Apr 2023

Hong Kong

Law Over Borders Comparative Guide:

Arbitration

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1 . Key considerations in deciding whether to arbitrate in this jurisdiction

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1.1. Advantages

The main advantages of arbitration in Hong Kong are its legal framework for arbitration, its pro-enforcement regime and extensive experience in arbitration of practitioners in Hong Kong and the Hong Kong Courts:

  • The Arbitration Ordinance (Cap 609) (AO), is based on the UNCITRAL Model Arbitration Law as amended in 2006 (Model Law). It is regularly updated to ensure it continues to accord with international best practice. Its notable features include that it:
    • Is a unitary system with no distinction between foreign and domestic arbitration (save as to enforcement).
    • Allows ad hoc arbitration as well as institutional arbitration. 
    • Allows a high degree of party autonomy, including as to:
      • document production, documents only hearing, confidentiality and online hearings; and
      • choice of party representative (who does not have to be a Hong Kong lawyer (S.63, AO)).
    • Provides for expedited and emergency arbitrator proceedings.
    • Allows interim measures to be granted by the Court of First Instance of the High Court of Hong Kong (the “Court”) in aid of arbitrations taking place in Hong Kong and outside Hong Kong (S.45(2), AO).
    • Allows enforcement of interim orders by arbitrators sitting in and outside Hong Kong to be enforced as orders of the Court, with the leave of the Court.
  • Hong Kong’s unique reciprocal Arrangement with Mainland China for enforcement of interim relief measures by designated bodies conducting arbitration in Hong Kong in Mainland China, called the “2019 Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings by the Courts of the Mainland of the Hong Kong Special Administrative Region” (Interim Relief Arrangement).
  • Hong Kong is a common law jurisdiction with extensive experience of civil law.
  • Hong Kong is bound by major treaties and conventions applicable to arbitration including:
    • the Convention on Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention); and
    • the Convention on the Settlement of Investment Disputes between States and Nationals of Other States 1965 (Washington Convention).

Hong Kong’s advantages include:

  • An independent and impartial judiciary, supportive of arbitration with a track record of enforcing agreements to arbitrate, arbitral awards and interim orders.
  • Major arbitral institutions being based in Hong Kong, including the ICC, CIETAC Hong Kong and the Hong Kong International Arbitration Centre (HKIAC) with emerging arbitral institutions including AALCO Hong Kong Regional Arbitration Centre (AALCO); eBRAM Online International Arbitration Centre (eBRAM) and the South China International Arbitration Centre.
  • Hong Kong has a deep pool of legal and professional service providers including experts, court reporters, translation and online (virtual/remote) hearing services.
  • Hong Kong is an international financial and professional services hub for Asia with strong links to, and experience with, Mainland China.
  • Hong Kong has extensive experience with bilingual and multilingual arbitrations with 2 official languages (Chinese and English).
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1.2. Disadvantages and common pitfalls

Disadvantages

Non-residents must obtain a business visa before coming to Hong Kong for an arbitration hearing or to do arbitration work. 

Common Pitfalls

  • Limitation periods apply to commencing arbitrations and enforcing awards. An arbitration claim must be commenced in Hong Kong within six years from the date on which the cause of action accrued for claims in contract or tort (s.14,AO; s.4(l), Limitation Ordinance (Cap 347)). Please see Section 11.2 below regarding the limitation period for set aside applications, and Section 12 regarding limitation periods for applications to recognise and enforce an award.
  • To be eligible to invoke the 2019 Interim Relief Arrangement parties must arbitrate their dispute in a Hong Kong-based arbitral institution that is in the list of designated institutions.
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1.3. Other distinctive features

  • For the purposes of arbitration Hong Kong, a common law jurisdiction, is a separate legal jurisdiction from Mainland China, a civil law jurisdiction. 
  • Hong Kong’s common law system is guaranteed under s.8 of the Basic Law of the Hong Kong Special Administrative Region of the People’s Republic of China (Basic Law) until 30 June 2047. The Basic Law does not specify an end date for Hong Kong’s common law system.
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2 . Principal laws and institutions relating to international arbitration in this jurisdiction

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2.1. Legal framework

The Arbitration Ordinance (Cap 609) (AO): 

