6. Institutional vs. ad hoc arbitration

6. Institutional vs. ad hoc arbitration

When drafting an agreement, parties must decide whether they prefer an “institutional” (or administered) arbitration or an “ad hoc” arbitration.  

Institutional arbitration 

An institutional arbitration is conducted under the existing rules of a specific body, 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”).  

These institutions provide a structured framework by acting as an appointing authority, supervising the conduct of the case and administering funds for tribunal fees. Depending on the institution, additional services may include appointing arbitrators where the parties cannot agree, acting as a clearing house for documents, providing hearing facilities, administering deposits and fees, supervising procedural timetables and, in some cases, scrutinising draft awards. 

Ad hoc arbitration 

In contrast, an ad hoc arbitration is conducted pursuant to rules agreed upon by the parties themselves or laid down by the tribunal, without institutional oversight and administration. While ad hoc arbitration offers maximum flexibility and may avoid certain institutional costs, it requires more cooperation between parties. 

Many parties in ad hoc proceedings adopt the UNCITRAL Arbitration Rules to provide a general procedural structure. Even in ad hoc cases, parties often designate an institution like the HKIAC to act solely as the “Appointing Authority” to break deadlocks without administering the entire case. 

HKIAC as the statutory default authority 

Under the Arbitration Ordinance (Cap. 609), the HKIAC serves as the statutory default authority for all arbitrations seated in Hong Kong, not just ad hoc ones, where the parties’ appointment procedure fails. A critical statutory function of the HKIAC is the power to determine the number of arbitrators (either one or three) and to appoint arbitrators when the parties fail to reach an agreement. 

Special considerations for Mainland China 

The choice between these two forms is particularly significant when dealing with Mainland Chinese entities. Under Articles 27 and 29 of the PRC Arbitration Law, a valid arbitration agreement must designate a specific “arbitration commission”; consequently, onshore ad hoc arbitrations (seated in the Mainland) are generally not recognized in Mainland China.  

However, the enforceability of Hong Kong-seated awards in the Mainland is robust. Pursuant to the Arrangement Concerning Mutual Enforcement of Arbitral Awards (1999) and the Supplemental Arrangement Concerning Mutual Enforcement of Arbitral Awards (2020), the PRC courts will recognize and enforce any Hong Kong award, whether institutional or ad hoc, rendered in accordance with the Arbitration Ordinance. 

While foreign ad hoc awards (including those from Hong Kong) may be enforced in the PRC under reciprocal arrangements, institutional arbitration remains the safer and more standard choice for disputes involving Chinese parties to ensure the agreement’s validity.