New Arbitration Law Passed in Hong Kong

December 7, 2010 Authors: C. Mark Baker, Matthew H. Kirtland

The Hong Kong Legislative Council's passing of the Hong Kong Arbitration Bill in November 2010 is the culmination of a very extended period of consultation, drafting and legislative consideration. This process dates back to the establishment by the Hong Kong Institute of Arbitrators and the HKIAC of the Committee on Hong Kong Arbitration Law in 1998, which Committee published its report in 2003. But the wait has been worthwhile: Hong Kong will now have an excellent, user-friendly and highly-regarded arbitration law which will further enhance Hong Kong's reputation as an international arbitral venue.

The previous arbitration law in Hong Kong adopted a split regime under which the UNCITRAL Model Law applied only to international cases. Domestic arbitrations were regulated by separate provisions based on the English Arbitration Acts of 1950, 1975, 1979 and 1996, which gave the Hong Kong courts greater powers of supervision and intervention than is the case under the Model Law. Under the new law, this distinction is done away with, and the Model Law is now to apply to all arbitrations in Hong Kong.

As well as causing the Model Law to apply to domestic as well as international arbitrations, the new law also brings the 2006 amendments to the Model Law into effect for all arbitrations in Hong Kong. These modifications include the important provisions addressing tribunal-ordered interim measures (Articles 17A to 17G of the Model Law). They also include the first option to Article 7, which provides inter alia that "an arbitration agreement is in writing if its content is recorded in any form…" and confirms that this includes any electronic communications in which the information is accessible for future reference.

Although the great majority of the Model Law has been incorporated into the new law without modification, there are some areas in which Hong Kong has chosen to modify or replace aspects of the Model Law with provisions based upon the previous law and/or the English Arbitration Act 1996. For example, the requirement at Article 18 of the Model Law that "each party shall be given a full opportunity of presenting its case" is replaced at section 46 with a requirement that the tribunal should give the parties "a reasonable opportunity to present their cases". Like the equivalent section in the previous law (and the similar provision in section 33 of the English Arbitration Act) the change of wording from "full" to "reasonable" is intended to ensure that tribunals have the ability to preclude parties from advancing unnecessary and over-extensive evidence and submissions. This is in the interests of efficient case management and the avoidance of unnecessary expense and delay.

While the move towards a unified regime based on the UNCITRAL Model Law is a very welcome simplification of Hong Kong's arbitration law, and one that will make the law much more familiar and user-friendly to parties and lawyers from outside Hong Kong, the new law does permit parties to agree to opt in to provisions similar to parts of the old domestic regime.

These include provisions concerning the court's power to consolidate arbitrations, the determination of preliminary questions of law by the court, and challenges of awards to the court on a question of law.

The Model Law does not itself contemplate applications to the court of the seat of the arbitration for the determination of preliminary questions of law or for appeals to the court of the seat on questions of law, while under the previous law in Hong Kong (and under sections 45 and 69 of the English 1996 Act) such applications were permitted unless excluded by the parties (either expressly or by the adoption of arbitral rules that clearly implied a waiver of such rights).

The position under the new law in Hong Kong, where the provisions concerning the court's powers in relation to questions of law only arise where the parties opt in to their application, is perhaps something of a happy compromise between these positions. Unlike the position in England, where sections 45 and 69 are the default position, parties from other Model Law jurisdictions who expect the tribunal's decision on a question of law to be final will not now find themselves surprised by the availability of such court applications in Hong Kong.

However where there is a genuine need or desire of the parties to provide for court scrutiny of questions of law, then the parties may agree to confer the necessary powers. These "opt in" provisions will also apply to any arbitration agreement entered into within six years of the new law coming into effect where such agreement provides that the arbitration is to be treated as a "domestic" arbitration.

Sections 32 and 33 of the new law address mediators. Provision is made for arbitrators to act as mediators with the parties' consent, and provide that where such a mediation has been conducted by the arbitrator this shall not give rise to any objection against the continuing conduct of the arbitral proceedings by the arbitrator.

The new law maintains the arrangements for the enforcement in Hong Kong of both New York Convention awards and Mainland Chinese awards.

Although the Arbitration Bill was passed by the Legislative Council in November 2010, it will only formally enter into force upon the issuance of a notice by the Secretary for Justice in the Government Gazette, which is likely to occur in the early months of 2011.

As the caseload of both the HKIAC and the Hong Kong branch of the ICC secretariat continue to increase, this new arbitration law is likely to assist in Hong Kong's continuing efforts to promote itself as a leading international arbitration centre, and particularly as an ideal venue for the arbitration of disputes between Chinese and Western companies.

This article was prepared by Richard Hill from Fulbright's International Arbitration Practice Group. Richard is based in our Hong Kong location. For further information on this topic please contact Richard Hill in Hong Kong, Mark Baker in Houston (+1 713 651 7708 or mbaker@fulbright.com), David Howell in London (+44 20 7832 3605 or dhowell@fulbright.com), Jonathan Sutcliffe in Dubai (+971 4293 2107 or jsutcliffe@fulbright.com), or Matthew Kirtland in Washington, D.C. (+1 202 662 4659 or mkirtland@fulbright.com).

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