  • applies where the place (legal seat) of the arbitration is Hong Kong; and 
  • includes some provisions that apply to arbitrations seated outside Hong Kong, e.g.  Part 10A as to third-party funding of arbitration, and Part 10B as to lawyer's funding of arbitration (sections 5, [98N] and [980], AO).
  • The High Court Ordinance (Cap. 4) (HCO) and the Rules of the High Court of Hong Kong (Cap 4A) (RHC), Order 73 are relevant to the support of the Court to arbitration under the AO.
  • The Limitation Ordinance (s.4(1)).
  • Contracts (Rights of Third Parties) Ordinance (Cap. 623)(s.12).
  • Relevant treaties by which Hong Kong is bound include the following:
    • the New York Convention; and
    • the Washington Convention. 
  • High Court Practice Direction 6.1 entitled “Construction and Arbitration List” establishes the Construction and Arbitration List to facilitate the disposal of specialised classes of civil action including “applications relating to arbitration whether arising under the … AO, …RHC… Order 73 or otherwise”. 
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2.2. What qualifies as international arbitration?

Hong Kong law provides a unitary arbitration regime and does not distinguish between local and international arbitration. A distinction between domestic and foreign arbitration is made expressly for the purposes of the procedure for recognition and enforcement of awards.

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2.3. Main local international arbitration institutions

  • The Hong Kong International Arbitration Centre (HKIAC).
  • Hong Kong Secretariat of the International Court of Arbitration of the International Chamber of Commerce (ICC Hong Kong).
  • Hong Kong office of the China International Economic and Trade Arbitration Commission (CIETAC Hong Kong).

Emerging international arbitration institutions include:

  • AALCO Hong Kong Regional Arbitration Centre (AALCO).
  • eBRAM International Online Dispute Resolution Centre (eBRAM).
  • Hong Kong Maritime Arbitration Group (HKMAG).
  • South China International Arbitration Centre (HK).

The Permanent Court of Arbitration (PCA) signed a host country agreement with the People’s Republic of China (PRC) Government and a related memorandum of administrative arrangements with the Hong Kong Government to facilitate the conduct of PCA-administered arbitration in Hong Kong in 2015.

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3 . Arbitration agreements

Hong Kong has adopted option 1 of Article 7 of the Model Law as to the definition and form of arbitration agreements (s.19, AO). 

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3.1. Requirements as to content and form

An arbitration agreement must be in writing. Pursuant to s.19 of AO an agreement is in writing if:

  • Its content is recorded in any form, including electronic communications, provided that the information in it is accessible to be useable for subsequent reference. 
  • It is contained in an exchange of statements of claim and defence in which the existence of an agreement is alleged by one party and not denied by the other.
  • A reference in a contract to any document containing an arbitration clause provided that the reference is such as to make that clause part of the contract.
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3.2. Validity of arbitration agreements

To be valid the arbitration agreement in writing must:

  • Concern arbitrable subject matter.
  • Be between parties who have the legal capacity (ability) to enter into the arbitration agreement.

Whether a company had validly executed a contract is to be determined according to the laws of that company’s place of incorporation (Integral Petroleum SA v. SCU-Finanz AG [2015] EWCA Civ 144, 26 February 2015).

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3.3. Special formalities

There are no special formalities save for that the arbitration agreement must be in writing.

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3.4. Governing law

The Parties may choose the law that governs the arbitration agreement. 

Where the Parties do not choose: “… the determination of the governing law of the arbitration agreement is a question of construction, a matter of interpretation of the relevant clauses of the underlying contract, and of the arbitration agreement… The governing law of the underlying contract, and the law with the closest and most real connection with the agreement to arbitrate, such as the chosen seat of the arbitration, are all matters to be taken into consideration in the process of construing and interpreting the parties’ agreements” (and Y v. ZPRC and ZHK [2020] HKCFI 63 at [24]).

