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Legal framework

National arbitration laws What legislation applies to arbitration in your jurisdiction? The Arbitration Ordinance (Cap 609), which came into force in June 2011, applies to arbitration in Hong Kong. The ordinance is largely based on the UNCITRAL Model Law on International Commercial Arbitration.

Mandatory laws Are there any mandatory laws? The Arbitration Ordinance (Cap 609) contains relatively few provisions that cannot be excluded by the parties. Section 3(2) of the ordinance explicitly states that it is based on the following principles:

"(a) that, subject to the observance of the safeguards that are necessary in the public interest, the parties to a dispute should be free to agree on how the dispute should be resolved; and

(b) that the court should interfere in the arbitration of a dispute only as expressly provided for in this Ordinance."

However, certain mandatory laws apply:

  • The arbitration agreement must be in writing (Section 19).
  • The court has the power to order a stay of court proceedings in favour of arbitration proceedings (Section 20).
  • The tribunal must be competent to rule on its own jurisdiction (Section 34).
  • The parties must be treated equally, and the tribunal must be independent and act fairly and impartially towards the parties, giving each reasonable opportunity to present its case and deal with its opponent's case, and use procedures that are appropriate to the particular case to avoid unnecessary delay and expenses (Section 46).
  • Certain general powers of the tribunal, including the power to make orders for security for costs, discovery, the collection of evidence and the preservation of property (Section 56).
  • The court has the power to order recovery of the tribunal's fees (Section 62) and the tribunal has the power to withhold an award for non-payment of the arbitrators' fees and expenses (Section 78).
  • The court has the power to set aside an award (Section 81).
  • The arbitral tribunal or mediator is liable for dishonest acts and omissions (Section 104).
  • Persons who appoint the arbitral tribunal or mediator or who administer arbitration proceedings are liable for dishonest acts and omissions (Section 105).

New York Convention Is your country a signatory to the New York Convention? If so, what is the date of entry into force? Hong Kong is a signatory by virtue of China’s accession to the convention on January 22 1987 (although the convention was first applied to Hong Kong on April 21 1977 through a declaration by the United Kingdom).

However, since the 1997 handover of Hong Kong to Chinese sovereignty, the New York Convention no longer applies to the enforcement of Hong Kong awards in mainland China and vice versa. This is because mainland China does not consider Hong Kong awards to be awards made in the territory of another New York Convention state. Reciprocal enforcement of arbitration awards with mainland China is now governed by the Arrangement Concerning Mutual Enforcements of Arbitral Awards between the Mainland and the Hong Kong Special Administrative Region, which came into force in 1999.

Are there any reservations to the general obligations of the convention? In common with many other signatories to the convention, Hong Kong (via China's accession) has adopted both the reciprocity reservation and the commercial reservation. The reciprocity reservation provides that Hong Kong will recognise and enforce only those arbitral awards made in other states which are also signatories to the convention. The commercial reservation limits recognition and enforcement to arbitral awards made in commercial cases.

Treaties and conventions What other treaties and conventions in relation to arbitration is your jurisdiction party to? The Hong Kong Department of Justice website provides a list of all the treaties that are in force and are applicable to Hong Kong (www.doj.gov.hk/eng/laws/interlaw.html). Most of the treaties listed applied to Hong Kong before the July 1 1997 handover and continue to apply, while others were applied to Hong Kong on July 1 1997 (because China was already a signatory) or have been applied since that date.

In addition to the New York Convention, Hong Kong is party to a number of other treaties and conventions relevant to arbitration, including:

  • the Hague Convention for the Pacific Settlement of International Disputes 1899;
  • the Hague Convention for the Pacific Settlement of International Disputes 1907;
  • the Statute of the Hague Conference on Private International Law 1951 (as amended 2007);
  • the Washington Convention on the Settlement of Investment Disputes between States and Nationals of Other States 1965;
  • the Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters 1970; and
  • 17 bilateral investment treaties.

UNCITRAL Has your jurisdiction adopted the UNCITRAL Model Law? The Arbitration Ordinance (Cap 609) almost entirely incorporates the provisions of the UNCITRAL Model Law, including the amendments to the UNCITRAL Model Arbitration Law adopted in 2006.

Before the current Arbitration Ordinance came into effect in June 2011, Hong Kong had two separate sets of rules – one for domestic arbitrations and another, separate regime for international arbitration (largely based on the UNCITRAL Model Law).

Although the separate domestic regime has essentially been abolished, there remains a procedure allowing parties to opt into certain provisions from the former domestic regime. Those provisions, set out in Schedule 2 to the ordinance, cover:

  • the appointment of a sole arbitrator;
  • consolidation of arbitrations;
  • the decision of preliminary questions of law by the court;
  • challenging arbitral awards on the grounds of serious irregularity; and
  • an appeal against an arbitral award on a question of law.

Reform Are there any impending plans to reform the arbitration laws in your jurisdiction? On October 19 2015 the Hong Kong Law Reform Commission published a consultation paper recommending that third-party funding for arbitrations taking place in Hong Kong be permitted under Hong Kong law.

Arbitration agreements

Validity What are the validity requirements for an arbitration agreement? Section 19 of the Arbitration Ordinance (Cap 609) provides that an arbitration agreement must be in writing. However, the term ‘in writing’ has a broad definition, and includes an arbitration agreement whose content is recorded in any form – even if the arbitration agreement itself has been concluded orally, by conduct or by other means.

The definition expressly includes:

  • electronic communications;
  • 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; and
  • 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.

