Commercial Arbitration

Last verified on Thursday 2nd April 2020

Commercial Arbitration: Hong Kong

Peter Yuen

Fangda Partners

Infrastructure

1. Is your state a party to the New York Convention? Are there any noteworthy declarations or reservations?

Hong Kong

Hong Kong is a Special Administrative Region (SAR) of the People’s Republic of China (PRC). As such, Hong Kong is not a separate party to the New York Convention.

On 1 July 1997, upon resumption of sovereignty over Hong Kong, the PRC extended its territorial application of the New York Convention to Hong Kong, subject to the reservations originally made by the PRC upon accession to the New York Convention (both the reciprocity reservation and the commercial reservation, which apply to Hong Kong).

Answer contributed by Peter Yuen

2. Is your state a party to any other bilateral or multilateral treaties regarding the recognition and enforcement of arbitral awards?

Hong Kong

Hong Kong maintains an arrangement with Mainland China for reciprocal enforcement of arbitral awards, as well as an arrangement with Macao for reciprocal recognition and enforcement of arbitral awards. These arrangements are in essence the New York Convention mechanism between Hong Kong, Mainland China and Macao.

The ICSID Convention applies in Hong Kong following the resumption of sovereignty over Hong Kong on 1 July 1997.

Finally, at the time of writing, Hong Kong has ratified 20 bilateral investment treaties, as well as an investment protection agreement with the Association of Southeast Asian Nations; a vast majority of those treaties provide for arbitration as means to resolve investor-state disputes.

Answer contributed by Peter Yuen

3. Is there an arbitration act or equivalent and, if so, is it based on the UNCITRAL Model Law? Does it apply to all arbitral proceedings with their seat in your jurisdiction?

Hong Kong

The Hong Kong Arbitration Ordinance (Cap 609) (HKAO) is based principally upon the UNCITRAL Model Law 1985 with a number of adjustments. HKAO applies as the procedural law governing all Hong Kong seated arbitrations.

Answer contributed by Peter Yuen

4. What arbitration bodies relevant to international arbitration are based within your jurisdiction? Do such bodies also act as appointing authorities?

Hong Kong

  • 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);
  • eBRAM International Online Dispute Resolution Centre;
  • Hong Kong Maritime Arbitration Group;
  • South China International Arbitration Center (HK); and
  • In January 2015, the Permanent Court of Arbitration (PCA) signed a host country agreement with the Central People’s Government and a related memorandum of administrative arrangements with the government of the Hong Kong SAR to facilitate the conduct of PCA-administered arbitration in Hong Kong.

All institutions may act as appointing authority. Under the HKAO, the HKIAC acts as the default appointing authority in Hong Kong-seated ad hoc (unadministered) arbitrations (see, sections 13 and 24 of the HKAO).

Answer contributed by Peter Yuen

5. Can foreign arbitral providers operate in your jurisdiction?

Hong Kong

Yes.

Answer contributed by Peter Yuen

6. Is there a specialist arbitration court? Is the judiciary in your jurisdiction generally familiar with, and supportive of, the law and practice of international arbitration?

Hong Kong

There is no specialist arbitration court in Hong Kong. However, Practice Direction 6.1 “Construction and Arbitration List” has established a list of Hong Kong judges who have control over the matters in the list, which include “applications relating to arbitration whether arising under the Arbitration Ordinance, Rules of Court, Order 73 or otherwise”.

The Hong Kong judiciary has developed significant expertise in arbitration-related matters.

Answer contributed by Peter Yuen

Agreement to arbitrate

7. What, if any, requirements must be met if an arbitration agreement is to be valid and enforceable under the law of your jurisdiction? Can an arbitration agreement cover future disputes?

Hong Kong

Section 19 of the HKAO adopts Option I of article 7 of the UNCITRAL Model Law, and provides that the arbitration agreement “may be in the form of an arbitration clause in a contract or in the form of a separate agreement”, and that it be “in writing”.

Section 19(1)(3) further clarifies that an arbitration agreement is in writing “if its content is recorded in any form, whether or not the arbitration agreement or contract has been concluded orally, by conduct, or by other means”. Electronic communications meet the requirement “in writing” for the purposes of section 19, where qualifying electronic communications include email (section 19(1)(4) of the HKAO).

Further, section 19(1)(5) provides that an arbitration agreement is “in writing” if 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.

An arbitration agreement can cover future disputes.

Answer contributed by Peter Yuen

8. Are any types of dispute non-arbitrable? If so, which?

Hong Kong

The following disputes are not arbitrable in Hong Kong:

  • criminal cases;
  • actions in rem against ships;
  • competition and antitrust disputes;
  • divorce proceedings; guardianship applications; and
  • matters reserved for resolution by state agencies and tribunals (eg, taxation, immigration and national welfare entitlements).

In 2017, HKAO was amended to clarify that disputes relating to intellectual property rights are arbitrable in Hong Kong.

The question of whether or not a winding up order should be made may be arbitrable depending upon the grounds on which the winding up order is sought (Re Southwest Pacific Bauxite (HK) Ltd [2018] 2 HKLRD 449; Dayang (HK) Marine Shipping Co Ltd v Asia Master Logistics Ltd [2020] HKCFI 311). 

