Hong Kong passes new Arbitration Ordinance | Practical Law

Hong Kong passes new Arbitration Ordinance | Practical Law

John Choong (Senior Associate), Freshfields Bruckhaus Deringer LLP

Hong Kong passes new Arbitration Ordinance

Practical Law UK Legal Update 7-504-1006 (Approx. 3 pages)

Hong Kong passes new Arbitration Ordinance

by Practical Law
Published on 01 Dec 2010Hong Kong - PRC
John Choong (Senior Associate), Freshfields Bruckhaus Deringer LLP
Hong Kong's new Arbitration Ordinance (Cap. 341) (Arbitration Ordinance) was passed on 11 November 2010 and is expected to come into force in a few months' time. It represents the culmination of over 10 years of debate and public consultation.
The new Arbitration Ordinance removes the distinction between domestic and international arbitration which existed under the previous legislation and creates a unified system based on the UNCITRAL Model Law (Model Law). These reforms aim to create an arbitration system that continues to accord with widely accepted international practice and maintains Hong Kong's position as a state-of-the-art arbitration venue for international arbitration.
The Arbitration Ordinance creates a single system and applies many articles in the Model Law to both domestic and international arbitrations. Several provisions of the English Arbitration Act 1996 have also been used as a guide in the drafting of the new provisions.
The following are the key issues to be aware of:
  • Reduced judicial intervention: compared with the previous position, the Hong Kong courts' powers to intervene in domestic arbitrations (as defined under the previous system) are now more limited. Instead, several standard provisions that use judicial protections previously given to domestic arbitrations may be 'opted-in' to by parties. However, the immediate effect of this change is likely to be muted because the Arbitration Ordinance automatically applies these 'opt-in' provisions to domestic arbitration agreements entered into before, or within six years after, the commencement of the Arbitration Ordinance.
  • Power of arbitral tribunal to order interim measures: based on Article 17 of the Model Law, as amended in 2006, the new Arbitration Ordinance now adds greater detail in relation to the power of the tribunal to grant interim measures, such as an order for preservation of assets, in domestic arbitrations. The arbitral tribunal will also be empowered to grant a preliminary order, directing a party not to frustrate the purposes of any interim measures.
  • More extensive costs and taxation provisions: in recognition of the increasingly contentious issues over costs in arbitrations, the Arbitration Ordinance now includes more extensive provisions in relation to taxation of costs by a court and in disputes over arbitrators' fees and expenses. These provisions aim to enhance the efficiency of the costs/taxation process and to reduce the costs of arbitration by streamlining and providing more structure to the procedure.
  • Enforcement of arbitral awards: the Arbitration Ordinance does not adopt the enforcement provisions from the Model Law but takes a similar approach to that under the old legislation. As such, an arbitral award is enforceable in the same manner as a judgment of the court, but only with leave of the court. The provisions under the previous regime covering awards that are made in a New York Convention state or in mainland China are retained and also mirrored in a new section covering enforcement in Hong Kong of awards that are not made in a New York Convention state or in mainland China, providing further details on the evidence needed to enforce (and the grounds for refusal to enforce) such awards.
  • Confidentiality: the Arbitration Ordinance codifies the obligation to keep the information disclosed during arbitral proceedings, and the arbitral award itself, confidential. Conversely, each party to the arbitration may now also apply to have any court proceedings related to the arbitration held in open court, and the court will decide whether this is appropriate.
  • Mediator-arbitrators: under the Arbitration Ordinance, an arbitrator is also allowed to act as a mediator after arbitral proceedings have begun, provided the parties consent in writing. Once a mediator-arbitrator is appointed, the arbitration will be stayed and the mediator-arbitrator will act as a mediator, communicating in confidence with both parties to try to settle the matter.
The unification of the domestic and international regimes has raised some concerns with domestic arbitration users, but these have been addressed by including the opt-in provisions and their automatic application to domestic arbitrations for the next six years. On the other hand, the move towards a unified arbitration regime governed by internationally recognised principles will likely serve to streamline the arbitration process in Hong Kong and provide greater efficiency and certainty to domestic and foreign parties that choose Hong Kong as their arbitration seat.