Enforcement of agreements How are arbitration agreements enforced in your jurisdiction? What is the attitude of the national courts towards arbitration agreements? Under Section 20 of the Arbitration Ordinance (Cap 609), where a claim is brought before the court in a matter which is the subject of an arbitration agreement, a party to the claim can request that the parties be referred to arbitration. The court will grant that request and stay the court proceedings unless the arbitration agreement is null and void, inoperative or incapable of being performed.

The Hong Kong courts are generally supportive of arbitration. Arbitral awards, whether made in or outside Hong Kong, are enforceable in the same way as court judgments, provided that leave is first obtained under Section 84 of the ordinance. Leave will only be refused in exceptional cases.

Consolidation Can an arbitral tribunal with its seat in your jurisdiction consolidate separate arbitral proceedings under one or more contracts, and, if so, in what circumstances? An arbitral tribunal has no power to consolidate arbitration proceedings. However, the Hong Kong International Arbitration Centre (HKIAC), which administers arbitrations in Hong Kong under its own sets of rules, has the power to do so under certain circumstances. Under Article 28 of the HKIAC Administered Arbitration Rules 2013, the HKIAC has the power, at the request of a party and after consulting with the parties and any confirmed arbitrators, to consolidate two or more arbitrations pending under the rules where:

  • the parties agree to consolidate;
  • all of the claims in the arbitrations are made under the same arbitration agreement; or
  • the claims are made under more than one arbitration agreement, a common question of law or fact arises in both or all of the arbitrations, the rights to relief claimed are in respect of, or arise out of, the same transaction or series of transactions and HKIAC finds the arbitration agreements to be compatible.

In addition, Schedule 2, Section 2 of the Arbitration Ordinance (Cap 609) provides that the Hong Kong courts have the power to consolidate two or more domestic arbitrations where the court finds that:

  • a common question of law or fact arises in both or all of them;
  • the rights to relief claimed in those arbitral proceedings are in respect of or arise out of the same transaction or series of transactions; or
  • it is desirable to do so for any other reason.

Choice of law How is the substantive law of the dispute determined? Where the substantive law is unclear, how will a tribunal determine what it should be? Most agreements contain a clause expressly stating the law governing the substantive contract. Where no such clause exists, the tribunal will apply conflict of laws rules in order to determine the substantive law of the dispute. These rules are quite complex, but the basic principle is to give effect to the parties' likely intentions as to where a dispute arising from the contract should be resolved. It is possible that different issues in a dispute will need to be resolved by reference to different systems of law.

Even where the parties have expressly chosen the law governing the substantive contract, and perhaps also the procedural rules for arbitration, it is not uncommon for them to have failed to stipulate which other relevant systems of law apply, such as the law governing the arbitration proceedings and the law governing the agreement to arbitrate – thereby leaving them open to dispute. This can lead to a great many complications, and can require recourse to the courts (which will again apply conflict of laws rules to resolve the issue). In an effort to prevent such difficulties from arising, the Hong Kong International Arbitration Centre has included in its model arbitration agreement an express choice of law clause covering these points.

Separability Are there any provisions on the separability of arbitration agreements? Yes. Under Section 34 of the Arbitration Ordinance (Cap 609) (which incorporates Article 16 of the UNCITRAL Model Law), the arbitral tribunal:

"may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. For that purpose, an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract. A decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause."

Multiparty agreements Are multiparty agreements recognised? Yes. The Arbitration Ordinance (Cap 609) does not restrict the number of parties to an agreement to arbitrate. In addition, multiparty arbitrations by way of joinder or consolidation are expressly provided for in Articles 27 and 28 of the Hong Kong International Arbitration Centre Administered Arbitration Rules 2013.

Arbitral tribunal

Criteria for arbitrators Are there any restrictions? Under Section 23 of the Arbitration Ordinance (Cap 609) (which adopts Article 10 of the UNCITRAL Model Law), the parties are free to determine the number of arbitrators or authorise a third party (eg, an administering body such as the Hong Kong International Arbitration Centre) to make that determination. The parties are free to agree on a procedure for appointing the arbitrator or arbitrators, and can essentially adopt whatever criteria they wish in selecting an arbitrator or arbitrators. Although Section 24 of the ordinance provides that "[n]o one shall be precluded by reason of his nationality from acting as an arbitrator", it also allows the parties to agree otherwise.

Contractual stipulations What can be stipulated about the tribunal in the agreement? The parties are free to determine the number of arbitrators or authorise a third party, including an institution, to make that determination (Section 23 of the Arbitration Ordinance (Cap 609)). The parties may stipulate that an arbitrator must possess certain characteristics (eg, being a professional or an expert in a particular field). 

An arbitrator may not be prohibited from being appointed by reason of his or her nationality, unless the parties agree otherwise (Section 24 of the ordinance). 

Default requirements Are there any default legal requirements as to the selection of a tribunal - for example, concerning the number of arbitrators or their characteristics? 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 Hong Kong International Arbitration Centre (HKIAC) (Section 23(3) of the Arbitration Ordinance (Cap 609)). However, if the parties have opted into Schedule 2, Section 1 of the ordinance, there will be a sole arbitrator.

The parties are free to agree on the procedure for appointing the arbitrator or arbitrators (Section 24(1) of the ordinance). If the parties do not do so, the following default provisions under Section 24 of the ordinance will apply:

  • In an arbitration with three arbitrators, each party will appoint one arbitrator and those two arbitrators will appoint the third arbitrator (Section 24(1)).
  • In an arbitration with a sole arbitrator, if the parties are unable to agree on the arbitrator one will be appointed, at the party's request, by the HKIAC (Section 24(1)).
  • In an arbitration with an even number of arbitrators, each party is to appoint the same number of arbitrators (Section 24(2)).
  • In an arbitration with an uneven number of arbitrators greater than three:
    • each party will appoint the same number of arbitrators; and
    • the HKIAC will appoint the remaining arbitrator or arbitrators (Section 24(3)).