Answer contributed by Peter Yuen

9. Can a third party be bound by an arbitration clause and, if so, in what circumstances? Can third parties participate in the arbitration process through joinder or a third-party notice?

Hong Kong

Hong Kong courts have applied certain legal theories to bind entities that have not executed an arbitration agreement. In Dickson Valora v Fan Ji Qian [2019] 2 HKLRD 173, the Court analysed the nature of the contractual right before holding that a third party’s conscience can be “bound by the conditions integral to the rights they have acquired, which [the third party] therefore be restrained by equity from asserting those rights in a manner inconsistent with those conditions”. In that case a third party trying to enforce a contract was held to be bound by the arbitration clause. Section 12 of the Contracts (Rights of Third Parties) Ordinance also provides that a third party enforcing an agreement will be treated as a party to an arbitration agreement for the purpose of the HKAO.

Article 27 of the 2018 HKIAC Administered Arbitration Rules contains a joinder mechanism that empowers HKIAC tribunals to allow additional parties to be joined to the arbitration, provided that such parties are bound by an arbitration agreement, along with other requirements as set out in the rules.

Answer contributed by Peter Yuen

10. Would an arbitral tribunal with its seat in your jurisdiction be able to consolidate separate arbitral proceedings under one or more contracts and, if so, in what circumstances?

Hong Kong

Yes, in circumstances of specific party consent to consolidation, agreement to the application of certain institutional rules, or opt-in to Schedule 2 of the HKAO.

Section 2 of Schedule 2 to the HKAO (provisions that may be expressly opted for) empowers the court on the application of any party to Hong Kong-seated arbitration proceedings to order consolidation of proceedings or simultaneous hearing of the proceedings, if the court finds that (i) a common question of law or fact arises in both or all of them; (ii) the rights to relief claimed in those arbitral proceedings are in respect of or arise out of the same transaction or series of transactions; or (iii) for any other reason it is desirable to consolidate the proceedings or to hear them at the same time. Under the same HKAO provision, the court may also stay any of the relevant arbitral proceedings until after the determination of any of such proceedings, if such would be appropriate.

Under article 28 of the 2018 HKIAC Administered Arbitration Rules, the HKIAC has the power, at the request of either party, and after consulting with the parties and any of the confirmed arbitrators, to consolidate two or more arbitrations pending under the HKIAC rules, if (i) the parties agree to consolidate; (ii) all of the claims in the arbitrations are made under the same arbitration agreement; or (iii) the claims are made under more than one arbitration agreement, a common question of law or fact arises in both or all of the arbitrations, the rights to relief claimed are in respect of, or arise out of, the same transaction or series of transactions, and HKIAC finds the arbitration agreements to be compatible.

Answer contributed by Peter Yuen

11. Is the "group of companies doctrine" recognised in your jurisdiction?

Hong Kong

In Hong Kong, the “group of companies doctrine”, being largely the product of civil law jurisprudence, has not so far been accepted or even tested by Hong Kong courts, according to Prof. Anselmo Reyes, and it is unclear whether the scope of the arbitration agreement may be extended to a non-signatory in that way.

Arbitration agreements may, nonetheless, be extended to that party under other contractual or equitable principles (see question 9 (third parties)).

Answer contributed by Peter Yuen

12. Are arbitration clauses considered separable from the main contract?

Hong Kong

Yes, arbitration clauses are separable from the main contract under section 34 of the HKAO (which adopts article 16 of the UNCITRAL Model Law subject to section 13(5)). 

Answer contributed by Peter Yuen

13. Is the principle of competence-competence recognised in your jurisdiction? Can a party to an arbitration ask the courts to determine an issue relating to the tribunals jurisdiction and competence?

Hong Kong

The principle of competence-competence is recognised by section 34 of the HKAO.  

Section 34(1)(3) of the HKAO allows a party, within 30 days of the tribunal’s preliminary ruling that it has jurisdiction over the dispute or parts thereof, to request the court to review the decision. The court’s review is binding and subject to no appeal. The tribunal’s negative decision on jurisdiction, if made as a preliminary matter, is not subject to review by the courts under section 34(1)(3) of the HKAO. Further, section 34(4) of the HKAO provides that a ruling of the arbitral tribunal that it does not have jurisdiction to decide a dispute is not subject to appeal.

Section 81 of the HKAO (adopting article 34 of the UNCITRAL Model Law) allows the parties to apply to set aside an arbitral award, including on the grounds that the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration.

Answer contributed by Peter Yuen

14. Are there particular issues to note when drafting an arbitration clause where your jurisdiction will be the seat of arbitration or the place where enforcement of an award will be sought?

Hong Kong

Hong Kong courts adhere to the principle of presumptive validity of arbitration agreements, and will generally seek to uphold the validity of an arbitration clause. Nonetheless, to avoid procedural difficulties, parties drafting arbitration clauses with a Hong Kong seat should seek to clearly identify the seat, the administering institution (if any), the applicable procedural rules (if not those of the administering institution), the law governing the arbitration clause, the number of arbitrators, the scope of submission to arbitration, and other issues that are typical for an arbitration agreement that is a valid, operative and capable of being performed. It would also be helpful to identify the language of arbitration and number of arbitrators.

