LGS 1： Introduction to Arbitration and the Arbitration Agreement

What is Arbitration?
 a method of dispute resolution. Others include:
 Adjudication / Early Neutral Evaluation/ Expert Determination/ Mediation & Conciliation/ Negotiation
 At a very basic level, arbitration is the non-Court adjudication of disputes :
• By agreement(consensual) between parties – submission (cannot join non-party);
• To a party appointed arbitrator/tribunal;
• To decide a dispute – binding and Final – no appeal.
• Award enforceable locally and internationally through court order.
Most countries are a party of the NY Convention of arbitration
Re Carus-Wilson and Greene (1886) QBD 18).
 Early definition of arbitration:
 “[if] it appears from the terms of the agreement by which a matter is submitted to a person’s decision, that
the intention of the parties was that he should hold an inquiry in the nature of a judicial inquiry, and hear
the respective cases of the parties and decide upon evidence laid before him,
then the case is one of arbitration.
The intention of party “ a judicial inquiry worked out in a judicial manner.
 Intention: to ascertain matter for the purpose of preventing differences from arising, not of settling them when
they have arisen,
mere evaluation not arbitration
 There may be cases of an intermediate kind, where, though a person is appointed to settle disputes that have
arisen, still it is not intended that he shall be bound to hear evidence or arguments. In such cases it may be often
difficult to say whether he is intended to be an arbitrator or to exercise some function other than that of any
arbitrator. Such cases must be determined each according to its particular circumstances.”
The Arbitration Ordinance of Hong Kong: A Commentary; 1 (1997).
 Arbitration is:
 private judicial resolution
 by an arbitrator of a civil dispute or difference (which may be legal, technical or commercial, or a
combination of these)(arbitrable(family, wills, one’s status no arbitration),
 by agreement of the parties.
 The arbitrator : neutral and independent person, other than a judge in a court of competent jurisdiction, who is
selected by or on behalf of the parties on the basis of his expertise, reputation and experience in the legal,
professional or economic specialty from which the dispute stems.
 The normal outcome of the process :
 is an award which is final, binding and ultimately enforceable in court
 in the same manner as a judgement.
Redfern and Hunter on International Arbitration; (6th edition)UK, at 1.04:
 a very simple method of resolving disputes.
 Disputants agree to submit their disputes to an individual whose judgement they are prepared to trust.
 Each puts its case to this decision maker, this private individual – in a word, this ‘arbitrator’. He or she listens to
the parties, considers the facts and arguments, and makes a decision.
 That decision is final and binding on the parties – and is because the parties have agreed that it should be,
rather than because of the coercive power of any state.
 Arbitration, in short, is an effective way of obtaining a final and binding decision on a dispute, or series of
disputes, without reference to a court of law (although because of national laws and international treaties
such as the New York Convention, that decision will generally be enforceable by a court of law if the losing party
fails to implement voluntarily).

Essential Attributes of Arbitration

 The parties should have a proper opportunity of presenting their case(due process rights)
 Arbitrators should act impartially and transparently.
 Fundamental: arbitrators should not receive unilateral communications from parties.
 not disclose all communications with one party to the other party
 Hallmarks of an arbitral process : proper and proportionate due process procedures for the receipt of evidence
 Finality(must have): The agreement pursuant to which the process is, or is to be, carried on (“the procedural
agreement”) must contemplate that the tribunal which carries on the process will make a decision which is
binding on the parties to the procedural agreement.
 The procedural agreement must contemplate that:
o the process will be carried on between those persons whose substantive rights are determined by the
tribunal. The arbitration agreement binds parties only.
The jurisdiction of the tribunal: to carry on the process and to decide the rights of the parties must derive:
 either from the consent of the parties,
 or from an order of the court
 or from a statute the terms of which make it clear that the process is to be an arbitration.
 Ways to choose Tribunal: either by the parties, or by a method to which they have consented.
o HKIAC: default position is 3 arbitrators, usually let 3rd party to choose if cant agree who to choose
 The procedural agreement must contemplate that the tribunal will determine the rights of the parties in an
impartial manner, with the tribunal owing an equal obligation of fairness towards both sides.
 The agreement of referring dispute to arbitration tribunal must be intended to be enforceable in law.
 The procedural agreement must contemplate a process whereby the tribunal will make a decision upon a
dispute which is already formulated at the time when the tribunal is appointed.(actual dispute)???
 Arbitration proceedings are private and confidential.
Other factors?
 Whether the agreement contemplates that the tribunal will receive evidence and contentions, or at least give
the parties the opportunity to put them forward.
 Whether the wording of the agreement is consistent or inconsistent with the view that the process was
intended to be an arbitration.
 Whether the identity of the chosen tribunal, or the method prescribed for choosing the tribunal, shows that
the process was intended to be an arbitration.
 Whether the procedural agreement requires the tribunal to decide the dispute according to law.
law and rules applicable to arbitrations?
 The starting point is the national law.
 In Hong Kong, the primary law dealing with arbitration is the Arbitration Ordinance:
 Cap 341 (older version) dealt with separate schemes for domestic and international arbitration;
Arbitration Ordinance Cap 609(1 June 2011).
 unified the pre-existing domestic and international arbitration regimes under the single framework of the
UNCITRAL Model Law.
5 different systems of law which may have a bearing on an (international commercial) arbitration:
1. The law governing the arbitration agreement
• (this is not necessarily the same as the law governing the contract between the parties);
2. The ‘curial’ or ‘procedural’ law –Law Of The ‘Seat’ Of The Arbitration(Venue);
3. The ‘substantive’ or ‘applicable law’ – the substantive law applicable to the dispute between the parties;
4. ‘Soft-law’ eg, IBA Rules on the Taking of Evidence in International Commercial Arbitration;
5. Law governing recognition and enforcement of an award. Applicable national law + New York Convention).
The legal context of an arbitration
1. New York Convention(NYC)(UN)
 Make award recognized internationally
2. UNCITRIAL
 (procedural rules governing arbitration) 1976
 Model law for member states 2011
 Most country basically followed this(optional clause)
3. Hong Kong Arbitration Ordinance
(domestic + international)
4. Institutional Rules(subject to party’s decision)