Where a party fails to appoint an arbitrator in accordance with an agreed or default procedure, the HKIAC can make the necessary appointment (Sections 24(1) to (4)).

Under Section 46 of the ordinance, the tribunal must:

  • be independent;
  • act fairly and impartially as between the parties, giving them a reasonable opportunity to present their case and deal with their opponent's case; and
  • 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 three requirements are mandatory and may not be varied by the parties.

Challenging the appointment of an arbitrator Can the appointment of an arbitrator be challenged? Can an arbitrator be disqualified? What is the procedure for this? The appointment of an arbitrator can be challenged if circumstances exist that give rise to justifiable doubts as to his or her impartiality or independence, or if he or she does not possess qualifications agreed to by the parties (Section 25(1) of the Arbitration Ordinance (Cap 609)). A party may challenge an arbitrator appointed by it, or in whose appointment it participated, only for reasons of which it becomes aware after the appointment has been made (Section 25(2)).

Under Section 26(1) of the ordinance the parties are free to agree on the procedure for challenging the appointment of an arbitrator. If the parties have not agreed on a procedure, the following default provisions will apply:

  • A party which intends to challenge an arbitrator must, within 15 days of becoming aware of the constitution of the arbitral tribunal or of any of the grounds set out 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 or her office or the other party agrees to the challenge, the arbitral tribunal will decide on the challenge (Section 26(1)).
  • If the challenge under the above procedure is not successful, the challenging party can request the court or another authority (eg, the Hong Kong International Arbitration Centre (HKIAC)) to decide on the challenge. The challenging party must do so within 30 days after having received the notice of the decision rejecting the challenge. The court or other authority's decision may not be appealed. While such a request is pending, the tribunal, including the challenged arbitrator, may continue the arbitral proceedings and make an award.

If an arbitrator becomes unable to perform his or her duties, or for other reasons fails to act without under delay, the parties can remove the arbitrator by agreement. If the arbitrator refuses to withdraw from office or the parties cannot agree, any party may request the court or other authority (eg, the HKIAC) to decide on the termination of the arbitrator's mandate (Section 27 of the ordinance). That decision cannot be appealed.

Jurisdictional objections How should an objection to jurisdiction be raised? An arbitral tribunal is competent to rule on its own jurisdiction (including any objections with respect to its constitution) matters submitted to arbitration and the existence or validity of the arbitration agreement (Section 34 of the Arbitration Ordinance (Cap 609)).

A plea that the tribunal does not have jurisdiction must be raised by no later than submission of the statement of defence. A party is not precluded from raising such a plea by the fact that it has appointed or participated in the appointment of an arbitrator. A plea that the tribunal is exceeding the scope of its authority must be raised as soon as the matter alleged to be beyond the scope of its authority arises during the arbitration proceedings. In either case, the tribunal may admit a later plea if it considers the delay justified (Section 34(1)).

Where the tribunal rules that it has jurisdiction, any party may request, within 30 days of receiving notice of the ruling, that the court decide on the matter (which decision cannot be appealed) (Section 34(1)). In effect, this amounts to a right to appeal the tribunal's initial decision.

However, where the tribunal rules that it has no jurisdiction to decide a dispute, such decision is not subject to appeal (Section 34(4)).

Replacement of an arbitrator Why and how can an arbitrator be replaced? An arbitrator can be replaced where his or her mandate has been terminated. This may occur if:

  • the arbitrator's appointment is successfully challenged under Section 25 of the Arbitration Ordinance (Cap 609) (ie, justifiable doubts as to his or her impartiality or independence are established);
  • he or she becomes de jure or de facto unable to perform his or her functions or for other reasons fails to act without undue delay, and he or she either withdraws from office or is removed by the parties' agreement or by decision of the court or other authority (Section 27); or
  • he or she dies (Section 29).

In the above circumstances, a substitute arbitrator will be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced (Section 28).

Powers and obligations What powers and obligations do arbitrators have? Arbitrators have the powers conferred on them by the arbitration agreement and the applicable arbitration rules, as agreed by the parties. Under Section 56 of the Arbitration Ordinance (Cap 609), the tribunal also has general powers to:

  • require that a claimant provide security for the costs of the arbitration;
  • direct the discovery of documents or the delivery of interrogatories;
  • direct that evidence be given by affidavit;
  • direct the inspection, photographing, preservation, custody, detention or sale of any relevant property;
  • direct that samples be taken from, observations be made of or experiments be conducted on any relevant property;
  • decide whether and to what extent it should take the initiative in ascertaining the facts and relevant law;
  • administer oaths and take affirmations;
  • examine witnesses and parties under oath or affirmation;
  • direct the attendance of witnesses before the tribunal in order to give evidence or produce documents or other material evidence; and
  • appoint one or more experts to report to it on specific issues to be determined by the tribunal, and require a party to give the expert any relevant information, documents or other property for his or her inspection (Section 54).

In addition, the tribunal has the power to:

  • appoint one or more experts to report on specific issues to be determined by the tribunal and assessors to assist the tribunal on technical matters (Section 54);
  • require the parties to provide experts with relevant materials for their inspection (Section 54);
  • require the expert to participate in the hearing (Section 54); and
  • request the assistance of the court in taking evidence (Section 55).

