1.1 Describe the prevalence of commercial arbitrations as a method of settling disputes, both domestic and international.
Hong Kong is a very established forum so far as arbitration is concerned. This appears to be the case in both domestic and international arbitrations.
On the domestic front, the property market is one of Hong Kong’s major economies and therefore construction projects form an important part of the domestic economy. Due to the complex nature of construction projects, arbitration has been traditionally a popular means of dispute resolution and an alternative to litigation in Hong Kong as the parties are given the right to select their preferred professional with the necessary expertise in the issues involved to determine their disputes. Apart from the private sector, the Hong Kong government has also opted for arbitration as the method of settling disputes in a number of ordinances relating to franchises for large-scale public infrastructure. The Hong Kong High Court has also established a ‘Construction and Arbitration List’ to provide judicial support to disputes related to construction and arbitration.
On the international front, arbitration has also been widely incorporated in contracts relating to shipping and international trade where parties to the contracts are often domiciled in different countries. Hong Kong, as a major commercial and financial centre in the region for many years, is not only a popular forum for arbitration where one of the parties is domiciled in Hong Kong but it has also been a very popular neutral choice for arbitration where both parties are domiciled outside of Hong Kong.
2.1 What are the principal sources of law and regulation relating to domestic and international arbitration? (Describe the role of federal or state laws and relevance of court decisions.)
The principle sources of law relating to arbitration are primarily codified in the Hong Kong Arbitration Ordinance. Part IA of the Ordinance applies to both domestic and international arbitration.
Domestic arbitration
Part II of the Ordinance governs domestic arbitration. The definition of domestic arbitration agreement under the Ordinance is an agreement which is not an international agreement as defined under art 1(3) of the UNCITRAL Model Law on International Commercial Arbitration (the Model Law). The Ordinance allows parties to domestic arbitration to treat the dispute to be arbitrated as an international arbitration under Part IIA.
International arbitration
Part IIA of the Arbitration Ordinance governs international arbitration and incorporates the Model Law with some amendments. According to art 1(3) of the Model Law, an arbitration is international if the parties’ places of business are in different states; or the place of arbitration or the performance of the contract is outside the state in which the parties have their places of business; or the parties have expressly agreed that the subject-matter of the arbitration agreement relates to more than one country. The Ordinance allows parties to international arbitration to treat the dispute to be arbitrated as a domestic arbitration under Part II.
The current Arbitration Ordinance has evolved from its earliest version dating back to 1844. It does not provide a complete legal code governing arbitration. The common law, namely decisions made by judges, remains the source for interpreting the provisions under the Ordinance and fills in the lacuna where the Ordinance is silent.
In 1990, the Basic Law of Hong Kong was enacted by the Peoples’ Republic of China (PRC). It took effect on 1 July 1997 on which date the PRC resumed its sovereignty over Hong Kong. The Basic Law preserves Hong Kong’s common law system and expressly provides that the Hong Kong courts may continue to refer to the precedents of other common law jurisdictions.
Rules of the High Court
Order 73 of the Rules of High Court sets out the mode by which applications including interim measures of protection available under the Arbitration Ordinance should be made to the court. It also prescribes the mode by which enforcement of arbitral awards and applications to set aside orders granting leave to enforce awards should be made.
2.2 List and briefly describe relevant arbitration statutes, international treaties and conventions.
The Arbitration Ordinance
The Arbitration Ordinance provides the legislative framework to arbitrations in Hong Kong.
1958 New York Convention
Before 1 July 1997, Hong Kong was a party to the United Nations Convention on the Recognition and Enforcement of Arbitral Awards 1958 (the New York Convention) by virtue of its status as a colony of the UK. After 1 July 1997, the PRC extended the New York Convention to Hong Kong. Accordingly, the New York Convention continues to apply in Hong Kong and arbitral awards obtained in another contracting state to the New York Convention are enforceable directly in Hong Kong. Likewise, arbitral awards issued in Hong Kong can be enforced in over 120 states which are also signatories to the New York Convention.
