New dispute resolution law provides chance for change (Hong Kong)
By Phil Taylor
Companies should review their arbitration clauses in order to make the most of Hong Kong’s new arbitration ordinance, say leading dispute resolution practitioners.
The new ordinance, which comes into effect on 1 June 2011, has been passed after 12 years of discussions and extensive debate. It seeks to unify domestic and international arbitrations by establishing a unitary regime which is closely based on the UNCITRAL Model Law.
Parties can choose to opt in to a number of clauses of the ordinance when drafting their arbitration agreements. Under the old law, these provisions applied only to domestic arbitrations; if chosen, they will now apply to any arbitration seated in Hong Kong.
'The opt-in provisions provide a timely reminder for people to review some of their standard precedent clauses,' says Frances van Eupen, a consultant in the Hong Kong office of Allen & Overy. 'Parties may want to think about updating their clauses to make most of the provisions.'
Doing this could, for example, make available useful tools such as requests to the court to make a preliminary decision on a point of law, or applications for court consolidation of arbitrations. The latter could be helpful in heading off time-wasting and costly multiple arbitrations commenced by a rogue counterparty.
One element of Hong Kong’s ordinance which will surprise many common-law counsel is section 33, which allows an arbitrator to act as a mediator in the same proceedings.
'In practice, international clients, particularly Western ones, are unlikely to rely on these provisions,' says van Eupen.
A similar clause existed in Hong Kong’s previous law (where the term ‘conciliator’ was used). Chiann Bao, secretary-general of the Hong Kong International Arbitration Centre, admits that it was rarely used and would be regarded as unusual in a common law jurisdiction.
Hong Kong’s position in Asia and proximity to mainland China may help explain why it remains in place. According to research conducted by Hong Kong University assistant professor Shahla Ali, between 1990 and 1997 around 19 per cent of cases handled by mainland China’s leading arbitration body, China International Economic and Trade Arbitration Commission (CIETAC), were settled by the parties through conciliation performed by the arbitrators. Ali also points out in his research that arbitrator-initiated settlement discussions are more culturally acceptable in East Asia than in the Western world.
With the new law, Hong Kong is one of a small number of jurisdictions to incorporate an express duty of confidentiality into its arbitration legislation. This idea was rejected in England and Wales due to perceived difficulties in codifying confidentiality, particularly in relation to carve-outs. As confidentiality is often a deciding factor influencing parties to choose arbitration, Hong Kong’s drafting could help build confidence in the city as a dispute resolution venue.
With the new law, Hong Kong is one of a small number of jurisdictions to incorporate an express duty of confidentiality into its arbitration legislation
'It was good foresight on the government’s part to consider including an express confidentiality provision in the arbitration law,' says Bao. 'It makes arbitration in Hong Kong feel even more like a safe haven for resolving disputes – it’s a confidence booster.'
One of the frustrations for bodies such as the Hong Kong International Arbitration Centre (HKIAC) is that, despite its long service as a leading international arbitration venue and efforts by its community to promote arbitration in the region as a whole, Hong Kong can sometimes be overlooked. Neighbour and long-time rival Singapore has recently made great efforts to promote itself, and now boasts a particularly spectacular international dispute resolution centre known as Maxwell Chambers. Those in Hong Kong hope that the law will go some way in keeping Hong Kong in the headlines.
'While we may not see Hong Kong mentioned more overnight as a result, the ordinance is the product of a collaborative effort on the part of the government and the community to further strengthen Hong Kong as a venue for arbitration,' Bao says.