Section 46(2) of the ordinance provides that the parties must be treated equally. This principle requires the arbitrators to:

  • be independent;
  • act fairly and impartially as between the parties, giving them a reasonable opportunity to present their cases and to deal with the cases of their opponents; and
  • 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 (Section 46(3)).

Liability of arbitrators Are arbitrators immune from liability? No. An arbitrator is liable in law for an act done or omitted to be done by him or her (or his or her employee or agent) in relation to the exercise or performance of his or her functions only if it is proved that the act was done or omitted to be done dishonestly (Section 104 of the Arbitration Ordinance (Cap 609)).

Communicating with the tribunal How do the parties communicate with the tribunal? It is standard practice for the parties to communicate with the tribunal in writing. However, this is generally less formal than court proceedings, and email is commonly used.

All statements, documents or other information supplied to the tribunal by one party must be communicated to the other party (Section 52 of the Arbitration Ordinance (Cap 609)).

Reaching decisions Is unanimous agreement of the tribunal required? If there is disagreement, does the will of the majority suffice? What are the implications of this? Unless otherwise agreed by the parties, in arbitration proceedings with more than one arbitrator, any decision of the tribunal must be made by a majority of the tribunal's members (Section 65 of the Arbitration Ordinance (Cap 609)).

Where there is a dissenting opinion, the signature of the dissenting arbitrator need not be included on the final award. This will not affect the award's validity, provided that the reason for the omitted signature is stated (Section 67).

Arbitrability Are there any disputes incapable of being referred to arbitration? The following categories of dispute may not be referred to arbitration:

  • family law matters, including those relating to divorce and child custody;
  • criminal law matters;
  • actions in rem against vessels; and
  • matters reserved for determination by the state, including taxation and immigration.

Section 70 of the Arbitration Ordinance (Cap 609) provides that the tribunal cannot make orders as to specific performance of any contract relating to land or any interest in land.

There are also a wide range of possible disputes that may not be suitable for arbitration, even if arbitration is not expressly excluded.

Can the arbitrability of a dispute be challenged? The tribunal may rule on its own jurisdiction (including any objections with respect to its constitution) matters submitted to arbitration and the existence or validity of the arbitration agreement (Section 34 of the Arbitration Ordinance (Cap 609)).

Jurisdiction and competence-competence Is the principle of competence-competence recognised in your jurisdiction? Can a party to an arbitration ask the courts to determine an issue relating to the tribunal’s jurisdiction and competence? The principle of competence-competence is recognised in Section 34 of the Arbitration Ordinance (Cap 609).

Where the tribunal rules that it has jurisdiction, any party may request, within 30 days of receiving notice of the tribunal's ruling, that the court decide on the matter (which decision cannot be appealed) (Section 34(1)). In effect, this amounts to a right to appeal the tribunal's initial decision.

Where the tribunal rules that it does not have jurisdiction to decide a dispute, such decision is not subject to appeal (Section 34(4)) and the court must, if it has jurisdiction, decide the dispute (Section 34(5)).

Arbitral proceedings

Starting an arbitration proceeding What is needed to commence arbitration? Unless otherwise agreed by the parties, the arbitration proceedings commence on the date that the respondent receives a request to refer the dispute to arbitration (Section 49 of the Arbitration Ordinance (Cap 609)).

Limitation periods Are there any limitation periods for the commencement of arbitration? Section 14 of the Arbitration Ordinance (Cap 609) provides that the Limitation Ordinance (Cap 347) (the main legislation governing limitation periods for bringing claims in Hong Kong) and "any other Ordinance relating to the limitation of actions" apply to arbitrations just as they apply to court actions. The duration of the relevant limitation period varies depending on the cause of action. For claims in contact or tort, the limitation period is generally six years from the date on which the cause of action accrued (Section 4(1) of the Limitation Ordinance).

As for contractually agreed limitation periods, Section 58 of the Arbitration Ordinance provides that if an arbitration agreement stipulates that a claim will be time barred unless it is referred to arbitration within a specified period, the tribunal may, on the application of any party, extend the period within which arbitration must be commenced if it is satisfied that:

  • the circumstances of the claim were outside the reasonable contemplation of the parties at the time they entered into the agreement and it is just to extend the period; or
  • the conduct of any party makes it unjust to hold the other party to the strict terms of the agreement.

Procedural rules Are there any procedural rules that arbitrators must follow? Section 47 of the Arbitration Ordinance (Cap 609) provides that the parties are free to agree on the procedural rules to be applied. If and to the extent that the parties fail to agree, the tribunal may conduct the arbitration in the manner that it considers appropriate, "subject to the provisions of this Ordinance" (ie, the tribunal must act fairly and impartially in accordance with Section 46 of the ordinance).

Dissenting arbitrators Are dissenting opinions permitted under the law of your jurisdiction? The Arbitration Ordinance (Cap 609) does not prohibit dissenting opinions. Arbitrators are not obliged to give a dissenting opinion; however, the reason for the arbitrator's failure to sign an arbitral award must be stated (Section 67 of the ordinance).