.
NY Convention(1958)on Recognition
and Enforcement of Foreign Arbitral Awards
 Hong Kong is a member of the NYC via the membership of China.
 More than 157 member states.
The First Pillar: The Start Of The Process(The Agreement);
 Recognition/Enforcement of Arbitration Agreements - Article II (3)
 To enforce the arbitration agreement in foreign member states
 “The Court of a Contracting State, when seized with an action in a matter in respect of which the parties have
made agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to
arbitration, unless ….”
 Exceptions: null and void, inoperative or incapable of being performed
The Second Pillar: The Result Of The Process;
 Recognition/Enforcement of Arbitration Awards (foreign, non-domestic, awards): Article III
 Exceptions: Article V.1 (a) to (e), and Article V.2 (a) and (b).
 Lack of capacity of a party to enter into the arbitration agreement;
 invalidity of the arbitration agreement;
 party unable to present its case due to lack of notice of proceedings or appointment of tribunal;
 the award exceeds arbitrator’s jurisdiction by determining matters outside the scope of the agreement to
arbitrate, improper constitution of arbitration tribunal.
 award not yet binding on parties;
 subject matter of dispute not arbitrable in enforcing state;
 award contravenes public policy of state where enforcement sought.(most commonly used)
UNCITRAL – the United Nations Commission on International Trade Law
 Secretariat is based in Vienna UNCITRAL’s task is to harmonize and modernize trade law. The basic idea is that
an Increase in trade leads to an increase in prosperity. Disparities in national laws impede the flow of trade.
Risks arise where there are difficulties in resolving disputes and difficulties in enforcing the outcome. If there is a
risk, that becomes an added cost to meet that risk, increases cost
 UNCITRAL first passed a set of arbitration rules in 1976. The rules were designed to provide an internationally
recognized process for parties to adopt which fall between the two pillars set out in the NYC. The 1976 rules (as
revised in 2010) are divided into 4 parts: Introductory Rules; Composition of the Arbitration Tribunal; Arbitral
Proceedings; and the Award.
 But the Arbitration Rules of UNCITRAL are merely contractual and up to parties to use, so in 1985 the UN
General Assembly passed a resolution encouraging member states to adopt the Model Law on international
commercial arbitration formulated by UNCITRAL. The Model Law sets out internationally agreed principles of
best practice in international arbitration. It covers all stages of the arbitral process: from arbitration agreement,
jurisdiction of arbitral tribunal, conduct of arbitral proceedings – fundamental rights of parties and determination
of rules and procedures, making of the award, recourse against an award to recognition and enforcement.
The Hong Kong Arbitration Ordinance (Cap. 609) 1 June 2011
 4 key features of Hong Kong’s Arbitration Regime (S.3 of AO)
1. Autonomy of parties(Party autonomy)
2. Minimum court intervention (s. 3(2)(b))
3. Speed
4. Reasonable cost
 Other key features:
 Cap. 609 is to apply if the place of arbitration is in H. K. (s. 5)
 Competence & severability principles:A n arbitrator may rule on his own jurisdiction (s. 34) -
 HKIAC (default appointment) and the CFI: assistance and supervision of arbitration conducted in HK(s. 13)
 Special regime for enforcement of arbitral awards
 (with leave of court; convention awards; PRC awards (Part 9 of the Ordinance).
 Part 10 AO s92: A Mainland award is, enforceable in Hong Kong either—
(a) by action in the Court; or
(b) in the same manner as an arbitral award,
 section 84 applies accordingly as if a reference in that section to an award were a Mainland award.
 AO incorporates provisions of the UNCITRAL Model Law(4 schedules)
 The incorporation technique is novel – the AO inserts entire articles of the Model Law into the body of the
Ordinance. The entire Model Law is also attached as a schedule to the AO. The AO, as amended in 2013,
is divided into 15 Parts that basically mirror the sequence of phases and issues in a typical
arbitration.
 The 2011 AO has 4 schedules to the AO.
 Schedule 2 contains 7 sections that may be expressly opted for by parties to an arbitration (mostly those
relating to previous ‘domestic arbitrations’) or which automatically apply by operation of Part 11 (sec 99-103).
 These ‘opt-in’ provisions include:
 a sole arbitrator (absent of parties agreement);
  court authority to order consolidation of arbitration proceedings;
 court jurisdiction to determine preliminary questions of law;
 party’s right tom challenge arbitral award on grounds of serious irregularity;
 right of appeal to court from decision of arbitrator on question of law;
 applications for leave to appeal award;
 and supplementary provisions to challenge or appeal award.
 The Model Law, as incorporated by the AO, therefore applies to all domestic arbitrations as well as all
international commercial arbitrations due to the unitary regime created by the AO.
AO also deals with Interim Measures in arbitrations.
 parties may need orders to preserve evidence, to protect assets, or to maintain the status quo.
 An arbitrator only has the power to grant interim measures against another party to the arbitration only –
so court assistance is required in regard to non-parties.
The AO sets out a detailed process, including preliminary orders made on an ex parte basis (s.37(1)).
Greater efficiency:
 Current AO(s.46(3)): parties are given a reasonable opportunity to deal with the case of their opponent, rather
than a full opportunity as contained in the previous AO
 Parties scope to approach court (unless opted-in under schedule 2) has also been limited.
 Courts cannot interfere in arbitrations except expressly allowed by the AO, which include:
 Challenging an arbitrator appointment (s.25)
 Ending the authority or mandate of an arbitrator (s.26(4)).
 Setting aside an arbitral award (s.81)
 Assisting in taking evidence (s.55(2)).
(Court can order attendance of person, produce evidence at arbitration proceedings).
Confidentiality requirements enhanced:
 Previously, confidentiality was governed by court decisions,
 but now strict confidentiality is dealt with by s.18 of the AO.
AO, like the Model Law, contains the following types of provisions:
 Mandatory provisions(parties cannot opt-out):
o S.46(3) mandates that arbitrators:
(a) be independent,
(b) act fairly and impartially and allow parties to put their case,
(c) use an appropriate process.
o S.46(2) establishes due process rights of parties and provides that parties must be treated with
equality.
o S19 Also, thee arbitration agreement must be in writing
 Opt-in provisions: as in schedule 2
o Party autonomy: a wide range of provisions enabling parties to decide their own [Link] s.47, s.50
o Default rules S.18: which apply where parties are not in agreement as to the procedure. Example:
Confidentiality – applies unless parties agree otherwise.
o Wide discretion of arbitrators: to decide matters not agreed between the parties. S.47, s.50 as examples.

Arbitral Institutions
 HKAO and arbitration agreement does not provide a comprehensive procedural process in terms of which
arbitration proceedings are held.
 one looks to the rules of arbitral institutions, and the provisions of guidance documents known as ‘soft law’.
2 main forms of arbitration:
 Institutional Arbitrations:
o arbitration conducted under the rules of a particular arbitration institution.
o Provides procedural rules that will govern the arbitration, it will administer often host) the arbitration, and
o it sometimes will have the power to appoint arbitrators where parties cannot agree to such.
This is all done in return for a fee charged to the parties.
 Ad Hoc Arbitrations:
o where parties do choose an institution to administer their arbitration – the parties formulate and choose their
own procedural rules to apply (they must comply with the AO mandatory requirements for arbitrations) or allow
the arbitral tribunal to do this.
o In practice, most parties simply choose the UNCITRAL Arbitration Rules or variations of these.
o The parties are also responsible for all administrative and practical arrangements of the arbitration: case
management, administrative support, negotiating and paying fees of the arbitrator, venue, etc.
Worldwide Arbitral Institutions
 Most countries are signatories of the NYC and adopt the UNCITRAL model law,
the rules of arbitral institutions tend to be similar.
 Most advanced economies have one or more arbitral institutions.
 Some examples are:
o The Hong Kong International Arbitration Centre (HKIAC)
o China International Economic and Trade Arbitration Commission (CIETAC)
o International Chamber of Commerce (ICC)
o London Court of International Arbitration (LCIA)
o Singapore International Arbitration Centre (SIAC)
o Australian Centre for International Commercial Arbitration (ACICA)
o Kuala Lumpur Regional Centre for Arbitraton (KLRCA)
o Korean Commercial Arbitration Board (KCAB)
o Japan Commercial Arbitration Association (JCAA).
 The procedural rules and details of facilities of each institution can be found on the internet.
Arbitral Institutions: HKIAC
 Advantages to institutional arbitration include:
• Well known and tested rules to regulate the arbitration procedure;
• The availability of institutional staff to assist with the management and conduct of a case;
• Availability of staff to assist with administrative matters.
• Tribunal Secretaries to project-manage the arbitration (organizational, financial and administrative
leadership), including legal research.
• Venue, facilities, library, convenient location, etc.
• Holding of funds for arbitration cases; and
• Act as appointing authority under arbitration agreements.
 The HKIAC was founded in 1985 to cater for the growing need for dispute resolution services in Hong Kong. In
 2008 the HKIAC’s rules for administered arbitrations came into effect.
 HKIAC’s Administered Arbitration Rules (2013), f important functions, including ☹not important)
o Interpreting the HKIAC Rules;
o Amending time limits prescribed in the Rules and any time limits set by the HKIAC;
o Fixing arbitrators fees, determining arbitrators hourly rates;
o Determining the number of arbitrators in the absence of parties’ agreement on this, and appointing substitute
arbitrators and emergency arbitrators;
o Deciding challenges to arbitrators;
o Deciding whether another party should be joined before the arbitratiral tribunal is constituted.
o Deciding whether to consolidate two or more HKIAC arbitrations;
o Collecting and managing deposits for the costs of an arbitration;
o Deciding whether to apply the expedited arbitration procedure.
A hybrid clause: one institution’s rules used to administer a dispute in another institution?
Insigma Technology Co Ltd v Alstom Technology Ltd [2008] SGHC 134 (“ the Insigma Case”).
 Clause: “Any and all such disputes shall be finally resolved by arbitration before the Singapore International
Arbitration Centre in accordance with the Rules of Arbitration of the International Chamber of Commerce”.
 Alstom initiated an ICC arbitration, which Insigma objected to saying that it should be a SIAC arbitration. Alstom
then initiated a SIAC arbitration in Singapore – and Insigma again objected, saying that the arbitration
agreement was invalid, and that the SIAC tribunal was not validly constituted under ICC rules. The SIAC
arbitral tribunal held that it did have jurisdiction to hear the arbitration. Insigma applied to court to have the
arbitration proceedings set aside.
 The Singapore High Court held:
o The administering authority (SIAC) and the procedural rules adopted by the parties do not have to be the
same – in the case at hand, SIAC agreed to use ICC rules, and such rules were so similar that it would in any
event not have made a difference in this arbitration under which rules the arbitrator was appointed or the
arbitration was conducted.
o It is possible for the appointment of an arbitrator to be simultaneously made in accordance with two sets of
rules.

