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Guide To Regional Arbitration (volume 4 - 2016)

Institutions Worth a Closer Look: Asia

03 November 2015

If regional arbitration has a birthplace, it is Asia. It was the emergence of the Hong Kong International Arbitration Centre that proved the concept would work: if you build a regional centre, users will come. Of course, there’s more to it than that – many stars must align for a seat and its arbitral centre to flourish. But the HKIAC showed it could happen – that a regional arbitration provider could prosper.

Today there are 40-plus international arbitration institutions around Asia seeking to emulate Hong Kong’s success. They have their own club: the Asia Pacific Regional Arbitration Group (APRAG).

And new ones are appearing all the time. Recent examples are the Bangladesh International Arbitration Centre and the Delhi Arbitration Centre (which opened a branch of its international arm in 2013). Meanwhile, in China, two city branches of CIETAC have broken away from their parent and set up in competition.

Added to this mix, 2015 saw the launch of the Singapore International Commercial Court (SICC). The court will take on high-value, complex, cross-border commercial cases, operating as a division of the Singapore High Court. In addition to the existing panel of High Court judges, the SICC will also have local and international jurists appointed to its panel.

In the words of Chief Justice Menon, the SICC is intended to “build upon and complement the success of [Singapore’s] vibrant arbitration sector” and “make the city state’s judicial institutions and legal profession available to serve the regional and the global community”.

So, amid all this energy, which Asian arbitral providers are the safe options?

Well, a conservative view is two (see our white list below). But there are others that are suitable for the right case or type of contract, or that are only a little short of our white list. And these are covered in the “ones to watch” section.

Hong Kong International Arbitration Centre (HKIAC)

Why is the HKIAC on a white list of regional arbitration providers?

Regional arbitration pretty much began with the HKIAC. No regional institution has been running for so long, or with such success.

How successful is it?

In case terms, very. In 2014 the centre handled 252 arbitration matters, almost all of which were international in nature. The total amount in dispute was US$2.8 billion, up from US$2 billion in 2013.

Doesn’t it count cases a little differently from others?

It’s complicated – but yes. An important statistic within the overall total is the number of cases being administered under the HKIAC’s own rules. In 2014 that climbed to 110 cases, up from 81 in 2013 (and 68 in 2012).

Isn’t it all construction and maritime arbitration?

It used to be, but not anymore. In 2014 the biggest category of cases was energy and resources (around 18 per cent). Maritime accounted for around 15 per cent of the caseload in 2014, followed by consulting and professional services, corporate and M&A, and banking and finance.

How did the HKIAC establish itself?

It was a combination of luck and good judgement. The HKIAC was arguably in the right place at the right time, but has also had excellent leaders. Two of its founding fathers are Neil Kaplan QC and Michael Moser – less well known then, but now towering figures. They helped it grasp how to grow beyond domestic work in Hong Kong. And the government has helped too.

What has the government done?

Although it didn’t do much in the beginning, it has since become a keen supporter. It recently ensured the HKIAC got a whole floor in downtown Hong Kong to turn into a hearing centre (no easy task in that real estate market). The chief executive of Hong Kong (head of the government) appeared at the centre’s opening ceremony in October 2012, followed by a very frisky golden dragon.

Did being on China’s doorstep help?

Undoubtedly. China’s economic rise is a big part of why Hong Kong has emerged as a seat. A global seat that is; 2014 saw an increase in non-Chinese users.

What are the HKIAC’s strengths?

Its proven track record (it has been handling cases for two decades); a fine set of rules; and a light-touch style of case administration. It is also affordable, even in a city as expensive as Hong Kong. The HKIAC was the first institution to give parties a choice in how they pay arbitrators (by value of case, or an hourly rate). It’s gone even further recently on arbitrator costs.

How does the HKIAC differ from SIAC?

The two have different structures – the HKIAC’s rules are more UNCITRAL-inspired, while SIAC is closer to the ICC approach. They also had quite different beginnings. The HKIAC grew organically. It can be viewed as an offshoot of the local bar; in fact, it started life as a very successful branch of the CIArb. SIAC, in contrast, was a government idea.

Does organic growth make a difference?

Well, it says something about Hong Kong’s legal environment and its support for arbitration. But it also certainly helps an institution to have the backing of a vibrant arbitration bar. It’s arguable that the HKIAC would have been less able to respond to Singapore’s marketing push without the support of its local bar. Those voices helped it to make the case for upgrading Hong Kong’s arbitration infrastructure.

