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International arbitration in Hong Kong – innovation and change

Hong Kong continues to compete and innovate in the world of international arbitration. This is reflected in the legislative framework, key reforms, and the practice of the leading institutions in Hong Kong. This short article introduces Hong Kong as a seat of arbitration and provides an update on recent reform and innovation.

Authors David Holloway and Damien McDonald conclude this article with an observation on practice in Hong Kong and how it supports the development of Hong Kong as a leading arbitration seat.

Arbitration Framework – supporting commercial arbitration

Hong Kong’s international focus

The arbitration law in Hong Kong was based on English arbitration law until 1989 when the Arbitration Ordinance was amended to adopt the UNCITRAL Model Law on Commercial Arbitration (the “Model Law”). The adoption of the Model Law in 1989 was part of a conscious policy decision to develop Hong Kong as one of the leading seats for international arbitration. This has, in many respects, been a successful policy choice for Hong Kong.

Significant amendments since 1989 include the unification of the domestic and international arbitration regimes in 2011 and the introduction of Third-Party Funding provisions in 2017.

Outcome related fees reform

A further important reform is to be introduced to allow lawyers to charge outcome related fees (i.e., conditional fee agreements, damages-based agreements, and hybrid damages-based agreements) in arbitration. This was recommended by the Law Reform Commission of Hong Kong in December 2020. Legislation to introduce this change to the law is expected to be passed this year (2022).

The PRC-Hong Kong Interim Measures Arrangement with Mainland China (the “Arrangement”)

The Arrangement allows parties to arbitrations seated in Hong Kong with six arbitration institutions, including the Hong Kong International Arbitration Centre (the “HKIAC”), ICC and CIETAC (HK) (all introduced below) to apply to the mainland courts for interim measures.

The Arrangement was introduced in 2019 and has been very successful. The HKIAC has reported that as of September 2021, there had been 50 applications (47 to preserve assets), with preservation orders totalling some RMB 10.9 billion or approximately USD 1.7 billion worth of assets issued. The applicants and respondents to these applications were from diverse international jurisdictions.

The arbitration institutions

HKIAC

The HKIAC was established in 1985. It has amended its Rules several times to maintain its competitiveness. The latest changes in 2018 included amendments to the emergency arbitration procedure to allow applications before the notice of arbitration, the introduction of an early determination procedure, a default time limit of three months for delivering the award from the closure of proceedings (or relevant phase of proceedings) and changes in respect of joinder, multiple contract disputes and concurrent proceedings.

The HKIAC also recently introduced a searchable Case Digest for Decisions of the HKIAC Proceedings Committee and Appointments Committee.

China International Economic and Trade Arbitration Commission Hong Kong Arbitration Center (“CIETAC (HK)”)

CIETAC (HK) was established as a branch office of CIETAC in 2012. It was the first CIETAC branch outside mainland China. The CIETAC Rules (2015) have a separate “Chapter VI Special Provisions for Hong Kong Arbitration”, which has adopted the CIETAC Rules for Hong Kong arbitration and administration by CIETAC (HK).

ICC

Finally, the ICC is also based in Hong Kong with a dedicated Asia Secretariat. ICC in Hong Kong offers the same Rules, practice, and service as Paris, but with a team in Central Hong Kong to deal with disputes in the Greater China Region and elsewhere in Asia.

Practice

International arbitration practice in Hong Kong is international. In this respect, many parties, arbitrators, law firms and counsel are international. Many arbitrators and counsel in HKIAC arbitrations are from the English bar.

The Hong Kong legal services market for international arbitration is also made-up of international law firms, Hong Kong law firms and the Hong Kong bar. Many Hong Kong lawyers are also dual qualified and have practised internationally. The Hong Kong judiciary is also widely accepted to be pro-arbitration and non-interventionist. This is reflected in the court practice and decisions and supported by the legislative framework discussed above.

The result is that the practice, procedure, and decision-making adopted by Hong Kong institutions and arbitration tribunals follow the same international practice as other leading international arbitration seats. This practice, together with the mix of leading Hong Kong and international lawyers, continues to create and support an environment of innovation and change in international arbitration in Hong Kong.

More about our team

This article was written by David Holloway and Damien McDonald, both members of Outer Temple’s International Arbitration team.

David Holloway has particular expertise in the field of international arbitration and has represented clients in numerous arbitrations conducted under various international institutional rules and in ad hoc arbitrations including ICC, LCIA, UNCITRAL, LMAA and ICSID. He was one of the first lawyers to conduct an Emergency Arbitration Procedure under the ICC Rules of Arbitration.

Damien McDonald specialises in international commercial and contractual disputes predominately involving mainland China having worked in Shanghai, Beijing, and Hong Kong. He is based in Hong Kong but will also practice from London where he accepts instructions as advocate and advisor.

To find out more about David and Damien, contact Sam Carter on +44 (0)203 989 6669 or Colin Bunyan on +44 (0)20 7427 4886 for a confidential discussion.

Arbitration, Legal Blog & Publications, International 8 Apr, 2022

Authors

David Holloway

Call: 1996

Damien McDonald

Damien McDonald

Call: 2021 (England and Wales), 2020 (Hong Kong)

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