E-briefing: HKIAC Administered Arbitration Rules 2018

Why is this important? The new Hong Kong International Arbitration Centre (“HKIAC”) Administered Arbitration Rules 2018 (“HKIAC Rules 2018” or “Rules”) come into force on 1 November 2018. New disputes based on contracts that include an HKIAC arbitration clause may benefit from a number of the innovations contained in the new Rules.

Three things you should know:

1. HKIAC has maintained its traditional “light touch” approach to administering and managing arbitrations. Intervention is kept to a minimum and only occurs where it will support the efficient and effective running of an arbitration. 
2. The Rules contain new provisions including: (i) an early determination procedure; (ii) mandatory disclosure of third party funding arrangements; and (iii) the conduct of concurrent proceedings by the same tribunal.
3. The Rules include updated provisions including: (i) emergency arbitrators; and (ii) the conduct of arbitration proceedings.

Key Changes:

• Early Determination Procedure

Early determination, or summary disposal procedures, have become increasingly popular as a means of countering manifestly unmeritorious claims or defences.

The Rules authorise a tribunal to summarily determine a point of law or fact that is: (i) manifestly without merit; (ii) manifestly outside the tribunal’s jurisdiction; or (iii) even if assumed to be correct, would not result in an award in favour of the party making the submission. 

A request for early determination should be made as promptly as possible. The tribunal then has 30 days to either dismiss the request or allow it to proceed. If the request is allowed to proceed, the tribunal may make an order or award on the matter within 60 days.

HKIAC provisions on Early Determination do not apply to arbitration agreements that were concluded before 1 November 2018, unless otherwise agreed. 

This new procedure brings Hong Kong in step with similar developments in other major arbitral centres. Examples of similar changes include: 

• In August 2016, the Singapore International Arbitration Centre (“SIAC”) introduced SIAC Rules 2016, permitting the early dismissal of claims and defences, on grounds similar to (i) and (ii) of the Rules (above);
• In January 2017, the Arbitration Institute of the Stockholm Chamber of Commerce (“SCC”) incorporated provisions in the SCC Rules 2017 to permit requests to a tribunal to decide issues of fact or law by way of summary procedure. The SCC procedure goes further than the HKIAC and SIAC Rules, by also allowing a tribunal to decide “issues of jurisdiction, admissibility or the merits”; 
• In October 2017, the International Chamber of Commerce (“ICC”) published a guidance note confirming that immediate dismissal of manifestly unmeritorious claims or defences is already available under the ICC Rules 2017. 

• Disclosure of Third Party Funding

Third party funding of international arbitrations in Hong Kong is now permissible. The Rules require a funded party to provide written notice of such funding to all parties, the tribunal and HKIAC, and to disclose the identity of a third party funder. Funded parties must make these disclosures in the Notice of Arbitration, Answer to the Notice of Arbitration, Request for Joinder or Answer to the Request for Joinder (as may be applicable), or as soon as practicable after a funding arrangement has been agreed.

The HKIAC has adopted a different approach from SIAC. SIAC Practice Note on Arbitrator Conduct in Cases Involving External Funding (PN-01/17) authorises the tribunal to make enquiries and order the disclosure of any funding relationship and/or the identity of the funder. Where appropriate, details of the funder’s interest in the outcome of the proceedings, and/or whether or not the funder has committed to undertake adverse costs liability may also be disclosed.

• Concurrent Proceedings

The Rules allow for both concurrent and/or sequential arbitrations, subject to consultation with the parties. The Rules also permit the suspension of any of these arbitrations until one has been determined. This is subject to: (i) each arbitration having the same tribunal members; and (ii) a common question of law or fact arising in all arbitrations.

This provision gives tribunals greater flexibility, particularly in situations where the requirements for consolidation of arbitrations cannot be met, but there is an opportunity to save time, or costs, or both. This is a unique innovation and yet to be adopted by other major arbitral institutions.

• Emergency Arbitrators

The Rules enhance the Emergency Arbitrator (“EA”) procedure. The changes include: 

• First, parties can file an application for emergency relief up to seven (7) days prior to the submission of a Notice of Arbitration (previously, the application had to be filed concurrently with or after the Notice of Arbitration). Parties should note that this provision does not apply if the arbitration agreement was concluded prior to 1 November 2018, unless otherwise agreed; 
• Second, the Rules now expressly provide that the factors to be considered by an arbitral tribunal in any application for a grant of interim measures also apply to the EA in the grant of emergency relief; and
• Third, an EA must be appointed by HKIAC within 24 hours (previously, two (2) days) and a decision as to relief must be granted within 14 days (previously, 15 days).

• Conduct of Arbitration Proceedings

The Rules contain important changes designed to support the efficient conduct of arbitration proceedings. They include:

• Multi-contract disputes - Parties may commence a single arbitration under multiple arbitration agreements even though not all parties are bound by each arbitration agreement giving rise to the arbitration. This is subject to meeting all other requirements (previously, all parties had to be bound by the same arbitration agreement). This change has broad implications in, for example, construction disputes where separate contracts involving different parties are based on the same fact patterns;
• Deadline for delivery of awards – The Rules require tribunals to deliver awards within three months from the close of proceedings. The tribunal must also advise the parties of the anticipated date of the award. This time limit may be extended by agreement of the parties or, in appropriate circumstances, by HKIAC; and
• Use of online document repositories – Parties may agree to use secure online repositories for all written communications between the parties.

These changes are a timely, thoughtful response to concerns that have been expressed by users, including calls for greater flexibility and to make arbitrations more cost-efficient.

As the rules of different arbitral institutions become increasingly sophisticated and specialised, parties are well advised to review the different features of each institution when selecting the appropriate dispute resolution clause for their contracts. 

The full text of the HKIAC Rules 2018 can be accessed here.

Eversheds Harry Elias regularly provides advice on different types of dispute resolution strategies to meet the client’s needs in cross-border disputes with particular focus on international commercial and investment arbitration. We also have full rights of audience in the Singapore courts, including the Singapore International Commercial Court. We work closely with our colleagues in the Eversheds Sutherlands Hong Kong office to support our clients in the key jurisdictions of Hong Kong and Singapore.

Authors:

Francis Goh

Head, International Arbitration

Partner

Eversheds Harry Elias

Rachael Shek

Partner

Eversheds Sutherland (HK)

Shaun Leong

Of Counsel

Eversheds Harry Elias

Wing Chan

Senior Associate

Eversheds Sutherland (HK)

Janice Lee

Foreign Legal Associate

Eversheds Harry Elias

Jason Tam

Associate

Eversheds Sutherland (HK)