The law governing the Arbitration Agreement

Interpretation or validity of the arbitration agreement(Important!!!)
 Doctrine of “Separability” of the arbitration clause:
 Arbitration clause is a separate agreement, distinct from the underlying contract, so parties are free to
choose a separate law to govern the arbitration agreement.
 Arbitration clause will survive the termination of the contract
 Simply because the underlying contract may be unenforceable, does not mean that the arbitration agreement
is also unenforceable
 In order for the arbitration clause to fail must be some additional factor going directly to the arbitration clause –
so the arbitration tribunal retains jurisdiction.

 Generally two choices for law governing the arbitration agreement:

 1. The law which governs the contract as a whole (the ‘substantive’ or ‘applicable’ law); or
2. The law of the seat
 Eg: a contract is governed by the law of Hong Kong, with disputes to be resolved by way of international
arbitration with the seat in Singapore.
 A dispute arises as to the interpretation to be given to the arbitration agreement.
Should the Substantive Law of the Contract apply?
 Argument in favour: The arbitration agreement appears in the underlying contract and it makes logical sense
that the substantive law of the contract was also intended to govern the arbitration agreement. Sonatrach
Petroleum Corp v Ferrell International [2002] 1 All ER 627; Sumitomo Heavy Industries Ltd v Oil & Natural
Gas Commission [1994] 1 Lloyd’s Rep 45;
 Leibinger v Stryker Trauma GmbH [2005] EWHC 690:
 Presumption that the parties intended the law of the arbitration agreement to be the same as the governing
law of the contract.
 Although the arbitration agreement is separable, it should have the same law as the underlying contract.
Should the Law of the Seat apply?
 No reason why the substantive law of the contract should also apply to the arbitration agreementseparability.
 The arbitration agreement has its “closest connection” to the law of the seat.
 XL Insurance Ltd v Owens Corning [2001] 1 All ER 530:
 Arbitration agreement provided that all disputes to be finally resolved in London under the Arbitration Act 1996
(UK). Governing law was New York law.
 Court held that parties had chosen London as the seat, which indicated that the parties had intended
English law to govern matters such as the validity of the arbitration agreement. I
 C v D [2007] EWCA Civ 1282:
 Arbitration agreement provided that all disputes to be finally resolved in London under the Arbitration Act 1996
(UK). Governing law was New York law.
 English Court of Appeal noted that the arbitration agreement should be presumed to be governed by the law of
the seat as the agreement to arbitrate has its closest and most real connection with the place the parties have
agreed to arbitrate
Sulamerica Cia Nacional De Seguros v Enesa Engenharia [2012] (English Court of Appeal)
 An appeal against an anti-suit injunction preventing Enesa from proceeding in the Brazilian courts:
 The overall contract provided “this Policy will be governed exclusively by the laws of Brazil”
 The arbitration agreement provided:
• Disputes to be “referred to arbitration under ARIAS Arbitration Rules. The Arbitration Tribunal shall
consist of three arbitrators, one to be appointed by the Insured, one to be appointed by the Insurer(s)
and the third to be appointed by the two appointed arbitrators. The Tribunal shall be constituted upon
the appointment of the third arbitrator…The seat of the arbitration shall be London, England.”
Issue before Court: What is the law of the arbitration agreement?
 Under Brazilian law, the arbitration agreement would not be enforceable against Enesa, without Enesa’s
consent. The Court identified two different approaches in English law:
 Law of the Seat
 Substantive Law
The Court Held:
 Absent an express choice of the law to govern the arbitration agreement, parties will generally have intended the
substantive law of the contract to govern the arbitration agreement, unless there are “factors which point to a
different conclusion.”
 In this case:
 Choice of Brazilian law as the law governing the contract a “strong pointer” towards an implied choice of
Brazilian law as the law governing the arbitration agreement
 The fact that if Brazilian law is applied the arbitration agreement may be ineffective pointed against the parties
intending Brazilian law to apply to the arbitration agreement
 English law applied to the arbitration agreement – the law of the seat.
The Hong Kong Court different approach
 which testifies to the old adage that every case should be decided on its own unique facts.
Klockner Pentaplast Gmbh & Co Kg v Advance Technology (HK) Company Ltd [2011]
 the CFI dealt with deciding which law was to govern the arbitration agreement in the absence of the parties’
agreement on this issue, where the law governing the underlying contract and the law governing the arbitration
(lex arbitri – the law of the seat) were different.
 If the law governing the arbitration (seat) was applied, then the arbitration clause was invalid. If the law governing
the substantive agreement was applied, then the arbitration clause could be invoked to stay court proceedings.
 The court agreed that usually the law of the seat would apply, but regard must also be had to the express
terms of the arbitration clause and the substantive agreement between the parties and the intention of the
parties.
Court: 3 main grounds for finding that the law of the substantive agreement applied:
1. The underlying contract included expressions such as “all of the obligations” and “in its entirety” plainly
referred to the whole contract including the arbitration clause.
2. According to the arbitration clause, the Chairman of the arbitral tribunal was to be admitted to practice the
same law as the law governing the dispute (the law of the substantive agreement), a condition that would
have been illogical if the substantive law of the dispute were not intended to govern the arbitration agreement.
3. The governing law of the underlying contract and the arbitration clause were contained under the same
heading – “Governing Law and Jurisdiction” – which again was a strong indication that the governing law of the
dispute was to be applied.
 Our take away message:
 It should not be assumed that the law of the seat (lex arbitri) will apply in the absence of express agreement as
to the law governing the arbitration agreement.
Where the law of the seat and the law of the governing contract are different, parties should insert a simple
clause as follows:
 ‘The law of the arbitration clause shall be [Hong Kong] law.’ (See standard HKIAC sample clause); or
 ‘This agreement to arbitrate shall be governed by and construed in accordance with [Hong Kong
Law].”

