New Rules

In a development that received surprisingly little comment, the Hong Kong International Arbitration Centre (“HKIAC”) effective September 1, 2008, promulgated new Administered Arbitration Rules (the “Administered Rules”). Previously, HKIAC arbitrations were conducted under the United Nations Commission on International Trade Law (“UNCITRAL”) Arbitration Rules, supplemented by the HKIAC’s Procedures for the Administration of International Arbitration (the “Procedures”), for those parties wishing to have an UNCITRAL arbitration administered by the HKIAC. Although the UNCITRAL Rules coupled with the HKIAC Procedures functioned perfectly well for more than two decades, it was evidently concluded by the HKIAC that its own set of freestanding rules, without the need to refer to outside documents, would facilitate arbitrations and add convenience. Moreover, almost all of the world’s leading arbitration institutions, with whom the HKIAC competes for cases, have their own freestanding rules.

New Nationality Requirement

The HKIAC’s Administered Rules lean heavily on the UNCITRAL Rules and provide more administrative details than were previously available under the HKIAC Procedures. With respect to the appointment of arbitrators, the HKIAC Administered Rules1 provide that, where the parties to an arbitration agreement are of different nationalities, a sole arbitrator or the Chairman of a three-member arbitral tribunal, shall not have the same nationality as any of the parties, unless specifically agreed otherwise by all parties in writing. We see this as a helpful provision and one that is perhaps aimed at avoiding the “hometown” advantage that Chinese parties often enjoy under CIETCAC arbitrations conducted in China (where the Chairman of the panel will typically be from Mainland China).

Continued Low Cost

The administrative cost of an HKIAC arbitration under its new Administrated Rules has increased from prior practice, although Hong Kong remains a relatively low-cost arbitration venue. For example, under the former Procedures, a US$10 million claim would result in an administrative fee of US$12,821. Under the new Administrated Rules, the same US$10 million claim would attract an administrative fee of US$60,000. Nevertheless, the HKIAC’s fee schedule remains very much in line with other international arbitration bodies and is lower than many. The new Administrated Rules also state all amounts in US dollars; the Procedures stated amounts in Hong Kong dollars.

Positive Development

While still very much an UNCITRAL jurisdiction, the adoption of freestanding rules by the HKIAC moves it in line with other comparable international bodies. While some disputants remain committed to ad hoc arbitration, the majority seems to prefer the convenience of administered arbitration. Freestanding rules are a logical evolutionary development.

Hong Kong continues to be a popular site for the resolution of disputes involving China, as well as for domestic disputes arising from Hong Kong’s own vibrant economy. This is due to Hong Kong’s “clean” judiciary, plus a depth of experienced arbitrators, counsel and experts. The issuance of its own Administered Rules is simply another effort by the HKIAC to remain at the forefront of international arbitration bodies and should not, to any significant extent, change the way of arbitrations have been conducted in Hong Kong or unduly increase their cost. The provision of additional administrative detail in the Administered Rules is likely to be viewed as a positive development.