3.1 What are/describe the principal institutions and/or government agencies that assist in the administration or oversight of international and domestic arbitrations?
There are no legal requirements to involve any arbitral institutions to assist in the administration of any arbitration in Hong Kong. In 1985, the Hong Kong International Arbitration Centre (HKIAC) was established to promote arbitration and other alternative dispute dissolution in Hong Kong. The HKIAC is empowered by the Arbitration Ordinance as the appointing authority to decide the number and choice of arbitrators in default of agreement between the parties.
In 2004, there were 3,353 disputes involving the HKIAC, of which 280 were of international nature. This figure placed the HKIAC as the fourth most popular arbitral institution among the 11 other similar arbitral institutions around the world.1 It is to be noted that many international arbitrations taking place in Hong Kong are conducted pursuant to ICC Rules, UNCITRAL Rules, LMAA Terms, FOSFA/GAFTA Rules that do not involve the HKIAC. Therefore, the actual number of arbitrations in Hong Kong is far in excess of the figure compiled by the HKIAC.
The East-Asia Branch of the Chartered Institute of Arbitrators and the Hong Kong Institute of Arbitrators are also active in promoting arbitration in Hong Kong.
4.1 What is the relationship between agreements to arbitrate and access to the courts? Is there a presumption of arbitrability/policy support for arbitration? Will the courts stay court actions in favour of agreements to arbitrate?
International regime
Article 8 of the Model Law provides that if a party to an arbitration agreement commences legal action in Hong Kong, the court shall, upon the request of the other party, refer the parties to arbitration unless it finds that the agreement is null and void. This article, coupled with other provisions under the Arbitration Ordinance further discussed below, clearly shows a strong presumption in favour of upholding international arbitration agreement and also in enforcing an award obtained under it.
1 The 11 other similar institutions shown on the HKIAC’s official website, www.hkiac.com, are:
the American Arbitration Association, the China International Economic and Trade
Arbitration Commission, the International Chamber of Commerce, the Japan Commercial
Arbitration Association, the Korean Commercial Arbitration Board, the Kuala Lumpur
Regional Centre for Arbitration, the London Court of International Arbitration, the Singapore
International Arbitration Centre, the Arbitration Institute of the Stockholm Chamber of
Commerce, the British Columbia International Commercial Arbitration Centre and the
International Arbitral Centre of the Austrian Federal Economic Chamber.
Domestic regime
Section 6 of the Arbitration Ordinance extends the application of art 8 to domestic arbitration except that the court may, upon an application by a party, make an order staying the legal proceedings if it is satisfied that there is no sufficient reason why the matter should not be referred to arbitration and that the applicant is ready and willing to refer the dispute for arbitration. In practice, the court almost invariably exercises its discretion in favour of a stay of proceedings if it is satisfied that a valid arbitration agreement exists.
4.2 May an arbitral tribunal rule on a party’s challenge to its own jurisdiction (‘competence-competence’)? Need a tribunal suspend its proceedings if a party seeks to test jurisdiction in the courts?
International regime
Article 16 of Model Law provides that an arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. In that regard, an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract. It is therefore possible that the contract containing an arbitration clause is null and void but the arbitration clause is valid and binding.
If the arbitral tribunal rules as a preliminary question that it has jurisdiction, any party may request the HKIAC to decide the matter, which decision shall be subject to no appeal. While such a request is pending, the arbitral tribunal may continue the arbitral proceedings and make an award.
Domestic regime
Pursuant to s 13B of the Arbitration Ordinance, art 16 of the Model Law also applies to domestic arbitration.
5.1 Provide a selected bibliography of the most influential publications in or relied upon in the jurisdiction – books, journals, newsletters and pamphlets.