Judicial assistance Can local courts intervene in proceedings? Consistent with Hong Kong's pro-arbitration stance, the courts cannot interfere with arbitration proceedings, except in certain circumstances in order to assist the arbitral process. The courts' powers to assist in relation to arbitrations include to:

  • stay court proceedings brought before them in a matter that is the subject of an arbitration agreement (Section 20 of the Arbitration Ordinance (Cap 609));
  • determine a challenge to the appointment of an arbitrator (Section 26);
  • grant interim measures, including injunctions (Section 45);
  • assist in the taking of evidence (Section 55);
  • order a person to attend proceedings before an arbitral tribunal in order to give evidence or produce documents or other evidence (Section 55(2));
  • extend the time to commence arbitration proceedings (Section 58);
  • dismiss a claim for unreasonable delay and debar a party from commencing further arbitral proceedings (Section 59);
  • make an order (Section 60):
    • 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;
  • set aside an arbitral award (Section 81);
  • to enforce an arbitral award, including foreign arbitral awards in accordance with the New York Convention (Sections 84, 87, 92 and 98A); and
  • under certain conditions, refuse to enforce a domestic or foreign arbitral award (Sections 86, 89, 95 and 98D).

Can the local courts assist in choosing arbitrators? Section 13 of the Arbitration Ordinance (Cap 609) provides that the Hong Kong International Arbitration Centre (HKIAC) is the appointing authority. Under Section 24 of the ordinance, where a party has failed to make an appointment under the applicable appointment procedure (whether an agreed procedure or the default procedure prescribed by the ordinance where no procedure has been agreed), any party can ask the HKIAC to make the necessary appointment.

The courts' involvement is normally restricted to termination of an arbitrator's mandate. The courts may need to decide on the termination of an arbitrator's mandate if called on by one of the parties to determine a challenge to an arbitrator's appointment (Section 26) or to decide whether an arbitrator has become unable to perform his or her functions or has failed to act without undue delay (Section 27).

What is the applicable law (and prevailing practice) where a respondent fails to participate in an arbitration? Can the courts compel parties to arbitrate? Can they issue subpoenas to third parties? A respondent cannot be compelled to participate in an arbitration. However, unless otherwise agreed by the parties, if without showing sufficient cause the respondent fails to communicate its statement of defence or appear at a hearing, the tribunal may continue the proceedings and make an award on the evidence before it (Section 53 of the Arbitration Ordinance (Cap 609)).

If, again without showing sufficient cause, the respondent fails to comply with any order or direction of the tribunal, the tribunal may make a peremptory order to the same effect, prescribing the time for compliance (Section 53(3)). If the respondent fails to comply with the peremptory order, the tribunal may:

  • direct that the party is not entitled to rely on any allegation or material which was the subject matter of the peremptory order;
  • draw any adverse inferences that the circumstances may justify from the non-compliance;
  • make an award on the basis of any materials which have been properly provided to the tribunal; or
  • make any order it thinks fit as to the payment of the costs of the arbitration incurred in consequence of the non-compliance.

The tribunal may request assistance from the court in taking evidence (Section 55(1)). The court may order a party to attend proceedings before a tribunal to give evidence or produce documents or other evidence (Section 55(2)).

Third parties In what instances can third parties be bound by an arbitration agreement or award? A party which has not signed an arbitration agreement or otherwise agreed to become a party to the arbitration proceedings cannot be bound by an arbitration agreement or award.

However, a third party which has not agreed to be bound by an arbitration agreement may enjoy a right to enforce a contract term through arbitration under the Contracts (Rights of Third Parties) Ordinance (Cap 623) if:

  • the contract term is enforceable by the third party;
  • the term provides that the dispute between the third party and the promisor is to be submitted to arbitration; and
  • the term constitutes an arbitration agreement.

Default language and seat Unless agreed by the parties, what is the default language and location for arbitrations? There is no default language or location under the Arbitration Ordinance (Cap 609).

The parties are free to agree on the place of arbitration (Section 48 of the ordinance). Failing such agreement, the place of arbitration will be determined by the tribunal having regard to the circumstances of the case, including the convenience of the parties.

Similarly, the parties are free to agree on the language or languages to be used in the arbitral proceedings (Section 50 of the ordinance). Failing such agreement, the tribunal will determine the language or languages to be used in the proceedings.

Gathering evidence How is evidence obtained by the tribunal? Under Section 55 of the Arbitration Ordinance (Cap 609), the tribunal (or a party with the tribunal's approval) may request from a competent Hong Kong court assistance in taking evidence. The court may execute the request within its competence and according to its rules on taking evidence. The court may order a person to attend proceedings before a tribunal to give evidence or produce documents or other evidence (Section 55(2)).

Unless otherwise agreed by the parties, a tribunal may decide whether and to what extent it should itself take the initiative in ascertaining the facts and the law relevant to the arbitral proceedings (Section 56(7)). Unless otherwise agreed by the parties, the tribunal may direct the attendance before it of witnesses in order to give evidence or produce documents or other evidence (Section 56(8)).

What kinds of evidence are acceptable? The tribunal is not bound by the rules of evidence and may accept any evidence that it considers relevant to the proceedings, but it must give the weight that it considers appropriate to the evidence adduced in the proceedings (Section 47 of the Arbitration Ordinance (Cap 609)).

Confidentiality Is confidentiality ensured? Section 18 of the Arbitration Ordinance (Cap 609) provides that, unless otherwise agreed by the parties, no party may publish, disclose or communicate any information relating to the arbitral proceedings or an award made in those proceedings.

However, under Section 18(2) of the ordinance, a party may publish, disclose or communicate the above information to:

  • protect or pursue its legal right or interest or to enforce or challenge the award;
  • a government body, regulatory body, court or tribunal if obliged to do so by law; or
  • a professional or any other adviser.

Can information in arbitral proceedings be disclosed in subsequent proceedings? Not unless otherwise agreed by the parties, or such disclosure falls within the exceptions set out in Section 18(2) of the Arbitration Ordinance (Cap 609).

