ONPOINT / A legal update from Dechert's International Arbitration Group
How to choose between the arbitration rules commonly used in South East Asia?
October 2017
How to choose between the arbitration rules commonly used in South East Asia?
October 2017 / Written by Dechert's International Arbitration Group As explained in this briefing, factors to be considered when selecting an arbitral institution include each institution's track record for handling international cases, any particular nuances or innovations in their arbitration rules, and the fees the institutions charge for their services and those of arbitrators. The leading arbitral institutions operating in South Asia based on their respective case-loads are:
the International Chamber of Commerce (ICC), which has offices in Hong Kong and Singapore, and had
966 new cases in 2016,1 amounting to an annual increase of 20%;
the Singapore International Arbitration Centre (SIAC), which has headquarters in Singapore and liaison
offices in Shanghai, Gujarat, Mumbai and Seoul, 'handled'2 343 new cases in 2016 out of which 274 were international arbitrations, also up by 20% since 2015;
the Hong Kong International Arbitration Centre (HKIAC), which had 94 new administered arbitrations in
2016 out of which 81 were international arbitrations, which is down by 25% from the year before; and
the Kuala Lumpur Regional Centre for Arbitration (KLRCA), which administered 7 new arbitration cases
in 2016.3 Each of these institutions has arbitration rules which are broadly similar. Indeed, there has been something of a `rules race' in recent times as arbitral institutions regularly update their rules to reflect best practice. Nonetheless, subtle but important differences in the rules remain, which are summarized in the table below.
1 The ICC does not distinguish in its statistics between domestic and international administered cases. 2 SIAC uses the term `handled' rather than `administered' as the figure includes cases in which SIAC acted as the
appointing authority as well as cases it supported which were governed by the UNCITRAL Arbitration Rules. 3 KLRCA has not reported its 2015 case-load.
Dechert LLP
Comparison of the rules of arbitration of ICC, SIAC, HKIAC, and KLRCA
ICC Rules, 2017 SIAC Rules, 2016
1. Standard procedures for commencement of the arbitration, appointment of arbitrators, and conduct of proceedings
2. Interim relief available from arbitral tribunal or courts
3. Interim relief from Emergency Arbitrator
HKIAC Rules, 2013
KLRCA Rules, 2017
4. Default seat
(HK)
(KL)
5. Expedited procedures
6. Early dismissal mechanism
(KLRCA Fast Track Arbitration Rules
2015)
7. Joinder of third party
8. Arbitration under multiple contracts
9. Consolidation of related proceedings
10. Time limit for rendering draft award/final award
11. Express obligation of confidentiality
12. Scrutiny of awards
13. Institutional and Tribunal fees
14. Specifically tailored investment rules
Calculated ad valorem based on amount in dispute
Calculated ad valorem based on amount in dispute
Hourly rates apply by default. Parties can agree to opt into the HKIAC Schedule of Fees.
Calculated ad valorem based on amount in dispute
October 2017
Page 2
Dechert LLP
Thus, by way of illustration, all four of the arbitral institutions under consideration in this briefing allow a party to seek interim relief from an arbitral tribunal, a local court or an emergency arbitrator (hence, a tick for each in the second row in the table above). Only the SIAC Rules, however, incorporate a mechanism to enable a party to seek the early dismissal of a claim or defence that is manifestly without legal merit or outside the jurisdiction of the arbitral tribunal (thus, SAIC is the only institution with a tick in row six).4
While the rules of SIAC, HKIAC and ICC each allow a party to pursue claims arising under different contracts in a single arbitration (row eight), that is currently not permitted under the KLRCA Rules. Similarly, while there is an express obligation of confidentiality under the rules of SIAC, HKIAC and KLRCA (row 11), the ICC Rules are silent on the point, leaving the question as to whether ICC proceedings are confidential to be answered by the parties or the applicable law. Another key difference is that the ICC (from 1927), SIAC (from 2007), and KLRCA (since June this year) will scrutinise a draft award and provide comments (row 12), including making suggestions as to the form of an award and drawing attention to points of substance without affecting the tribunal's liberty to decide the dispute as it deems appropriate. In contrast, the HKIAC does not formally scrutinise draft awards before they are circulated to the parties (although a degree of review is undertaken).
Thus, it could be said that the HKIAC adopts a more `light-touch' approach to the supervision and management of arbitrations under its auspices as compared to that of some of its peers. As a consequence, HKIAC arbitrations can have lower administrative costs than those administered by SIAC and the ICC. As the table below demonstrates, the HKIAC also has a cheaper filing fee to commence an arbitration than the ICC and SIAC.
The table compares the filing fees (which never change regardless of the amount in dispute) and the administration and tribunal fees (which will vary) potentially payable in cases conducted under the auspices of SIAC, the ICC, and the HKIAC. The administration and arbitrator fees are calculated with reference to the amount in dispute (ie ad valorem), using five different sample claim amounts. The SIAC fees and HKIAC fees, which are respectively set in Singapore and Hong Kong dollars, have been converted to US dollars at the prevailing exchange rate for comparison purposes. The cheapest option is highlighted in yellow.