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4 . Arbitrability

The tribunal has jurisdiction over:

  • Disputes submitted to it for final determination pursuant to the Parties’ arbitration agreement, provided the subject matter is arbitrable and the Parties have capacity.
  • Disputes submitted to it pursuant to an investment treaty or an Investment Protection and Promotion Agreement (IPPA) provided it falls within the scope of such treaty or IPPA and satisfies its requirements.
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4.1. Applicable restrictions

A dispute finally determined in an arbitration must be capable of final settlement by arbitration (arbitrable) under Hong Kong law (s.81, AO). Examples of categories of disputes that are not arbitrable are:

  • Criminal charges.
  • Labour and employment disputes falling within the scope of the Employment Ordinance (Cap. 57) – s.4.
  • Disputes relating to intellectual property, except where enforcement rights are sought against a particular person.
  • Competition and anti-trust.
  • Consumer claims, save in limited circumstances – s.15 of the Control of Exemption Clause (Cap. 71).
  • Marriage and divorce.
  • Relations between parents and children.
  • Probate and succession.
  • Actions in rem against vessels; and
  • Matters reserved for resolution by state agencies and tribunals, such as taxation, development control, immigration, nationality, and social welfare entitlements.
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5 . Enforcing arbitration agreements

Where there is a valid arbitration agreement which a party relies upon in litigation proceedings, the Court is obliged to refer the parties to arbitration (s.20, AO).

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5.1. Stay of proceedings

The court will stay litigation proceedings in favour of arbitration where there is a valid arbitration agreement (L v. M N & Anor [2021] HKCFI 282). 

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5.2. Anti-suit injunctions

 The Courts have power under the AO (s.45) to grant an interim anti-suit injunction to restrain a party from commencing or continuing legal proceedings in breach of a valid arbitration agreement, whether in Hong Kong or elsewhere. See, for example, GM 1 and GM 2 v. KC [2019] HKCFI 2793. 

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6 . Arbitral Tribunal

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6.1. Restrictions on the parties’ freedom to choose arbitrators

The parties are entitled to choose any person to serve as arbitrators, provided that such person is independent and impartial. 

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6.2. Requirement of arbitrator independence and impartiality

Hong Kong law requires arbitrators to be independent of the parties and impartial (S.25, AO).

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6.3. Mandatory rules applicable to the appointment process

The parties are free to agree on the arbitrator selection procedure (subject to statutory safeguards). 

If the agreed upon procedure is ineffective the HKIAC will make the default appointment upon a party’s request (s.13, AO) pursuant to s.24, AO.

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6.4. Appointment mechanism in the absence of party agreement or applicable institutional rules

The HKIAC acts as the default appointing authority in Hong Kong-seated arbitrations, in ad hoc arbitrations, or in the absence of applicable institutional rules, where the parties cannot agree (sections 13 and 24, AO).

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6.5. Mandatory rules applicable to the replacement process

See Sections 6.6 to 6.9 below.

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6.6. Mandatory disclosure obligations

A prospective or serving arbitrator has a continuing duty to notify the parties of any circumstances existing that may give rise to justifiable doubts as to their impartiality and independence (s.25, AO).

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6.7. Grounds for challenge

An arbitrator may be challenged only if existing circumstances give rise to justifiable doubts as to their impartiality or independence, or if they do not possess qualifications agreed upon by the parties (s.25, AO).

A court will determine whether the relevant circumstances ‘would lead a fair-minded and informed observer to conclude that there was a real possibility of bias on behalf of the decision-maker’ (Deacons v. White & Case LLP [2004] 1 HKLRD 291).

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6.8. Mandatory rules governing the challenge of arbitrators

The parties may agree on a procedure for challenging an arbitrator (s.26, (subject to s.13(4), AO)).

Absent the parties’ agreement or compliance with it:

  • A party intending to challenge an arbitrator must send to the tribunal a written statement within 15 days after becoming aware of the constitution of the tribunal or of any circumstance that may give rise to a challenge, of the reasons for the challenge of a member of the tribunal. 
  • Unless the challenged arbitrator withdraws from their office or the other party agrees to the challenge, the tribunal shall decide on the challenge (s.26(1), AO). 
  • If this procedure is not successful, the challenging party may, within 30 days of having received notice of the decision rejecting the challenge, request the Court (see S.6, AO) to decide on the challenge.
  • The Court’s decision may not be appealed. 
  • Pending the Court’s determination, the tribunal, including the challenged arbitrator, may continue with the arbitral proceedings and issue an award.
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6.9. Removal

Where the mandate of an arbitrator terminates:

  • under sections 25 or 26, AO (Article 13 or 14, Model Law); or
  • because of their withdrawal from office for any other reason; or
  • because of the revocation of their mandate by agreement of the parties; or 
  • in any other case of termination of their mandate;

a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced.

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6.10. Liability and immunity of arbitrators

Arbitrators are immune from liability for their acts and omissions, or for those of their employees or agents, in relation to the exercise or performance, or the purported exercise or performance, of their arbitral functions save where it is proved that the act or omission was done dishonestly (S.104, AO).