Ethical codes What ethical codes and other professional standards, if any, apply to counsel and arbitrators conducting proceedings in your jurisdiction? The Hong Kong International Arbitration Centre (HKIAC) has published a Code of Ethical Conduct for Arbitrators (www.hkiac.org/en/arbitration/arbitrators/code-of-ethical-conduct). Other professional bodies involved in arbitration have their own ethical codes – for example, the Hong Kong Institute of Arbitrators, whose Code of Professional and Ethical Conduct is virtually identical to the HKIAC code (www.hkiarb.org.hk/en/ethicalconduct.php).

Solicitors in Hong Kong must comply with the rules and principles set out in the Hong Kong Law Society's Guide to Professional Conduct. Similarly, Hong Kong barristers must comply with the Hong Kong Bar Association's Code of Conduct.

Costs

Estimation & allocation How are the costs of arbitration proceedings estimated and allocated? Under Section 74 of the Arbitration Ordinance (Cap 609), the tribunal may include in an award directions concerning the costs of the arbitration proceedings (including the fees and expenses of the tribunal). The tribunal may specify by whom, to whom and in what manner the costs of the arbitration proceedings are to be paid. In practice, the tribunal will adopt the normal common law approach to the recovery of costs (ie, the losing party will generally be required to pay the winning party's costs).

The tribunal is not obliged to follow the scales and practices adopted by the court on taxation when assessing the amount of costs (other than the fees and expenses of the tribunal) (Section 74(6)). The tribunal must allow only costs that are reasonable and (unless otherwise agreed by the parties) may allow costs incurred in the preparation of the proceedings before the start of the arbitration.

The parties can, if they wish, agree that the costs of the arbitration proceedings are to be taxed by the court (Section 75).

Unless otherwise agreed by the parties, the tribunal may direct that the recoverable costs of arbitral proceedings be limited to a specified amount (Section 57).

Security for costs Can the national court or tribunal order security for costs under the law in your jurisdiction? The tribunal has the power to require a claimant to give security for the costs of the arbitration. The tribunal must not order the claimant to give security solely on the basis that it is a foreign national or entity (Section 56(1) of the Arbitration Ordinance (Cap 609)).

The tribunal must specify the time period within which the claimant has to comply with the security for costs order (Section 56(3)).

The award

Requirements What legal requirements are there for recognition of an award? Must reasons be given for the award? Does the award need to be reviewed by any other body? Section 64 of the Arbitration Ordinance (Cap 609) provides that in arbitration proceedings with more than one arbitrator, any decision of the tribunal must be made, unless otherwise agreed by the parties, by a majority of all its members.

Under Section 67 the award must be in writing and signed by the majority of the arbitrators, state the reasons on which it is based (unless the parties have agree that no reasons are to be given), and the date and the place of arbitration.

The award need not be reviewed by any other body. Unless otherwise agreed by the parties, an award made by a tribunal under an arbitration agreement is final and binding on the parties and any person claiming through or under any of the parties (Section 73).

Timeframe for delivery Are there any time limits on delivery of the award? Unless otherwise agreed by the parties, the tribunal is not subject to a time limit for delivery of the award. If the arbitration agreement imposes a time limit to render an award, Section 72 of the Arbitration Ordinance (Cap 609) provides that the court may extend that time limit, regardless of whether it has expired.

Remedies Does the law impose limits on the available remedies? Are some remedies not enforceable by the court? Section 70 of the Arbitration Ordinance (Cap 609) provides that unless otherwise agreed by the parties, the tribunal may award any remedy or relief that could have been ordered by the court if the dispute had been the subject of civil proceedings in court, including the ability to order specific performance of any contract. However, the tribunal cannot order specific performance of a contract relating to land or any interest in land (Section 70(2)).

What interim measures are available? Will local courts issue interim measures pending constitution of the tribunal? Under Section 35 of the Arbitration Ordinance (Cap 609), the tribunal has the power, at the request of a party, to order interim measures. Such measures can include ordering a party to:

  • maintain or restore the status quo pending determination of the dispute;
  • take action that would 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 from which a subsequent award may be satisfied; or
  • preserve evidence that may be relevant and material to the resolution of the dispute.

Section 45(2) of the ordinance provides that on the application of any party, the court may, in relation to any arbitration proceedings which have been or are to be commenced in or outside Hong Kong, grant interim measures, including injunctions.

The court may grant interim measures irrespective of whether the tribunal may exercise similar powers under Section 35 (Section 45(3)), although it may decline to do so if the interim measure sought is currently the subject of arbitral proceedings and the court considers it more appropriate for the tribunal to deal with it (Section 45(4)). Where the tribunal has not yet been constituted, it is more likely that the court will grant interim measures.

Interest Can interest be awarded? Section 79 of the Arbitration Ordinance (Cap 609) provides that unless otherwise agreed by the parties, the tribunal may award simple or compound interest from the dates and at the rates it considers appropriate.

Interest is payable on money awarded by the tribunal from the date of the award, unless otherwise provided by the tribunal. Interest is payable on costs from the date of the costs award, unless otherwise provided by the tribunal.

At what rate? Under Section 80 of the Arbitration Ordinance (Cap 609), except where the award provides otherwise, interest is payable at the judgment rate (8% at the time of writing). The judgment rate is determined in accordance with Section 49(1)(b) of the High Court Ordinance (Cap 4).

Finality Is the award final and binding? Unless otherwise agreed by the parties, an award made by a tribunal pursuant to an arbitration agreement is final and binding both on the parties and on any person claiming through or under any of the parties (Section 73 of the Arbitration Ordinance (Cap 609)).

