On November 10, 2010, Hong Kong enacted a new Arbitration Ordinance, Chapter 609 of the Laws of Hong Kong. This represents a major step in Hong Kong’s continuing effort to modernize its arbitration regime. The new ordinance is set to replace the current Arbitration Ordinance, Chapter 341, and will take effect on June 1, 2011.
Historically, Hong Kong has been a key player in promoting arbitration in the East Asia region. The Arbitration Ordinance was first enacted in 1963. In 1985, the independent, non-profit Hong Kong International Arbitration Centre (HKIAC) was set up to provide services in relation to arbitrations and alternative dispute resolution in Hong Kong. In 1992, on the recommendation of a committee formed by the HKIAC, Hong Kong amended the Arbitration Ordinance to apply the principles of the Model Law of the United Nations Commission on International Trade Law, an internationally recognized arbitration framework, to the administration of arbitrations in Hong Kong. Hong Kong adopted the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards on April 21, 1977, by virtue of the UK’s accession to the convention. After July 1, 1997, China extended the application of the convention to Hong Kong.
Hong Kong has achieved success in establishing itself as the preferred seat of choice for arbitration and a prime center for arbitration, especially in the Asia Pacific region. In 2010, the HKIAC published statistics reporting that it handled 624 dispute cases in that year, of which 291 were arbitration cases, 107 were domain name disputes and 226 mediation disputes. In a continuing effort to modernize arbitration in Hong Kong, the new Arbitration Ordinance introduces a number of important changes to Hong Kong’s current arbitration regime.
The most significant change under the new ordinance is the abolition of the dual regime currently in place governing the administration of arbitrations. Under the dual regime, a distinction is drawn between ”international” arbitrations and ”domestic” arbitrations. International arbitrations include, among other things, those arbitrations in which the parties have places of business in different states or outside of the place of arbitration or substantial performance of the subject matter in dispute. Different rules are applicable—while to a certain extent they are harmonized since the amendments in 1992, there are notable differences. In particular, the court enjoys more power to intervene or assist in a domestic arbitration, for example, by deciding on questions of law or challenges to the arbitrator’s decisions. Under the new ordinance, there will be one unitary regime largely based on the Model Law. As such, there will be greater party autonomy and limited scope for court intervention, with primary authority vesting in the arbitral tribunal. The provisions of the current ordinance, giving the court the power to intervene and other safeguards, will now apply only if the parties have expressly agreed to such or in specified circumstances.
The new ordinance also brings a host of new improvements. The provisions of the Model Law are drafted directly into the body of the ordinance so that it becomes more readable and user-friendly. It provides that, except in specified circumstances, the parties shall keep the arbitral proceedings and arbitral award confidential, thus codifying into law one of the main perceived advantages of arbitration. While a judgment or report on court proceedings may be published, there is now an express confirmation that the court can order the concealment of information that a party reasonably wishes to keep confidential. The arbitral tribunal is also given powers to grant interim orders, such as preservation orders, restraining orders and preemptory orders, with potential adverse consequences flowing from noncompliance, including, in extreme situations, dismissal of the claim.
The new ordinance retains provisions of the current ordinance not appearing in the Model Law, providing for the express power of the arbitral tribunal to direct discovery of documents or delivery of interrogatories. These are English concepts that require broad disclosure of relevant documents or information by a party. The new ordinance also retains the current provisions on enforcement of foreign awards in Hong Kong.
The new ordinance, combining the flexibility of the Model Law and additional safeguards above and beyond the Model Law, places Hong Kong in an enviable position for conducting arbitrations. Parties will no longer need to be concerned with the distinction between ”international” and ”domestic” arbitrations when drafting arbitration agreements. They will enjoy flexibility and party autonomy in the arbitration process under the Model Law, while appreciating the arbitral tribunal’s additional powers, which will be exercised to allow a fair resolution of a dispute. The successful party will enjoy the assurance that an arbitral award made pursuant to the Model Law will be enforceable in other jurisdictions, including mainland China. Under the Arrangement Concerning Mutual Enforcement of Arbitral Awards between the mainland and Hong Kong in 1999, Hong Kong courts already enforces “mainland awards” and vice versa.
It will not take long for the practical benefits of Hong Kong’s new arbitration framework to emerge and be internationally recognized.