Law governing the Arbitration – Law of sears the lex arbitri or “curial law”
 Curial law follows from the selection of the ‘seat’ of the arbitration.
 The law of the seat provides the legal framework within which the arbitration takes place.
 The term ‘seat’ refers to the forum or venue where the arbitration is agreed to be held
determines the procedural law of the arbitration, the Arbitration statute applicable, and more importantly.
 the identity, jurisdiction and powers of a court which may be called upon to assist the parties to the arbitration.
 The applicable procedural law may contain any of the following provisions to assist the parties:
o The appointment of the arbitrator - how and by whom made. (s.24 AO)
o A party’s right to challenge appointments of arbitrator; (s.25 AO);
o Court order to terminate an arbitrator’s mandate; (s.27 AO)
o A court order to prevent assets being disposed of or relocated out of jurisdiction; (s.21 AO)
o A court order for securing attendance of a witness or the production of evidence (s.24 AO)
o Court order to stay legal proceedings in favour of arbitration (s.20 AO)
o Deciding any challenge to an arbitral award (s.81 AO)
In Shagang South-Asia (Hong Kong) Trading Co v Daewoo Logistics [2015] (Comm)
 The contract provided: “Arbitration: Arbitration to be held in Hong Kong. English law to be applied.”
 The arbitrator held that: (i) the seat was England; and (ii) he had been properly appointed under the English
Arbitration Act
 The Court held that the seat was Hong Kong and English law applied to the parties dispute.
 Next question: what was the law governing the arbitration? The English Arbitration Act or the Hong Kong
Arbitration Ordinance? The Court held that Hong Kong law was the law governing the arbitration procedure.
The Court noted that it is not uncommon to have different sets of laws applying to the arbitration procedure
and the substance of the dispute.
It is “uncommon” to have a difference between the laws of the place of arbitration and the procedure of the
arbitration. “..the choice of place generally carried with it an implied choice of [the law] governing procedure [of the
arbitration]”.
 Out take away:
• The Latin maxim qui indicem forum elegit jus applies – “a choice of seat/venue is a choice of law”.
 Suggested clause: “The seat of the arbitration agreement shall be [Hong Kong}’
The law applicable to the substance of the dispute
 ‘substantive law’; ‘applicable law’ or the ‘governing law’. This is the system of law which governs the:
 Interpretation and validity of the contract
 Rights and obligations of the parties
 Mode of performance
 Consequences of any breach of contract
 Choice of National Law: In accordance with the principle of party autonomy, the parties are left to decide the
substantive law governing their dispute within the main substantive agreement between them.
Suggested clause: “The governing law of the contract shall be the substantive law of [ Hong Kong].“
 Choice of trans-National Law: Transnational law: Set of rules which sit outside of national laws and define the
parties’ relationship
• UNIDROIT Principles: Principles of International Commercial Contracts drawn up by UNIDROIT.
• Lex mercatoria: body of customary mercantile law which developed in medieval Europe applied in disputes
between merchants.
Scope of Arbitration Clause
 NYC (Art.2), the AO (s.19), the Model Law (Art.7: arbitration agreement must be in writing.
 If not void + not enforced nationally (in NYC countries) and will not be recognized of enforces internationally.
 3 important issues arise at the outset:
1. Is the arbitration agreement in writing?
2. Is the arbitration agreement made between the parties to a dispute and binding on them?
3. Is the arbitration agreement severable from the main substantive agreement?
 It is important to define the scope of the arbitration clause when drafting an agreement to arbitrate.
Example: [HKIAC Arbitration Clause}
 “Any dispute, controversy, difference or claim arising out of or relating to this contract, including the existence,
validity, interpretation, performance, breach or termination thereof or any dispute regarding non-contractual
obligations arising out of or relating to it shall be referred to and finally resolved by arbitration administered by
the Hong Kong International Arbitration Centre under the Hong Kong International Arbitration Centre
Administered Arbitration Rules in force when the Notice of Arbitration is submitted.”
Some other standard clauses
Language:
 “The language of the arbitration shall be English” Or:
 “The language of the arbitration shall be English, provided that either party may submit witness or documentary
evidence in any other language and shall, on the request of the other party, furnish a translation or interpretation
into English of any such witness or documentary evidence”.
Arbitrators:
 (Check institutional rules regarding arbitrators appointment first: default number, appointing authority, etc)
 “The number of arbitrators shall be [one or three?]
 And insert any other qualities of the arbitrator/tribunal as are agreed:
 “ The Arbitrator shall be a qualified [legal practitioner/accountant/engineer] in [country]
 “The arbitrator/chairman shall not be a citizen or resident of either {country] or [country]”
Tiered or escalating dispute resolution clauses:
 first requires disputes to be negotiated, then mediated and only then arbitrated.
 Clauses of this nature should be very carefully worded to ensure:
 The clause should avoid the trap of rendering arbitration permissive, not mandatory.
 Clear method for identifying and appointing a mediator, and who is entitled to negotiate on behalf of
parties.
 The clause should specify a period of time for negotiation or mediation, triggered by a defined and
undisputable event (ie, a written request), after which either party can resort to arbitration.
 Regardless of the overall ADR clause, provision may need to be made for emergency arbitration or interim
measures pending the outcome of other ADR procedures.
 Care should be taken that other ADR processes do not allow room for opportunism and delay of one party
at the expense of prejudice to the other party.
 The clause should define the disputes to be submitted to negotiation or mediation and to arbitration in
identical terms.
Some drafting guidelines
IBA Guidelines
 Guideline 1: The parties should decide between institutional and ad hoc arbitration.
 Guideline 2: The parties should select a set of arbitration rules and use the model clause recommended for
these arbitration rules as a starting point.
 Guideline 3: Absent special circumstances, the parties should not attempt to limit the scope of disputes subject to
arbitration and should define this scope broadly.
 Guideline 4: The parties should select the place of arbitration. This selection should be based on both practical
and juridical considerations.
 Guideline 5: The parties should specify the number of arbitrators.
 Guideline 6: The parties should specify the method of selection and replacement of arbitrators and, when ad hoc
arbitration is chosen, should select an appointing authority.
 Guideline 7: The parties should specify the language of arbitration.
 Guideline 8: The parties should ordinarily specify the rules of law governing the contract and any subsequent
disputes.
IBA Guidelines (optional elements)
 Option 1: The authority of the arbitral tribunal and of the courts with respect to provisional and conservatory
measures.
 Option 2: Document production.
 Option 3: Confidentiality issues.
 Option 4: Allocation of costs and fees.
 Option 5: Qualifications required of arbitrators.
 Option 6: Time limits.
 Option 7: Finality of arbitration.
Drafting Basic Arbitration Agreements: Considerations
 Seat
 Law of Arbitration Agreement
 Law Governing Contract
 Arbitration & Scope of Dispute
 Institution & Procedural Issues
 Arbitrator: Number & Qualification
 Practical Issues: Language, Venue, etc
 LGS 2: Arbitration Procedure
Commencement of the process
Jurisdictional requirements:
1. Is it an Agreement to ‘arbitrate’
2. Is the agreement in writing
3. A ‘dispute’ arising out of a commercial relationship
4. An agreement to arbitrate disputes which ‘have arisen or which may arise’
5. Parties to the dispute are parties to the agreement to arbitrate.
6. The dispute falls within the agreement to arbitrate (subjective arbitrability);
 and it is a dispute capable of being subject to arbitration in terms of the governing law of the agreement
and the law of the seat. (Disputes with a public interest element may not be arbitrable, such as citizenship;
validity of a marriage; grants of statutory licences; validity of registration of trademarks, patents or copyrights;
winding up of companies; and criminal offences).
Claimant’s Notice of Arbitration
 Arbitrations (as with civil litigation disputes) are usually initiated by a notice of arbitration (in the form of a
letter) being sent by one party to another(also copy one to HKIAC).
 If it is an institutional arbitration by HKIAC (or if not, this is good practice anyway), the notice should contain
the following information (Art.4 of HKIAC Administered Arbitration Rules):
 a request that the dispute be referred to arbitration;
 the names and (in so far as known) the addresses, facsimile numbers and/or email addresses of the parties
