7. Arbitral rules
Importance of the choice of arbitral rules
The choice of arbitral rules provides the procedural roadmap for the dispute, and while parties enjoy significant party autonomy to select which rules will govern their proceedings, this freedom is not absolute. In Hong Kong, the parties’ freedom to agree on procedures is subject to the mandatory provisions of the Arbitration Ordinance (Cap. 609). Most notably, section 46 mandates that the tribunal act fairly and impartially, treating the parties with equality and giving each a reasonable opportunity to present their case and deal with that of their opponents. Any procedural agreement that contravenes these fundamental requirements of natural justice may result in the resulting award being set aside.
Incorporation of institutional rules
Parties often incorporate the rules of a permanent arbitral institution, such as the Hong Kong International Arbitration Centre (“HKIAC”), the International Court of Arbitration of the International Chamber of Commerce (“ICC”), the China International Economic and Trade Arbitration Commission (“CIETAC”), or the Singapore International Arbitration Centre (“SIAC”), by reference in their arbitration agreement, which is a common practice that saves the time and expense of drafting a fully original set of procedures. These tried-and-tested institutional rules clarify the conduct of the arbitration, including the appointment of arbitrators, handling default by a party, seeking emergency relief, the presentation of evidence, and the making of awards.
All arbitral institutions have different procedural rules, different supervisory powers and different fee structures. Before selecting, parties should check that the chosen rules, supervisory framework and fees meet their commercial needs.
Compatibility between rules and administering institutions
It is essential to ensure that the chosen rules are compatible with the designated institution. For example, the ICC Rules explicitly prohibit anybody other than the ICC Court from administering arbitration under its rules. Attempting a “hybrid” approach, such as designating one institution to administer another’s rules, is a complex exercise that can lead to significant jurisdictional problems and may result in the final award being held unenforceable in certain jurisdictions, such as Mainland China.
Use and amendment of model clauses
The starting point when drafting an institutional arbitration clause should be the relevant institution’s recommended model clauses. These clauses are generally widely drafted, consistent with the institution’s rules and tested in practice before courts and tribunals. Drafters should specify that the rules “in force when the Notice of Arbitration is submitted” will apply if the parties intend to use the most up-to-date version of the arbitration procedure.
If the selected institutional rules do not precisely match the parties’ requirements, the parties may amend the model clauses. For example, they may specify 3 arbitrators rather than a sole arbitrator, a particular seat, a particular language, confidentiality obligations or qualifications for arbitrators. Institutional rules are generally subject to the parties’ express agreement to the contrary, unless the rule in question is mandatory. However, parties should be aware that some institutions may be reluctant to depart from their established administrative framework.
The following is an example of the standard HKIAC Administered Arbitration Rules model clause, amended to include specific requirements for arbitrator qualifications and to clarify the governing law of the arbitration agreement.
“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 (HKIAC) under the HKIAC Administered Arbitration Rules in force when the Notice of Arbitration is submitted.
The law of this arbitration clause shall be Hong Kong law.
The seat of arbitration shall be Hong Kong.
The number of arbitrators shall be three. The presiding arbitrator shall be a legally-qualified practitioner with at least 10 years of experience in the technology and software licensing sector.
The arbitration proceedings shall be conducted in English.”
Ad hoc arbitration and the UNCITRAL Rules
For ad hoc arbitrations, parties frequently adopt the UNCITRAL Arbitration Rules, which are widely recognized and provide a robust procedural structure without requiring an administering institution. It is generally recommended that parties specify the version of the rules they wish to apply (such as the rules in force at the time of commencement) to ensure clarity.
Appointing authority in ad hoc arbitration
When providing for ad hoc arbitration, it is prudent to specify an appointing authority to ensure a tribunal can be constituted if the parties cannot agree on appointments. However, in Hong Kong, the failure to specify an authority is not fatal to the agreement. Under the Arbitration Ordinance, the HKIAC serves as the statutory default appointing authority for all arbitrations seated in Hong Kong, ensuring the process does not reach a deadlock.
Bespoke procedural rules
While parties may draft their own bespoke procedural rules, this should be approached with extreme caution. Such rules must be detailed and comprehensive, dealing with all foreseeable procedural issues. Bespoke drafting is often time-consuming and expensive, and if not done carefully, it remains a major source of legal uncertainty and potential challenges to the award.
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