Hku international arbitration

1. CMS Hong Kong | HKU
International Arbitration
Class 1: Introduction to the structure of Arbitration

2. Class 1: Introduction to the structure of Arbitration | 2017 CMS Hong Kong | HKU
Learning Outcomes
2
 Knowledge and Understanding of Arbitration Law from an
international perspective
 Ability to advise on and explain Arbitration Law
• Orally
• In writing
 Ability to provide support for arguments
• Statute (UNCITRAL, HK Arbitration ord.)
• Case law

3. Class 1: Introduction to the structure of Arbitration | 2017 CMS Hong Kong | HKU
Reading Materials
3
 Core text
• International Commercial Arbitration - Second Edition
Gary B. Born Kluwer Law International (available free
via library)
 Key Reference:
• NY Convention on the Recognition and Enforcement of
Foreign Arbitral Awards
• The UNCITRAL Model Law on International Commercial
Arbitration
• HK Arbitration Ordinance

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Seminars
4
 Seminar Handouts
• Pre-reading
 Timing
• 18.30-21.30
• Break
 Format
• Introduction to subject
• Interactive
• Group work
 Participation

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Assessment
5
 Mid-term Assignment (During Course)
• Take home
• Advice on an issue(s)
 Examination (December)
• Traditional
• Open book

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Class 1: Introduction to the structure
of Arbitration
Introduction
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What is arbitration?
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 Agreed method of determination of dispute by one or more
independent third parties
 Tribunal chosen by parties
 Decision binding
 Arbitration requires: (Born p. 249)
i. a consensual agreement
ii. to submit disputes to
iii. a non-governmental decision-maker, chosen by or for them, to
iv. render a binding resolution of that dispute,
v. in accordance with adjudicatory procedures affording the parties an
opportunity to be heard.

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Choice of Arbitration
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 In commercial transaction disputes are bound to arise, it is therefore
important for the transactional lawyer to ensure that means are
available to settle future disputes
 With increased transnational transactions, parties are keen not to
litigate in the other party's home turf for reasons ranging from
complicated legal procedures, uncertainty
 With arbitration parties are able to choose; law, language, place and
venue of the proceedings, specialized arbitrators

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Choice of Arbitration Cont’d
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 Arbitration is considered as a lesser evil when compared to litigation:
“…There are myriad reasons why parties may choose to resolve disputes
by arbitration rather than litigation. … the opportunity to choose a
“neutral” forum and a “neutral” tribunal … and second, international
enforceability of arbitral awards. .. confidentiality, procedural flexibility and
the choice of arbitrators with particular technical or legal expertise ...
Another crucial factor that cannot be overlooked is the finality of the
arbitral process. …”
Singapore Court of Appeal in Tjong Very Sumito and Others v Antig Investments Pte Ltd[2009] 4 SLR
732

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Class 1: Introduction to the structure
of Arbitration
History of International Arbitration
10

11. Class 1: Introduction to the structure of Arbitration | 2017 CMS Hong Kong | HKU
History of International Arbitration
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 Most societies developed at an early date systems of
“arbitration” for the settlement of disputes
 Domestic procedures and laws were applied and arbitrations were
essentially domestic
 In 1920s many European countries did not recognise an agreement to
submit future dispute to arbitration and arbitration agreement often did
not prohibit the court from taking jurisdiction
 The 1923 Geneva Protocol on Arbitration Clauses and the 1927
Geneva Convention for the Execution of Foreign Arbitral Awards
adopted by the League of Nations resolved these difficulties

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History of International Arbitration
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 International Chamber of Commerce (ICC) adopted its first rules of
arbitration and in 1923 & established the Court of Arbitration
 Numerous international organisations researched and campaigned for
uniform procedural rules
 The 1958 New York Convention adopted by the United Nations laid
the foundation for modern international commercial arbitration
 UNCITRAL Arbitration Rules
 Development and adoption of the UNCITRAL Model Law by various
jurisdictions harmonised arbitration law

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Class 1: Introduction to the structure
of Arbitration
Advantages and Disadvantages
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14. Class 1: Introduction to the structure of Arbitration | 2017 CMS Hong Kong | HKU
Advantages of International Arbitration
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 Neutral Dispute forum – International arbitration removes the
perceived bias of local courts and ensures that the resolution of the
dispute takes place in a neutral forum
 Choice of applicable laws and arbitrators – this guards against
parochial prejudice
 Avoids multiplicity of law suits which may take place in different
jurisdictions
 Readily enforceable in many jurisdictions – facilitated by the wide
acceptance of the New York Convection-ratified by 157 states

