C. The Arbitration Tribunal
An arbitration tribunal has the power to grant any remedy that may be granted by the Hong Kong courts, except to make any order that is binding on those who are not parties to the arbitration.
Where a sum of money is involved, the tribunal has power to award simple or compound interest on the principal sum at such rate as it considers appropriate up to the date of the award. Once the award is made, simple interest accrues on the award at the same rates as are payable on awards made by Hong Kong court judgments.
The tribunal has power to decide which party is liable to pay the costs of the arbitration and on what basis. The usual order is that the losing party is required to pay the winning party's costs in addition to their own.
The costs of the arbitration include the costs incurred by the parties in the course of the arbitration (e.g. professional fees such as fees for expert witnesses giving technical opinion), the arbitrators’ fees, and fees paid to the arbitration institution.
Once an award of the costs has been made, the parties may agree upon the sum to be paid to the party in whose favour the award was made. If no agreement is reached, the party whose costs are to be paid may submit its bill of costs to a court for "taxation". In the taxation process, the party's costs are assessed by a court official, and any costs that were not properly or reasonably incurred will be disallowed.
An arbitration award made in Hong Kong may be enforced in the same manner as a court judgment, once the court has given leave to enforce the award. The application for leave to enforce an award is made on paper (and submitted to a court) without having to give notice to the party against whom the enforcement is sought.
A tribunal has power to grant any remedy that may be granted by the Hong Kong courts, except to make any order that is binding on parties who were not parties to the arbitration.
An award may be set aside on grounds relating to lack of jurisdiction, improper constitution of the tribunal or arbitral procedure not in accordance with the agreement of the parties. The involved parties may also expressly opt to challenge the award on the grounds of irregularity and questions of law. Any application to set aside an award must be made within three months from the date of receipt of the award, after which it can not be set aside.
Rules and Procedures
Arbitration in Hong Kong is governed by the Arbitration Ordinance, Chapter 341 of the Laws of Hong Kong (the Current Ordinance). The Current Ordinance is based on a split regime - an international regime, which is based on the UNCITRAL Model Law, and a domestic regime.
The UNCITRAL Model Law was promulgated by the United Nations Commission on International Trade Law (UNCITRAL) in 1985, to provide states with a template for an effective and comprehensive arbitration regime with limited scope for local courts to intervene in the arbitral process. It has been adopted (or adapted) in numerous jurisdictions around the world.
The UNCITRAL Arbitration Rules were adopted by UNCITRAL in 1976, to provide a set of procedural rules generally appropriate for use in international commercial arbitrations. These Rules were subsequently amended in 2010.
In 1990, Hong Kong adopted the UNCITRAL Model Law to apply to international arbitrations.
The new Arbitration Ordinance ( Chapter 609 of the Laws of Hong Kong) that was enacted in November 2010 and came into effect on 1 June 2011 (“the New Ordinance”), replaced the former Ordinance (i.e. the Arbitration Ordinance, Chapter 341 of the Laws of Hong Kong).
The New Ordinance unifies a system that formally provided different procedures depending on whether the arbitration was considered "international" or "domestic." With the new Ordinance, there is no longer any such distinction and the UNCITRAL Model Law in effect applies to all arbitrations in Hong Kong.
Under section 1 of Schedule 3 of the new Ordinance (transitional provisions), the former Ordinance will apply to all arbitrations commenced prior to 1 June 2011 and any related proceedings. The New Ordinance will apply to all arbitrations commenced on or after 1 June 2011 and any related proceedings.
"Institutional" Arbitration v. "Ad Hoc" Arbitration
Institutional arbitration proceedings are administered by an arbitration institute, such as the Hong Kong International Arbitration Centre (“HKIAC”), the International Chamber of Commerce (“ICC”), the China International Economic and Trade Arbitration Commission (“CIETAC”) or the London Court of International Arbitration (“LCIA”). These arbitrations are conducted under the arbitration rules devised by each institution.
Ad hoc arbitrations are arranged solely between the arbitrators and the parties. They may adopt a readymade set of arbitration rules (such as the UNCITRAL Rules of Arbitration) or the arbitration may be conducted under rules drawn up by the parties involved.
The Law applied by the Arbitral Tribunal
The tribunal will apply the governing law of the contract to determine the substantive issues in a contract claim. (For Procedural issues, see: Rules and Procedures above)
If the contract is governed by a foreign law and the tribunal has no expertise in that legal system, the parties will be required to call in expert evidence to establish the applicable principles of the foreign law.
If the contract is silent as to its governing law, that is, if the contract itself does not state that it must be governed by a specific law (Hong Kong law, Chinese Law, British Law etc.), the tribunal will be required to determine what law governs that contract. This will be the law of the jurisdiction with which the contract has the closest connection. If the contract provides for arbitration in Hong Kong, this may be a factor in favour of the tribunal applying Hong Kong law as the governing law of the contract.
The tribunal will determine the governing law of a tort claim by applying Hong Kong choice of law rules. This may lead to tort claims being determined under a different law to the governing law of the contract.
Thus it is wise to insure that any contract includes a statement specifying what law it is to be governed by and where any arbitration, if needed, should take place.
The Hong Kong Institute of Arbitrators provides detailed information on matters relating to arbitration in Hong Kong.