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New HKIAC Administered Arbitration Rules Take Effect on 1 November 2013一月 1, 0001
The Hong Kong International Arbitration Centre (“HKIAC”) has launched a second edition to its Administered Arbitration Rules (“New Rules”) which take effect on 1 November 2013. The New Rules replace the first edition of the HKIAC Rules which has been in effect since 2008 (“2008 Rules”).
The New Rules introduce changes in a number of key aspects which users should be aware. While the New Rules continue to adopt a “light touch” approach to administered arbitration, they also recognize the need to provide greater institutional support to parties engaged in complex multi-party/multi-contract arbitrations. Equally important, the New Rules introduce provisions for the appointment of emergency arbitrators who may grant interim measures prior to the constitution of the arbitral tribunal. The New Rules also seek to impose a cap on the amount an arbitrator can charge and offer greater scope for parties to invoke expedited procedures than under the 2008 Rules.
These key changes are summarized below.
Joinder and consolidation
Under the 2008 Rules, an additional party may only be joined to an on-going arbitration if such party and the applicant party consent in writing. By contrast, the New Rules provide that such power may be exercised by either the arbitral tribunal or the HKIAC (pending constitution of the arbitral tribunal but without prejudice to the arbitral tribunal subsequently considering whether it has jurisdiction over the additional party) provided that the additional party is prima facie (i.e. provisionally on the face of the document) bound by the arbitration agreement giving rise to the arbitration under the New Rules.
In circumstances where the joinder is made before the arbitral tribunal is constituted, Article 27.11 of the New Rules provides that all parties shall be deemed to have waived their right to designate an arbitrator and the HKIAC may revoke the appointment of any arbitrators already designated or confirmed; under such circumstances, the HKIAC shall appoint the arbitral tribunal.
The 2008 Rules did not allow for separate but related arbitrations to be consolidated and heard together in one arbitration. Such consolidation is often useful in the context of multi-party and/or multi-contract transactions, to enable a dispute which arises out of a single economic transaction (e.g. an infrastructure project involving the owner, contractor, sub-contractor and financier) to be resolved before a single arbitral tribunal instead of two or more arbitrations. By consolidating the disputes, the parties can eliminate potential inefficiency (e.g. arising from having to contest in two separate arbitration proceedings) and the risk of inconsistent decisions. The parties can also obtain one award which is binding on all relevant parties involved.
To this end, Article 28.1 provides the HKIAC with the power to consolidate two or more arbitrations into the arbitration that has commenced first (unless all parties agree or the HKIAC decides otherwise) where (a) all parties agree to consolidate, (b) all claims in the arbitrations are made under the same arbitration agreement, or (c) 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 the HKIAC finds the arbitration agreements to be compatible. Note however that the consolidation provisions under the New Rules only apply to contracts entered into after 1 November 2013 unless the parties agree otherwise.
Upon consolidation of the arbitration proceedings, Article 28.6 provides that the parties to all such arbitrations shall be deemed to have waived their right to designate an arbitrator, and the HKIAC may revoke the appointment of any arbitrators already designated or confirmed; under such circumstances, the HKIAC shall appoint the arbitral tribunal.
In line with developments in other major arbitral institutions such as the International Chamber of Commerce and the Singapore International Arbitration Centre, the New Rules have introduced a new procedure for the appointment of an emergency arbitrator to hear urgent applications pending the constitution of the arbitral tribunal. Note however that the emergency arbitrator provisions under the New Rules only apply to contracts entered into after 1 November 2013 unless the parties agree otherwise.
The advent of the emergency arbitrator regime will address one of the key challenges facing arbitration users. Unlike in litigation where applications for interim relief may be made to the court ex parte even before the commencement of the legal proceedings, users often find the arbitration process to be less effective when urgent and immediate interim relief is required at the outset of a dispute. This is because it will take time to constitute the arbitral tribunal following the filing of the Notice of Arbitration.
Pursuant to Article 23 (read with Schedule 4 of the New Rules), the HKIAC shall appoint an emergency arbitrator within two (2) days after receipt of the application and payment of the appropriate fee. The emergency arbitrator shall also render his/her decision within 15 days of from the date he/she receives the file from the HKIAC. The 15-day period may be extended by agreement of the parties or, in appropriate circumstances, by the HKIAC.
In conjunction with the introduction of the emergency arbitrator regime under the New Rules, the Arbitration Ordinance (Cap. 609) has been amended to clarify that emergency relief ordered by an emergency arbitrator is enforceable in Hong Kong in much the same way as an order or direction of an arbitral tribunal. These legislative amendments not only provide for enforcement of emergency relief made in Hong Kong, they also provide for the enforcement of emergency relief made outside Hong Kong provided that certain conditions are met.
Fees and Expenses of Arbitral Tribunal
While the two existing methods of remuneration – hourly rate or an ad valorem approach using a fee schedule appended to the arbitration rules – for the arbitral tribunal remain the same, the New Rules introduce a new cap to limit the hourly rate that arbitrators can charge at a maximum of HK$6,500 (approximately US$833) per hour.
The New Rules have also addressed a key user dissatisfaction with the expedited procedures under the 2008 Rules, applicability of which was restricted to disputes not exceeding US$250,000 in value (aggregating both the claim and the counterclaim). The threshold was said to be too low and precluded many fairly straightforward disputes from benefiting from the expedited procedures.
The monetary threshold for invoking the expedited procedures under the New Rules has now been revised upwards to HK$25 million (approximately US$3.2 million).
While the New Rules continue to adopt a “light touch” approach to administration, they also introduce changes that are necessary for the HKIAC to provide institutional support for the conduct of increasingly complex disputes in today’s environment, in particular during the initial phases of an arbitration. These changes are in line with “best practices” which should help reinforce Hong Kong’s position as a regional hub for international arbitration.
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