Books
R Morgan The Arbitration Ordinance of Hong Kong – A Commentary, and 1997 Supplement , (Hong Kong, Butterworths, 1997) Halsbury’s Laws of Hong Kong – Arbitration (Hong Kong, Butterworths, 2003 reissue) The Hon Mr Justice Ma Arbitration in Hong Kong: A Practical Guide (Hong Kong: Sweet & Maxwell, 2003)
Websites
HKIAC: www.hkiac.org
The Hong Kong Institute of Arbitrators: www.hkiarb.org.hk
The Chartered Institute of Arbitrators, East Asia Branch: www.ciarbasia.org
6.1 Are there form and/or content requirements for an enforceable agreement to arbitrate? How may they be satisfied?
There are no form or content requirements for an enforceable arbitration agreement although s 2AC of the Arbitration Ordinance requires that an arbitration agreement must be in writing. Section 2AC expressly replaces art 7C of the Model Law and applies to both domestic arbitration and international agreements. Section 2AC(2) provides a very extensive definition for what amounts to in writing. A document is in writing irrespective of whether it was signed by both parties if it is in a document, or made on an exchange of written communications or recorded by one of the parties to the agreement or is alleged by one party and is not denied by the other party.
Arbitration is essentially a private arrangement adopted by parties who wish to resolve any dispute other than by litigation. It is only mandated for disputes that involve the Hong Kong government in its private capacity as a party to certain contractual arrangements regulated by legislation. For instance, arbitration is mandated to resolve certain disputes arising from franchises granted for the operation of some infrastructure projects, eg the Tai Lam Tunnel and Yuen Long Approach Road Ordinance and also the Tung Chung Cable Car Ordinance.
Pursuant to s 11 of the Labour Relations Ordinance, Cap 55, the Chief Executive in Council may with the consent of the parties, refer the trade dispute to arbitration. Pursuant to s 118 of the Securities and Futures Ordinance, Cap 571, the Securities and Futures Commission may establish an arbitration panel to determine certain matters governed by that Ordinance.
7.2 Is arbitration prohibited for certain types of dispute (restraints of fundamental public policy)?
Arbitration is not used to resolve any disputes that would involve the exercise of the state’s jurisdiction. For instance, once a couple is legally married, the marriage may only be terminated by the court.
Section 26(1) of the Arbitration Ordinance also provides that where a dispute subject to an arbitration agreement concerns a question of fraud, the court has the power to determine such question and refuse to stay any action brought in breach of the agreement.
8.1 May an arbitral clause be considered valid even if the rest of the contract in which it is embedded is invalid?
Under common law, the principle of separability of an arbitration clause contained in a contract means that an arbitration clause may be considered valid even if the rest of the contract is invalid.
International regime
Article 16 of Model Law provides that an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract. Even if the contract is held by the arbitral tribunal as null and void, it will not invalidate the arbitration clause.
Domestic regime
Section 13 of the Arbitration Ordinance extends art 16 of the Model Law to domestic arbitration.
9. QUALIFICATION/APPOINTMENT/LIABILITY OF ARBITRATORS
9.1 Are there specific provisions regulating the qualifications of arbitrators? Are there requirements (including disclosure) for ‘impartiality’ and ‘independence’, and do such requirements differ as between domestic and international arbitrations?
There are no statutory provisions regulating the qualifications of arbitrators. Parties are free to set out the qualifications of arbitrators in an arbitration agreement.
An arbitral tribunal is required under s 2GA of the Arbitration Ordinance to act fairly and impartially as between the parties, giving them a reasonable opportunity to present their cases and to deal with the case of their opponents. This applies to both domestic and international arbitrations.
International regime
Article 12 of the Model Law further provides that when a person is approached in connection with his possible appointment as an arbitrator, he must disclose any circumstances likely to give rise to justifiable doubts as to his impartiality or independence. This is a continuing obligation from the time of an arbitrator’s appointment and throughout the arbitral proceedings.
9.2 Are there provisions governing the challenge or removal of arbitrators? Do the courts or other jurisdictions play/have a role in any such challenge?
International regime
Article 12(2) of the Model Law provides that an arbitrator may be challenged only if circumstances exist that give rise to justifiable doubts as to his impartiality or independence, or if he does not possess qualifications agreed to by the parties. It further provides that a party may challenge an arbitrator appointed by him, or in whose appointment he has participated only for reasons of which he becomes aware after the appointment has been made.