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7 . Assistance by the State courts

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7.1. Interim measures

Overview of interim measures

  • Unless otherwise agreed by the Parties, the tribunal has the power to order interim measures effective against the Parties to the arbitration, including:
    • to maintain or restore the status quo pending determination of the dispute;
    • to take action that would prevent, or refrain from taking action that is likely to cause, current or imminent harm or prejudice to the arbitral process itself;
    • to provide a means of preserving assets out of which a subsequent award may be satisfied; or
    • to preserve evidence that may be relevant and material to the resolution of the dispute. (s.35, AO.)
  • A tribunal’s interim relief orders and directions in Proceedings, whether made in Hong Kong or elsewhere are enforceable in the same manner as an order or direction of the Court with the same effect, with the leave of the Court. A decision of the Court to grant or refuse to grant leave is not subject to appeal (s.61(4), AO).
  • The Court may, in relation to any Proceedings which have been or are to be commenced in or outside Hong Kong, grant an interim measure application irrespective of whether similar powers may be exercised by an arbitral tribunal under s.35 of the AO in relation to the same dispute (S.45, AO).
  • The Court has the same power to make any incidental order or direction to ensure the effectiveness of an interim measure granted in relation to Proceedings outside Hong Kong as if the interim measure were granted in Hong Kong Proceedings (s.45(8), AO; sections 21L and s.21M, High Court Ordinance).

Relevance of availability of emergency arbitrator mechanism

Parties may agree that an emergency arbitrator be appointed under the arbitration rules they have agreed upon or adopted to “deal with the parties’ applications for emergency relief before an arbitral tribunal is constituted (s.22A, AO).

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7.2. Taking of evidence

  • The Court may assist in taking evidence in Proceedings wherever located according to its rules on the taking of evidence, including ordering a person to attend proceedings before a tribunal to give evidence or produce documents or other evidence (s.55(2), AO). 
  • The Court has special powers in relation to Proceedings in or outside Hong Kong to make an order as to the inspection, photographing, preservation, custody, detention or sale of any relevant property by the tribunal, a party to the Proceedings or an expert, or sampling (s.60 of AO).
  • An order or decision of the Court is not subject to appeal, save as to an order for sale of property, (s.60(9) of AO) with leave (s.60(10), AO).
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7.3. Appointment or challenge of arbitrators

See Sections 6.1 to 6.8 above.

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7.4. Other available assistance

  • Within 30 days of the tribunal’s ruling that it has jurisdiction over the dispute or parts thereof, a party may request the Court to review the decision (s.34(1)(3), AO); this is a de novo (fresh) review by the Court, which is binding and may not be appealed.
  • The parties may agree that a Court may tax (assess) the costs of the arbitration upon a party’s application (s.75 of AO).
  • The Parties may agree to opt in to greater supervision by the Courts and the right to appeal (sections 4 and 5 of Schedule 2, AO).
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8 . General procedural (minimum) requirements

  • The tribunal shall, pursuant to the AO:
    • treat all parties equally (s.46(2));
    • be independent (s.46(3)(a));
    • act fairly and impartially (s.46(3)(b)); and
    • adopt procedures that would avoid unnecessary delay or expense (s.46(3).
  • If the Parties do not agree upon the arbitral procedure, the tribunal may decide, applying the principles in s.46, AO outlined immediately above.
  • The Parties are free to agree upon the seat (legal place) of the arbitration. 
  • The Tribunal may hold an arbitration in any geographical location they choose, irrespective of the seat of the arbitration: (s.48, AO).
  • Subject to any contrary agreement by the parties, the tribunal shall decide whether to hold oral hearings for the presentation of evidence or for oral argument, or whether the Proceedings shall be conducted on the basis of documents and other materials. 

However, unless the parties have agreed that no hearings shall be held, the tribunal shall hold such hearings at an appropriate stage of the Proceedings, if requested by a party: (s.52, AO).

  • Default procedural rules, absent party agreement to the contrary, include:
    • termination of the Proceedings if the claimant fails to communicate their statement of claim without sufficient cause;
    • continuation of the Proceedings without treating the respondent’s failure to communicate its statement of defence in itself as an admission of the claimant’s allegations; 
    • the tribunal may continue the Proceedings and make the award on the evidence before it if, without sufficient cause, any party fails to appear at a hearing or to produce documentary evidence.