Parties should also consider the nature of potential claims. An arbitration agreement may result in a lower threshold required for a debtor to stay insolvency proceedings in favour of a disputed debt (merely disputing the debt as opposed to the usual test for disputing the debt on substantial grounds): see the discussion at question 8. Therefore, where potential claims are likely to be for a debt, parties should consider the suitability of arbitration.

If the transaction has a Mainland China aspect, the parties may wish to keep open the prospect of applying to the Mainland Chinese courts for interim relief in support of the arbitration. If so, they should specify administered rather than ad hoc arbitration. This will allow them to benefit from the PRC-Hong Kong interim relief arrangement which only applies to administered arbitration.

Answer contributed by Peter Yuen

15. Is institutional international arbitration more or less common than ad hoc international arbitration? Are the UNCITRAL Rules commonly used in ad hoc international arbitrations in your jurisdiction?

Hong Kong

Institutional arbitration is a large and growing area of disputes in Hong Kong. There is no source of statistics that would be able to capture the number of ad hoc arbitrations seated in Hong Kong, due to the nature of ad hoc arbitrations (no institutional involvement) and the inherent confidentiality.

Answer contributed by Peter Yuen

16. What, if any, are the particular points to note when drafting a multi-party arbitration agreement with your jurisdiction in mind? In relation to, for example, the appointment of arbitrators.

Hong Kong

The standard recommendation is to ensure that all interconnected agreements contain identical or at the very least compatible arbitration clauses. The arbitration agreements’ compatibility will depend on whether the relevant agreements nominate the same administering institution, provide for the application of the same procedural rules, specify the same seat; and whether the agreements contain a functional tribunal constitution mechanism that would determine how the tribunal is to be constituted in case of multi-contract and multi-party proceedings. Typically, such functional tribunal constitution mechanism in the relevant arbitration agreements would contain a provision that would identify the “framework arbitration” into which other disputes may be consolidated, how the tribunal is to be constituted in the “framework arbitration”, and often, whether the same arbitrators may be appointed under the relevant contracts. 

The 2018 HKIAC Administered Arbitration Rules contain a mechanism for single proceedings under multiple contracts that is designed to address a situation where disputes may arise under a number of interconnected transactions. Article 29 of the 2018 HKIAC Administered Arbitration Rules provides that claims arising out of or in connection with more than one contract may be made in a single arbitration, provided that:

  • a common question of law or fact arises under each arbitration agreement giving rise to the arbitration;
  • the rights to relief claimed are in respect of, or arise out of, the same transaction or a series of related transactions; and
  • the arbitration agreements under which those claims are made are compatible.

In addition to that, often in situations where the relevant arbitration agreements are not compatible, or where the single arbitration under multiple contracts may not be engaged, the 2018 HKIAC Administered Arbitration Rules contain a mechanism that allows the arbitral tribunals to conduct two or more arbitrations at the same time, thus ensuring procedural efficiency and reducing the risks of inconsistent findings. Article 30 of the 2018 HKIAC Administered Arbitration Rules provides that the arbitral tribunal may, after consulting with the parties, conduct two or more arbitrations under the Rules at the same time, or one immediately after another, or suspend any of those arbitrations until after the determination of any other of them, where (i) the same arbitral tribunal is constituted in each arbitration; and (ii) a common question of law or fact arises in all the arbitrations.

Answer contributed by Peter Yuen

Commencing the arbitration

17. How are arbitral proceedings commenced in your jurisdiction? Are there any key provisions under the arbitration laws of your jurisdiction relating to limitation periods of which the parties should be aware?

Hong Kong

Section 49 of the HKAO (adopting article 21 of the UNCITRAL Model Law) provides that the arbitral proceedings commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent.

Under article 4.2 of the 2018 HKIAC Administered Arbitration Rules, an arbitration shall be deemed to commence on the date on which a copy of the Notice of Arbitration is received by HKIAC. Articles 3.1 to 3.5 of the 2018 HKIAC Administered Arbitration Rules contain rules on written communications (and when such communications shall be deemed to be delivered), as well as on calculation of time limits.

The limitation period to bring an arbitration claim is six years from the date on which the cause of action accrued for claims in contact or tort (see section 14 of the HKAO; see also, section 4(1) of the Hong Kong Limitation Ordinance).

Section 58 of the HKAO empowers the tribunal to extend the time period for bringing a claim, if an arbitration agreement stipulates that a claim will be time barred unless it is referred to arbitration within a specified period, if the tribunal is satisfied that (i) the circumstances of the claim were outside the reasonable contemplation of the parties at the time they entered into the agreement and it is just to extend the period; or (ii) the conduct of any party makes it unjust to hold the other party to the strict terms of the agreement.

Answer contributed by Peter Yuen

Choice of law

18. How is the substantive law of the dispute determined? Where the substantive law is unclear, how will a tribunal determine what it should be?

Hong Kong

Most agreements contain a clause expressly identifying the law that governs the substantive contract. Where no such clause exists, the tribunal will apply conflict of law rules in order to determine the substantive law of the dispute. 