Has the HKIAC been hurt by the rise of Singapore?

There’s no doubt the two are serious rivals, but in the past, each has had a protected area. For the HKIAC it was China, while Singapore enjoyed a monopoly on India (Hong Kong awards weren’t enforceable there, owing to a technicality of Indian law). Singapore has lost that advantage because India has “gazetted” Hong Kong, while Hong Kong must deal with a perception in some quarters that, now it is part of China, it is not as suitable for China disputes as it once was.

So what’s going to happen?

Who knows? Hong Kong’s share of Chinese work is standing up well. Competition in any walk of life is usually a good thing and it’s hard to see why arbitration should be an exception.

As it happens, the HKIAC doesn’t only face competition from SIAC. It has to contend with both the ICC (which administers cases in Hong Kong) and now CIETAC Hong Kong on its doorstep.

How does the HKIAC feel about its prospects?

Its mood seems buoyant, and with some justification. Hong Kong as a seat is in better shape than it was a few years ago (thanks to a roundly applauded new arbitration ordinance and some very favourable court decisions). It also has the new hearing centre, new rules and new leadership – and the local arbitration community is also only getting bigger and better.

How so?

Things aren’t as active in Hong Kong as in, say, London, Paris or Geneva but there is more and more going on; for example, an annual international arbitration week (a series of events, including a ball). Recent years have also seen the relocation to Hong Kong of some big names, plus the emergence of a younger generation of specialists, including the HKIAC’s own secretary general, Chiann Bao.

What are the HKIAC’s new rules like?

Although not a major departure, they do contain some useful regional elements. One is an improved set of powers on joinder. Asian investments are more often spread over several contracts; the rules give the HKIAC and arbitrators more power to join third parties to proceedings. Since the introduction of the multiparty and multi-contract provisions in 2013, the centre has received 10 requests for consolidation and three applications for joining additional parties.

They also extend the HKIAC’s tradition of doing its utmost to control arbitrator costs.

How do they do that?

As well as giving parties a choice of how to pay the arbitrators, they contain a cap on the arbitrator’s hourly rate unless the parties agree otherwise.

Is that useful?

Well, arbitrators will tell you that the percentage of total costs they account for is very low. But every little helps in this day and age, and rules like this go down particularly well with Asian parties. The cap is HK$6,500 an hour.

Did you say the leadership has been revamped?

Yes. The HKIAC has a new organisational structure and has expanded its advisory board, as of early 2014. It’s now directed by a six-member executive board, headed by new chair Teresa Cheng, with Lord Goldsmith and John Budge as vice chairs.

It also expanded its international advisory board with eight new members, including big names such as Gary Born, Emmanuel Gaillard, Julian Lew QC and Albert Jan van den Berg. A host of new, internationally renowned names came aboard early in 2015.

Are there any pitfalls?

With the HKIAC, no. With Hong Kong, occasionally. Korean firms and lawyers from civil law jurisdictions feel that at times Hong Kong arbitration is a little litigation influenced. Also, there’s always a slight concern that in 15 years’ time, Hong Kong may not be the place it is today.

Singapore International Arbitration Centre (SIAC)

Why is SIAC worth a closer look?

At the conceptual level, SIAC stands for the proposition that dreams can come true. Thirteen years ago, it was a small (if well-funded) player. From there it has become the fastest-growing arbitral provider in this report, to equal the best.

It grabbed headlines in 2015 when Gary Born took over the presidency following founder Michael Pryles’ departure. He was quick to nail his colours to the mast: “We aim in the coming years to ensure that users from all parts of the world regard SIAC as their preferred choice for international dispute resolution.”

At a more mundane level, it’s a safe pair of hands (and seat) in a neutral state that’s not actually part of China.

How was its transformation achieved?

Slowly. SIAC was launched in 1991, but didn’t see casework take off until fairly recently. So success didn’t come overnight.

What finally swung it?

The glib answer is, building the world’s biggest international arbitration hearing centre. The 2010 opening of Maxwell Chambers – a mega-sized hearing complex dedicated entirely to international arbitration – put Singapore firmly on the arbitration map.

How’s that connected to SIAC?

SIAC proposed the idea, after canvassing sources around the world on how to kickstart its project. One could see Maxwell Chambers as a metaphor for Singapore’s whole approach to international arbitration: trawl the world for good ideas and have total government backing.

So has the government been an important part of SIAC’s success?