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Advantages of International Arbitration
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 Expertise of the tribunal – qualified arbitrators who can deal with
complex subjects - An option not available in local courts
 Finality of awards – Arbitration awards are not subject to appeal
except in limited circumstances
 Party autonomy and procedural flexibly – party autonomy makes it
possible to remove procedural bottlenecks which may cause undue
delay
 Cost and speed – in many cases an expensive exercise (hiring
counsel, arbitration fees paid to administering institutions)
 Confidentiality – –disputants may not want issues out in the public.
On the other hand, arbitration is not entirely confidential given that at
the enforcement stage there is recourse to the courts should the losing
party fail to honor the award

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Disadvantages of International Arbitration
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 Arbitrators
• Competence
• Availability
• Legal experience
 Formality
 Time consuming
 Expensive
• Procedure
• Arbitrators
• Facilities
 Powers
 No precedent

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Class 1: Introduction to the
structure of Arbitration
Increasing use of International
Commercial Arbitration
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18. Class 1: Introduction to the structure of Arbitration | 2017 CMS Hong Kong | HKU
Increasing Use of International Commercial Arbitration
 International commercial
transactions
 Steadily increasing caseloads
at leading arbitral institutions,
with the number of reported
cases increasing between two
and ten-fold in the past 20
years.
Cases Filed with Leading Arbitral
Institutions (1993-2013)
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Increasing Use of International Commercial Arbitration
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 Preference for international commercial arbitration is also reflected in
empirical studies on the use of arbitration clauses in international
commercial agreements
 Use of arbitration in new categories of cases: investment treaty claims,
online disputes, class actions, sports disputes, tax disputes,
intellectual property matters and human rights claims

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Class 1: Introduction to the
structure of Arbitration
Contemporary Legal Framework for
International Commercial Arbitration
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21. Class 1: Introduction to the structure of Arbitration | 2017 CMS Hong Kong | HKU
Overview of Contemporary Legal Framework for International
Commercial Arbitration
A multi-tier legal regime:
1. International arbitration
conventions
2. National arbitration
legislation
3. Institutional arbitration rules
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International arbitration conventions - Overview
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New York Convention of 1958
 The first comprehensive international legal framework for international
arbitration agreements, arbitral proceedings and arbitral awards
Inter-American Convention
 1975 Panama Convention
 Rectified by the United States and most South and Central American
nations
European Convention
 1961 European Convention on International Commercial Arbitration
 Most European states (but not the United Kingdom, the Netherlands or
Finland) are party to the Convention, while some ten non-EU states
are parties, including Russia, Cuba and Burkina Faso

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International arbitration conventions - New York Convection
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 Replaced the Geneva protocol and the Geneva convention- Previously
under the Geneva convention a requirement of double exequatur
existed –meaning an award had first to be enforced at the place it was
made before being enforced in a different jurisdiction which was costly
and cumbersome
 Widely accepted as main tool for national courts and arbitration
tribunals in the recognition of arbitration agreements and enforcement
of awards

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International arbitration conventions - New York Convection
Cont’d
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 The anchor law for the UNICTRAL Model Law
 The New York convection is innovative as it shifts the burden of proof
away from the party seeking enforcement to the party resisting
enforcement ( Article 111-V)
“The goal of the Convention, and the principal purpose underlying
American adoption and implementation of it, was to encourage the
recognition and enforcement of commercial arbitration agreements in
international contracts and to unify the standards by which agreements to
arbitrate are observed and arbitral awards are enforced in the signatory
countries”
Scherk v. Alberto-Culver Co., 417 U.S. 506, 502 n.15 (U.S. S.Ct. 1974)

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International arbitration conventions - European convection
on International Commercial Arbitration
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 The convention entered into force on 7th January 1964
 Recognizes the validity of international arbitration agreements
 Limits the role of the national courts and expands parties’ autonomy

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International arbitration conventions - Inter-American
Convention on International Commercial Arbitration
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 Also known as the Panama convention
 Similar to the New York Convention
 10 parties as of 2013 (America’s)
 Differs slightly with the New York Convention where the parties have
not expressly agreed to any institutional or other arbitration rules, the
rules of the “Inter-American Commercial Arbitration Commission”
(“IACAC”) will govern

