting the tribunal power to allow additional parties to be joined to the arbitration provided that the additional party is bound by the arbitration agreement under the HKIAC 2013 Rules giving rise to the arbitration (including any arbitrations under articles 28 or 29).
In addition, the HKIAC 2013 Rules allow the HKIAC to consolidate two or more arbitrations at a party's request (article 28). HKIAC is required to consult with the parties and any constituted tribunal and may grant such a request where:
Similarly, claims arising under more than one contract will be able to be arbitrated together and the requirements for this procedure are set out in article 29 of the HKIAC 2013 Rules.
The expedited HKIAC arbitration procedure is clarified and changed under the HKIAC 2013 Rules.
The most significant change is that the expedited procedure will not be the default position for claims under USD 250,000 (see article 38 of HKIAC Rules 2008) (although this provision is subject to the parties' agreement or intervention of the HKIAC Secretariat).
Instead, under article 41 of the HKIAC 2013 Rules, a party may, prior to constitution of the tribunal, apply for the expedited procedure to apply where the amount in dispute does not exceed HKD 25,000,000 (roughly USD 3,200,000), or where both parties agree or in cases of exceptional urgency.
The HKIAC has stated that use of the expedited procedure presumes that a sole arbitrator will hear the dispute and the award will be handed down within six months of the transmission of the file. The availability of this expedited procedure is likely to be very attractive for time-pressured, cost-conscious commercial parties.
In addition to the above, the HKIAC 2013 Rules have been revised to include the following notable changes:
Our original arbitration analyses can be viewed here--Revised HKIAC Arbitration Rules announced and Hong Kong amends its Arbitration Ordinance.
Subscribers to LexisPSL will be interested to note that we have updated our HKIAC practice notes to reflect the changes introduced by the 2013 version of the HKIAC Rules:
We will also be adding additional HKIAC practice notes very soon, so keep a close eye on the HKIAC subtopic.
This article was first published on Lexis®PSL Arbitration on 31 October 2013. Click here for a free 24 trial of Lexis®PSL.
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