The Hong Kong conflict of law rules are similar to the conflict of law rules applied in England and Wales, and as such involve three stages of analysis. First, the arbitrator applying Hong Kong law will see whether the parties had made an express choice of law. Second, if no express choice of law had been made, the arbitrator will examine all the facts surrounding the agreement to determine whether there was an inferred or implied choice of law by the parties. Third, if no implied choice of law had been made, the arbitrator will look beyond the parties’ intentions (because at this stage of the analysis, it would have been determined that the parties had no intentions as to the choice of law), and the arbitrator will apply “the system of law with which the transaction has the closest and most real connection”. There, at that stage of the analysis, the factors that are taken into account will include the nationalities of the parties, the parties’ domicile and habitual residence or place of business, the place of the contract performance (and the specific type of contract), the place where the contract was signed, the language in which the contract was negotiated and signed, the currency of the contract, and other aspects of the transaction.

Answer contributed by Peter Yuen

Appointing the tribunal

19. Does the law of your jurisdiction place any limitations in respect of a partys choice of arbitrator?

Hong Kong

No, neither the HKAO, nor the HKIAC arbitration rules, place any limitation with respect to a party’s choice of arbitrator, apart from the standard duty of impartiality and independence.

Section 24 of the HKAO (adopting article 11 of the UNCITRAL Model Law) provides that no person shall be precluded by reason of his nationality from acting as an arbitrator, unless otherwise agreed by the parties.

Article 11.2 of the 2018 HKIAC Administered Arbitration Rules provides that as a general rule, where the parties to an arbitration under the HKIAC rules are of different nationalities, a sole or presiding arbitrator shall not have the same nationality as any party unless specifically agreed otherwise by all parties. However, under article 11.3 of the rules, in appropriate circumstances and provided that none of the parties objects within a time limit set by HKIAC, a sole or presiding arbitrator may be of the same nationality as any of the parties.

Answer contributed by Peter Yuen

20. Can non-nationals act as arbitrators where the seat is in your jurisdiction or hearings are held there? Is this subject to any immigration or other requirements?

Hong Kong

Non-PRC nationals and/or those nationals who do not hold a Hong Kong Identity Card are allowed to act as arbitrators in Hong Kong. There is no provision in the HKIAC rules or in the HKAO that would prohibit foreign arbitrators from being appointed in respect of Hong Kong-seated arbitrations, or impose separate immigration or other requirements on them.

Should that be required, the HKIAC would assist foreign nationals with immigration permits for entry to Hong Kong.

Answer contributed by Peter Yuen

21. How are arbitrators appointed where no nomination is made by a party or parties or the selection mechanism fails for any reason? Do the courts have any role to play?

Hong Kong

Article 6 of the 2018 HKIAC Administered Arbitration Rules provides that if the parties have not agreed on the number of arbitrators before the commencement of arbitration, or within 30 days from the date of the notice of arbitration is received by the respondent, the HKIAC shall decide on whether the dispute shall be heard by a sole arbitrator or by a panel of three arbitrators.

Under article 7 of the 2018 HKIAC Administered Arbitration Rules, the HKIAC appoints the sole arbitrator if the parties fail to do so within the applicable time frame. Article 8 governs default appointments with respect to a three-member panel, where the HKIAC would make such appointments if they are not made within the designated time frame.

Under section 24 of the HKAO (adopting article 11 of the UNCITRAL Model Law), the court will make the default appointment upon a party’s request, if a party fails to appoint the arbitrator within 30 days of receipt of a request to do so, or if the two arbitrators fail to agree on the third arbitrator within 30 days of their appointment.

Answer contributed by Peter Yuen

22. Are arbitrators afforded immunity from suit under the law of your jurisdiction and, if so, in what terms?

Hong Kong

Arbitrators are generally immune to civil liability. However, arbitrators may be civilly liable if it is proved that the act or omission in question was done dishonestly (section 104 of the HKAO). The same applies to employees and agents of an arbitral tribunal.

Answer contributed by Peter Yuen

23. Can arbitrators secure payment of their fees in your jurisdiction? Are there fundholding services provided by relevant institutions?

Hong Kong

Institutions typically hold funds on account for arbitrators’ and institutional fees, and will delay taking steps in the procedure (eg, passing the case file to the arbitrator or issuing the award) pending payment of these amounts.

Answer contributed by Peter Yuen

Challenges to arbitrators

24. On what grounds may a party challenge an arbitrator? How are challenges dealt with in the courts or (as applicable) the main arbitration institutions in your jurisdiction? Will the IBA Guidelines on Conflicts of Interest in International Arbitration generally be taken into account?

Hong Kong

Absent party agreement to the procedure for challenge of an arbitrator (either ad hoc or institutional), the HKAO provides that:

  • A party may challenge an arbitrator’s appointment if circumstances exist that give rise to justifiable doubts as to his or her impartiality or independence, or if he or she does not possess qualifications agreed to by the parties (section 25(1) of the HKAO, which adopts article 12(1) of the Model Law).
  • A party who intends to challenge an arbitrator shall, within 15 days after becoming aware of the constitution of the arbitral tribunal or after becoming aware of any circumstance that may give rise to a challenge, send a written statement of the reasons for the challenge to the arbitral tribunal.
  • Unless the challenged arbitrator withdraws from his or her office or the other party agrees to the challenge, the arbitral tribunal shall decide on the challenge (section 26(1) of the HKAO, which adopts article 13 of the Model Law subject to section 13(4) HKAO). If this procedure fails, the challenging party may request, within 30 days after having received notice of the decision rejecting the challenge, the court or another authority (eg, HKIAC) to decide on the challenge, which decision shall be subject to no appeal; while such a request is pending, the arbitral tribunal, including the challenged arbitrator, may continue the arbitral proceedings and make an award.

