Australia: Hong Kong’s new Arbitration Ordinance

Last Updated: 16 March 2011
Article by Jim James

Introduction

The effective date of the much anticipated Hong Kong Arbitration Ordinance (the AO) has been announced; it comes into force on 1 June 2011. This new legislation, based largely on the UNCITRAL Model Law on International Commercial Arbitration (the Model Law), will not only make Hong Kong's arbitration law more user-friendly but will also cement Hong Kong's position as a leading arbitration centre in Asia and as a regional centre for legal services and dispute resolution. Moreover, by enabling participants to operate within an arbitration regime that accords with widely accepted international practices and development and with the Model Law being familiar to participants from both civil law and common law jurisdictions, the AO is designed to promote Hong Kong to the international business community as an attractive place to conduct arbitrations.

The AO will replace the current Arbitration Ordinance (the old law). A key feature of this was the different regimes for domestic arbitrations (i.e. arbitrations involving Hong Kong parties) and international arbitrations (effectively, arbitrations with an international element). The AO abolishes this distinction and establishes a unitary regime based on the Model Law, which will apply to all arbitrations and not merely to "international commercial arbitration". This approach is similar to the approach taken in other jurisdictions such as the United Kingdom and Singapore.

A synopsis of some of the key features of the AO is set out below.

Arbitration agreement

It will remain the case that an arbitration agreement must be in writing. However, from 1 June 2011, this requirement can be satisfied by an electronic communication (including, for example, communications by electronic data exchange, electronic mail or telegram) if the information is accessible so that it may be used for subsequent reference. Obviously, this is in line with today's wide-spread use of technology in business and has brought the arbitration law up to date with modern practice.

Opt-in provisions for "domestic" arbitration

The Model Law's unitary regime will apply to all arbitrations as opposed to only those arbitrations with an international element. However, the AO allows parties to tailor their clauses by choosing to apply a number of the provisions which under the old law were only applicable to "domestic" arbitrations. These opt-in provisions, if chosen, will apply to any Hong Kong seated arbitration (whether involving Hong Kong parties or whether having an international element).

The opt-in provisions, which parties can incorporate into their arbitration agreements either individually or entirely, relate to:

  1. the default number of arbitrators;
  2. the consolidation of arbitrations;
  3. court decisions on preliminary points of law;
  4. appeals on grounds of serious irregularities; and
  5. appeals on points of law.

Where these opt-in provisions apply, the courts will have wider powers to intervene in the arbitration proceedings than they would have under a Model Law arbitration where recourse to court is relatively limited.

Importantly, in order to cater for the widespread use of standard form contracts in Hong Kong and to allow parties a period to change these, there is a transitional period for arbitration agreements entered into before the commencement of the AO or for six years after which provide that arbitration under the agreement is domestic arbitration. Under this arrangement, the opt-in provisions will automatically apply to these agreements unless agreed otherwise. The AO also addresses concerns raised by the construction industry and provides automatic opt-in for all Hong Kong construction subcontracting cases under the umbrella of a main contract which provides for domestic arbitration.

Interim measures and preliminary orders (in aid of arbitration proceedings)

A Hong Kong seated arbitral tribunal is able to grant interim measures and preliminary orders relating to, for example, injunctive relief and orders for the preservation of assets and evidence, in respect of any arbitration proceedings commenced (unless the parties have agreed otherwise). As an arbitration friendly jurisdiction, Hong Kong courts also have the ability to grant interim measures in aid of:

  • arbitration proceedings commenced in Hong Kong; and
  • so long as certain elements are satisfied, arbitration proceedings commenced outside Hong Kong.

The Hong Kong courts' ability to grant interim measures in relation to arbitration proceedings commenced outside of Hong Kong is a relatively new feature of Hong Kong arbitration law. Under the AO, the test for granting interim measures with respect to non-Hong Kong seated arbitrations is more clearly defined. Specifically, not only must the arbitration proceedings be capable of giving rise to an award (whether interim or final) that may be enforceable in Hong Kong, the interim measures sought must be of a type which may be granted by the Hong Kong courts in relation to Hong Kong seated arbitrations.