Domestic regime
Section 3 of the Arbitration Ordinance provides that unless a contrary intention is expressed in the agreement, the authority of an arbitrator in domestic arbitration is not irrevocable except by leave of the court. Section 25(1) provides that the court may remove an arbitrator who has misconducted himself or the proceedings.
9.3 Does legislation govern, or have the courts developed rules regarding the liability of arbitrators for acts related to their decision-making function?
Section 2GM of the Arbitration Ordinance provides that an arbitral tribunal is liable for acts related to its decision-making functions only if it is proved that such acts were done dishonestly. This section applies to both domestic and international arbitration.
10. PARTY REPRESENTATION
10.1 Are there particular qualification requirements for representatives (‘counsel’) appearing in the jurisdictions?
Subject to any express provisions in an arbitration agreement, there are otherwise no particular qualification requirements for party representatives appearing in the jurisdiction.
Section 2F of the Arbitration Ordinance expressly provides that representation and preparation of arbitration proceedings may be conducted by persons who are not legally qualified except where it is done in connection with court proceedings arising out of an arbitration agreement or arbitration proceedings.
11. PLACE OF ARBITRATION/PROCEDURES
11.1 Are there provisions governing the place (seat) of arbitration, or any requirement for arbitral proceedings to be held at the seat?
International regime
Article 20(1) of Model Law provides that the parties are free to agree on the place of arbitration. Failing such agreement, the place of arbitration shall be determined by the arbitral tribunal having regard to the circumstances of the case, including the convenience of the parties. Article 20(2) expressly allows the arbitral tribunal, unless otherwise agreed by the parties, to meet at any place it considers appropriate for consultation among its members, for hearing witnesses, experts or the parties, or for inspection of goods, other property or documents.
Domestic regime
There are no statutory provisions governing the place of arbitration in the domestic regime or any requirement for arbitral proceedings to be held at the seat. Unless the parties to an international arbitration opt to submit to the domestic regime, arbitration within the domestic regime would not have any overseas element. It is submitted that if parties to a domestic arbitration agreement elect to refer their disputes to arbitration in Hong Kong, then Hong Kong would likely be accepted as the place of arbitration. Although there is no provision under the Arbitration Ordinance extending art 20(2) to the domestic regime, it is submitted that subject to the parties’ agreement and the availability of the tribunal, the arbitral proceedings may be held outside of Hong Kong.
11.2 Are specific procedures mandated in particular cases, or in general?
The Arbitration Ordinance is based upon the principle that the parties to a dispute should be free to agree how the dispute should be resolved. There are no specific procedures mandated in particular or general cases save some express provisions under the Model Law to be further discussed below. Parties to both domestic and international arbitrations are free to incorporate institutional arbitral rules in arbitration agreements. For instance, the HKIAC’s Domestic Arbitration Rules are frequently incorporated in domestic arbitration agreements in Hong Kong.
International regime
The parties’ right to agree on the procedure in conducting the arbitration is further underpinned by art 19 of the Model Law. On the other hand, Chapter V of the Model Law sets out a number of provisions for commencement of the arbitration, statements of claim and defence and hearings and written proceedings. Many international arbitration agreements incorporate institutional arbitral rules, eg the LMAA Terms, the ICC/GAFTA/ FOSFA and UNCITRAL Rules. These institutional arbitral rules often set out their own provisions for the conduct of arbitration which are likely different from that set out under Chapter V of the Model Law. It is submitted that if the Model Law is applicable solely because Hong Kong has been selected as the place of the arbitration, in case of conflicts between the Model Law and the institutional arbitral rules, the latter specifically adopted by the parties in the arbitration agreement should prevail and the Model Law only falls into play where the arbitral rules are silent.
12. EVIDENCE GATHERING
12.1 What is the general approach to the gathering and tendering of evidence at the pleading stage and at the hearing stage (production, discovery, privilege, use of witness statements etc)? Are there differences between domestic and international arbitrations?