A party may challenge an arbitrator appointed by it, or in whose appointment it participated, only for reasons of which that party becomes aware after the appointment has been made (section 25(2) of the HKAO, which adopts article 12(2) of the Model Law).

If an arbitrator becomes unable to perform his or her duties, or for other reasons fails to act without undue delay, the parties can remove the arbitrator by agreement. If the arbitrator refuses to withdraw from office or the parties cannot agree, any party may request the court or another authority (eg, the HKIAC) to decide on the termination of the arbitrator's mandate (section 27 of the HKAO, which adopts article 14 of the Model Law subject to section 13(4) of the HKAO), the decision of which also cannot be appealed.

In deciding challenges to arbitrators the Hong Kong courts will apply a high standard to establish that a particular set of circumstances may create a real danger of bias (Jung Science Information Technology Co Ltd v ZTE Corp [2008] 4 HKLRD 776).

Answer contributed by Peter Yuen

Interim relief

25. What main types of interim relief are available in respect of international arbitration and from whom (the tribunal or the courts)? Are anti-suit injunctions available where proceedings are brought elsewhere in breach of an arbitration agreement?

Hong Kong

Section 35 of the HKAO (adopting article 17 of the UNCITRAL Model Law) empowers the tribunal to order interim measures to:

  • maintain or restore status quo pending determination of the dispute;
  • 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;
  • provide a means of preserving assets out of which a subsequent award may be satisfied; and/ or
  • preserve evidence that may be relevant and material to the resolution of the dispute. 

As the tribunal’s power derives from the arbitration agreement, it does not have power to make orders against non-parties.

The Hong Kong Court has broad jurisdiction under section 21L and section 21M of the High Court Ordinance to grant interim relief in support of arbitration proceedings in or outside Hong Kong so long as those proceedings give rise to an award that is ultimately enforceable in Hong Kong.

Hong Kong courts also grant anti-suit injunctions against parties who commence legal proceedings elsewhere in breach of an arbitration agreement (see, for example, GM 1 and GM 2 v KC [2019] HKCFI 2793). These powers are also consistent with section 45(2) of the HKAO, which gives the court jurisdiction to grant interim measures, including injunctions, in relation to any arbitration proceedings that have been or are to be commenced in or outside Hong Kong.

Answer contributed by Peter Yuen

26. Does the law of your jurisdiction allow a court or tribunal to order a party to provide security for costs?

Hong Kong

Yes, the tribunal has the power to require a claimant to give security for the costs of the arbitration. Section 56(1) of the HKAO provides that the tribunal must not order the claimant to give security solely on the basis that it is a foreign national or entity.

According to section 56(3) of the HKAO, the tribunal must specify the time period within which the claimant has to comply with the security for costs order.

Answer contributed by Peter Yuen

Procedure

27. Are there any mandatory rules in your jurisdiction that govern the conduct of the arbitration (eg, general duties of the tribunal and/or the parties)?

Hong Kong

Section 46 of the HKAO (substituting article 18 of the UNCITRAL Model Law), provides that the tribunal shall:

  • treat all parties equally (section 46(2));
  • be independent (section 46(3)(a));
  • act fairly and impartially (section 46(3)(b)); and
  • adopt procedures that would avoid unnecessary delay or expense (section 46(3)(c)).

Under section 47 of the HKAO (adopting article 19(1) of the UNCITRAL Model Law), the parties are free to agree on the arbitral procedure. Further, section 53 of the HKAO (adopting article 25 of the UNCITRAL Model Law) provides for the application of certain default procedural rules absent party agreement to the contrary.

Answer contributed by Peter Yuen

28. What is the applicable law (and prevailing practice) where a respondent fails to participate in an arbitration?

Hong Kong

A respondent cannot be compelled to participate in an arbitration. Indeed, if without showing sufficient cause the respondent fails to communicate its statement of defence or appear at a hearing, the tribunal may continue the proceedings and make an award on the evidence before it (section 53 of the HKAO).

If, without showing sufficient cause, the respondent fails to comply with any order or direction of the tribunal, the tribunal may make a peremptory order to the same effect, prescribing the time for compliance (section 53(3)). If the respondent fails to comply with the peremptory order, the tribunal may:

  • direct that the party is not entitled to rely on any allegation or material which was the subject matter of the peremptory order;
  • draw any adverse inferences that the circumstances may justify from the non-compliance;
  • make an award on the basis of any materials that have been properly provided to the tribunal; or
  • make any order it thinks fit as to the payment of the costs of the arbitration incurred in consequence of the non-compliance.

Answer contributed by Peter Yuen

29. What types of evidence are usually admitted, and how is evidence usually taken? Will the IBA Rules on the Taking of Evidence in International Arbitration generally be taken into account?

