In this two-part series, we outline the key developments in Hong Kong and China arbitration leading into 2015. In this edition, we present some highlights for Hong Kong arbitration, while our next edition will focus on highlights for PRC arbitration.
HKIAC updates its Procedures for the Administration of Arbitration under the UNCITRAL Arbitration Rules
The HKIAC Procedures for the Administration of Arbitration under the UNCITRAL Arbitration Rules (the 2015 Procedures) came into force on the 1st of January, replacing the 2005 Procedures. The 2015 Procedures are of particular importance where parties wish to arbitrate under the UNCITRAL Arbitration Rules, and wish to have the HKIAC provide administrative assistance.
The 2015 Procedures should not be confused with the HKIAC’s own set of arbitration rules, which are the HKIAC Administered Arbitration Rules (last revised: 2013, the 2013 Rules). The 2013 Rules set out a standalone set of arbitration rules, which contain a number of innovative provisions, allowing for a more efficient arbitration.
In contrast, the 2015 Procedures are not standalone, but work in conjunction with the UNCITRAL Rules. The UNCITRAL Rules reflect accepted international arbitral practice, but contain less innovative provisions than those found in the HKIAC Rules.
Parties with existing arbitration template clauses which refer to the HKIAC Procedures should ensure that they are updated to refer to the 2015 Procedures; we regularly come across older form clauses in template contracts which do not reflect current practice in arbitration.
HKIAC model arbitration clause amended
Generally, at least three laws are applicable in an international arbitration:
- the governing law of the contract;
- the law of the place (or seat) of arbitration; and
- the law of the arbitration agreement.
Most standard form international contracts designate (i) and (ii), but they seldom deal with (iii).
However, a number of recent cases have involved challenges to the validity of an arbitration agreement, raising uncertainty as to what law determines such a challenge.1 This has underscored the benefits of expressly specifying the law governing the validity of the arbitration agreement.
As a result, the HKIAC amended its model arbitration clauses in August 2014, to include specific wording prompting parties to designate an appropriate law to specifically govern their arbitration agreement (click here to access the HKIAC model clause).
Going forward, parties, should give careful thought to stipulating the law of the arbitration agreement, particularly where there is a risk the agreement may be held to be invalid or where there is uncertainty over what law governs the agreement (e.g., when the governing law of the contract, and the law of the place of arbitration are different).
Ready enforceability of Hong Kong awards in the PRC?
Hong Kong has historically been the preferred seat for China-related arbitrations, and the latest statistics confirm that Chinese parties remain the most frequent users of HKIAC arbitration.
Recent publicly available figures indicate that over the past five years, there has been no known case where the PRC courts have refused to enforce an arbitral award rendered in Hong Kong.2 In contrast, this has not been the case with awards made in a number of other arbitral seats. Although the latest figures are encouraging, it is important for parties to appreciate that they can still face difficulties, and the speed of enforcement will vary within the PRC.
Hong Kong also maintains a very good track record for enforcing PRC awards. In the period 1997 to 2014, only five PRC awards were refused enforcement (the latest being in 2010), compared with over 130 cases in the same period where enforcement was sought.3 In 2014, 13 applications to enforce PRC awards were granted, and no PRC award was refused enforcement.
Amendments to the Hong Kong Arbitration Ordinance
The Hong Kong Government has tabled amendments to the Arbitration Ordinance (Cap 609) to allow parties opting for domestic arbitration to decide on the number of arbitrators, whilst retaining their right to seek the Court's assistance on other matters. This amendment is of significance to parties who agree to domestic arbitrations, and addresses an apparent inconsistency in the legislation, under which it was not clear if certain provisions in the Ordinance would apply to domestic arbitrations, where parties had stipulated the number of arbitrator(s) in the arbitration agreement.4