(s.53, AO.)

  • Where a party does not comply with a tribunal’s orders the tribunal has the power to make peremptory orders (save as to security for costs), draw adverse inferences, make an award, and make an order for costs (s.53, AO).
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9 . Confidentiality

  • Unless otherwise agreed by the parties, no party may publish, disclose, or communicate any information relating to the Proceedings and/or the award (s.18(1), AO).
  • The exceptions to the general duty of confidentiality are where the disclosure is made to:
    • protect or pursue its legal right or interest or to enforce or challenge the award;
    • a government body, regulatory body, court, or tribunal is obliged to do so by law; or
    • a professional or any other adviser of the parties. (s.18(2), AO.)
  • Court proceedings relating to arbitration are heard in closed court, with hearings in open court conducted only in exceptional cases (on the application of a party or if the court is satisfied that those proceedings ought to be heard in open court) (s.16(1), AO).
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10 . Awards

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10.1. Requirements as to content and form

 An award must:

  • be in writing;
  • be signed by the arbitrator(s) (where more than one arbitrator serves on the tribunal, a signature by a tribunal majority is sufficient, provided that the reason for any omitted signature is stated);
  • state the reasons on which it is based, unless the parties have agreed otherwise; and
  • be dated and state the place of arbitration. (S.67, AO.)

A signed copy of the award must be delivered to each party. 

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10.2. Time limit

The law of Hong Kong does not impose a time limit for rendering an award unless parties otherwise agree (s.72, AO).

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10.3. Remedies

An arbitrator may award any remedy or relief that could have been ordered by the Court in civil litigation proceedings including, unless otherwise agreed by the parties, specific performance of any contract, other than a contract relating to land or any interest in land (s.70, AO), as well as interest (s.79, AO) and costs (s.74, AO).

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11 . Post-award proceedings

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11.1. Interpretation and correction of awards

  • Within 30 days of receipt of the award:
    • A party may request the tribunal to correct any computational, clerical, or typographical errors or similar errors in the award. 
    • Unless otherwise agreed by the parties, to give an interpretation of a specific point or part of the award. 
  • Following such a party’s request, the tribunal may, within 30 days, determine whether the request is justified and, if so, make the correction or give the interpretation. The interpretation will form part of the award (s.69, AO).
  • The tribunal may, within 30 days of the parties’ receipt of the award, correct, on its own initiative, a computational, clerical, typographical or similar error.
  • Unless otherwise agreed by the parties, a party may, within 30 days of receipt of the award, request an additional award as to claims presented in the Proceedings but omitted from the award. The tribunal has 60 days to make the additional award if it considers the request to be justified (s.69(1)(3), AO). 
  • The tribunal may extend the time limit to make a correction requested by a party, interpretation, or additional award.
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11.2. Challenge of an award

An unsuccessful party may apply to set aside an award on the grounds (mirroring those in Article V (1) of the New York Convention save where the parties have opted into Schedule 2, AO) that:

  • a party to the arbitration was under some incapacity;
  • the arbitration agreement is invalid under the law to which the parties subjected it or, failing any indication in the agreement as to which law the agreement is subject to, under Hong Kong law;
  • the party making the application was not given proper notice of an arbitrator’s appointment or of the arbitration, or was otherwise unable to present its case;
  • the award deals with a dispute not contemplated by the terms of the submission to arbitration or contains decisions on matters beyond the scope of the submission to arbitration (providing for severability of any valid parts of the award);
  • the constitution of the tribunal or the arbitration proceedings was not in accordance with the agreement of the parties, unless such agreement conflicted with a mandatory provision of the AO from which the parties cannot derogate or, failing such agreement, was not in accordance with the AO; or
  • where the court finds that:
    • the subject matter of the dispute is not capable of settlement by arbitration under Hong Kong law; or 
    • the award conflicts with Hong Kong's public policy; 
  • the court may set aside an award (s. 81,AO adopting Art. 34 of the Model Law).

The Hong Kong courts narrowly construe the public policy ground for set aside.

Consideration of a public policy objection considers other public policy interests, including upholding parties’ agreement to arbitrate their dispute, facilitating enforcement of arbitral awards, and observing New York Convention obligations (X v. Jemmy Chien [2020] HKCFI 286, [2020] HKEC 356).

