Background

Starting from 1 November 2013, the Hong Kong International Arbitration Centre (“HKIAC”) Administered Arbitration Rules (the “2013 HKIAC Rules”) has taken effect in replacement of its predecessor, which had been in use since 2008 (the “2008 HKIAC Rules”). This article highlights the implication of the 2013 HKIAC Rules on the time and costs for conducting institutional arbitration in Hong Kong.

Option to pay arbitrators by capped hourly rates

In the past, the 2008 HKIAC Rules provided for only one specific method for calculating arbitrators’ fees and leave the parties to agree on any other fee arrangements. Now, parties may choose to either adopt a fee schedule to calculate arbitrators’ fees based on the sum in dispute, or agree on an hourly rate. By default, if there is no agreed fees arrangement, the fees will be calculated based on an hourly rate.

Moreover, a mechanism is in place to standardize arbitrators’ fees under either option. An agreed hourly rate is capped at HK$6,500 with any annual increment to be capped at 10%. The fees to be calculated based on the sum in dispute will be fixed by the HKIAC and subject to objective criteria, such as the amount in dispute, complexity of the subject-matter, the time spent by the arbitrators, whether any secretary is appointed, etc.  The fee for each arbitrator generally shall not exceed the maximum rate set out in the rules, subject to adjustment in exceptional circumstances and limited exceptions, such as amendments and request for joinder or consolidation.

The above options for calculating arbitrators’ fees are rather unique that they are rarely seen in the rules of other arbitration institutions. These provisions are intended to save parties’ time in negotiating on the fees and expenses at the pre-hearing stage. Further Practice Notes on arbitrators’ fees, expenses, terms and conditions have been issued to supplement the 2013 HKIAC Rules on the calculating arbitrators’ fees.

Arbitrate fast

To address the urgency inherent in arbitration, the 2013 HKIAC Rules introduce the Emergency Arbitrator Procedure to provide the parties with urgent interim relief (such as injunction) at an early stage of arbitration. At any time between the commencement of the arbitration and formation of the arbitral tribunal, a party may apply to the HKIAC for the appointment of an emergency arbitrator by (1) providing the prescribed information, including the relevant facts of the dispute, the emergency relief sought and explanation as to the urgency for emergency relief; and (2) paying an application deposit of HK$180,000 for the HKIAC’s administrative expenses and the emergency arbitrator’s fees and expenses (which will be calculated based on an hourly rate).

Once the application is accepted, the HKIAC will appoint an emergency arbitrator within 2 days. After the file is transmitted to the emergency arbitrator, an emergency decision will be made within 15 days. To avoid delay, the 2013 HKIAC Rules empower an emergency arbitrator to rule on any challenge to the emergency arbitrator’s jurisdiction, including objections as to the existence, validity or scope of an arbitration clause or agreement.

The 2013 HKIAC Rules also provide for an elective expedited procedure where an award will be made within 6 months after the file is transmitted to the arbitrators, provided that the parties so agree or the sum in dispute does not exceed HK$ 25 million.

Consolidation of arbitrations

Joinder and consolidation are rather useful in complex commercial disputes involving multiple overseas parties and multiple contracts. The 2008 HKIAC Rules allowed joinder of parties in the arbitration, but the 2013 HKIAC Rules further allow consolidation of arbitrations in the following situations:

1.        all claims in the arbitrations are made under the same arbitration agreement;

2.        the rights to relief claimed are in respect of, or arise out of the same transaction or series of transactions, even though the claims are made under two or more arbitration agreements (as long as they are compatible); or

3.        the parties agree to consolidate.

Once the HKIAC decides to consolidate or allow a joinder, the parties will be deemed to have waived (1) any objection to the validity and/or enforcement of any award made in the proceedings and (2) their right to designate an arbitrator. The arbitral tribunal in the consolidated arbitration will be appointed by the HKIAC which may revoke any pre-existing appointment.

Conclusion

The 2013 HKIAC Rules allow the parties to save time by consolidating multiple disputes that involve multiple parties and control arbitrators’ fees by adopting existing fee arrangements. An elective expedited procedure allows disputes to be resolved summarily. In urgent situations, parties can even obtain interim relief under the Emergency Arbitrator Procedure. The 2013 HKIAC Rules will apply to all arbitrations that commence on or after 1 November 2013. However, provisions in relation to consolidation and emergency arbitrators will not apply unless the arbitration agreement is entered into on or after 1 November 2013 or by the parties’ agreement.