What if there are any mistakes? Section 69 of the Arbitration Ordinance (Cap 609) provides that within 30 days of receipt of the award, unless another period of time has been agreed on by the parties, a party, with notice to the other party, may request the tribunal to:

  • correct any computational, clerical or typographical errors or any errors of similar nature in the award;
  • give an interpretation of a specific point or part of the award; or
  • make an additional award as to claims presented in the arbitration proceedings but omitted from the award.

Can the parties exclude by agreement any right of appeal or other recourse that the law of your jurisdiction may provide? The parties cannot agree to exclude or limit a party's right under the Arbitration Ordinance (Cap 609) to appeal or challenge an award.

Appeal What is the procedure for challenging awards? An application to the courts under Section 81 of the Arbitration Ordinance (Cap 609) must be made within three months of the date on which the party making the application received the award (Section 81(3) of the ordinance). The application is made by originating summons under Order 73, Rule 1 of the Rules of the High Court (Cap 4A). 

On what grounds can parties appeal an award? An award cannot be appealed. The only means of recourse against a Hong Kong arbitral award is by applying to the High Court for an order setting aside the award under one of the limited grounds set out in Section 81 of the Arbitration Ordinance (Cap 609). Under Section 81, an award may be challenged and set aside where the party making the challenge can prove that:

  • a party to the arbitration was under some incapacity;
  • the arbitration agreement is invalid under the law to which the parties subjected it or, failing any indication in the agreement as to which law the agreement is subject to, under Hong Kong law;
  • the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitration, or was otherwise unable to present its case;
  • the award deals with a dispute not contemplated by the terms of the submission to arbitration or contains decisions on matters beyond the scope of the submission to arbitration; or
  • the composition of the tribunal or the arbitration proceedings was not in accordance with the agreement of the parties, unless such agreement conflicted with a mandatory provision of the ordinance.

An award may also be set aside where the court finds that:

  • the subject matter of the dispute is not capable of settlement by arbitration under Hong Kong law; or
  • the award conflicts with Hong Kong’s public policy.

Enforcement What steps can be taken to enforce the award if there is a failure to comply? Where an unsuccessful party fails or refuses to comply with an arbitral award, the successful party may seek to enforce the award through the courts. The successful party may apply to court for leave to enforce the award and to enter judgment in the same terms as the award under Section 84(2) of the Arbitration Ordinance (Cap 609). Once judgment has been obtained, the successful party may pursue the same enforcement measures as for any court judgment, including execution against goods belonging to the judgment debtor, a garnishee order or a charging order.

Can awards be enforced in local courts? Yes. Section 84 of the Arbitration Ordinance (Cap 609) provides that an award issued in relation to arbitration proceedings by a tribunal is enforceable in the same way as a judgment of the court, but only with the leave of the court.

Enforcement procedures under the ordinance depend on whether the award is:

  • a local Hong Kong award;
  • an award made in mainland China;
  • an award made in a country which is a signatory to the New York Convention;
  • an award made in Macau; or
  • an award made in some other country.

Under Section 85 of the ordinance, the party seeking to enforce an arbitral award which is not a convention award, a mainland Chinese or a Macau award must produce the original or a certified copy of the award, the original or a certified copy of the arbitration agreement and, if relevant, any necessary translations.

Under Sections 86, 89, 95 and 98D of the ordinance, the courts may refuse to enforce an award for similar reasons as are set out in Article 34 of the UNCITRAL Model Law (enshrined in Section 81) for the setting aside of an award.

Schedule 2 to the ordinance contains additional provisions on challenging arbitral awards, which will apply if the parties have opted in.

How enforceable is the award internationally? Hong Kong is a signatory to the New York Convention by virtue of China’s accession to the convention. The Hong Kong courts will normally enforce foreign awards from New York Convention states and territories, except in the limited circumstances set out in Section 89 of the Arbitration Ordinance (Cap 609), and other jurisdictions which are signatories to the New York Convention should adopt a similar approach. As for the non-New York Convention countries, the extent to which a Hong Kong arbitral award is enforceable will depend on those countries' domestic laws.

To what extent might a state or state entity successfully raise a defence of state or sovereign immunity at the enforcement stage? Foreign states enjoy absolute immunity from enforcement in Hong Kong. An arbitral award against a foreign state cannot be enforced in Hong Kong unless the foreign state agrees to waive immunity.

The Chinese government is not a foreign state in Hong Kong, since Hong Kong is part of China. However, the High Court has held that the Central People's Government enjoys crown immunity in Hong Kong, the practical effect of which is the same – immunity from enforcement. Certain state-owned bodies, if controlled to a sufficient degree by the state, may also enjoy immunity. The determining factor is ultimately the degree of control that the state has over the defendant. Most state-owned enterprises are unlikely to be able to claim immunity, especially if their operations are managed separately from the state. Like sovereign immunity, crown immunity can be waived.

Are there any other bases on which an award may be challenged, and if so, by what? The grounds for refusing to enforce an award in Hong Kong under Section 86 of the Arbitration Ordinance (Cap 609) largely mirror those set out in the New York Convention. However, Section 86(2) also gives the court discretion to refuse to enforce an award where "for any other reason the court considers it just to do so".

How enforceable are foreign arbitral awards in your jurisdiction? The Hong Kong courts adopt a positive approach to the enforcement of foreign arbitral awards. New York Convention awards may be enforced with leave of the court, and leave has been refused only on rare occasions.

