Arbitration

UNCITRAL Model Law

Is the arbitration law based on the UNCITRAL Model Law?

Yes, the Arbitration Ordinance (Chapter 609) (AO) adopts the UNCITRAL Model Law, with supplemental or modified provisions that are specific to Hong Kong.

Arbitration agreements

What are the formal requirements for an enforceable arbitration agreement?

An arbitration agreement must be in writing to be enforceable in Hong Kong (AO, s. 19). That requirement is met if:

  • the content of the arbitration agreement is recorded in any form, irrespective of how the agreement was concluded;
  • the content of the arbitration agreement is recorded in electronic communication; or
  • reference is made in a contract to any document containing an arbitration clause, which makes the arbitration clause part of the contract.
Choice of arbitrator

If the arbitration agreement and any relevant rules are silent on the matter, how many arbitrators will be appointed and how will they be appointed? Are there restrictions on the right to challenge the appointment of an arbitrator?

The parties are at liberty to determine the number of arbitrators or authorise a third party to make the decision. Otherwise, the Hong Kong International Arbitration Centre (HKIAC) will determine whether one or three arbitrators should be appointed (AO, s. 23).

The parties are free to agree on the procedure for challenging an arbitrator. Otherwise, the AO prescribes the procedure for making that challenge, which includes provisions for the challenging party to submit written reasons to the arbitral tribunal and, if unsuccessful, to further request the court or HKIAC to decide on the challenge.

An arbitrator can only be challenged if there are justifiable doubts about his or her impartiality or independence, or if he or she does not possess the qualifications agreed to by the parties.

Arbitrator options

What are the options when choosing an arbitrator or arbitrators?

Arbitrators can be chosen from an extensive pool of local and foreign professionals in Hong Kong, who are multilingual and possess expertise in different industries (eg, international trade, construction, maritime, intellectual property). Various arbitral institutions and professional associations (eg, HKIAC, the Hong Kong Bar Association and the Law Society of Hong Kong) maintain arbitration committees or lists to assist parties in choosing suitable arbitrators. The parties are free to appoint arbitrators from abroad if necessary.

Arbitral procedure

Does the domestic law contain substantive requirements for the procedure to be followed?

Under the AO, the parties may agree on the procedure to be followed by the arbitral tribunal in conducting the arbitration. In the absence of agreement, the arbitral tribunal may conduct the arbitration in the manner it considers appropriate and in compliance with the following overriding principles (AO, s. 46):

  • parties’ right to equal treatment and the right to be heard;
  • the arbitral tribunal must conduct the arbitration independently, fairly and impartially; and
  • the arbitral tribunal must use appropriate procedures to avoid unnecessary delay or expense, to provide a fair means for resolving the dispute.
Court intervention

On what grounds can the court intervene during an arbitration?

The court may only intervene in arbitral proceedings in limited circumstances prescribed under the AO, including:

  • staying court proceedings for arbitration where the matter is the subject of an arbitration agreement;
  • determining challenges to arbitrator appointment;
  • granting interim measures (for example, injunctions, asset or evidence preservation orders);
  • granting orders to inspect, preserve or sell property being the subject of arbitral proceedings; and
  • setting aside and enforcing arbitral awards.

 

The Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings by the Courts of the Mainland and of the HKSAR, which came into effect on 1 October 2019, allows a party to arbitral proceedings administered by a Chinese arbitral institution to apply to the Court of First Instance for interim measures. Similarly, a party to arbitral proceedings in Hong Kong may apply to the intermediate people’s court of the place of residence of the other party for interim measures. Hong Kong is the first and only jurisdiction that can seek mutual assistance from China in interim measures in aid of arbitral proceedings.

Interim relief

Do arbitrators have powers to grant interim relief?

Yes, the AO empowers arbitrators to grant interim measures, including injunctions, asset or evidence preservation orders.

Award

When and in what form must the award be delivered?

The AO does not prescribe any time limit for the arbitral tribunal to make and deliver an award. Nonetheless, it is an overriding duty for the arbitral tribunal to render an award in a conscientious, reasonable and timely manner, and not unduly delay in rendering the award.

The parties may also agree on a specified time limit for the arbitral tribunal to render the award.

An award must be in writing, signed by the arbitrators, dated and stated with the seat of arbitration, and shall provide reasons upon which the award is based unless agreed otherwise. After the award is made, a copy signed by the arbitrators shall be delivered to each party.

Appeal

On what grounds can an award be appealed to the court?