Hong Kong

The tribunal is not bound by rules of evidence and may receive any evidence that it considers relevant to the arbitral proceedings. It must give weight that it considers appropriate to the evidence adduced in the arbitral proceedings (section 47(3) of the HKAO). In practice, parties and tribunals often make reference to rules of evidence, such as the IBA Rules on the Taking of Evidence in International Arbitration 2010.

Answer contributed by Peter Yuen

30. Will the courts in your jurisdiction play any role in the obtaining of evidence?

Hong Kong

The court is empowered under section 55 of the HKAO (adopting article 27 of the UNCITRAL Model Law) to assist in taking evidence within its competence (including in support of foreign arbitrations), and according to its rules on taking evidence. The court may order a person to attend proceedings before a tribunal to give evidence or produce documents or other evidence (section 55(2) of the HKAO). The powers conferred on the courts in assisting with taking evidence may be exercised irrespective of whether or not similar powers may be exercised by an arbitral tribunal in relation to the same dispute (section 55(3) of the HKAO).

Answer contributed by Peter Yuen

31. What is the relevant law and prevailing practice relating to document production in international arbitration in your jurisdiction?

Hong Kong

The parties are free to agree on the terms and the mode of discovery and inspection of documents. If there is no agreement, the tribunal will make the determination (section 47 of the HKAO). The tribunal may not require a person to produce any document or other material evidence that they would not be required to produce in civil proceedings before a court (section 56(9) of the HKAO).

The practice in Hong Kong is for the parties to exchange requests for disclosure, whereupon the disclosing party will either disclose these documents voluntarily or object on grounds of relevance, materiality, or that the request is impossible or unreasonably burdensome to satisfy. Often reference is made to the International Bar Association (IBA) Rules on Evidence.

Answer contributed by Peter Yuen

32. Is it mandatory to have a final hearing on the merits?

Hong Kong

Absent party agreement to the contrary, a tribunal may decide whether to have a final hearing on the merits or decide the matter on a documents-only basis (section 52 of the HKAO, adopting article 24 of the UNCITRAL Model Law). A party may require the tribunal to hold a hearing at an appropriate stage of the proceedings (section 52 of the HKAO).

Answer contributed by Peter Yuen

33. If your jurisdiction is selected as the seat of arbitration, may hearings and procedural meetings be conducted elsewhere?

Hong Kong

Yes.

Answer contributed by Peter Yuen

Award

34. Can the tribunal decide by majority?

Hong Kong

Unless otherwise agreed by the parties, in arbitration proceedings with more than one arbitrator, any decision of the tribunal must be made by a simple majority of arbitrators (section 65 of the HKAO, adopting article 29 of the UNCITRAL Model Law). Section 67 of the HKAO (adopting article 31 of the UNCITRAL Model Law) provides that where there is a dissenting opinion, the signature of the dissenting arbitrator need not be included on the final award. This will not affect the award's validity, provided that the reason for the omitted signature is stated.

Answer contributed by Peter Yuen

35. Are there any particular types of remedies or relief that an arbitral tribunal may not grant?

Hong Kong

Unless otherwise agreed by the parties, the tribunal may award any remedy or relief that could have been ordered by the court if the dispute had been the subject of civil proceedings (section 70 of the HKAO). This includes remedies of damages, specific performance, declarations, injunctions, restitution, rectification of contracts, interest and costs. A tribunal may not order specific performance of a contract relating to land or any interest in land (section 70(2) of the HKAO). 

Answer contributed by Peter Yuen

36. Are dissenting opinions permitted under the law of your jurisdiction? If so, are they common in practice?

Hong Kong

The HKAO does not prohibit dissenting opinions. Arbitrators are not obliged to give a dissenting opinion; however, the reason for the arbitrator's failure to sign an arbitral award must be stated (section 67 of the HKAO).

Answer contributed by Peter Yuen

37. What, if any, are the legal and formal requirements for a valid and enforceable award?

Hong Kong

Section 67 of the HKAO sets out the formal and substantive requirements for an award. An award must:

  • be in writing;
  • be signed by the arbitrator or arbitrators. A signature by a tribunal majority is sufficient in proceedings with more than one arbitrator, 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.

In addition, a signed copy of the award must be delivered to each party. 

Answer contributed by Peter Yuen

38. What time limits, if any, should parties be aware of in respect of an award? In particular, do any time limits govern the interpretation and correction of an award?

Hong Kong

Absent party agreement to the contrary a party may within 30 days of receipt of the award request that the tribunal:

  • correct any computational, clerical or typographical errors or similar errors in the award; and
  • if so agreed by the parties, give an interpretation of a specific point or part of the award.

The tribunal may within this 30-day period also correct on its own initiative a computational, clerical or typographical or similar error (section 69(1) of the HKAO, adopting article 33 of the UNCITRAL Model Law).

Upon a party’s request for correction, 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.

Separately, absent party agreement to the contrary, a party may, within 30 days of receipt of the award, request an additional award as to claims presented in the arbitral proceedings but omitted from the award. The tribunal has 60 days to make the additional award if it considers the request to be justified (section 69(1)(3) of the HKAO). The tribunal may extend the time limit to make a correction, interpretation or additional award (section 69(1)(4) of the HKAO).

