On 16 October 2012, the Hong Kong International Arbitration Centre (“HKIAC”) issued a draft of its revised Arbitration Rules (the “Revised Rules”), which give users more choice as to how to conduct arbitrations. Key changes include the introduction of a procedure for appointing emergency arbitrators, new caps for arbitrator’s fees and provisions for joinder and consolidation of disputes. The Revised Rules are currently still undergoing consultation and are not expected to come into force until early 2013.

The Revised Rules incorporate recent market trends in international commercial arbitration and an increasing demand from parties for greater flexibility and efficiency.

In this alert, we look at three the major changes proposed in the draft Revised Rules: the introduction of an emergency arbitration procedure, increased guidance for arbitrator’s fees, and new joinder and consolidation provisions.

Introduction of an emergency arbitrator procedure

Implementing emergency arbitrator procedures that enable parties to obtain fast interim relief has become part of a growing trend among leading arbitration institutions. The Singapore International Arbitration Centre (“SIAC”), Stockholm Chamber of Commerce (“SCC”), International Centre for Dispute Resolution (“ICDR”) and the International Chamber of Commerce (“ICC”) have all introduced provisions in their arbitration rules that provide for the appointment of emergency arbitrators who can determine applications for interim relief before the arbitral tribunal is constituted.

Under the HKIAC’s new procedure, an emergency arbitrator will be appointed within two days of the centre’s acceptance of an emergency application. Acceptance of an emergency application will depend on whether the relief sought is truly urgent and cannot wait until the arbitral tribunal is constituted.

Once appointed, the emergency arbitrator will issue a decision within 15 days of receiving the file.

The emergency decision will bind the parties until:

  • the emergency arbitrator or arbitral tribunal so decides;
  • the rendering of a final award by the arbitral tribunal (unless otherwise specified);
  • the termination of the arbitration before the final award; or
  • 90 days have elapsed from the date of the emergency decision without the arbitral tribunal being constituted.

Changes to fees

A key feature of HKIAC arbitration is that parties are given a choice as to how the arbitrator’s fees are calculated. Under the current HKIAC Administered Arbitration Rules, parties can opt for a fee calculated as a percentage of the sum in dispute, or for calculation of fees on the basis of hourly rates.

The Revised Rules retains this choice, and introduces new provisions that give more guidance and detail on the fees and expenses of the arbitrator. A key change is the new hourly cap of HK$6,500 (approximately US$838) on the arbitrators’ fees if parties choose to calculate fees on the basis of hourly rates.

The new provisions are in the form of two schedules that set out in detail the terms of appointment with respect to fees and expenses of arbitrators. The aim is to minimise the time and effort spent negotiating such issues.

Joinder and Consolidation of Disputes

The Revised Rules have introduced procedures for joining parties and consolidating disputes.

At the request of a party, additional parties can now be joined to a dispute, provided there is at least one arbitration agreement that binds all parties. The arbitral tribunal will decide the issue of joinder after consultation with the parties.

Where a joinder request is made prior to the constitution of an arbitral tribunal, the HKIAC has the power to join additional parties and will appoint all the arbitrators to the dispute, even if arbitrators had already been appointed. The HKIAC-appointed tribunal can then hear and decide any objection to its jurisdiction after it has been constituted.

The new consolidation procedures empower the HKIAC to consolidate two or more HKIAC arbitrations into the arbitration that commenced first if the claims arise under the same transaction or series of transactions. At the request of a party, the HKIAC will determine whether consolidation is suitable for the dispute after consultation and agreement by the parties. If the HKIAC decides to consolidate the arbitrations, the parties waive the right to designate the arbitrators and the HKIAC will appoint the arbitral tribunal.

For both joinder and consolidation, the termination of any existing arbitrator’s appointment will not affect the validity of any act done by that arbitrator prior to termination or the arbitrator’s entitlement to fees and expenses.

The joinder and consolidation provisions will assist in streamlining the increasing number of disputes which involve multiple parties with related claims.

What it means to you

As Asia becomes increasingly important as a hub for international businesses, and with cross border investment involving China growing, Hong Kong is well positioned as a place for commercial dispute resolution.

The broad theme for the Revised Rules is improving the efficiency of the arbitral process. The changes reflect HKIAC’s continuing efforts to keep pace with industry best practice and to further enhance Hong Kong’s position as the leading destination for arbitration in the Asian region.