New Hong Kong international arbitration rules in force

The new HKIAC Administered Arbitration Rules (2018 rules) (73-page / 760KB PDF) came into force on 1 November 2018, and apply to cases where the notice of arbitration was submitted on or after that date, regardless of the date when the contract was concluded. The 2018 rules replace the previous edition of the rules. In addition, there is a new practice note (3-page / 541KB PDF) on the appointment of arbitrators.

"The 2018 rules are aimed at enhancing the efficiency of dispute resolution and provide flexibility and cost management tools for the benefit of the parties," said construction disputes expert Nicholas Turner of Pinsent Masons, the law firm behind Out-Law.com. 

The enhancements include the effective use of technology, which is a factor that must be considered by the arbitral tribunal when determining suitable procedures for the conduct of the arbitration. Parties may also now agree to deliver documents through the use of a secured online repository; either their own or a service provided by HKIAC.

"Although the use of online repository is already quite common and often agreed by the parties in international arbitration, the inclusion of such an express provision in the 2018 is still welcomed," said Turner.

The 2018 rules also included provisions to ensure the smooth implementation of the Arbitration and Mediation Legislation (Third Party Funding Amendment) Ordinance, when it is enacted on 1 February 2019 (for arbitration proceedings). Parties in receipt of third party funding will be required to disclose, promptly, the existence of a funding agreement, the identity of the funder and any subsequent changes to that information. The arbitral tribunal is expressly permitted to take any third party funding arrangements into account when fixing and apportioning the costs of the arbitration. A funded party may disclose otherwise confidential arbitration-related information to its existing or potential funder.

The provisions provide for flexibility in bringing a single arbitration under multiple contracts. Previously, a single arbitration could only be brought under multiple contracts if all parties were each bound by an arbitration agreement. The 2018 rules also expressly allow the arbitral tribunal to conduct concurrent or consecutive arbitrations, or to suspend any arbitration pending the outcome of another.

"These mechanisms have the potential to enhance the efficiency and reduce costs, and are likely to be of benefit to construction disputes where there can be multiple arbitrations arising from the same facts, such as between sub-contractor, contractor and employer," said construction disputes expert Celeste Lo of Pinsent Masons.

An early determination procedure has been incorporated, giving the arbitral tribunal the power to quickly determine points of law or fact at an early stage, in response to a request by one or both of the parties. This procedure applies to points of law or fact that are manifestly without merit or manifestly outside of the tribunal's jurisdiction; or to points of law or fact that, assuming they are correct, would not result in an award being made in favour of the party that submitted the point.

"This newly added procedure is welcomed, because it allows unmeritorious claims to be dismissed early in the proceedings," said Lo. "As well as potentially saving time and cost, it brings the 2018 rules in line with other well-known international arbitration rules such as ICC Rules."

There are strict time limits which apply to the early determination procedure, although these may be extended by the HKIAC or by party agreement. The tribunal has 30 days from the date of the request, to decide whether to proceed and, if that request is allowed, then 60 days within which to issue an order or award.

New provisions within the 2018 rules, allow parties to request an arbitration or emergency arbitrator procedure be suspended in order to give them time to pursue alternative means of settling their dispute, such as mediation or negotiation. A party may request that the arbitration or emergency arbitrator procedure resume at any time during or after the alternative process.

Another new addition to the 2018 rules is the procedure which allows parties to apply for an emergency arbitrator procedure prior to commencing arbitration. The emergency arbitration is a procedure allows a party to seek urgent, temporary relief. The 2018 rules also shorten the time limits applicable to an emergency arbitration procedure, and cap the applicable fees to a maximum amount which will be published on the HKIAC website. The HKIAC's Emergency Arbitrator Procedures under the 2013 rules will be updated to flesh out the details for the procedure under the 2018 rules.

The 2018 rules also incorporate a three month time limit on the delivery of an award, which begins running from the date of closure of the proceedings or relevant phase of the proceedings. This time limit may only be extended with the agreement of the parties, or by HKIAC in certain circumstances.

"This new addition is intended to bring greater certainty to the parties as to the timeline of the arbitration," said Turner. "In many respects, the revisions in the 2018 reflect the development of international arbitration more generally. In doing so, the 2018 rules will ensure Hong Kong remains an important centre for international arbitration."