and of their representatives;
 a copy of the arbitration agreement invoked;
 a copy of the contract(s) or other legal instrument(s) out of or in relation to which the dispute arises, or
reference thereto;
 a description of the general nature of the claim and an indication of the amount involved, if any;
 the relief or remedy sought;
 a proposal as to the number of arbitrators (i.e. 1 or 3), if the parties have not previously agreed thereon;
 the Claimant's proposal and any comments regarding the designation of a sole arbitrator under Article 7, or
the Claimant's designation of an arbitrator under Article 8;
 the existence of any funding agreement and the identity of any third-party funder pursuant to Article 44;
 confirmation that copies of the Notice of Arbitration and any supporting materials included with it have been or
are being communicated simultaneously to the Respondent by one or more means of service to be identified
in such confirmation.
Respondent’s Answer to Notice of Arbitration
 Within 30 days from receipt of notice, the Respondent must provide an answer to the Claimant and the
HKIAC, which answer must include:
 Respondent’s name and details (if different from those in the Notice of Arbitration);
 any plea that an arbitral tribunal constituted under these Rules lacks jurisdiction;
 the Respondent's comments on the particulars set forth in the Notice of Arbitration
 the Respondent's answer to the relief or remedy sought in the Notice of Arbitration;
 the Respondent's proposal as to the number of arbitrators (i.e. one or three), if the parties have not previously
agreed thereon;
 the Respondent’s proposal and any comments regarding the designation of a sole arbitrator or the Respondent's
designation of an arbitrator;
 the existence of any funding agreement and the identity of any third party funder pursuant to Article 44; and
 confirmation that copies of the Answer to the Notice of Arbitration and any supporting materials included with it
have been or are being communicated simultaneously to all other parties to the arbitration by one or more
means of service to be identified in such confirmation.
Appointment of Arbitrator(1 or 3)(no arbitrator, ADR cannot begin)
 In terms of the principle of party autonomy, the parties are to agree/decide the number of arbitrators and any other
criteria relating to the arbitrator(s).
 If parties cannot agree on the appointment of an arbitrator, the arbitrator may be appointed by the
designated institution or by an appropriate court order under the law of the seat.
 If a dispute arises in Hong Kong and the parties cannot agree (regardless of whether an institutional arbitration or
not), the default provisions in the AO apply.
 AO S.23 incorporates ML art.10HKIAC will serve as the appointing authority.
 Although it is left to the parties to agree on the criteria for arbitrators to be appointed to the dispute, AO s25 of the
AO does provide two mandatory qualifications: Impartiality and Independence.
 Common grounds to challenge the appointment of an arbitrator include conflict of interest resulting in bias, a
lack of independence, and that the arbitrator does not meet the parties’ contractually agreed criteria (qualifications,
experience, nationality, etc).
Jurisdictional Challenges(Obstruction at the door)
 A threshold issue before the arbitration on the merits can commence.
 An arbitration tribunal’s authority to resolve disputes comes from principally:
 The arbitration agreement – defines the nature/type of dispute to be arbitrated.
 The Notice of Arbitration, which specifies particulars of the specific dispute;
 The document appointing the tribunal;
 The relevant arbitration law applicable to the seat – in Hong Kong, the AO – for example authorises the arbitrator
to award costs; and
 AOs34(1) + ML:Art.16(1) authorises the arbitration tribunal to rule on its own jurisdiction.
o The principle of competence/competence allows a tribunal to determine its own competence to settle a
dispute.(having the competence to rule on their own competence)
 AOS.34(1)(2) objection to the tribunal’s jurisdiction should be raised not later than the submission of the
statement of defence.
 The section goes on tom state “ A party is not precluded from raising such a plea by the fact that he has
appointed, or participated in the appointment of, an arbitrator.
 A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter
alleged to be beyond the scope of its authority is raised during the arbitral proceedings.
 The arbitral tribunal may, in either case, admit a later plea if it considers the delay justified.”
 The tribunal may make a jurisdictional ruling either at a preliminary stage of the proceedings, or as part of its
substantive award at the end of proceedings.
Jurisdictional challenges can be:
o Total; Partial; Substantive; and Procedural.
Total substantive challenge:
o No valid arbitration agreement
o Dispute beyond scope of arbitration agreement
o Non-party to arbitration agreement
o Arbitration agreement no longer in force
o Dispute not capable of settlement by arbitration
Partial substantive challenge:
o Arbitration agreement covers some but not all claims
o Some claims not capable of settlement by arbitration
Procedural challenge:
o Condition precedent to arbitration not fulfilled: e. multi-tiered dispute resolution procedures not complied with.
o Arbitrator not appointed in accordance with agreed or default procedure.
Procedural matters in general
 Common practice: separate procedural matters from substantive disputes.
 Decisions of arbitrators on procedural matters cannot be challenged and are not subject to court review.
 The orders or directions of an arbitral tribunal may be enforced as if they were court orders, with the leave of
the Court under AO s.61.
Interlocutory Proceedings & Interim Measures
 Interlocutory applications and orders concern steps taken during the arbitration process that are incidental or
supplementary to the main dispute.
 Examples: applications for adjournment, orders relating to discovery of documents, contested amendment
of pleadings, extensions of time, sanctions for default, security for costs, etc.
 Interim measures are a type of interlocutory application that involve temporary (time limited) orders that prevent
or minimise the disadvantage which might be caused to a party pending the final award being made.
 An interim measure is designed to maintain the status quo pending finalization of the arbitration.
 AO S.35(1) and (2) (MLArt.17) define interim measures as including :
 injunction, an order to restore or maintain the status quo, and an order to preserve assets or evidence.
The Preliminary Meeting
 After an arbitrator has formally accepted his or her appointment, and the appointment has been confirmed by the
institution if it is an institutional arbitration (see Art.9.1 of HKIAC Rules),
the usual next step is for a preliminary conference to be convened with the parties.
 If parties disputed, the arbitrator will do the decision
 Agenda items for the preliminary meeting include:
o To confirm the original arbitration agreement and its terms; and the terms of appointment of the arbitrator(s);
o To identify issues in dispute;
o To confirm the type of arbitration: (full hearing vs short procedure; adversarial/inquisitorial; or documents only)
o Preliminary issues raised, including interim measures or other orders sought.
o Form of case submissions to be agreed – statements of case; formal pleadings; exchange of letters;
o Programme/timetable for submission of documents and pleadings;
o Submission of Scott Schedule;(document outline the summary of claim and defense)
o Discovery of documents: i.e. Discovery by list of documents, timing to exchange lists, inspection;
 o Communication protocols with arbitrators;
o Agreed documents and other types of evidence;
o Confirm representation of parties;
o Witnesses (number, exchange of statements, whether subpoenas necessary, whether statement will serve as
evidence-in-chief); and expert witnesses (nature, number, necessity, exchange of reports, hot-tubbing,
whether expert’s report will serve as evidence-in-chief).
o Housekeeping arrangements: Venue, sitting hours, transcription, translator.
o Duration of arbitration, dates,
o Agreed bundle of documents/correspondence to be prepared and when .
o Argument and closing addresses – oral or in writing.
o List of agreed items in dispute to be prepared before commencement.
o Taxation of costs arrangements.
Pleadings
 Pleadings and Discovery are not required in arbitrations by the Arbitration Ordinance.
 The Rules of the High Court also do not apply to arbitration. Under the AO, parties must be given a
reasonable opportunity to deal with the case of their opponent.
 AO s.46(3) requires that arbitrators: (a) be independent, (b) act fairly and impartially and allow parties to put their
case, (c) use an appropriate process.
 AO S.46(2) establishes due process rights of parties and provides that parties must be treated with equality.
How these due process rights are enacted in an arbitration is left to the parties to regulate and the arbitrator to
determine. The simplest way to ensure due process is to have some form of pleadings or documents that
identify and clarify relevant issues in dispute.