An arbitral award cannot generally be appealed to the court on the merits. Parties may agree to include the opt-in provisions in Schedule 2 of the AO in the arbitration agreement, which allow a party to challenge an award on the ground of serious irregularity or appeal to the court on questions of law.

Enforcement

What procedures exist for enforcement of foreign and domestic awards?

With leave of the court, an award (domestic or foreign) is enforceable in the same way as a Hong Kong court judgment. If leave is not granted, an award can still be enforced under common law by bringing an action on the award (s 84, AO).

Specifically, a Convention award (an award made in a country that is a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards) can be enforced in Hong Kong following the general procedures in s 84 of the AO (s 87, AO).

After the return of Hong Kong’s sovereignty to China in 1997 and with the implementation of the Arrangement Concerning Mutual Enforcement of Arbitral Awards Between the Mainland and the HKSAR in June 1999, Chinese awards made pursuant to the Chinese Arbitration Law can be enforced in Hong Kong like a convention award (1999 Arbitration Arrangement). A similar reciprocal arrangement is in place between Macao and Hong Kong.

On 27 November 2020, the Hong Kong Department of Justice and the Supreme People’s Court of the People’s Republic of China signed the Supplemental Arrangement Concerning Mutual Enforcement of Arbitral Awards between the HKSAR and the Mainland (Supplemental Arbitration Arrangement).

 

Important amendments made under the Supplemental Arbitration Arrangement:
  • Article 1 of the Supplemental Arbitration Arrangement includes the term ‘recognition’ when referring to enforcement of arbitral awards under the 1999 Arbitration Arrangement, in line with the two-stage approach (ie, the recognition stage and the execution stage) under the New York Convention.
  • Article 2 of the Supplemental Arbitration Arrangement clarifies the scope of the arbitral awards that may be mutually recognised and enforced in the Mainland and Hong Kong. It removes the condition of ‘recognised Mainland arbitral authorities’, and hence all awards issued in the Mainland pursuant to the Mainland’s Arbitration Law can be enforced in Hong Kong. Also, all arbitral awards (ie, both ad hoc and institutional) rendered in Hong Kong pursuant to the AO can be enforced in the Mainland.
  • Article 3 of the Supplemental Arbitration Arrangement enables parties to make simultaneous applications to enforce the arbitral award in both Hong Kong courts and the Mainland courts. Previously, parallel enforcement of an arbitral award was not permitted under the 1999 Arbitration Arrangement.
  • Article 4 of the Supplemental Arbitration Arrangement clarifies that the enforcing courts can impose interim measures before or after the court’s acceptance of an application to enforce an arbitral award.

 

Note that articles 1 and 4 of the Supplemental Arbitration Arrangement came into force on 27 November 2020, while articles 2 and 3 will only take effect after the completion of relevant legislative amendments in Hong Kong.

Costs

Can a successful party recover its costs?

An arbitral tribunal has discretion to give directions on costs in an award. The general practice of ‘costs follow the event’ is usually adopted. Only reasonable costs are allowed, which may include costs in the preparation of the arbitral proceedings prior to commencing arbitration. A tribunal may also direct a specified limit to the recoverable costs.

Under s 74 of the AO, a provision of an arbitration agreement to the effect that the parties, or any of the parties, must pay their own costs in respect of arbitral proceedings arising under the agreement is void, unless the provision is part of an agreement to submit to arbitration a dispute that had arisen before the agreement was made.

Furthermore, under s 56(1)(a) of the AO, unless otherwise agreed by the parties, when conducting arbitral proceedings, an arbitral tribunal may require a claimant to give security for costs of the arbitration.

The AO does not specify a list of factors that an arbitral tribunal will consider when determining whether or not to order security for costs. However, s 56(2) of the AO expressly excludes the following grounds for seeking an order for security for costs:

  • a natural person ordinarily resident outside Hong Kong; or
  • a body corporate or association incorporated or formed under the law of a place outside Hong Kong, or whose central management and control is exercised outside Hong Kong.

 

Through the enactment of the Arbitration and Mediation Legislation (Third Party Funding) (Amendment) Ordinance 2017 (which came into effect on 1 February 2019), third-party funding of arbitration is allowed in Hong Kong. Such funding can cover arbitral proceedings and any related court proceedings. Funding can be in the form of money or any other financial assistance in relation to any costs of the arbitration. The funding agreement must be in writing and must be disclosed to the parties to the arbitration and the arbitral tribunal.

Law stated date

Correct on

Give the date on which the above content is accurate.

15 April 2020