Quick notes: 10 questions on Hong Kong arbitration
With a modern arbitration law and supportive court system, Hong Kong is well known as a major venue for international arbitration.
Below is a short primer intended to give an overview of Hong Kong’s arbitration regime. For those interested in a more detailed guide to Arbitration Procedures and Practice in Hong Kong, we suggest looking at our Thomson Reuters article as part of their Country Q&A series.
- What is the important legislation and who are the major Arbitration institutions?
Hong Kong’s arbitration regime is governed by the Arbitration Ordinance (Cap. 609) (AO) and is based on the UNCITRAL Model Law.
The three major institutions operating in Hong Kong are the Hong Kong International Arbitration Centre (HKIAC), the International Court of Arbitration of the International Chamber of Commerce (ICC) and the China International Economic and Trade Arbitration Commission (CIETAC).
- Is the court system supportive of arbitration?
Hong Kong courts provide strong support for arbitration in accordance with the AO. Notably, there are express provisions that a court not interfere in an arbitration except as provided for in the AO (s.12 AO) and is required to refer a case (where there is an arbitration agreement) to arbitration if requested by a party (subject to certain exceptions) (s.20(1) AO).
- Is it confidential? What about any related court proceedings?
Yes, subject to certain exceptions (for example agreement by the parties, for legal proceedings before a court or by reason of regulatory matters) (s.18 AO).
The starting position is that any court proceedings relating to an arbitration should be heard in closed court (s.16(1) AO).
- Are there any requirements for the arbitration agreement?
Under the AO, an arbitration agreement must be in writing (s.19 AO). It may be in the form of an arbitration clause in a contract or contained in a separate agreement.
- Can the tribunal rule on its own jurisdiction and do parties have flexibility on procedural rules?
Yes (s.34 AO). The arbitral tribunal’s ruling as a preliminary question that it has jurisdiction is subject to appeal before the court by any party within 30 days of receiving notice of that ruling. The court’s decision is not subject to further appeal (s.34(1) AO).
Subject to the requirements of the AO, parties are free to agree on the procedural rules to be followed in an arbitration (s.47 AO). If there is no agreement, then the tribunal can conduct the arbitration in the manner it sees fit.
- Is there provision for consolidation of arbitrations and joinder of parties?
The rules of the major institutions allow for consolidation of arbitrations (Article 28 HKIAC Rules, Article 10 ICC Rules, Article 19 CIETAC Rules).
The institutions will consider a range of factors, including whether common question of law or fact arises in the arbitration, the rights to relief claimed in the arbitral proceedings are in respect of or arise out of the same transaction or series of transactions, or there are other reasons conducive to making an order to consolidate.
In addition, the court may order the consolidation of arbitrations if Schedule 2 of the AO applies. Schedule 2 only applies if (a) the parties have agreed it should apply; or (b) the arbitration agreement was made prior to 31 May 2017 and provides that the arbitration is a domestic arbitration (ss. 99-100 AO).
The major institutions contemplate joinder of parties by way of an application where there is an applicable arbitration agreement (Article 27 HKIAC Rules, Article 7 ICC Rules and Article 18 CIETAC Rules).
- What interim measures and remedies are available?
The court has the power to grant interim measures, including orders to preserve assets or evidence, or to maintain the status quo pending determination of the dispute (s. 45 AO). Unless otherwise agreed by the parties, the arbitral tribunal is also empowered to make orders in respect of interim measures (s. 35(1) AO).
Parties with Hong Kong seated arbitrations at specified institutions enjoy the unique benefit of being able to apply directly to PRC courts for interim measures including asset, evidence and conduct preservation orders under the Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings by the Courts of the Mainland and of the Hong Kong Special Administrative Region (the Interim Measures Arrangement).
Unless otherwise agreed, an arbitral tribunal can also award the same remedies that could be ordered had the dispute been the subject of civil proceedings in court (s. 70 AO).
- What if a party wants to appeal or set aside the award?
There are limited rights to appeal an arbitral award. The appeal may challenge the award on grounds of serious irregularity or on a question of law (Schedule 2(4)-(5) AO). However, an appeal is only permitted if the parties have agreed that the appeal provisions should apply, or the arbitration agreement was made prior to 31 May 2017 and provides that the arbitration is a domestic arbitration (ss. 99-100 AO).
A party may apply to set aside an award on limited grounds (s. 81 AO), including:
- a party to the arbitration agreement was under an incapacity or the agreement was not valid;
- a party was not given proper notice of the appointment of an arbitrator or the arbitral proceedings;
- the award deals with a dispute not contemplated by or not falling within the terms of the submission of arbitration, or contains decisions on matters beyond the submission to arbitration; or
- the composition of the tribunal was not in accordance with the terms of the arbitration agreement.
- Where can I enforce an award? What about enforcing in the PRC?
An arbitral award, whether made in or outside Hong Kong, is enforceable in the same manner as a judgment of the court, but only with the leave of the court (s. 84(1) AO).
Arbitral awards made in Hong Kong are enforceable overseas under the New York Convention (the PRC being a party to the New York Convention).
There are specific procedures for reciprocal recognition and enforcement of arbitral awards in Hong Kong and the PRC (being the Arrangement Concerning Mutual Enforcement of Arbitral Awards Between the Mainland and the Hong Kong Special Administrative Region) rather than the New York Convention (the Arrangement). Parties should be aware that the Arrangement will be further refined by the recent signing of the Supplemental Arrangement on 27 November 2020.
- Is there third party funding?
The AO permits third party funding of arbitration in Hong Kong (Part 10A AO). Many funders have a presence in Hong Kong. A Code of Practice for Third Party Funding of Arbitration applies to third party funders and any funding agreement.