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International arbitration conventions - ICSID Convention
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 153 Contracting parties
 Facilitates disputes where a foreign investor can sue a state for loss of
investments in the host state

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International arbitration conventions - North American Free
Trade Agreement (NAFTA)
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 Multilateral treaty between Canada, Mexico and the United States
which addresses a wide range of trade, investment and other issues
 chapter 11 of NAFTA sets forth standards for treatment by each
NAFTA state of investors from other NAFTA states, as well as a
mechanism for arbitrating investment disputes under those standards

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Types of Arbitrations
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Ad hoc arbitration
Administered
(institutional) arbitration
• No organising institution
• Parties choose
arbitrators
• Parties decide applicable
rules
• Organising authority
• Usually with own rules
• May act as:
• Appointing authority
• Account holder for
fees
• Supervise conduct
of the arbitration
• Provide arbitration
rules

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Arbitration Institutions - Roles
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 A number of organizations, located in different countries, provide
institutional arbitration service
 Provides rules for use in administering arbitration
 Provide model clauses
 Provide administrative services, venue and sometimes act as the the
appointing authority of arbitrators

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Arbitration institutions - Overview
The popular arbitration institutions are:
 HKIAC
 ICC
 LCIA
 SIAC
 CIETAC
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32. Class 1: Introduction to the structure of Arbitration | 2017 CMS Hong Kong | HKU
Arbitration institutions - HKIAC
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 HKIAC?
• Hong Kong International Arbitration Centre
 Established in 1985
 Hong Kong based
 Its rules are based in UNCITRAL Model Law

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Arbitration institutions - ICC
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 ICC?
• International Chamber of Commerce
 International Court of Arbitration of the ICC (ICC Court) established in
1923
 Paris based
 ICC court is not a ’court in the strict sense’
 ICC arbitration can be seated anywhere in the world
 ICC does not maintain a list of arbitrators
 ICC secretariat scrutinizes awards before they are rendered by the
arbitration tribunal
 Arbitrators fees are based on a % of the amount in dispute.

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Arbitration institutions - LCIA
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 LCIA?
• London Court of International Arbitration
 Established in 1892
 LCIA Secretariat based in London
 LCIA rules allow intervention of third parties
 Unlike ICC , it maintains a database of arbitrators
 Arbitrators fees pegged on an hourly basis
 LCIA India established in 2009
 DIFC-LCIA
• Dubai

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Arbitration institutions - SIAC
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 SIAC?
• Singapore International Arbitration Centre
 Established in 1991
 Based in Singapore

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Arbitration institutions - CIETAC
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 CIETAC?
• China International Economic and Trade Arbitration Commission
 Established in 1956
 Headquarters in Beijing
• Sub-commissions in Shenzhen, Shanghai, Tianjin and Chongqing

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The role of the Courts
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 Why do we need the courts to have any role?
 What areas should a court have a role in?
a) Enforcing an agreement to arbitrate
b) Supporting the conduct of the arbitration
c) Appeals
d) Enforcement of an award

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UNCITRAL Model Law
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 UNCITRAL Model Law
• United Nations Commission on International Trade Law
• Adopted 21/6/1985
• Amendments made in 2006
 Aim:
• Harmonisation and uniformity of national laws
 Minimal court intervention

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UNCITRAL
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“due to the relatively flexible nature of the United Nations model law
structure of international arbitration, which allows countries to gradually
and selectively adopt particular provisions of the model law, a relatively
high degree of substantive legal uniformity in arbitration rules
(convergence) can coexist and be enriched by procedural variation in
settlement processes and techniques (diversity) across regions.”
S. Ali, (2010) Resolving Disputes in the Asia Pacific Region, Routledge

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Institutional Rules
 HKIAC
 SIAC
 ICC
 CIETAC
 LMAA
 UNCITRAL
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Institutional Rules - HKIAC
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 Hong Kong International Arbitration Centre
 Administered Arbitration Rules
 With effect from 1/9/2008 and revised in June 2013

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Institutional Rules - SIAC
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 Singapore International Arbitration Centre
 SIAC Arbitration Rules
 With effect from 1/7/2010

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Institutional Rules - ICC
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 International Chamber of Commerce
 ICC Rules of Arbitration
 2017 ICC Rules
 “Hands on”

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Institutional Rules - CIETAC
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 China International Economic and Trade Arbitration Commission
 CIETAC Arbitration Rules
 With effect from 1/5/2012
 “Hands on”