A correction or interpretation of the award, or an additional award, must be made in accordance with the requirements of the HKAO as to form, content and delivery of awards generally (section 69(1)(5) of the HKAO). Section 69(2) of the HKAO further provides that the tribunal has the power to make other changes to an award that are necessary or consequential to the correction or interpretation of the award. 

The tribunal may also within 30 days of the award review an award of costs if, when making the award, the tribunal was not aware of certain information relating to costs that it should have taken into account. The tribunal can then confirm, vary or correct the award of costs (section 69(3) and section 69(4) of the HKAO).

Answer contributed by Peter Yuen

Costs and interest

39. Are parties able to recover fees paid and costs incurred? Does the "loser pays" rule generally apply in your jurisdiction?

Hong Kong

Tribunals have broad discretion to allocate costs (article 34 of the 2018 HKIAC Administered Arbitration Rules), allowing reasonable costs having regard to all the circumstances (section 74(7) of the HKAO). Tribunals typically apply the principle that costs follow the event, with the unsuccessful party paying the successful party’s reasonable costs, including its legal costs and the tribunal’s costs. Under section 74(6) of the HKAO, the tribunal is not obliged to follow the scales and practices adopted by the court on taxation when assessing the amount of costs.

A provision in an arbitration agreement that parties must pay their own costs in the arbitration is void under Hong Kong law (section 74(8) of the HKAO), unless it is a part of an agreement to submit to arbitration a dispute that had arisen before the agreement was made (section 74(9) of the HKAO).

The Hong Kong courts award costs on an indemnity basis against a party that makes an unsuccessful application to set aside an arbitral award (Pacific China Holdings Ltd (in Liquidation) v Grand Pacific Holdings Ltd CACV 136/2011).

Answer contributed by Peter Yuen

40. Can interest be included on the principal claim and costs? Is there any mandatory or customary rate?

Hong Kong

The arbitral tribunal has discretion to award pre-award interest, whether simple or compound at rates it considers appropriate (section 79 of the HKAO).

Pursuant to section 80(1) of the HKAO, post-award interest will be payable from the date of the award at a rate determined by the Chief Justice under section 49(1)(b) (Interest on judgments) of the High Court Ordinance (Cap 4).

Answer contributed by Peter Yuen

Challenging awards

41. Are there any grounds on which an award may be appealed before the courts of your jurisdiction?

Hong Kong

An arbitral award is final and binding, and not subject to appeal (section 73 of the HKAO). An award debtor may challenge the award under section 81 of the HKAO, section 4 and section 5 of Schedule 2 to the HKAO, or otherwise by any available arbitral process of appeal or review.

Grounds for set aside under section 81 of the HKAO are 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 the appointment of an arbitrator 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; or
  • the composition 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 ordinance.

An award may also be set aside 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 (section 81(1) of the HKAO).

Where the parties have opted in to the regime under Schedule 2 of the HKAO, a party may appeal on a question of law arising out of an award made in the arbitral proceedings (section 5 of Schedule 2 to the HKAO). Section 4 of Schedule 2 to the HKAO allows challenging the award on the grounds of serious irregularity affecting the tribunal, the arbitral proceedings or award.

Answer contributed by Peter Yuen

42. Are there any other bases on which an award may be challenged, and if so what?

Hong Kong

No, other than those set out in answer to question 41.

Answer contributed by Peter Yuen

43. Is it open to the parties to exclude by agreement any right of appeal or other recourse that the law of your jurisdiction may provide?

Hong Kong

No, the parties cannot agree to exclude or limit a party's right under the HKAO to bring set aside proceedings, or challenge an award.

Answer contributed by Peter Yuen

Enforcement in your jurisdiction

44. Will an award that has been set aside by the courts in the seat of arbitration be enforced in your jurisdiction?

Hong Kong

Under section 89(2)(f)(ii) of the HKAO, the court may, but is under no obligation to, refuse enforcement of the Convention award if an award has been “set aside or suspended by a competent authority of the country in which, or under the law of which, it was made”. The enforcing court in Hong Kong could nevertheless enforce the award or it could proceed to allow enforcement of the award before the set-aside application has been completed. 

Answer contributed by Peter Yuen

45. What trends, if any, are suggested by recent enforcement decisions? What is the prevailing approach of the courts in this regard?

Hong Kong

Hong Kong’s “enforcement manifesto” – the 10 general principles the courts will apply in dealing with enforcement of awards – has been set out by Hong Kong Justice Mimmie Chan in KB v S [2015] HKEC 2042:

  • the primary aim of the court is to facilitate the arbitral process and to assist with enforcement of arbitral awards;
  • the court should interfere in the arbitration of the dispute only as expressly provided for in the HKAO;
  • the parties to a dispute should be free to agree on how their dispute should be resolved, but this freedom should be subject to safeguards that are necessary in the public interest;
  • enforcement of arbitral awards should be “almost a matter of administrative procedure” and the courts should be “as mechanistic as possible”;
  • the party opposing enforcement has to show a real risk of prejudice and that its rights are shown to have been violated in a material way;
  • the court is concerned with the structural integrity of the arbitration proceedings, the conduct complained of “must be serious, even egregious”, before the court would find that there was an error sufficiently serious so as to have undermined due process;
  • in considering whether or not to refuse the enforcement of the award, the court does not look into the merits or at the underlying transaction;
  • failure to make prompt objection to the tribunal or the supervisory court may constitute estoppel or want of bona fide;
  • even if sufficient grounds are made out either to refuse enforcement or to set aside an arbitral award, the court has a residual discretion and may nevertheless enforce the award despite the proven existence of a valid ground; and
  • the parties to the arbitration have a duty of good faith.