The starting-point is whether an arbitration agreement has incorporated any arbitral rules. If so, the arbitral rules may make provision for the gathering and tendering of evidence at the pleading stage and at the hearing stage. If the arbitration is conducted on an ad hoc basis, the parties are free to agree on the gathering and tendering of evidence at the pleading stage and at the hearing stage. Failing agreement, the tribunal may determine any matters either on its motion or on an application by either party. Section 2GA of the Arbitration Ordinance expressly provides that an arbitral tribunal is not bound by the rules of evidence and can receive any evidence that it considers relevant to the proceedings and give such weight to the evidence adduced as it considers appropriate.
Section 2GB sets out the arbitral tribunal’s general powers, including directing the discovery of documents, the delivery of interrogatories and directing evidence to be given by affidavit. Section 2GC sets out the court’s special powers to make an order directing the inspection, photographing, preservation, custody, detention or sale of the property by the tribunal, a party to the proceedings or an expert or directing samples to be taken from, observations to be made of, or experiments to be conducted on the property. The court’s special powers in this regard can be exercised irrespective of whether or not similar powers may be exercised by the tribunal under s 2GB. The court may decline to make an order if the court considers it more appropriate for the matter to be dealt with by the relevant arbitral tribunal. The court may grant relief if the applicant can show that the case necessitates the grant of the relief to prevent serious and irreparable damage to the position of the applicant in the arbitration.
Sections 2GA–2GC apply to both domestic and international arbitration.
International regime
Article 19(2) of Model Law further expressly provides that in the absence of agreement between the parties, the arbitral tribunal may conduct the arbitration in such manner as it considers appropriate. The power conferred upon the arbitral tribunal includes the power to determine the admissibility, relevance, materiality and weight of any evidence.
12.2 What powers of compulsion or court assistance are there for arbitrators to require attendance of witnesses or production of documents, either prior to or at the substantive hearing? Is there a difference between domestic and international tribunals or as between parties and non-parties? Do special provisions exist for arbitrators appointed pursuant to international treaties (ie bilateral or multilateral investment treaties)?
The court may order a person to attend proceedings before an arbitral tribunal to give evidence or to produce documents or other material evidence under s 2GC(3). The court or a judge of the court may also order a writ of habeas corpus ad testificandum to be issued requiring a prisoner to be taken for examination before an arbitral tribunal. This section applies to both domestic and international arbitrations under s 2GC(4).
International regime
Pursuant to art 19(2) of Model Law, the arbitral tribunal may, in the absence of agreement between the parties, conduct the arbitration in such manner as it considers appropriate. The power conferred upon the arbitral tribunal includes the power to determine the admissibility, relevance, materiality and weight of any evidence. Article 27 gives the arbitral tribunal or a party with the approval of the arbitral tribunal the right to make an application to the High Court for assistance in taking evidence.
13. INTERIM MEASURES/ROLE OF THE TRIBUNAL
13.1 Are there special provisions relating to the granting of interim and preliminary relief? Have the courts recognised and/or limited any such authority? Do the courts themselves play a role in interim relief in arbitration proceedings?
Both domestic and international
An arbitral tribunal is empowered to grant interim injunctions or directing other interim measures to be taken under s 2GB(1)(f) of the Arbitration Ordinance. Section 2GC(1)(c) expressly provides the court with the same powers, in addition to the court’s inherent jurisdiction. The court’s power conferred under this section can be exercised irrespective of whether or not similar powers may be exercised by an arbitral tribunal but the court may decline to make an order if it considers more appropriate for the matter to be dealt with by the arbitral tribunal.
International regime
Article 17 of Model Law further provides that unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, order any party to take such interim measure of protection as the arbitral tribunal may consider necessary in respect of the subject-matter of the dispute. The arbitral tribunal may require any party to provide appropriate security in connection with such measure.
14. TAXATION OF ARBITRATORS’ FEES
14.1 Does the state, or any of its sub-divisions, purport to tax domestically the fees of foreign arbitrators conducting hearings in the state? Is there a difference if the arbitration is ‘seated’ in the state or elsewhere?