 In institutional rules, like the HKIAC rules which parties are free to selectively opt-out of, a system of
pleadings is required as a default option. In terms of the HKIAC rules:
Statement of Claim (Art.16)
o Unless it was part of the notice of arbitration, the claimant must provide its statement of claim to the other party
and the arbitrator within the time limit set by the arbitrator.
o The statement of claim must include: (a) a statement of the facts supporting the claim; (b) the points at issue;
(c) the legal arguments supporting the claim; and (d) the relief or remedy sought.
o The Claimant must also annex to its Statement of Claim all supporting materials on which it relies.
Statement of Defence (Art.17)
o Must be provided within time limit set by arbitrator and must include any jurisdictional challenge.
o The statement of defence must reply to the allegations in the statement of claim.
o If there is a counterclaim, set-off defence or cross-claim, then the reply must include (a)-(d) above.
o The Respondent must attach all supporting materials on which it relies.
Further Written Pleadings? (Art 20)(at discretion of arbitrator)
 “The arbitral tribunal shall decide which further written statements, if any, in addition to the Statement of Claim
 and the Statement of Defence, shall be required from the parties and shall set the time limits for communicating
such statements.”
Amendment of Pleadings: (Art.18)
 “During the course of the arbitration, a party may amend or supplement its claim or defence, unless the arbitral
tribunal considers it inappropriate to allow such amendment having regard to the circumstances of the case.
However, a claim or defence may not be amended in such a manner that the amended claim or defence falls
outside the jurisdiction of the arbitral tribunal.”
Time Limits (Art.21)
 “The time limits set by the arbitral tribunal for the communication of written statements should not exceed 45
days, unless the arbitral tribunal considers otherwise.
 The arbitral tribunal may, even in circumstances where the relevant time limit has expired, extend time limits
where it concludes that an extension is justified.”
The Hearing
Representation
 At the outset, remember that the arbitrator or the representative of any party is not required to be a lawyer.
 AO s63 allows parties to an arbitration to choose their own representatives, advisors and advocates regardless of
their nationalities and qualifications.
 Sections 44, 45 and 47 of the Legal Practitioners Ordinance do not apply to arbitrations, including
representation, preparation of documents, advice or any other thing done in relation to arbitration proceedings.
The basic rules
 AO S.46(3): mandates that arbitrators: (a) be independent, (b) act fairly and impartially and allow parties to put
their case, (c) use an appropriate process. S.46(2) establishes due process rights of parties and provides that
parties must be treated with equality.
 Arbitrators have a wide discretion to decide matters not agreed between the parties. S.47, s.50 of AO