The arbitral tribunal's powers to make orders for security for costs, discovery of documents, and directions that evidence is given by way of affidavit are separately provided for under the AO.

Confidentiality

The AO has changed the rules on confidentiality of court proceedings commenced in aid of arbitration proceedings. The default position will be that proceedings are to be heard in private but the court has the discretion to order the proceedings to be heard in open court on the application of any party, or if the court is satisfied that those proceedings ought to be heard in open court. This is to be contrasted with the position under the old law where the presumption was that proceedings should be heard in open court.

The new position accords with the general perception that arbitration is a confidential process and is intended to balance the need to protect confidentiality with public interest issues of transparency of process and public accountability of the judicial system. An order made by the Court of First Instance in this respect is not subject to appeal.

Where court hearings are conducted in private (e.g. closed court), the court must not make a direction permitting information to be published unless all parties have agreed or the court is satisfied that the information, if published, would not reveal any matter that any party reasonably wishes to remain confidential. This makes sense in light of the default position being to preserve confidentiality.

The AO preserves the rules that parties are deemed to have agreed not to publish, disclose or communicate any information relating to the arbitral proceedings or an award made in those proceedings (subject to a few statutory exceptions).

Mediation in the process of arbitration proceedings

There are some interesting provisions in the AO relating to the interplay of mediation and arbitration. As with disputes in a litigation forum, parties are increasingly turning to ADR processes. The AO allows an arbitrator sitting on the tribunal of a Hong Kong seated arbitration to act as mediator in respect of those proceedings after the arbitral proceedings have been commenced, so long as all parties have consented in writing. In the event that settlement is not reached in the mediation, no objection may be made against the person continuing to act as arbitrator solely on the ground that the person acted as mediator.

Whilst not a new feature of the law, having the one person wear two hats (i.e. act as arbitrator and mediator) is not a process that has been often used in Hong Kong. One concern in employing this approach is that an arbitrator who has previously acted as mediator may have acquired information during the course of the mediation which prevents him from being impartial during any subsequent arbitration. However, in jurisdictions such as China, this "two hats" approach is more widely used and is thought in many instances to speed up the process and to save time and costs.

Similar to the conciliation process provided under the old law, the AO envisages that where an arbitrator obtains confidential information from a party during the course of a mediation and the mediation terminates with no settlement having been reached, the arbitrator must disclose to all other parties as much of that information as the arbitrator considers material to the arbitral proceedings. The obvious concern is that this provision may discourage parties from engaging in a full and frank discussion of their respective positions during the course of mediation, in the fear that information may be used against them at a later stage if the matter does not settle. Again, this type of system will be familiar to parties from civil law systems such as China where similar procedures apply in CIETAC arbitrations.

Looking forward past 1 June 2011

The AO will help to reinforce Hong Kong's position as one of the leading international arbitration centres, especially in relation to disputes with a China element, and to uphold its position as a pro-arbitration jurisdiction where the Hong Kong courts generally adopt a non-interventionist approach in relation to Model Law arbitrations and where they are pro-enforcement of awards.

The adoption of a unitary regime applying the Model law is in accordance with other modern arbitration jurisdictions and its familiarity will be likely to attract international users of arbitration. At the same time, the new opt-in provisions will provide comfort to Hong Kong users familiar with the domestic regime under the old law and to those parties who seek greater court intervention.

It is hoped that the AO will help to continue to portray Hong Kong to both the international and local business communities and arbitration practitioners as an attractive place to conduct arbitrations.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Jim James
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert
Email Address
Company Name
Password
Confirm Password
Mondaq Topics -- Select your Interests
Accounting and Audit
Anti-trust/Competition Law
Consumer Protection
Corporate/Commercial Law
Criminal Law
Employment and HR
Energy and Natural Resources
Environment
Family and Matrimonial
Finance and Banking
Food, Drugs, Healthcare, Life Sciences
Government, Public Sector
Immigration
Insolvency/Bankruptcy, Re-structuring
Insurance
Intellectual Property
International Law
Law Practice Management
Litigation, Mediation & Arbitration
Media, Telecoms, IT, Entertainment
Privacy
Real Estate and Construction
Strategy
Tax
Transport
Wealth Management
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.