Updated HKIAC Arbitration Rules Seek to Save Time and Costs

by Dechert LLP
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The Hong Kong International Arbitration Centre (HKIAC) recently released a new version of the HKIAC Administered Arbitration Rules, effective November 1, 2018. The new version updates the 2013 HKIAC Administered Arbitration Rules, and makes significant changes in the rules as discussed below.

Overview

The 2018 Rules seek to achieve increased flexibility and efficiency in the proceedings, and also introduce specific provisions concerning third-party funding arrangements. Of particular note, the new provisions concern the use of technology; consolidation of multi-party and multi-contract disputes; management of concurrent proceedings; disclosure of third-party funding arrangements (as well as the provision of information to third-party funders and authorization for tribunals to consider such arrangements in cost awards); early determination of points of law or fact; alternative dispute resolution mechanisms, including mediation; enhanced emergency arbitrator procedures; and deadlines for awards.

Unless the parties agree otherwise, arbitrations commenced on or after November 1, 2018 are subject to the new rules (Article 1.4). Pending arbitrations commenced prior to November 1, 2018, and arbitrations administered by HKIAC according to UNCITRAL Rules, are not subject to the 2018 HKIAC Rules (unless the parties agree otherwise).  

Most Notable Changes

I. Use of Technology

HKIAC has introduced new provisions concerning the use of technology related to document submissions and the tribunal’s adoption of particular arbitration procedures.

The 2018 Rules add a provision to Article 3.1 so that parties can instantly upload documents and written communications to a secured online repository. Accordingly, Article 3.3 and Article 3.4 provide that communications will be deemed to be received when there is notice of such an upload. 

HKIAC has modified Article 13.1 generally to require the tribunal to consider using technology to streamline the proceedings, while providing all parties with equal treatment and a reasonable opportunity to present their cases. The tribunal and the parties were not prohibited from using technology under the 2013 Rules, but they were not expressly encouraged to do so as under the 2018 Rules.

II. Multi-Party and Multi-Contract Disputes

The 2018 Rules expand the scope for consolidating related arbitrations. Under Article 29.1(a) of the 2013 Rules, multiple related arbitrations could not be consolidated unless all parties were bound by each arbitration agreement underlying the disputes. The 2018 Rules omit this requirement, permitting parties to save time and costs by consolidating related arbitrations based on their respective arbitration agreements, and provided that other requirements are met (e.g., that a common question of law or fact arises under each arbitration agreement giving rise to the arbitration).

III. Concurrent Proceedings

The 2018 Rules add a new provision on concurrent proceedings as Article 30. Under the 2018 Rules, the tribunal “after consulting with the parties, can conduct two or more arbitrations under the Rules at the same time, or one immediately after another, or suspend any of those arbitrations” if all the arbitrations have the same tribunal, and there is a common question of law or fact arising in all the arbitrations. This added flexibility could allow tribunals to better manage and possibly expedite the resolution of concurrent proceedings.

IV. Early Determination of Points of Law or Fact

The 2018 Rules add a provision as Article 43 to enable the tribunal to make an early determination of particular points of law or fact. This provision could increase procedural efficiency by narrowing the factual or legal issues that the tribunal must address in the course of the proceedings, and thereby reduce the costs and duration of the arbitration.

V. Third-Party Funding

The 2018 Rules add a requirement for parties to disclose the fact and identity of any third-party funder, with the addition of Article 44 Disclosure of Third Party Funding of Arbitration. This rule on disclosure also applies to an emergency arbitration (see Schedule 4  Emergency Arbitrator Procedure).

The 2018 Rules further provide, at Article 34.4, that the tribunal can consider any third-party funding arrangements in its decision on costs of the arbitration.

Finally, the 2018 Rules expressly exempt disclosure of information to third-party funders from the Rules’ broad confidentiality provisions. Rule 45 of the Rules provides that “[u]nless otherwise agreed by the parties, no party or party representative may publish, disclose or communicate any information relating to (a) the arbitration under the arbitration agreement; or (b) an award or Emergency Decision made in the arbitration.” In setting forth exceptions to the general rule of confidentiality, the 2018 Rules expressly provide in Article 45.3(e) that parties may disclose information related to the arbitration to “a person for the purpose of having, or seeking, third-party funding of arbitration.” Parties may have been able to make such disclosures under Article 42.3(c) of the 2013 Rules, which permitted disclosure to “a professional or any other adviser” of a party. The new rules make clear that disclosures are permitted with respect to third-party funders.

