A user-friendly, model law framework will be attractive to international users of arbitration and will build on Hong Kong’s position as an established arbitration centre.
In recent years, the Hong Kong judiciary has changed its approach to arbitration. It now promotes it as a means of resolving disputes with minimal judicial intervention. If current changes under discussion go through, the law on arbitration in Hong Kong will become much more user friendly.
In 2007, the Department of Justice published a consultation paper on reform of the arbitration law, along with a draft Arbitration Bill. The consultation period was due to end at the end of June 2008.
The draft Bill is based on the UNCITRAL model law. It reflects certain principles associated with the model law: the need to promote uniformity, the observance of good faith.
Under the current Arbitration Ordinance (Cap 341), a distinction is made between domestic arbitration and international arbitration. The draft Bill proposes doing away with that distinction. The new regime will apply to all arbitrations. It is not limited to “international commercial arbitration” as provided under the model law. There is no list of non-arbitral subjects.
The Bill addresses concerns raised by the construction industry through its proposal for an opt-in system for “domestic arbitration”. The parties can include provisions under the Ordinance which at the moment only apply to domestic arbitrations. These include the ability to appeal on points of law, the default position of having a sole arbitrator, consolidation and pre-determination of points of law by the court. The Bill proposes that these opt-in provisions apply automatically where the arbitration agreement states it shall be a “domestic arbitration”, for all arbitration agreements entered into prior to the new legislation coming into force or within six years after commencement.
Under the Ordinance, it is mandatory for proceedings to be heard other than in open court. The Bill proposes that the default position is for proceedings to be heard in open court, but, if a party requests it, the court shall order the proceedings to be heard other than in open court (unless the court is satisfied otherwise). Why the change? The idea is to balance the need to protect confidentiality with the public interest in transparency of process and accountability of judicial system.
Confidentiality in reporting is safeguarded. The Ordinance empowers the court to give directions as to what may be published about arbitral proceedings. Under the Bill, the parties are deemed to have agreed not to publish, disclose or communicate any information relating to the arbitral proceedings or to an award made in those proceedings, subject to a few exceptions.
The Bill will empower the tribunal to grant interim measures and preliminary orders. It has adopted articles 17 to 17J of the model law to give the tribunal this power. The court will be able to grant interim measures for proceedings conducted in or outside of Hong Kong (subject to certain conditions). The interim resources include injunctive relief, security for costs and orders for the preservation of evidence.
Will the courts only be able to grant interim measures for proceedings outside Hong Kong where courts in the corresponding place of arbitration will act reciprocally? The jury is still out.
Neither is there a decision on whether the law should require that the type of order granted must be available for arbitral proceedings in Hong Kong.
The Bill reproduces proposed amendments to the Ordinance (by a 2007 Hong Kong Bill) permitting the courts to grant interim measures only where the arbitral proceedings are capable of giving rise to an arbitral award enforceable in Hong Kong.
Under the Bill, a party seeking to enforce an award made other than under the New York Convention, or by a mainland PRC arbitration authority, needs to demonstrate that the court in the place where the award is made will act reciprocally where awards made in Hong Kong are concerned.