Section 14 of the Inland Revenue Ordinance provides that where a person carries on a trade, profession or business in Hong Kong, any profits from that trade, profession or business have arisen in or derived from Hong Kong are subject to profits tax. The role of an arbitrator likely falls within the definition of profession within s 14. If an arbitrator is appointed in a domestic arbitration in Hong Kong and conducts the arbitral proceedings in Hong Kong, his fees will be subject to profit tax. However, if an arbitrator is appointed in an arbitration where the seat is located outside of Hong Kong but he visits Hong Kong solely to attend part of the arbitral proceedings for the convenience of the parties or his peer arbitrator so as to save costs, it is not entirely clear whether his fees earned from that part of the proceedings would be considered having arisen in or derived from Hong Kong. The source concept is highly contentious and is outside the ambit of this book.
Section 21 of the Arbitration Ordinance provides that if an arbitrator or umpire refuses to deliver his award except on payment of the fees demanded by him, the court may, on an application by any party to the reference, order that the arbitrator or umpire shall deliver the award to the applicant on payment into court by the applicant of the fees demanded, and further that the fees demanded shall be taxed by the taxing officer and that out of the money paid into court there shall be paid out to the arbitrator or umpire by way of fees such sum as may be found reasonable on taxation and that the balance of the money, if any, shall be paid out to the applicant.
15. DEFAULT PROCEEDINGS
15.1 Are there provisions governing a tribunal’s ability to determine the controversy in the absence of a party who, on appropriate notice, fails to appear at or seek adjournment of the arbitral proceedings?
Both domestic and international
Section 2AA (1) of Arbitration Ordinance clearly states that the object of the Ordinance is to facilitate the fair and speedy resolution of disputes by arbitration without unnecessary expense. An arbitral tribunal is required under s 2GA to use procedures that are appropriate to the particular case, avoiding unnecessary delay and expertise so as to provide a fair means for resolving the disputes.
Section 2GE empowers the tribunal to make an order dismissing a party’s claim if it is satisfied that the party or its adviser has unreasonably delayed in pursuing the claim.
International regime
Article 25 of the Model Law empowers the arbitral tribunal to terminate an arbitration if the claimant fails to communicate his statement of claim. The tribunal may also continue the proceedings if the respondent fails to communicate his statement of defence without treating such failure in itself as an admission of the claimant’s allegations. If any party fails to appear at a hearing or to produce documentary evidence, the arbitral tribunal may continue the proceedings and make the award on the evidence before it.
16. THE ARBITRAL AWARD
16.1 Must an award take any particular form, eg in writing, signed, dated, place, the need for reasons, delivery etc?
Domestic regime
There are no provisions governing the form of an award under the domestic regime.
International regime
Article 31 of the Model Law provides that the award shall be made in writing and shall be signed by the arbitrator or arbitrators. Where there is more than one arbitrator, the signatures of the majority of all members of the arbitral tribunal shall suffice provided that the reason for any omitted signature is stated.
It also provides that the award shall state the reasons upon which it is based, unless the parties have agreed that no reasons are to be given or the award is made pursuant to a settlement agreement during the arbitral proceedings. Further, the award shall state its date and the place of arbitration as determined. The award shall be deemed to have been made at that place. After the award is made, a copy duly signed by the arbitrators shall be delivered to each party.
16.2 Are there limits on arbitrators’ powers to fashion appropriate remedies, eg punitive or exemplary damages, rectification, injunctions, interest and costs?
Both domestic and international
Section 2GF of the Arbitration Ordinance provides that in deciding a dispute, an arbitral tribunal may award any remedy or relief that could have been ordered by the High Court if the dispute has been the subject of civil proceedings in the High Court. This section is subject to s 17 which deems there to be an implied term in every arbitration agreement that the tribunal has the same power of the court to order specific performance of any contract other than a contract relating to land or any interest in land.
