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Resolving Disputes by Arbitration

  • International status of Hong Kong arbitration
    • International recognition of awards: As a contracting party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (also known as the New York Convention), Hong Kong’s arbitral awards are recognised and can be enforced through the courts of more than 140 signatory jurisdictions including the Chinese mainland.
    • Leading arbitration centre in Asia: With its unique geographic location, sound legal system, professional expertise in various fields, and excellent facilities in transport, communications and accommodation, Hong Kong has become a leading arbitration centre in Asia.
    • Sound legislation: The Arbitration Ordinance (Chapter 609 of the Laws of Hong Kong) is internationally recognised as one of the finest pieces of arbitration legislation in the world.
  • Difference between arbitration and litigation
    • Both arbitration and litigation are legal processes resulting in enforceable rulings. However, in resolving disputes, there are differences between the two in the finality of ruling, the procedures and time required, and the costs to the parties involved.

      Comparison of arbitration and litigation

      ConfidentialityThe purpose is only to resolve dispute. The case is not publicly disclosed.Confidential information of the enterprises has to be disclosed at public court hearings.
      Time- After an award is made, there is no mechanism for appeal unless it is proven that there are procedural or technical errors.
      - The disputing parties can even set an arbitration timetable.
      - After a judgment is made, there is mechanism for appeal. Lawyers can use this as a delay tactic.
      - It is difficult to estimate the time for appeal. Litigation cases can drag on for years without any final ruling.
      Costs- It is not mandatory for the parties involved to attend arbitration hearings. Representatives can be deployed to save time and travel expenses.
      - Arbitrators charge by the hour. Their hourly rate does not exceed HK$6,500 (unless agreed otherwise), depending on the experience of the arbitrator and the complexity of the case.
      - The parties involved must attend the court hearings in person. This incurs costs in terms of travel expenses and loss of time.
      - The fees of lawyers are relatively high. Cost control is not easy as it is difficult to estimate the amount of time required.
      Ruling- Awards are made by arbitrators. Arbitrators are normally people from the industry familiar with its operations and possessing relevant professional knowledge. In making awards they are in a better position to consider the interests and responsibilities of both parties. For industries with a high professional content, such rulings are more fair and impartial.
      - The 1958 New York Convention has established a detailed framework for the recognition and enforcement of foreign arbitral awards. At present there are more than 140 signatory jurisdictions to this Convention. Arbitral awards made in Hong Kong are recognised and enforceable in most of the world’s trading nations.
      - Judgments are made by judges, who may know little about the industry. In making judgments, they have to rely heavily on the evidence given by the parties concerned and the specialist witnesses brought in by the lawyers. This may work to the advantage of the bigger enterprises with more resources.
      - Judgments made in a local court may not be recognised or enforceable in other jurisdictions. This involves complicated legal principles.

  • Arbitration in Hong Kong: Since its inauguration in 1985, the Hong Kong International Arbitration Centre has been handling an increasing number of cases every year. The reasons are as follows:
    • Foreign firms
      • Arbitral awards made in Hong Kong are recognised and enforceable in China.
      • Hong Kong adopts common law principles familiar to people in Europe and the Americas.
      • Hong Kong is a community with strong respect for the rule of law.
    • Mainland enterprises
      • Enhancement of the image of the enterprise: Even if the disputing parties are both mainland enterprises, they may still choose Hong Kong as the venue for arbitration to demonstrate that they are more internationalised.
      • Savings in costs: Hong Kong has an advantage in terms of language and geographic location.
      • Fair and just: By choosing Hong Kong as the venue of arbitration and using Hong Kong arbitrators, the disputing parties can ensure the award will be independent of the interests of both parties. This also helps build up mutual trust which will facilitate the implementation of the award.
  • Selection of arbitrators: To mediate effectively between disputing parties and to make fair and just awards, the arbitrator should be an independent third party. Arbitrators should be selected carefully, having regard to the following:
    • acceptability to both parties;
    • relevant professional knowledge; and
    • experience in arbitration.
  • How to look for arbitrators
  • Hong Kong International Arbitration Centre
    • Established: 1985
    • Organisation structure:
      • Non-profit organisation
      • Comprises leading businesspeople and professionals in Hong Kong
      • Sponsored by the Hong Kong Special Administrative Region Government and the business community
      • Independent operation
    • Objective: to help disputing parties resolve their disputes through arbitration and other means.
    • Functions
      1. The Hong Kong International Arbitration Centre may appoint arbitrators or umpires where the parties have failed to agree or have not designated an appointing authority or the designated appointing authority fails to carry out its function.
      2. The Hong Kong International Arbitration Centre may determine whether a tribunal of one or three arbitrators should consider a dispute under the international (UNCITRAL Model Law) regime. (Where an arbitration falls within the domestic regime, unless the parties have agreed otherwise there shall be only one arbitrator).
  • The Hong Kong International Arbitration Centre is committed to ensuring that the process of arbitration is fair, just, transparent and confidential
    • The Appointment Advisory Board of the Hong Kong International Arbitration Centre is made up of the following persons or representatives:
      • Chief Justice of the Court of Final Appeal
      • Chairman of Hong Kong Bar Association
      • President of the Law Society of Hong Kong
      • Hong Kong General Chamber of Commerce
      • Hong Kong Chinese General Chamber of Commerce
      • Chairman of Hong Kong Institute of Engineers
      • President of Hong Kong Institute of Surveyors
      • President of Hong Kong Institute of Architects
      • Hong Kong Shipowners Association
      • Hong Kong Federation of Insurers
    • Requirements for arbitrator
      • Industry-specific knowledge
      • Practical experience in arbitration
      • Connections with the Asia-Pacific region
      • Not having been found guilty by a court or disciplinary tribunal of misconduct which in the sole opinion of Hong Kong International Arbitration Centre calls into question his or her ability to act as arbitrator
      • Be under 75 years of age
      • Observes the “Code of Ethical Conduct for Arbitrators”

HKTDC Tips (on arbitration)

  • List of arbitrators: can be found on the official website of Hong Kong International Arbitration Centre
  • Costs of arbitration:
    • Arbitrator’s hourly rate: not exceeding HK$6,500
    • Fee for appointment of one arbitrator or umpire by the Hong Kong International Arbitration Centre: HK$8,000
    • Fee for determining the number of arbitrators: HK$8,000
    • Registration fee: HK$8,000
    • Administrative fee: HK$19,800 to HK$400,000 (for sum in dispute between under HK$400,000 and over HK$400 million)
    • Arbitral tribunal fee: 11% of amount in dispute to maximum of HK$12,574,000 (for sum in dispute between under HK$400,000 and over HK$4 billion)
    • Challenge Registration Fee: HK$50,000
    • Emergency Arbitrator Application Deposit: HK$250,000
    • Holding security for arbitrators' fees and expenses: HK$4,000
    • Holding security for the amount in dispute or security for costs: HK$10,000
    • Authentication fee for arbitral awards: HK$5,000
    • Booking of conference room (room rates): HK$1,550 to HK$27,200

Note: The above fees may be adjusted from time to time. For details please refer to the official website of Hong Kong International Arbitration Centre http://www.hkiac.org

Content provided by Picture: HKTDC Research
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