Absolutely. Barely a year goes by without some change to Singapore’s arbitration regime – or “ecosystem” as the minister of law and education has called it. Often those require legislative time.

Ways the government has helped SIAC include introducing tax perks for foreign arbitrators and arbitration firms who work in Singapore, plus almost countless adjustments to the law to fill lacunae or ensure SIAC’s rules work as intended.

Does SIAC change its rules often?

More than most. It released new rules in 2013 – the third set since 2007. Most providers amend their rules every nine or 10 years.

Early 2015 saw the introduction of SIAC’s “practice note” on the appointment of administrative secretaries, which regulates appointments and fees.

So it’s a simplification to say Maxwell Chambers put Singapore on the map?

Yes. Although Maxwell Chambers helped, it takes more than a new hearing centre to get to the top – even a really good one.

It so happens that SIAC hit the road hard between 2001 and 2007, promoting itself to law firms, corporations and its own government, and there’s strong evidence it was this effort that finally yielded fruit.

What evidence is that?

SIAC’s excellent statistics. These show a seismic jump in case numbers between 2008 and 2009 – a full year before the opening of Maxwell Chambers. So the new centre may have brought what was happening to wider attention, but it didn’t start it off.

The government also assisted SIAC greatly when it opened the legal market to foreign firms. Once those firms were in place, they had an incentive to promote Singapore as an international arbitration centre – since it was a form of work in which they had a competitive advantage.

SIAC has also steadily reached out to the international arbitration inner circle, giving them key jobs. In 2008 it invited a number of international luminaries to join its board of directors. Since then the signs have continued to be very encouraging.

How so?

All the key indicators are improving. SIAC has enjoyed its best ever year for new cases in 2013, with 259. It posted a very respectable total of 222 cases in 2014. On top of that, the clauses producing these were mostly written in the past four years. So SIAC seems firmly implanted in deal lawyers’ minds. But perhaps more importantly, the value of those cases is much bigger than it used to be. This aspect of its work has been something of a fly in SIAC’s ointment. It has had lots of cases, but they’ve been small and rather commodities-centric.

Now, though, it’s getting bigger disputes. In 2014 the value in disputes at SIAC was just over S$5 billion, S$2.4 billion of which was accounted for by a single matter.

It’s also getting many more parties from China: in 2014, they formed the biggest single group of users, followed by the US and India.

Has SIAC continued to innovate?

It’s more of a fast-adopter; a lot of its ideas started somewhere else first. It did launch a Congress in June 2014, to take place every two years.

What was on the agenda at that?

The usual topics: trends, enforcement and treaty matters. Oddly, it also spent a lot of time on the city state’s new international commercial court.

Why’s that odd?

Some think it might rock the SIAC boat – and have a similar effect on other international arbitration providers – by taking work. But the keynote speaker at the Congress, Singapore’s minister for law, K Shanmugam, was at pains to say it wouldn’t. He said the court and a new mediation centre would complement SIAC, not substitute it.

What’s arbitrating at SIAC like?

It’s not that different from the ICC. The 2013 rules made it resemble that organisation even more, and it was already fairly similar. They introduced a Court of Arbitration to resolve the issues arising mid-case. This court comprises 16 illustrious names from the international arbitration firmament.

Like the ICC, SIAC also now publishes redacted versions of awards (with the parties’ consent).

Since 2010, there’s also been an expedited procedure for use when certain criteria are met, and the option of an emergency arbitrator. In 2014, SIAC received 44 requests for expedited proceedings.

The 2013 rules added extra flexibility for the registrar at the outset of a case (regarding time periods) and for the arbitrators to hear arguments that emerge mid-case.

So it’s like arbitrating at the ICC then?

Well, the experience of any case depends on the individual arbitrators and how they run the process. SIAC arbitrators are at times criticised for mirroring Singaporean court litigation too much. It may lose that if it branches out.

Is branching out a possibility?

It’s early days but there are signs. SIAC recently opened its first foreign office, in Mumbai. The office won’t administer cases and is primarily a promotional and educational step, but it signals a serious push in India.

Are there any pitfalls to be aware of?

No pitfalls per se, just the standard little things to watch out for. One is that the rule on confidentiality is particularly broad. Another is that the model clause makes a few choices for you that other clauses leave blank (such as Singapore as a seat).

Other than that, no real traps exist for the unwary – although, with the rules changing often, there can be scope for arguments about which set should apply.