The Parties may agree (s.4, Schedule, AO) to allow a challenge of the award on the grounds of serious irregularity affecting the tribunal, the Proceedings or award, and to be able to appeal on a question of law arising out of an award made in the Proceedings (s.5, Schedule 2, AO). 

An application to set aside an award may not be made after three months have elapsed from the date on which the party making that application had received the award or, if a request had been made under article 33 (s.69, AO), from the date on which that request had been disposed of by the tribunal.

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11.3. Recognition and enforcement proceedings

The successful party may bring an action to enforce the Award in the Court against a non-compliant party and claim the following relief: 

  • judgment for the amount of the Award;
  • a declaration that the Award is binding; 
  • in appropriate cases, specific performance of the Award; 
  • damages for failure to perform the Award; and
  • an injunction restraining the unsuccessful party from failing to comply with the Award. 

Judgment may be granted on an Award in a foreign currency.

(Sections 2 and 84, AO.)

The Court will grant leave to enforce the Award as a judgment unless there is either a real ground for doubting the validity of the Award, or the Award is not in a form which can be enforced as a judgment.

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11.4. Cost of enforcement

Where a party has been unsuccessful in setting aside or resisting enforcement of an arbitral award in Hong Kong, in the absence of special circumstances, that party should pay costs on an indemnity basis (Pacific China Holdings Ltd (in Liquidation) v. Grand Pacific Holdings Ltd [2011] 4 HKLRD 188; [2011] HKCU 1249; sA v. R [2009] 3 HKLRD 389 and Gao Haiyan & Anor v. Keeneye Holdings Ltd & Anor (No 2) [2012] 1 HKC 491). 

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11.5. Enforcement of orders of emergency arbitrators

Emergency relief granted by an emergency arbitrator in Hong Kong or elsewhere, may be enforced in the same manner as an order or direction of the Court with the same effect, with the Court’s leave (s.22B (1), AO).

A decision of the Court to grant or refuse to grant leave is not subject to appeal (s.22B(2), AO).

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12 . Enforcement of foreign awards

Four main types of awards may be enforced in Hong Kong:

  1. awards which are not New York Convention, Mainland or Macao Awards (AO, Part 10, division 1), whether made in or outside Hong Kong;
  2. New York Convention Awards (AO, Part 10, division 2) – ­these Awards are made in states or territories that have ratified or acceded to the New York Convention, other than China or territories of China.
  3. Mainland China Awards (AO, Part 10, division 3) – these Awards are made in the mainland by a recognised Mainland arbitral authority in accordance with the PRC Arbitration Law; and
  4. Macao Awards (division 4 of Part 10 of AO).
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12.1. Process for enforcing New York Convention awards

  • A New York Convention Award is enforceable in the same manner as a judgment of the Court that has the same effect, but only with the leave of the Court (s.87, AO; Order 73, Rule 10, RHC).
  • The recognition and enforcement procedure is:
    • The successful party applies to the Court without notice to the other party, with the application supported by an affidavit or affirmation setting out the information required and exhibiting (attaching) the required documents. 
    • If the Court grants leave to enforce, the applicant must serve the court order on the judgment debtor, who then has 14 days to apply to the court to set aside the court order giving notice to the other party. 
    • Both parties may be heard in any set aside proceedings.
    • The arbitral award cannot be enforced until the relevant time limit has lapsed or an application to set aside has been rejected. 
    • The Court may then enter judgment in terms of the award, and the award may be enforced in the same manner as a Hong Kong judgment.

(s.84, AO.)

  • The evidence to be produced for enforcement of a New York Convention Award is:
    • the duly authenticated original award or a duly certified copy of it;
    • the original arbitration agreement or a duly certified copy of it; and
    • if the award or agreement is not in either or both of the official languages, a translation of it in either official language certified by an official or sworn translator or by a diplomatic or consular agent.

(s.85, AO.)