Answer contributed by Peter Yuen

46. To what extent might a state or state entity successfully raise a defence of state or sovereign immunity at the enforcement stage?

Hong Kong

Foreign states enjoy absolute immunity from enforcement in Hong Kong (State Immunity). The PRC government, which forms part of the same sovereign unit as Hong Kong, enjoys absolute immunity form enforcement (Crown Immunity). In both cases, an arbitral award will be unenforceable against the award debtor unless it agrees to waive immunity.

The Chinese government has confirmed that generally speaking Chinese state-owned enterprises are not considered to be emanations of the Chinese state. It follows that most state-owned enterprises will be unlikely to successfully claim Crown Immunity in Hong Kong (TNB Fuel Services SDN BHD v China National Coal Group Corporation HKCFI 1016).

Answer contributed by Peter Yuen

Further considerations

47. To what extent are arbitral proceedings in your jurisdiction confidential?

Hong Kong

Section 18 of the HKAO provides that, unless otherwise agreed by the parties, no party may publish, disclose or communicate any information relating to the arbitral proceedings and/or the award.

Section 18(2) of the HKAO sets out the exceptions to this general duty, in cases 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 if obliged to do so by law; or
  • a professional or any other adviser.

In addition, section 16 of the HKAO provides that court proceedings relating to arbitration are heard in closed court, with hearings in open court 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).

The rules of arbitral institutions typically impose a confidentiality obligation on participants (see, for example, article 45 of the HKIAC Rules).

Answer contributed by Peter Yuen

48. What is the position relating to evidence produced and pleadings filed in the arbitration? Are these confidential? Is there any way that they might be relied on in other proceedings (whether arbitral or court proceedings)?

Hong Kong

These are subject to the same general duties and exceptions referenced above.

Answer contributed by Peter Yuen

49. What ethical codes and other professional standards, if any, apply to counsel and arbitrators conducting proceedings in your jurisdiction?

Hong Kong

Solicitors in Hong Kong and foreign lawyers registered with the Hong Kong Law Society must comply with the rules and principles set out in the Hong Kong Law Society's Guide to Professional Conduct. Similarly, Hong Kong barristers must comply with the Hong Kong Bar Association's Code of Conduct.

A number of professional bodies or entities involved in arbitration in Hong Kong have published ethical codes. For example, the HKIAC has published a Code of Ethical Conduct for Arbitrators, and the Hong Kong Institute of Arbitrators has published a Code of Professional and Ethical Conduct.

Answer contributed by Peter Yuen

50. Are there any particular procedural expectations or assumptions of which counsel or arbitrators participating in an international arbitration with its seat in your jurisdiction should be aware?

Hong Kong

Hong Kong-seated arbitration procedures tend to accord with international best practice. Having said that, given the proximity to Mainland China, it might be expected that a larger than usual number of arbitrations will be bilingual or dual-language.

Traditionally, procedures tended to follow that of the court as opposed to continental memorial style exchanges. This is slowly changing, and we are increasingly seeing a hybrid of the two.

Answer contributed by Peter Yuen

51. Is third-party funding permitted in your jurisdiction? If so, are there any rules governing its use?

Hong Kong

Following the relevant amendments to the HKAO, which came into force in February 2019, funding is expressly permitted for Hong Kong-seated arbitrations.  

A Code of Practice for Third Party Funding of Arbitration imposes upon funders a number of obligations, including the following:

  • Funding agreement: A funder must ensure the funded party knows it is entitled to take independent legal advice, explain clearly in the funding agreement its key features and terms, etc.
  • Capital adequacy: A funder must maintain capacity to pay all its debts and cover its aggregate funding liabilities for a minimum of 36 months, as well as maintain access to at least HK$20 million of capital.
  • Conflicts of interest: A funder must maintain effective procedures for managing conflicts of interest and must not take any steps that may cause the funded party’s legal representative to act in breach of its professional duties.
  • Confidentiality and legal professional privilege: A funder must observe the confidentiality and privilege of all information and documentation relating to the arbitration and the subject of the funding agreement.
  • Control: The funding agreement shall set out that the funder will not seek to influence the funded party or its lawyers, take steps that cause the funded party’s lawyers to breach their professional duties, or seek to influence the tribunal.
  • Disclosure: A funder must remind the funded party of its obligation to disclose information about the funding.
  • Liability for costs: The funding agreement must state whether, and to what extent, the funder will be liable for the funded party’s costs, including adverse costs, costs insurance premiums, security for costs and any other financial liability.

Contingency fee arrangements remain prohibited in Hong Kong, although the Hong Kong Law Reform Commission is currently consulting on reforms.

The authors gratefully acknowledge the contribution to the chapter by Zi Wei Wong and Francis Wong.

Answer contributed by Peter Yuen

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