Arbitration awards made by non-New York Convention states and territories are still enforceable in Hong Kong, at the discretion of the Hong Kong courts (Section 84 of the ordinance).

Mainland Chinese arbitral awards will normally be enforced, unless the grounds for refusal under Section 95 (which largely replicate those set out in the New York Convention) are established. Reciprocal enforcement of arbitration awards with mainland China is governed by the Arrangement Concerning Mutual Enforcements of Arbitral Awards between the mainland and the Hong Kong Special Administrative Region, which came into force in 1999.

Will an award that has been set aside by the courts in the seat of arbitration be enforced in your jurisdiction?

This will depend on the merits of the case. The courts have the discretion to enforce an award that has been set aside by the courts in the seat of arbitration.

Third-party funding

Rules and restrictions Are there rules or restrictions on third-party funders? Yes. Hong Kong has laws regarding champerty and maintenance which generally prohibit third-party funding in litigation. However, there is currently some uncertainty in the law over whether arbitration is also subject to the same prohibition.

On October 19 2015 the Hong Kong Law Reform Commission published a consultation paper on third-party funding in arbitration which recommended that third-party funding for arbitrations taking place in Hong Kong be permitted under Hong Kong law. The paper strongly supported legislative amendment to the Arbitration Ordinance (Cap 609) to make it expressly clear that third-party funding is permitted for arbitrations taking place in Hong Kong. The consultation period ended on February 1 2016.

If introduced, the proposed reform will provide much-needed clarity on the issue. Third-party funding of foreign arbitrations (in jurisdictions where maintenance or champerty does not exist) has already been accepted by the Court of Final Appeal. Moreover, many parties to institutional arbitrations in Hong Kong are from foreign jurisdictions where third-party funding is available. Therefore, many argue that there should be a formal level playing field for arbitrations taking place in Hong Kong. Further, formalising the position in Hong Kong would serve to recognise what already goes on in some international arbitrations.

As a leading and prominent international arbitration centre, and in the interests of maintaining Hong Kong’s competitiveness, expressly permitting third-party funding for arbitrations taking place in Hong Kong would be an important development. A number of large commercial third-party funders have now set up offices in Hong Kong and are actively marketing for funding opportunities.

Class-action or group arbitration

Concept Is there a concept in your jurisdiction providing for class-action arbitration or group arbitration? If so, are there any limitations to the arbitrability of such claims or requirements that must be met before such claims may be arbitrated? Hong Kong law does not currently allow any form of class action in litigation or arbitration.

Multiparty litigation and arbitration are permitted. In court proceedings, individuals can make a claim on the same issue as joint plaintiffs (Order 15, Rule 12 of the Rules of the High Court). As for arbitration, the Arbitration Ordinance (Cap 609) does not restrict the number of parties to an agreement to arbitrate and multiparty arbitrations by way of joinder or consolidation are expressly provided for in the 2013 Hong Kong International Arbitration Centre (HKIAC) Administered Arbitration Rules (Articles 27 and 28). Article 27 allows an additional party to be joined to an existing arbitration, while Article 28 empowers the HKIAC to combine arbitrations if they involve a common question of law or fact, claims arising out of the same transaction or series of transactions, and compatible arbitration agreements. On January 1 2016 the HKIAC released a practice note on consolidation of arbitrations to supplement Article 28.

On May 28 2012 the Law Reform Commission published a report recommending that a mechanism for class actions be adopted in Hong Kong. In January 2014 the Department of Justice established a working group to consider the Law Reform Commission’s proposals. However, even if class action litigation comes to Hong Kong in future, it is doubtful whether class action arbitration will be allowed, since parties to arbitration must agree to be contractually bound to arbitrate.

Hot topics

Emerging trends Are there any hot topics or trends emerging in arbitration in your jurisdiction? The principal hot topic at the time of writing is third-party funding in arbitrations taking place in Hong Kong. Except in limited circumstances, third-party funding for litigation is expressly prohibited in Hong Kong under the laws against champerty and maintenance – a restriction which is widely considered to be excessive and outdated. Whether this prohibition also applies to arbitration is uncertain.

The Hong Kong Law Reform Commission's Consultation Paper on third-party funding in arbitration, published on October 19 2015, strongly supported legislative amendment to the Arbitration Ordinance (Cap 609) to make it expressly clear that third-party funding is permitted for arbitrations taking place in Hong Kong. The consultation period ended on February 1 2016.

If introduced, the proposed reform will provide much-needed clarity on the issue. Third-party funding of foreign arbitrations (in jurisdictions where maintenance or champerty does not exist) has already been accepted by the Court of Final Appeal. Moreover, many parties to institutional arbitrations in Hong Kong are from foreign jurisdictions where third-party funding is available. Therefore, many argue that there should be a formal level playing field for arbitrations taking place in Hong Kong. Further, formalising the position in Hong Kong would serve to recognise what already goes on in some international arbitrations.

As a leading and prominent international arbitration centre, and in the interests of maintaining Hong Kong’s competitiveness, expressly permitting third-party funding for arbitrations taking place in Hong Kong would be an important development. A number of large commercial third-party funders have now set up offices in Hong Kong and are actively marketing for funding opportunities.

A continued trend in Hong Kong arbitration is the ongoing popularity of Hong Kong as a location for arbitrations involving overseas parties – in particular mainland China-related disputes. The increasing significance of China-related arbitration is reflected by the fact that in November 2015, the Hong Kong International Arbitration Centre opened a representative office in Shanghai – the first time an offshore arbitration institution had established a formal presence in mainland China.