Comparative cost of three arbitral institutions (in USD)
Dispute Amount Case filing fee Administration fee
Sole arbitrator fee Three-person tribunal
(maximum)
fee (maximum)
(USD)
ICC SIAC HKIAC
ICC
SIAC
HKIAC
ICC
SIAC
HKIAC
ICC
SIAC
HKIAC
1 million
5,000 1,481 1,020
23,335 12,825 9,893
64,130
55,183 50,528 192,390 165,554 151,584
10 million
5,000 1,481 1,020
57,515 31,591 24,173 187,400 128,975 122,934 562,200 386,925 368,802
100 million
5,000 1,481 1,020 100,975 70,485 51,045 351,300 275,082 262,720 1,053,900 825,247 788,160
1 billion
5,000 1,481 1,020 150,000 70,485 51,045 783,300 715,307 564,566 2,349,900 2,145,923 1,693,698
10 billion
5,000 1,481 1,020 150,000 70,485 51,045 4,383,300 1,483,919 1,604,685 13,149,900 4,451,757 4,814,057
Thus, it could be said that HKIAC arbitration is generally cheaper than those administered by the ICC or SIAC. The reality can be different, however, as the default position under the HKIAC Rules is that HKIAC arbitrators are paid an hourly rate (see row 13 in the first table). In other words, the HKIAC Schedule of Fees (on which the HKIAC arbitrator fees in the table above have been calculated) only applies if all parties agree to opt into the
4 With that said, arguably an arbitral tribunal constituted under other arbitration rules could exercise its inherent powers to dismiss a claim early even if not expressly stated in the applicable rules of arbitration.
October 2017
Page 3
Dechert LLP
Schedule of Fees, otherwise HKIAC tribunal members will be paid based on how many hours they devote to a case, which of course is difficult to predict.5
Further, while the HKIAC charges the lowest filing and administration fees, the services that the institutions provide are not identical. In particular, as already noted, the HKIAC does not scrutinize draft awards, whereas both the ICC and SIAC expend considerable resources seeking to ensure that draft awards are enforceable.
Direct comparisons are also complicated by the fact that none of these institutions tend to pay arbitrators the maximum fees payable under their respective schedule of fees. The amount actually paid to an arbitrator will depend on the complexity of the case, its duration, and the extent to which the arbitration was conducted efficiently. A SIAC tribunal, for instance, will generally receive 75 to 80 per cent of the maximum fees payable under the SIAC Schedule of Fees.6 If a case is terminated, withdrawn, or settled, the SIAC Registrar will take into account the stage of the proceedings at which the arbitration ended and the amount of work done or time spent by the tribunal on the matter in order to determine an appropriate fee for the tribunal.7
Conclusion
While the ICC, SIAC, HKIAC and KLRCA all provide an excellent service, factors which help make an informed choice between them include the historical case-load and thus experience each institution has in handling complex international cases, the subtle differences in their rules of arbitration, and lastly the fees that they charge.
For more information and guidance on these issues, please contact the authors named below or consult the leading commentary on the SIAC Rules, `A Guide to the SIAC Arbitration Rules' by Dechert's Mark Mangan et al (with the second edition published by Oxford University Press forthcoming in early 2018), in which the SIAC Rules are compared to those of its closest competitors.
For more information on this issue, please contact one of the following:
Mark Mangan Partner, Singapore +65 6730 6983 Send email
Claire Chong Associate, Singapore +65 6730 6989 Send email
Henry Defriez Associate, Singapore +65 6730 6987 Send email
5 Like SIAC and the ICC, the KLRCA charges administration and arbitral fees with reference to the amount in dispute. See row 13 in the first table.
6 Similarly, the ICC's starting point for calculating an arbitrator's fee is the `average' amount, being the midpoint between the minimum and maximum fee payable under the ICC's Scale of Administrative Expenses and Arbitrators Fees. Likewise, if the parties to a HKIAC arbitration have agreed to opt into the payment of the arbitrators based on the HKIAC Schedule of Fees, the HKIAC will take into account various factors when fixing the tribunal's fees, including the amount in dispute, the complexity of the matter, and the work done by the tribunal: HKIAC Rules (2013), Art 10.3(a).
7 SIAC Practice Note for Administered Cases (2 January 2014), para 15.
October 2017
Page 4
Dechert LLP
2017 Dechert LLP. All rights reserved. This publication should not be considered as legal opinions on specific facts or as a substitute for legal counsel. It is provided by Dechert LLP as a general informational service and may be considered attorney advertising in some jurisdictions. Prior results do not guarantee a similar outcome. We can be reached at the following postal addresses: in the US: 1095 Avenue of the Americas, New York, NY 10036-6797 (+1 212 698 3500); in Hong Kong: 27/F Henley Building, 5 Queen's Road Central, Hong Kong (+852 3518 4700); and in the UK: 160 Queen Victoria Street, London EC4V 4QQ (+44 20 7184 7000). Dechert internationally is a combination of separate limited liability partnerships and other entities registered in different jurisdictions. Dechert has more than 900 qualified lawyers and 700 staff members in its offices in Belgium, China, France, Germany, Georgia, Hong Kong, Ireland, Kazakhstan, Luxembourg, Russia, Singapore, the United Arab Emirates, the UK and the US. Further details of these partnerships and entities can be found at dechert.com on our Legal Notices page.
October 2017
Page 5
