1. Statutory and contractual limitation periods

1. Statutory and contractual limitation periods 

Statutory limitation periods 

Under section 14(1) of the Arbitration Ordinance (Cap. 609), the Limitation Ordinance (Cap. 347) and any other Ordinance relating to the limitation of actions apply to arbitrations just as they apply to court proceedings. This means that a party who wishes to bring a claim in arbitration must still commence the arbitration within the applicable statutory limitation period. Arbitration does not suspend or avoid the ordinary rules on limitation. 

In general, time starts to run when the cause of action accrues. For simple contract or tort claims, the limitation period is generally six years from the date the cause of action accrued. Where the claim is based on a contract executed under seal, the limitation period is generally 12 years. 

Some contracts contain what is known as a Scott v Avery clause. Such a clause may provide that no court action can be brought until an arbitral award has first been obtained. However, section 14(3) of the Arbitration Ordinance (Cap. 609) prevents such a clause from postponing the running of time for limitation purposes. The cause of action is treated as having accrued when it would have accrued if the clause had not existed. 

Contractual time limits 

Apart from statutory limitation periods, parties may agree on their own contractual time limits. These are often called contractual time bars. For example, a contract may require a party to give a notice of arbitration, appoint an arbitrator, or take another step to commence arbitration within a specified period. Such contractual time limits may be shorter than the statutory limitation period. 

If a party fails to comply with a contractual time bar, the usual consequence is that the claim or remedy may be procedurally barred under the contract. However, this does not usually mean that the arbitration agreement itself becomes inoperative or incapable of being performed. In other words, the existence of a time-bar defence does not normally deprive the arbitral tribunal of jurisdiction. 

For that reason, if court proceedings are brought despite an arbitration agreement, the court will usually still grant a stay of the court proceedings in favour of arbitration. It will then be for the arbitral tribunal to decide whether the contractual time bar applies and what effect it has on the claim. 

Statutory power to extend contractual time limits 

Section 58 of the Arbitration Ordinance provides an important safeguard where a contractual time limit would otherwise prevent a claim from being brought in arbitration. It allows the arbitral tribunal to extend the time for taking a step to commence arbitration or any mandatory pre-arbitration procedure. If the tribunal has not yet been constituted, the court may exercise that power. 

However, an extension under section 58 is only available in limited circumstances. The tribunal or court must be satisfied either that the relevant circumstances were outside the reasonable contemplation of the parties when they made the arbitration agreement and that it would be just to extend time, or that the conduct of one party makes it unjust to hold the other party strictly to the contractual time limit. 

It is important to distinguish contractual time bars from statutory limitation periods. Section 58 can only extend time limits agreed by the parties in their contract. It cannot extend or override a statutory limitation period under the Limitation Ordinance. If the statutory limitation period has expired, section 58 will not revive the claim.