Duties of an arbitrator in relation to the hearing

 In summary:
 To act judicially and exercise discretion based on factual and legal grounds;
 To decide the dispute in accordance with the arbitrator’s mandate;
 To conduct the arbitration procedure in accordance with the parties’ agreement;
 To proceed expeditiously.
 To demonstrate the elementary skills of an arbitrator. For example, in Pratt v Swanmore Builders Ltd and
Baker [1980] Lloyd’s Rep 504, the court removed an arbitrator for misconduct:
 The misconduct resulted in significant delay;
 The arbitrator failed to show the elementary skills of an arbitrator;
 Imposing regulations contrary to party wishes in absence of an agreed procedure;
 Reducing the arbitration to such a state that there was no prospect of justice being done.
Powers of an arbitrator in relation to the hearing
o To order interim measures and determine interlocutory applications;
o To proceed without regard to the strict rules of evidence (s.47(3) of AO and Art 19 ML);
o Unless otherwise agreed with parties, to order security for costs or for the monetary amount in dispute
(s.56(1)(a) and 56(2), and s.56(1)(d).
 o To order discovery and delivery of interrogatories (s.56(1)(b)).
o To order evidence be given by affidavit (s.56(1)(c));
o To order inspection and preservation of subject-matter (s.56(1)(d));
o To decide the extent to which the arbitrator himself or herself will take the initiative to ascertain facts and
the law, unless parties otherwise agree. (s.56(7) and 47(2)).
o To administer oaths and affirmations if parties so agree (s.56(8)(a) and (b));
o To direct the attendance of witnesses (s.56(8)(c), and 55(1)).
o To extend the time for commencing arbitral proceedings (s.58);
o To dismiss a claim or counterclaim for want of prosecution (s.59);
o To make interim or partial awards;
o To award interest and costs (s.79(1) and s.74)
o To limit recoverable costs; (s.57(1));
o To correct its own award (s.69, and Art.33 of ML);
o To give an interpretation of a specific point or part of the award, if so agreed by the parties (s.69(1));
o To make an additional award, unless otherwise agreed by the parties (s.69(1) and Art 33(3) of ML)
 The powers of the arbitrator can also be agreed by the parties in setting out those powers (or excluded
powers) in the arbitration agreement. Such powers cannot exceed any limits imposed by the national law (seat)
applicable to the arbitration.
 In general, an arbitral tribunal may exercise the following powers where a party is in default (either of the
agreed rules, the AO, or the order of an arbitrator):
o The power to act ex parte where the party refuses to obey an order or attend the hearing (s.56(4);
o The power to draw adverse inferences from non-compliance (Art 25(b) of ML);
o The power to determine costs and penalties (s.74);
(As to power of CFI to enforce an arbitrator’s order, see s.61 of AO, discussed earlier).
Conduct of the Hearing
 The nature and the procedure of a hearing is a matter to be agreed between the parties (usually the
institutional rules), and in the absence of agreement, to be determined by the arbitrator taking into consideration
the parties overall right to due process.
 The type of procedure may be adversarial or inquisitorial– or a combination of both.
 Common adversarial procedure followed in Hong Kong and in other common law jurisdictions:
o The arbitrator commences proceedings by
 identifying the parties involved,
 confirming the arbitration agreement and governing law of the contract and the seat of the arbitration;
 confirm the manner of each arbitrator’s appointment;
 Provide a summary of the dispute;
 Summarize the events, meetings and issues leading up to the hearing
o The arbitrator then declare the commencement of the arbitration, and deal with any preliminary or
interlocutory challenges raised.
o The arbitrator invites the claimant to commence presenting its case, which could include an opening
statement followed by witness evidence, cross-examination, and re-examination of each witness. At the end of
witness evidence, the claimant closes its case.
o The respondent is then invited to commence its case, and proceeds in the same manner as the claimant’s
 case, ultimately closing its case.
o The arbitrator may intervene at any stage and take the initiative to ascertain facts relevant to the
arbitration, which includes acting inquisitorially. Any facts ascertained by the arbitrator through his own
investigation must be disclosed to the parties for their for comment (Apex Tech Investment Ltd v
Chuang’s Development (China) Ltd [1996] 2 HKLR 155).
o At the end of evidence being presented, the parties each present oral or written closing submissions.
o After final submissions, the hearing is declared closed. The arbitrator then should indicate then the final award
will be made available to the parties.
 Time saving devices employed by arbitrators
 Splitting the determination of the merits from the determination of quantum
 The proof of evidence or witness statement of each witness to stand as evidence in chief
 Certain legal or factual issues to be determined at the outset of a matter(as this may affect how parties present
their cases)
 “Chess Clock Procedure to limit the time parties have to present the case, or cross-examine or re-examine
witness, or make key opening/closing submission
 The use of written submissions only on points of law
 Written submissions only (often limited in length) for opening or closing addresses/arguments.