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12.2. Grounds for resisting enforcement of New York Convention awards

In KB v. S [2015] HKEC 2042 Justice Mimmie Chan set out 10 principles applicable to enforcement of awards in Hong Kong:

  1. the primary aim of the court is to facilitate the arbitral process and to assist with enforcement of arbitral awards;
  2. the court should interfere in the arbitration of the dispute only as expressly provided for in AO;
  3. the parties should be free to agree on how their dispute should be resolved, subject to necessary safeguards in the public interest;
  4. the enforcement of arbitral awards should be “almost a matter of administrative procedure”;
  5. the party opposing enforcement must show a real risk of prejudice and that its rights have been violated in a material way;
  6. the court is concerned with the structural integrity of the arbitration proceedings; the conduct complained of “must be serious, even egregious”, for the court to find that there was an error sufficiently serious to have undermined due process;
  7. the court does not look into the merits or at the underlying transaction;
  8. failure to make prompt objection to the tribunal or the supervisory court may constitute estoppel or want of bona fides;
  9. the court has a residual discretion and may nevertheless refuse to set aside or enforce the award despite the proven existence of a valid ground; and
  10. the parties have a duty of good faith.
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12.3. Enforcing Non-Convention awards

The procedure for enforcing Non-Convention, non-Hong Kong, Macao and Mainland awards is similar to the procedure for enforcing Convention awards (s.84, AO).

As the Mainland and Hong Kong are not separate states, the New York Convention procedure does not apply and hence Hong Kong has entered into enforcement arrangements with the Mainland and Macao largely based upon the provisions of the New York Convention:

  • “Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and the Hong Kong Special Administrative Region” 1999 supplemented by the Supplemental Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and the Hong Kong Special Administrative Region 2020.
  • The “Arrangement Concerning Reciprocal Recognition and Enforcement of Arbitral Awards between the Hong Kong Special Administrative Region and the Macao Special Administrative Region” was signed on 7 January 2013 between the governments of Hong Kong and Macao. 

A sovereign state is bound by an arbitration agreement to which it is a party. However, since the reunification of Hong Kong with the Mainland, a State may invoke the doctrine of absolute immunity from enforcement (FG Hemisphere & Associates v. the Democratic Republic of the Congo [2011] 14 HKFCAR 395). 

Crown immunity applies to the PRC government (known for these purposes as the Central People’s Government (CPG)) (Hua Tian Long [2010] 3 HKC 557 at 88, 90).

Where a State or the CPG claim immunity from enforcement, an award will not be enforceable against them unless they have agreed to waive immunity from enforcement. Waiver will generally need to be done in proceedings. An agreement to arbitrate and participate in an arbitration is not an effective waiver of absolute immunity under Hong Kong law (FG Hemisphere & Associates v. the Democratic Republic of the Congo [2011] 14 HKFCAR 395). 

Chinese state-owned enterprises, are not generally entitled to claim Crown immunity from enforcement – see TNB Fuel Services SDN BHD v. China National Coal Group Corp [2017] 3 HKC at [23], where the Court relied upon a letter from the Hong Kong and Macao Affairs Office of the State Council of the People’s Republic of China to find that a party was not entitled to assert Crown immunity as follows: “…the Letter in fact states that the respondent [a Chinese state-owned enterprise] has no special status or interest, and is not to be deemed as part of the CPG. In my view, the Letter signally defeats the respondent’s assertion of Crown immunity”.

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13 . Professional and ethical rules

All parties’ and their representatives are bound by AO provisions, including as to confidentiality, third party funding of arbitration (Part 10A) and outcome related fee structures, as well as any delegated legislation or codes of practice relating to the same. 

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13.1. Applicable to counsel

Hong Kong barristers are bound by the Hong Kong Bar Association Code of Practice.

Hong Kong solicitors are bound by the professional conduct rules of the Hong Kong Law Society.

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13.2. Applicable to arbitrators

Arbitrators must be independent, impartial and act honestly as set out in AO, with ongoing disclosure obligations as discussed earlier.

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14 . Third-party funding

In 2017 Hong Kong law was reformed to provide the legal framework for third-party funding of arbitration (and related proceedings under the AO) by Part 10A of the AO. Part 10A came fully into effect in February 2019, together with the Third Party Funding of Arbitration Code of Practice (Code of Practice).

Third-party funding is defined as non-recourse funding: the third-party funder will “receive a financial benefit only if the arbitration is successful within the meaning of the funding agreement” (s.98J, AO).

The Code of Practice sets out the practices and standards with which third-party funders are normally expected to comply as to ethical and financial matters.

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14.1. Applicable regulatory requirements

The Code of Practice applies to all third-party funders as defined in Part 10A of AO (save in circumstances specified by s.98O(1), AO) and to negotiating, making, and performing any agreement on the third-party funding of an arbitration between a third-party funder and a funded party (including a potential funded party) that is made or performed on or after the date of the Code of Practice’s entry into force. 