17. RECOURSE FROM AN AWARD
17.1 Are there provisions governing modification, clarification or correction of an award?
International regime
Article 33 of the Model Law provides that within 30 days of receipt of the award, unless another period of time has been agreed upon the parties:
Domestic regime
Section 19 of the Arbitration Ordinance provides that unless a contrary intention is expressed in the arbitration agreement, the arbitrator shall have power to correct in an award any clerical mistake or error arising from any accidental slip or omission.
17.2 May an award be appealed to or set aside by the courts? If so, on what grounds and by what procedures?
Domestic regime
The Hong Kong court has no jurisdiction to set aside or remit an award on the ground of errors of fact or law on the face of the award. However, the court has jurisdiction to hear an appeal on any question of law which may be brought by any party either with the consent of all the other parties or by the leave of the court. The court will only grant leave if it considers that the question of law could substantially affect the rights of one of the parties. Further, it is also possible to apply to set aside an award if an arbitrator has misconducted himself or the proceedings or an award has been improperly procured.
An application for appeal to an award must be made by originating motion to a single judge in charge of the Construction and Arbitration List within 21 days after the award has been made and published to the parties. It must also state the grounds of the application. On the determination of such an appeal, the court may confirm, vary or set aside the award; or remit the award to the reconsideration of the arbitrator together with the court’s opinion on the question of law which was the subject of the appeal.
International regime
The international regime places emphasis on the final and binding effect of an award issued in international arbitration. Consequently, there is no right of appeal against or general review of the merits of awards rendered in Hong Kong pursuant to the Model Law. Article 34 of the Model Law sets out six grounds for recourse against an award. They are as follows:
An application for setting aside an award made under the Model Law must be made to the judge in charge of the Construction and Arbitration List at the High Court. It must be made within three months after the date the applicant received the award. When the award is subject to a request for a correction to be made or an interpretation to be given, the time limit is three months from the date on which the tribunal disposed of the request.
18. ENFORCEMENT OF AWARD
18.1 What are the procedures and standards for enforcing an award? Is there a difference between ‘domestic’ and ‘non-domestic’ awards?
Summary enforcement
Section 2GG(2) of the Arbitration Ordinance provides that any award made in or outside Hong Kong by an arbitral tribunal is enforceable in the same way as a judgment with the leave of the court. The application for leave is made ex parte to a judge in charge of the Construction and Arbitration List. This is usually referred to as the summary enforcement procedure as the court will grant leave unless there is a real ground for doubting the validity of the award. The application must be supported by an affidavit exhibiting the arbitration agreement and the original award or, in either case, a copy of thereof. The court will then make an order entering judgment in terms of the award.
The applicant is required to serve the order on the award debtor at his usual or last known place of abode or business or in such other manner as the court may direct. The award cannot be enforced until after the expiration of 14 days after service of the order or, if the order is to be served out of jurisdiction, within such period as the court may direct. If the award debtor applies within the prescribed time limit to set aside the order, the award cannot be enforced until after the application has been dealt with and finally disposed of. Since the procedure is summary in nature and is intended to dispense with the formalities of a trial, the procedure is not appropriate where an objection is legitimately taken to the award which cannot be disposed of without a trial.
Action on the award
At common law, there is an implied undertaking in every arbitration agreement that the parties will perform the award. Therefore, the award creditor may commence an action to enforce the award if the award debtor has refused to satisfy the award. This applies to all awards and also that where leave for enforcement by summary procedure is refused.
The award creditor must commence the action by writ. The action is also heard before the judge in charge of the Construction and Arbitration List. The burden is on the claimant to prove that there was a valid arbitration agreement and a dispute within the scope of that agreement was referred to arbitration. The claimant will also have to prove that the tribunal by whom the award was made was properly constituted and the award was not satisfied or performed.