VI. Emergency Arbitrator Procedure

The 2018 Rules make several changes to the Emergency Arbitrator procedures, which are set forth in Schedule 4 of the Rules. These changes streamline and expedite the Emergency Arbitrator procedures. Specifically, the new rules reduce the time period for HKIAC to appoint an emergency arbitrator from two days to 24 hours after the receipt of both the Application and the Application Deposit; reduce the time period for HKIAC to appoint a substitute emergency arbitrator from two days to 24 hours from the vacancy of the emergency arbitrator; and reduce the time period for any decision, order or award of the emergency arbitrator from 15 days to 14 days from the date on which HKIAC transmitted the case file to the emergency arbitrator.   

The 2018 Rules add a provision that the emergency arbitrator procedures will be terminated if the applicant does not submit a Notice of Arbitration to HKIAC within seven days of HKIAC’s receipt of the Application, unless the emergency arbitrator extends the time limit. This provision puts the onus on the claimant to move forward with the arbitration without delay, or else rest its case.

The 2018 HKIAC Rules clarify in express terms that the emergency arbitrator has the power to fix and apportion any costs of the Emergency Relief proceedings, subject to the final determination of the arbitral tribunal, even if “the Emergency Arbitrator Procedure is terminated without an Emergency Decision.” 

Lastly, some provisions were deleted from Schedule 4, but they are accounted for elsewhere in the 2018 Rules. First, Article 16 of Schedule 4 of the 2013 Rules committed the parties to comply with an Emergency Decision without delay. This provision is now accounted for by amendment to Article 35.3 in the 2018 Rules (formerly 34.3): “The parties undertake to comply without delay with any order or award made by the arbitral tribunal or any emergency arbitrator, …” (italics added). Second, Articles 17 and 18 of Schedule 4 of the 2013 Rules, empowering the Emergency Arbitrator to order the party seeking emergency relief to provide an appropriate security and to modify, suspend, or terminate an Emergency Decision, respectively, were deleted. These provisions seemed to be redundant in light of substantially similar provisions in Articles 23.6 and 23.5, respectively, of the 2013 and 2018 Rules. Although Articles 23.6 and 23.5 refer to the “arbitral tribunal” generally, and not specifically to the “emergency arbitrator,” they would seem to apply equally to both decision-makers since Section 23 of the regimes applies to “Interim Measures of Protection and Emergency Relief” (italics added).  

VII. Alternative Means of Dispute Settlement

The 2018 Rules provide under Article 13.8 that the tribunal or emergency arbitrator “may, at the request of any party” suspend the arbitration or Emergency Arbitrator Procedure” if the parties agree to “pursue other means of settling their disputes after the arbitration commences.” This provision is similar to the SIAC-SIMC’s “Arb-Med-Arb” protocol, through which parties can agree to pursue mediation to settle their disputes after the commencement of arbitration, and can then resume the arbitration if the mediation does not resolve the dispute. Arbitral institutions are increasingly making provision for parties to be able to resolve disputes through mediation, which has the potential to save time and costs.

VIII. Deadline for Award 

Article 31 of the 2018 Rules requires the tribunal to establish a deadline for delivering its award, not to exceed three months “from the date when the arbitral tribunal declares the entire proceedings or the relevant phase of the proceedings closed.” The parties may agree to extend this deadline, and HKIAC may grant an extension in appropriate circumstances (Article 31.2). This provision aims to prevent any unnecessary delay in the tribunal’s rendering of the award.

Conclusion and What’s Next

The 2018 Rules make significant modifications in several areas to streamline proceedings and reduce the cost of HKIAC arbitrations – reflecting a broader trend to preserve and promote international arbitration as an efficient and cost-effective means of resolving cross-border disputes. As discussed, these modifications concern the use of technology, multi-party and multi-contract disputes, concurrent proceedings, early determination of points of law or fact, alternative means of dispute settlement, emergency arbitrator procedure, and deadline for the award. They also include disclosure rules and related provisions for third-party funding. 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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