When a dispute arises between parties who have entered into a valid arbitration agreement (see our previous article “Can You Arbitrate? Should You?”), it’s up to the aggrieved party (or parties) to properly initiate the arbitration proceedings. But before doing so, there are important decisions that should be made regarding the appointment of the arbitrator(s) and the rules that will apply to the dispute resolution proceedings.
How is arbitration commenced?
Section 49 of the Hong Kong Arbitration Ordinance (Cap. 609) (“HKAO”) states that, unless otherwise agreed by the parties, arbitral proceedings commence on the date that the respondent receives the request that a dispute be referred to arbitration. While the HKAO doesn’t require that the arbitration notice include the initiating party’s fully detailed statement of its claims, delivering a detailed description of the dispute with the notice will usually help expedite the proceedings. This also allows the responding party to better assess who should be nominated or appointed to act as the arbitrator(s).
How are arbitrators appointed? Can there be more than one?
As arbitration is a form of dispute resolution designed to be free of many of the procedural hurdles of traditional litigation, parties to an arbitration agreement are given wide discretion within the HKAO to decide for themselves how many arbitrators are appointed and the process used for their selection. Ideally, the parties would have already dealt with these issues in their arbitration agreement. In circumstances where there is no prior agreement (or the parties are unable to reach an agreement after arbitration has commenced), the HKAO gives the Hong Kong International Arbitration Centre (the “HKIAC”) statutory authority to make the appointment from its panel of arbitrators. In most instances the HKIAC will appoint either 1 or 3 arbitrators (also referred to as the “arbitral tribunal”) to conduct the proceedings. A party may challenge the appointment of an arbitrator, but only if it can show justifiable doubts as to the person’s impartiality, independence, or qualifications for the role given the nature of the dispute.
What are the duties and powers of the arbitrators?
The HKAO requires that arbitrators be fair and impartial, treat the parties equally, and that they give parties a reasonable opportunity to present their cases and in turn respond to those of their opponents. In addition to these general duties, arbitrators have wide-ranging powers to regulate the arbitration procedures before the full hearing. These include powers to order the claimant to pay security for costs, to order the respondent to provide security for money in dispute, to order discovery of documents, to grant interim injunctions, and to direct the manner in which evidence is to be given.
Are there different types of arbitration?
There are two distinct types of arbitration: institutional and ad hoc. Institutional arbitrations are administered by an arbitration institution, such as the HKIAC. Typically, the proceedings are conducted under the arbitration rules selected by the parties which have been drafted by the selected institution. These rules establish how the proceedings will be conducted, from the submission of the notice of arbitration to the issuance of the award.
Ad hoc arbitrations are arranged solely between the arbitrators and the parties. Since there is no institution administering the proceedings, the parties must advance the arbitration procedure themselves under the supervision of the tribunal. The parties may still choose to adopt a pre-determined set of arbitration rules, or the proceedings may be conducted in accordance with a set of custom rules that the parties draft themselves.
What are the most commonly adopted “ready-made” set of rules?
As there are many potential issues that can arise when the parties to a dispute attempt to draft their own rules, most arbitration agreements contain language specifying that a pre-determined set of rules will apply in the event a dispute is referred to arbitration. While there are many sets of these ready-made rules, those drafted by the HKIAC are the ones most commonly adopted and applied to arbitrations conducted in Hong Kong. Given the significant role the HKIAC has in influencing Hong Kong’s arbitration practices and procedures, its model rules are considered by many to be some of the most modern and comprehensive sets of rules available.
Can “ready-made” rules be modified?
Should the parties (or the tribunal) decide to adopt a pre-determined set of rules, the tribunal usually has wide discretion to modify the rules in order to ensure the proceedings are as efficient as possible given the nature and complexity of the dispute. Given the considerable power that the HKAO and the more commonly adopted ready-made rules give to the tribunal, it is vital that parties carefully consider who they appoint as arbitrators and the rules that will apply to the proceedings.
Our team at Hugill & Ip has extensive experience in dealing with Dispute Resolution issues – so if you need further advice on this subject, get in touch with us.
This article is for information purposes only. Its contents do not constitute legal advice and readers should not regard this article as a substitute for detailed advice in individual instances.