 If the arbitration is an institutional arbitration, the rules of the institution often provide a procedure to be
followed at hearings together with the procedural rights of the respective parties and the powers of the
arbitrator. (See HKIAC Rules 22-31).
The Hearing: HKIAC Rule 22
 Each party shall have the burden of proving the facts relied on to support its claim or defence.(balance of
opportunity)
 The arbitral tribunal shall determine the admissibility, relevance, materiality and weight of the evidence, including
whether to apply strict rules of evidence.
 At any time during the arbitration, the arbitral tribunal may allow or require a party to produce documents, exhibits
or other evidence that the arbitral tribunal determines to be relevant to the case and material to its outcome. The
arbitral tribunal shall have the power to admit or exclude any documents, exhibits or other evidence.
 The arbitral tribunal shall decide whether to hold hearings for presenting evidence or for oral arguments, or
whether the arbitration shall be conducted solely on the basis of documents and other materials. The arbitral
tribunal shall hold such hearings at an appropriate stage of the arbitration, if so requested by a party or if it
considers fit. In the event of a hearing, the arbitral tribunal shall give the parties adequate advance notice of the
relevant date, time and place.
 The arbitral tribunal may determine the manner in which a witness or expert is examined(limit the scope expert
evidenceto get experts from different sides to have some common grounds)
 The arbitral tribunal may make directions for the translation of oral statements made at a hearing and for a record
of the hearing if it deems that either is necessary in the circumstances of the case.
 Hearings shall be held in private unless the parties agree otherwise. The arbitral tribunal may require any
witness or expert to leave the hearing room at any time during the hearing.
Conduct of the Hearing HKIAC Rules(not tested!!)
o Article 22 – Evidence and Hearings
o Article 23 • Interim Measures of Protection and Emergency Relief
o Article 24 • Security for Costs
o Article 25 • Tribunal-Appointed Experts
o Article 26 • Default
o Article 27 • Joinder of Additional Parties
o Article 28 • Consolidation of Arbitrations
o Article 29 • Single Arbitration under Multiple Contracts
o Article 30 • Concurrent Proceedings
o Article 31 • Closure of Proceedings
o Article 32 • Waiver
 LGS 3 Arbitration Awards and their Enforcement
The Arbitration Award
What is an award?
 An arbitrator’s decision, or determination, of the issues in an arbitration is known as the award.
 almost always made in writing(to be enforceable) + the arbitration equivalent of a judgement in court
proceedings.
 An award can be in the form of an interim order or award - procedural decisions, rulings or directions, or interim
measures; all which do not dispose of the substantive issues in dispute.
 An award can also be a final award (s.67-68 AO), which can be a partial award (AO s.71), as long as it is
dispositive of one or more of the substantive issues between the parties.
In essence, a final award deals with remaining substantive issues in dispute between the parties.
 An award can also be a consent award (s.66(1) and (2) of AO), where the parties settle the issues in dispute
before the arbitrator publishes his/her award to them.
 though a settlement of the parties, the settlement is endorsed by the arbitrator as a consent award in order:
 That he issues in dispute are disposed of in an orderly manner;
 To ensure that the dispute is res judicata, and the arbitrator is functus officio;
 That it may be recognized and enforced in the same manner as a final award.
Essentials of a valid award
 The validity of an award is governed by the law of the seat where it is made, and by the law of any country
where it is sought to be enforced. By way of the New York Convention and the widespread adoption of the
UNCITRAL Model Law amongst member states of the NYC, there is a substantial similarity between the
arbitration laws of member states.
 Article IV of the NYC requires an award to be in documentary form if a party seeks enforcement or
recognition of such award.
 S.67 of the AO(ML Art 31), prescribes certain essentials as to form and content of awards. They are:
 The award must be in writing;
 The award must be signed by the arbitrator (if more than one, all to sign or at least a majority);
 Award shall state reasons on which it is based – unless parties agree no reasons be given or it is an
agreed award;
 The date and place of the arbitration must be stated.
 After award made, a copy signed by arbitrators must be delivered to each party.
Substantive requirements of an award
 To ensure enforceability of an award, the award should::
 Comply with the parties’ submission to arbitration. (Made within jurisdiction of arbitrator, dealing only
with disputes submitted to arbitration, and all disputes are dealt with/disposed).
 Be cogent and certain (unambiguous, clear, consistent between findings of fact and legal consequences,
and reasons must be intelligible);
 Be final (no delegation of some decisions, no reserving of decisions);
 Be Capable of performance (precision of obligations of parties in respect of remedies, clear timeframe).
Format of an award: Good practice(Not examed!)
  An award is often drafted along the same lines as a court judgement. A structured approach is best
practice:
 Heading: Applicable Arbitration Ordinance/Act; any other relevant statute, identification of parties.
 Background: Parties, underlying contract, governing law of contract, arbitration clause, seat, institutional
or agreed rules of arbitration, issues in dispute, appointment of arbitrator, jurisdiction of arbitrator.
 Interlocutory procedural matters: identify issues and how disposed of.
 Procedure up to hearing: Pleadings or documents setting out claims and defence, preliminary meeting/s;
applications/directions; issues in dispute at hearing summarised.
 Hearing: Date/place/formalities; representation of parties; identification of each witness and summary of
evidence in relation to issues in dispute; csummary of submissions by parties
 Analysis/findings/reasons/decisions on substantive issues: Numbered list of issues dealt with;
any common ground issues; summary of evidence and submissions, including: findings of fact, what held
as matters of law; application of law to facts, damages, interest.
 Interest: basis on which awarded (contractual, legal, common law)how to be calculated, relevant dates for
calculations.
 Costs: ability for costs; scale awarded; basis for determination, amount (if agreed or determinable).
 Operative section: (the “Award”)
 The fact of having considered the issues, evidence and the submissions.
 Any monetary amount to be paid by a party; or if non-monetary award, the order of declaration or
rectification, etc.
 Any conditions or terms;
 Time for performance
 Interest and post-award interest;
 Costs
 Signature of Arbitrator; Place; Date; Witnessed
Recognition and Enforcement of Arbitral Awards
 Hong Kong is a member of the NYC via the membership of China. More than 157 member states.
The First Pillar: The Start Of The Process;
 Recognition/Enforcement of Arbitration Agreements - Article II (3)
o The Court of a Contracting State, when seized with an action in a matter in respect of which the parties
have made agreement within the meaning of this article, shall, at the request of one of the parties, refer
the parties to arbitration, unless ….”
 Exceptions: null and void, inoperative or incapable of being performed
The Second Pillar: The Result Of The Process;
Recognition/Enforcement of Arbitration Awards (foreign, non-domestic, awards): Article III
Exceptions: Article V.1 (a) to (e), and Article V.2 (a) and (b).
 Lack of capacity of a party to enter into the arbitration agreement;
 invalidity of the arbitration agreement;
 party unable to present its case due to lack of notice of proceedings or appointment of tribunal;
 the award exceeds arbitrator’s jurisdiction by determining matters outside the scope of the agreement to
arbitrate; improper constitution of arbitration tribunal;
 award not yet binding on parties; subject matter of dispute not arbitrable in enforcing state;
 award contravenes public policy of state where enforcement sought.
Recognition
 Recognition indicates that the award is accepted by the courts of a country as having been validly made.
 It refers to the process where a court is usually requested to grant a declaratory remedy confirming the issues
in dispute between the parties have been determined and that the arbitral award is therefore valid and
binding on the parties to the arbitration.
 Butterworths Hong Kong Arbitration Law Handbook; para 87.04 (Damon YC So; Christopher To; 2012)
 Recognition, by contrast with enforcement, means that a court before which proceedings are brought
between the same parties and in relation to the same subject-matter will recognize the binding effect of
the award on the issues before it and so treat those issues as res judicata. The same conditions that
govern a Convention award govern its recognition.
 Note: Before an arbitration award is recognized and/or enforced, it constitutes a debt in the jurisdiction where it
is sought to be enforced and is subject to limitation periods in such jurisdiction.
 In Hong Kong, s.6(1)(c) of the Limitation Ordinance provides that enforcement proceedings of arbitral
awards cannot be brought after 6 years from the date of the award.
 Case of
Enforcement
 AO s.84: arbitral awards, whether made in or outside of HK are enforceable in the same manner as a
judgement of the Court that has the same effect, but only with leave of the Court.
For awards seated in China to be enforced in HK, see s.92 of AO.
 Enforcement means the court is requested to ensure that the award is honored using appropriate legal
sanction once the court has recognized the validity or legal force of that award.
 The process by which an application is made for recognition and enforcement of arbitral awards in Hong Kong
is contained in O.73 (and PD6.1) of the Rules of the High Court (RHC).
 An application is made ex parte, supported by an affidavit or affirmation.
 O.73 r.10(3) refers to all items that must be included or attached to the affidavit or affirmation:
 The original or an authenticated copy of the arbitration agreement,
 The or authenticated copy of the award,
 identifying details and address of the applicant and the person against whom enforcement is sought,
 a statement that the whole or part of the award has not been complied with at date of application
 Grounds for refusing enforcement of an arbitral award: (have a look)
 s.95 of AO (China Awards), s.89 of the AO (NYC Awards), and
 sections 81 and 86 of the AO (for other awards made under the UNCITRAL Model Law).
 Limited grounds for resisting enforcement + the courts construe such grounds narrowly. They include:
 Incapacity of a party;
 Invalidity of the arbitration agreement;
 Lack of notice of the arbitration proceedings and/or the appointment of the arbitrator;
 The award is in excess of the arbitrator’s jurisdiction;
 Composition of the arbitral authority or the arbitral procedure was not in accordance with the
agreement of the parties;
 The award has not yet become binding or has been set aside or suspended.
 The subject matter of the award not capable of settlement by arbitration under Hong Kong law;
  The award would be contrary to public policy of Hong Kong.
 Note on AO Schedule 2 opt-in provisions:
 If parties have opted-in to Schedule 2 of the AO (domestic arbitration carry-over provisions),
 further ground to resist recognition and enforcement arises under s.4 (1) of Schedule 2 – a serious
irregularity affecting the tribunal, the arbitral proceedings, or the award.
 S.4(2) provides a list of grounds that constitute a serious irregularity.
 S.5 of schedule 2 to the AO further provides for the right of a party to appeal against the decision of an
arbitrator on a question of law.
 For non-NYC countries(AO s.86(2)(c))
 An additional ground for a court to refuse enforcement is “for any other reason the court considers it
just to do”
Enforcement of Mainland Awards
 AO Part 10 (starting at s.92) applies to the enforcement of Mainland awards in Hong Kong.
 S.92 states that a Mainland award is enforceable in Hong Kong either by action in the Court, or in the same
manner as an arbitral award under AO s.84
 The grounds of refusal to enforce a Mainland award (s.95) are the same as the grounds for refusal of a NYC
country award.
Hebei Import & Export Corp. v Polytek Engineering Co Ltd (1999) [1999] 2 HKC 205 (CFA)
 Facts: Application to set aside a Mainland award.
 The arbitrator and the tribunal appointed experts and the original claimant held an inspection during the
arbitration which the respondent was not present at (nor had notice of).
 The arbitrator and claimant engaged in unilateral communications with each other in the absence of the
other party.
 There were also allegations of apparent bias on the part of the arbitrator. The respondent was denied a
further hearing after the inspection and denied the opportunity of calling a further witness.
 Issues:
 Whether the respondent established that it was unable to properly present its case in terms of s.44(2)(c) of
the AO.
 Whether the respondent could resist enforcement because award was tainted by bias;
 Whether enforcement could be resisted on grounds of breach of public policy;
 Whether, in any event, the court should exercise its discretion to enforce the award; and
 Whether it was open to the respondent to raise these issues in a Hong Kong court (failed to raise in
Mainland proceedings).
 Held:
On Grounds of Public Policy(high bar)
 Before a Convention jurisdiction can, in keeping with its being a party to the Convention, refuse enforcement of
a Convention award on public policy grounds, the award must be so fundamentally offensive to that
jurisdiction’s notions of justice that, despite its being a party to the Convention, it cannot reasonably be
expected to overlook the objection.
 The object of the Convention was to encourage the recognition and enforcement of commercial
arbitration agreements in international contracts and to unify the standards by which agreements to arbitrate
are observed and arbitral awards are enforced.
  It has been generally accepted that the expression “contrary to the public policy of that country” in Article
V.2(b)] means “contrary to the fundamental conceptions of morality and justice” of the forum.
Reasonable Opportunity to Present the case
 The opportunity of a party to present his case and a determination by an impartial and independent tribunal
which is not influenced, or seen to be influenced, by private communications are basic to the notions of justice
and morality in Hong Kong.
Decision
 The chief arbitrator was present at the inspection but did not take an active role.
 There was a conflict of evidence about whether the parties agreed that both parties would be present during
the inspection.
 The respondent did not at the arbitration hearing ask the tribunal for opportunity to question the experts
who were at the inspection or seek to call its own witnesses.
 A party should not keep silent about these types of issue at the arbitration hearing, and then seek to raise
them for the first time at an enforcement hearing. Parties have a duty of good faith, and failure to make a
prompt objection may constitute an estoppel or lack of bona fides.
 It was not established that the private communications affected the respondent’s due process rights.
 S.44 of AO requires court to also consider finality of disputes and comity amongst enforcing jurisdictions.
The court has a residual discretion under s.44(1) to refuse enforcement even where a ground of challenge
has been made out.
Appeal allowed and leave to enforce the award was restored to the applicant.
Focus on tutorial basic question

33min for the first 2 question

22 min for the last question
Exam:
Q1 and Q2 and mandatory(15 each)
#drafting arbitration clauses, what are their essentials?(essential characteristic of arbitration clause)
#advantage + disadvantage of arbitration
# draft notice of arbitration! (no need prep for pleadings too much)(Hearings are important)(Powers of arbitratorno
need to know in detail, conduct of hearing not so much)
Remember to add the time saving devices!(important!!!!)
Q3 and Q4 choose 1(10 each)
2 page long question

2+1Q