Enforcing Mainland Awards
The New York Convention applies to the enforcement of awards between two different contracting states. After the sovereignty of Hong Kong returned to the PRC in 1997, there were uncertainties as to whether an award made in the PRC was an award made in another contracting state hence enforceable as a Convention award. To remove such uncertainties, Hong Kong and the PRC made an ‘Arrangement between the Mainland and Hong Kong Special Administrative Region on the Mutual Enforcement of Arbitration Awards’. The Arrangement is primarily modelled on the provisions of the New York Convention and has been incorporated in the Arbitration Ordinance as Part IIIA. Therefore, the provisions governing the enforcement of Convention are applicable to enforcement of Mainland Awards.
‘Mainland Award’ means an arbitral award made by a recognised Mainland arbitral authority in accordance with the Arbitration Law of the PRC. ‘Mainland’ means any part of China other than Hong Kong, Macau and Taiwan. ‘Recognised Mainland arbitral authority’ means an arbitral authority which is specified in the list of Mainland arbitral authorities published by the Hong Kong government in the official Gazette. A Mainland Award is enforceable in Hong Kong either by action or by the summary procedure set out above.
Differences
The major difference between domestic and non-domestic awards is the grounds for defences to application for enforcement. Non-domestic awards are further divided into whether they are obtained in a contracting state to the New York Convention (Convention Award) or not.
Domestic awards may be defended on the grounds that there was no valid arbitration agreement, there had been no valid submission, a valid award was never made, the award is void because the arbitrator exceeded his jurisdiction or acted without jurisdiction, the award although valid when made has for some reason ceased to be binding, or that the award has been set aside by a court. As the court is concerned only with the jurisdiction of the tribunal, it is no defence to an action on the award that it has been misconducted or an error of fact or law on the part of the arbitrator.
As to Convention Awards and Mainland Awards, there is a strong presumption in favour of enforcement. The Hong Kong courts rarely refuse to enforce them unless the award debtor can establish at least one of the six grounds for refusal under art 34 of the Model Law set out at section 17.2 above. As to other non-domestic awards, there is no presumption in favour of enforcement and the Hong Kong court will only refuse to enforce a foreign award if one of the six grounds under art 34 is established by the award debtor.
19. CONFIDENTIALITY OF PROCEEDINGS
19.1 What are the confidentiality requirements of the arbitral process, ie existence of the arbitration, pleadings, documents produced, hearing, award?
One of the major advantages of arbitration is the confidential nature of this method of dispute resolution. At common law, the parties have a general duty to keep the information obtained in the course of arbitration confidential and not to disclose it to third parties without the consent of the other party. Section 2D of the Arbitration Ordinance gives a party which wishes to invoke the High Court’s supervisory jurisdiction the right to make an application to the High Court or the Court of Appeal to hear any proceedings commenced under the Arbitration Ordinance otherwise than in open court.
20.1 Is there any particular aspect of the approach to arbitration in the jurisdiction which bears special mention?
Following the return of sovereignty over Hong Kong to the PRC, Hong Kong has become a Special Administrative Region. With the PRC joining the World Trade Organization (WTO) and the implementation of the Closer Economic Partnership Agreement (CEPA) between Hong Kong and the PRC in 2004 giving Hong Kong companies exclusive preferential market access and import tariffs, Hong Kong has developed as a major role as the gateway to China for many overseas enterprises. There has been an increasing tendency, particularly in shipping and international trade, for Hong Kong to be chosen as the forum and English or Hong Kong law as the governing law of arbitration between PRC entities and their Western contracting partners domiciled outside of Hong Kong.
Not only does Hong Kong have a sophisticated legal framework for international arbitration but the HKIAC has the ability to draw on its panel of arbitrators from all over the world. Most legal practitioners in Hong Kong are bi- or multilingual who are not only familiar with legal precedents among other common law jurisdictions but also the general difficulties in enforcing an award in the PRC. Enforcement of awards can be problematic for a variety of reasons which are beyond the scope of this book but the technical defences often raised by the PRC entities are non-compliance with procedural rules, authority of legal advisers, and validity of the award. In view of the proximity, legal practitioners in Hong Kong are familiar with how to avoid the potential pitfalls in enforcing arbitral awards in the PRC.
