Hong Kong International Arbitration Centre introduces new arbitration rules

The Hong Kong International Arbitration Centre (“HKIAC”) will implement its new arbitration rules (the “2018 HKIAC Rules”) on 1 November 2018. The new edition introduces a number of new provisions and updates some of the existing rules. We examine these below.

What’s new

A significant addition to the 2018 HKIAC Rules is the incorporation of an early determination procedure under article 43.  This is similar to the early dismissal mechanism found in the arbitration rules of the International Centre for Settlement of Investment Disputes (“ICSID”), the Singapore International Arbitration Centre (“SIAC”), the Stockholm Chamber of Commerce (“SCC”) and the clarification note issued by the International Chamber of Commerce (“ICC”)  in 2017.

 Under article 43, parties may make a request for early determination of a point of law or fact under one or more of the following grounds: (i) such points of law or fact are manifestly without merit; (ii) such points of law or fact are manifestly outside the arbitral tribunal’s jurisdiction; or (c) even if such points of law or fact are submitted by another party and are assumed to be correct, no award could be rendered in favour of that party. The third ground is found in the SCC Rules but not the 2016 SIAC Rules nor the ICSID Convention Arbitration Rules.

Another important amendment to the 2018 HKIAC Rules is the addition of a third party funding provision, as well as corresponding amendments to existing provisions to allow for disclosure in relation to third party funding. Pursuant to article 44.1, any funded party must disclose (i) the existence of the funding agreement; and (ii) the identity of the third party funder to all other parties, the arbitral tribunal, any emergency arbitrator and the HKIAC.  Although tribunals have broad powers to make such disclosure orders pursuant to the major institutional rules, the 2018 HKIAC Rules are the first commercial arbitration rules to make such powers explicit under article 44 (the SIAC, for example, having done so only in relation to its 2017 Investment Arbitration Rules). Amendments have also been made to other provisions for coherence with article 44 (e.g., disclosure of third party funding in accordance with article 44.1 in the notice of arbitration pursuant to article 4.3(i)).

This new addition brings the 2018 HKIAC Rules in line with the legislative position in Hong Kong, since as of 14 June 2017 pursuant to the Arbitration and Mediation Legislation (Third Party Funding) (Amendment) Ordinance Order No. 6 of 2017, third party funding is expressly permissible in relation to arbitrations and mediations seated in Hong Kong.

Under the 2018 HKIAC Rules, there is also express permission for concurrent proceedings to take place pursuant to article 30.

What’s changed

 A number of key amendments have been made to existing provisions, generally aimed at improving the efficiency of the arbitral process under the 2018 HKIAC Rules.

For example, under article 27 in relation to the joinder of additional parties, a new ground has been added pursuant to article 27.1(b) whereby joinder is now also permitted if all parties, including the additional party, expressly agree. The amendment broadens the scope of joinders permitted to cases where the proposed additional party may not prima facie be bound by the arbitration agreement (which was the only possible ground for joinder pursuant to the previous edition of the HKIAC Rules). However, whether a tribunal will be inclined to rule in favour of joinder in such instances will be something to look out for as the rules come into force.

In relation to the consolidation of arbitrations under article 28, while substantive requirements to the form of the Request for Consolidation were previously expressed in the Practice Note on Consolidation of Arbitrations issued on 1 January 2016, these requirements, with minor amendments, are now part of the rules pursuant to article 28.3.

Perennial concerns for arbitration users are the length of time and costs of proceedings. The 2018 HKIAC Rules have been amended to address such concerns by setting time limits where there previously were no express provisions, and to shorten some of the existing time limits.  For instance, there is now a time limit for parties to agree on the number of arbitrators under article 6.1 (before commencement or within 30 days from the date of receipt of the Notice of Arbitration by the Respondent).

Under articles 7.1(b) and 8.1(b), where parties agree on the number of arbitrators after the arbitration commences, the time limit for designating the arbitrator is now 15 days. In the previous edition of the rules, the time limit with respect to a sole arbitrator was 30 days, whereas there was no time limit for three-member tribunals.

Another example of the new rules’ focus on efficiency is the amended joinder provision under article 27.3, where there is now a time limit for submitting a Request for Joinder (to be raised before the Statement of Defence, except in exceptional circumstances). According to the latest report by the institution on average costs and duration, the average duration of an HKIAC arbitration is 16.2 months, and cost an average of US$117,045. It is hoped that these amendments will contribute to further cost and time efficiencies when parties arbitrate at the HKIAC.

The 2018 HKIAC Rules reflect the HKIAC’s responsiveness to the needs of arbitration users by implementing procedures to improve the arbitral process. They reflect a wider trend of revisions being made by arbitral institutions around the world to offer more efficient and cost-effective arbitration proceedings.