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14.2. Overview of the third-party funding market in this jurisdiction

The HKIAC has reported in its 2022 Statistics that Parties made disclosures of third-party funding in 73 HKIAC-administered arbitrations under the 2018 HKIAC Administered Arbitration Rules and one HKIAC-administered arbitration under the UNCITRAL Arbitration Rules in 2022.

 

See Section 15 below regarding the 2022 reforms to allow lawyers’ funding by Outcome Related Fee Structures of Arbitration (ORFSA).

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15 . Trends and recent developments

  • Mutual Arrangement on Interim Measures. The HKIAC reported that in 2022 it processed 26 applications made to 14 different Mainland Chinese courts under the Hong Kong-Mainland China arrangement on interim measures:
    • These sought to preserve evidence or assets worth a total of RMB 7.6 billion (approximately USD 1.1 billion) in Mainland China. 
    • The Mainland Chinese courts issued orders to preserve RMB 1.26 billion (approximately USD 185.8 million) worth of assets. 
    • Approximately:
      • 17.2% of the applications were made by parties from Mainland China; and 
      • 82.8% by parties from Hong Kong, Singapore, Cayman Islands, Germany, Australia, and the British Virgin Islands. 
    • Approximately:
      • 68.9% concerned assets owned by Mainland Chinese parties; and 
      • 31.1% concerned assets or evidence owned by non-Mainland parties (i.e., from Hong Kong, Cayman Islands, Singapore, United States, and the British Virgin Islands).
  • The HKIAC is to be included in the China International Commercial Court’s (CICC) “One-Stop” Platform for Diversified International Commercial Dispute Resolution. See announcement dated 6 July 2022 of the Supreme Peoples’ Court of the People’s Republic of China (SPC). Parties to HKIAC-administered cases with an amount in dispute over RMB 300 million or otherwise likely to be of significant influence, may apply for interim relief and/or the enforcement of arbitral awards directly to the CICC. 
  • Escalation Clause. Issues as to a party’s compliance with a contractual dispute resolution escalation clause before commencing arbitration proceedings should generally be resolved by the tribunal, rather than the courts and is a question of admissibility not jurisdiction (C v. D [2021] HKCFI 1474).
  • Lawyers funding by Outcome Related Fee Structures of Arbitration (ORFSA). Effective 16 December 2022 lawyers are permitted to agree with their clients to be compensated by outcome related fee structures for arbitration (ORFSA) (commonly known as success fees or contingency fees) for their work on arbitrations taking place in Hong Kong and related proceedings under the AO) (Part 10B arbitration)) and for  work done in Hong Kong= on arbitrations taking place elsewhere (or without a place of arbitration) (Part 10B, AO and the Arbitration (Outcome Related Fee Structures for Arbitration) Rules).
  • The United Nations Convention on Contracts for the International Sale of Goods (CISG) came into effect in Hong Kong on 1 December 2022.

EXPERT ANALYSIS

Chapters

Australia

Cara North
Eleanor Clifford
Nastasja Suhadolnik
Samuel Kay

Brazil

Anna-Katharina Scheffer da Silveira
Paulo Macedo
Rafael Alves

Colombia

Juan Felipe Merizalde
Juan Pablo Gómez-Moreno

Ecuador

Adriana Rodas
David Toscano
Gabriela Ortega

England and Wales

Gregory Fullelove
Katie Bewlock

France

Carl Szymura
Julie Spinelli

India

Sanskriti Sidana
Shaneen Parikh
Tushar Karkaria

Italy

Gregorio Baldoli
Massimo Benedettelli

Nigeria

Igonikon Adekunle
Konyinsola Osipitan
Sesan Sulaiman

Saudi Arabia

Fahad N. AlArfaj

Singapore

Joel Quek
Koh Swee Yen SC
Wendy Lin

South Africa

Clement Mkiva
Jackie Lafleur
Jonathan Barnes
Tori Herholdt

South Korea

Brandon Bang
Hangil Lee
In Hyuk Hwang
Tony DongWook Kang

Switzerland

Noradèle Radjai

United States

Benjamin Guthrie
Carlos Hafemann
Daniela Páez
Emma McGrath
Lucila Marchini
Louis Thivierge

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