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Institutional Rules - UNCITRAL
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 United Nations Commission on International Trade Law
 UNCITRAL Arbitration Rules
 (as revised in 2010)
 Not an administered arbitration
 “Light touch

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Institutional Rules - HK Arbitration Ordinance (Cap 609)
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 Based on UNCITRAL Model Law (2006 amendments)
 Same system for both domestic and international

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Institutional Rules - HK Arbitration Ordinance (Cap 609)
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 Object and principles: Section 3:
1. The object of this Ordinance is to facilitate the fair and speedy resolution of
disputes by arbitration without unnecessary expense.
2. This ordinance is based on the principles –
a) that, subject to the observance of the safeguards that are necessary in the
public interest, the parties to a dispute should be free to agree on how the
dispute should be resolved; and
b) that the court should interfere in the arbitration of a dispute only as expressly
provided for in this Ordinance.”

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Institutional Rules - HK Arbitration Ordinance (Cap 609)
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 Some Model Law provisions are not adopted
• E.g. Article 1
 “Section 5 has effect in substitution for article 1 of the UNCITRAL Model Law.”
• E.g. Articles 17 H and I
 Some sections deal with matters not in the Model Law
• E.g. Section 18
 Disclosure of information relating to arbitral proceedings and awards prohibited.

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Institutional Rules - HK Arbitration Ordinance (Cap 609)
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 Schedule 1
• Text of Model Law
• Underlines provisions that are not applicable under the Ordinance
 Schedule 2
• Based on provisions that previously applied to domestic arbitrations
• Parties may opt in
• Schedule 2 automatically applies:
 Arbitration agreements entered into before the Ordinance commenced which
provide for domestic arbitration; or
 Agreements entered into within 6 years after commencement of the Ordinance
which provide for domestic arbitration (ie until 1/6/2017)

50. Class 1: Introduction to the structure of Arbitration | 2017 CMS Hong Kong | HKU
Institutional Rules - HK Arbitration Ordinance (Cap 609)
50
 Amends/adds to/clarifies/supplements Model Law e.g.
• Omits provision that default number of arbitrators = 3 (s. 23)
• Parties to have a “reasonable opportunity” to present case rather than a
“full opportunity” (s. 46)
• Expressly lists general powers of tribunal and courts (ss. 56 and 60)
• Includes more extensive provisions dealing with costs (ss. 57, 74-44)
• Adds:
 Confidentiality provisions (ss. 16-18)
 Provisions for mediator arbitrators (ss. 32-33)
 More extensive provisions to deal with enforcement of awards (Part 10)
 Schedule 2 opt in provisions
 Provisions limiting liability of Tribunals (ss. 104-105)

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Class 1: Introduction to the
structure of Arbitration
Theories of International Arbitration
51

52. Class 1: Introduction to the structure of Arbitration | 2017 CMS Hong Kong | HKU
Theories of International Arbitration
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1. The Jurisdictional Theory
• The power of an arbitrator derives from and is regulated by the domestic
law
• Supports the allocation to the states the powers of complete supervision
over commercial arbitration conducted within their jurisdiction
• Helps explain the power, duties and immunity of the arbitrator as well as
the state’s intervention in arbitration
• Neglects the freedom and power of the parties to select arbitrators
2. Contractual Theory
• The power of an arbitrator is contractual as the existence of an arbitration
derives from a valid arbitration agreement
• Arbitration should therefore be conducted according to the parties’ will
• Neglects domestic laws restraining the freedom of arbitration

53. Class 1: Introduction to the structure of Arbitration | 2017 CMS Hong Kong | HKU
Theories of International Arbitration
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3. The Mixed or Hybrid Theory
• The judicial powers of the state and party autonomy in contract exist in a
workable blend
• Based on the belief that contract and judicature can interact workably
4. The Autonomous Theory
• Parties to an arbitration ought to have unlimited autonomy to decide
whether or not to submit to arbitration
• Emphasizes on the aim and function of arbitration

54. Class 1: Introduction to the structure of Arbitration | 2017 CMS Hong Kong | HKU
Sources of Information about International Arbitration
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 ICCA Yearbook of Commercial Arbitration and ICC Handbooks
 Arbitration International
 Collections of ICC Arbitral Awards
 Redfern and Hunter On International Arbitration
Online
 Kluwer Arbitration and Kluwer Arbitration Blog
 Global Arbitration Review
 Transnational Dispute Management and OGEMID

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Questions?
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