D. Arbitration Ordinance (Cap. 609)

D. Arbitration Ordinance (Cap. 609) 

The principal legislation governing arbitration in Hong Kong is the Arbitration Ordinance (Cap. 609). It applies primarily based on the seat of the arbitration, the timing of the proceedings, and the form of the arbitration agreement. 

Objects and guiding principles 

Section 3 of the Arbitration Ordinance sets out the main objectives and guiding principles of Hong Kong’s arbitration law. The purpose of the Ordinance is to help parties resolve their disputes by arbitration in a way that is fair, speedy and cost-effective, and without unnecessary expense. 

A key principle is party autonomy. This means that the parties are generally free to agree on how their arbitration should be conducted, including the procedure to be followed and the manner in which their dispute is to be resolved. However, this freedom is subject to necessary safeguards, particularly where matters of public interest are involved. 

Another important principle is minimal court intervention. The court should not interfere in an arbitration unless the Arbitration Ordinance expressly allows it to do so. This reflects Hong Kong’s pro-arbitration approach. In practice, the court’s role is mainly to support the arbitration process, rather than to supervise or control it. 

UNCITRAL Model Law Framework 

A defining feature of the Arbitration Ordinance is its substantial verbatim reproduction of the UNCITRAL Model Law (1985 version with 2006 amendments) directly within its sections, which has the force of law in Hong Kong. This drafting style ensures overall familiarity for international practitioners and cements Hong Kong’s status as a Model Law jurisdiction.  

The Ordinance specifically incorporates 2006 amendments, such as Article 2A of UNCITRAL Model Law (international origin/uniformity) and Article 7 of UNCITRAL Model Law (modern writing requirements for agreements). While it replicates the Model Law, it also adapts it to the local landscape by substituting certain articles (such as Article 6 of UNCITRAL Model Law regarding the competent authority) with Hong Kong-specific provisions. 

The shift to a unitary regime 

The most salient feature of the current Arbitration Ordinance (Cap. 609) is the establishment of a unitary regime. Under the old Arbitration Ordinance (Cap. 341), Hong Kong maintained a dual system that drew a sharp distinction between “domestic” and “international” arbitrations, with different rules applying to each. The current Ordinance abolished this bifurcated approach. Now, a single set of rules applies to all arbitrations seated in Hong Kong, regardless of whether they involve local or international parties. 

Geographic application (the seat) 

The Arbitration Ordinance applies to an arbitration under an arbitration agreement, whether or not that agreement was entered into in Hong Kong, provided the seat of arbitration is in Hong Kong. While the seat must be Hong Kong for the full Ordinance to apply, the arbitral tribunal remains free to hold physical meetings or hearings at any other location for convenience. 

If the seat of arbitration is outside Hong Kong, only specific provisions of the Arbitration Ordinance apply to support the process, including: 

• Section 20: Stay of court proceedings in favour of arbitration. 
• Section 21: Confirming the compatibility of an arbitration agreement with a request to a court for an interim measure. 
• Part 3A: Enforcement of emergency relief. 
• Section 45: Granting of interim measures by the court in relation to foreign proceedings. 
• Sections 60 and 61: Special powers of the court and enforcement of tribunal orders. 
• Part 10: Recognition and enforcement of awards (including Convention, Mainland, and Macao awards). 
• Part 11A (specific sections): Only sections 103A, 103B, 103C, 103D, 103G, and 103H regarding Intellectual Property Rights (IPR) apply extra-territorially. 

Temporal application (commencement date) 

The current Arbitration Ordinance came into effect on 1 June 2011. 

Proceedings commenced on or after 1 June 2011 are governed by the current Ordinance (Cap. 609), even if the arbitration agreement was made before that date. 

Proceedings commenced before 1 June 2011 generally continue to be governed by the repealed Arbitration Ordinance (Cap. 341) as if the current Arbitration Ordinance (Cap. 609) had not been enacted. 

Form of the agreement 

The Arbitration Ordinance applies exclusively to arbitrations based on written agreements. While oral arbitration agreements are valid at common law, they are rare and are not subject to the Arbitration Ordinance. The powers conferred on arbitrators and the court by the Arbitration Ordinance do not apply to them. 

For more information, please refer to “Written agreement requirement”. 

Provisions under Schedule 2 (opt-in and automatic) 

The Schedule 2 provisions of the Arbitration Ordinance are a set of optional clauses that preserve certain features of the previous domestic arbitration regime (under the repealed Cap. 341) within Hong Kong’s current unitary regime of arbitration. While the Ordinance is primarily based on the UNCITRAL Model Law, Schedule 2 allows for greater court intervention and oversight than the standard Model Law provisions. 

Schedule 2 comprises 7 sections, often grouped into 5 distinct sets of procedural mechanisms: 

1. Sole arbitrator: If the parties fail to agree on the number of arbitrators, the dispute is automatically submitted to a sole arbitrator. This contrasts with the default under the unitary regime (section 23), where the HKIAC decides if there should be one or three arbitrators. 

2. Consolidation of arbitrations: The Court of First Instance (“CFI”) is empowered to order the consolidation of two or more arbitral proceedings, or order them to be heard concurrently or sequentially. This is permissible if a common question of law or fact arises, or if the claims arise from the same transaction or series of transactions. 

3. Preliminary question of law: With the consent of all parties or the arbitral tribunal, a party may apply to the CFI to determine a preliminary question of law arising during the proceedings. The court will only entertain this if the determination might produce substantial savings in costs. 

4. Challenge for serious irregularity: A party may challenge an award in court on the grounds of serious irregularity affecting the tribunal, the proceedings, or the award. This involves a “closed list” of irregularities (such as failure to comply with section 46 duties or exceeding powers) that have caused or will cause substantial injustice. 

5. Appeal on question of law: This provides a limited right to appeal to the CFI on a question of law arising out of an award. Unless all parties agree, the appellant must obtain leave from the court, which is granted only if the tribunal's decision was obviously wrong or the question is of general importance and open to serious doubt. 

Schedule 2 provisions apply in the following scenarios: 

1. Express opt-in: If the parties expressly state in their agreement that specific Schedule 2 provisions apply. 

2. Transitional automatic opt-in: The agreement was entered into before 1 June 2011, or within the six-year transitional period ending 31 May 2017, and provided that the arbitration is a “domestic arbitration”. 

3. Statutory arbitrations: These are deemed to have expressly provided that Schedule 2 applies. 

4. Construction sub-contracts: If Schedule 2 applies to a main construction contract under the transitional rules, it is deemed to apply automatically to related sub-contracts containing a written arbitration agreement. However, this is subject to an “international exception”: Schedule 2 will not automatically apply if the subcontractor is a non-local entity or if a substantial part of the work is performed outside Hong Kong. 

Funding and fee structures 

The provisions regarding third-party funding (Part 10A) and Outcome Related Fee Structures (Part 10B) also apply to arbitrations seated outside Hong Kong, but only in relation to costs and expenses for services provided within Hong Kong.