The Hong Kong International Arbitration Center (HKIAC) has launched an updated set of Administered Arbitration Rules (the "HKIAC Updated Rules"), effective as of 1 June 2024.1 They will thus apply to arbitrations commenced from 1 June 2024 unless otherwise agreed by the parties.2 The new Rules are available in English and Chinese (a simplified Chinese version and a traditional Chinese version).
The HKIAC Updated Rules were announced at the beginning of May during the 2024 Congress of the International Council for Commercial Arbitration held in Hong Kong3, which brought together "the largest gathering of business professionals in Hong Kong in recent years".4 While the new Rules introduce a number of new provisions to reflect social and technological advancements, they are "largely a refinement of the 2018 Rules", which were already a "market-leading set of arbitral rules".5 According to HKIAC's Secretary General, Joanne Lau, the idea was only to introduce a "light touch approach to case administration".6
Some of the points of the new Rules concern the following aspects of the proceedings:
- Efficiency and integrity of the arbitral process;
- Diversity, environmental and other considerations;
- Preliminary and other procedural issues;
- Fees and expenses.
Efficiency and Integrity of the Arbitral Process
According to Article 13.10 of the HKIAC Updated Rules, the Centre may now "take any measure necessary to preserve the efficiency or integrity of the arbitration" after consultation with the parties and the tribunal. This includes the Centre's power to revoke, "in exceptional circumstances", the appointment of any arbitrator where it considers that they are prevented from or have failed to fulfil their functions in accordance with the Rules or within the prescribed time limits. This is in addition to Article 11.6 of both the HKIAC Rules of 2018 (the "2018 HKIAC Rules") and the Updated HKIAC Rules, which provide the parties with the right to challenge an arbitrator in such circumstances. This means that the HKIAC can now, on its own, revoke the appointment of an arbitrator even where there has been no challenge of that arbitrator by the parties, subject to consultations with all parties and the tribunal before exercising this power.
Articles 13.8 and 13.9 of the HKIAC Updated Rules concern the change (or addition) to a party's legal representative after the constitution of the tribunal. The first provision obliges that party to communicate promptly "any proposed change or addition" to the other parties, the tribunal and the Centre. Previously, only notification once a change had been made was required.7 The second provision gives the tribunal the power to take any measure necessary to avoid a conflict of interest, including by excluding the proposed new party representatives from the arbitration.
Pursuant to the new Article 41.4(a), in case deposits for costs are not paid in full by the parties, the Centre can now suspend or cease to administer the proceedings, prior to the constitution of the tribunal. Once the tribunal has been constituted, the tribunal may order the suspension or termination of the arbitration, or the continuation of the arbitration on such basis and in respect of such claim or counterclaim as the tribunal deems fit (Article 41.4(b)). This is in line with the previous Article 41.4 of the 2018 HKIAC Rules.
With regard to the expedited procedure, Article 42.2(f) of the HKIAC Updated Rules now provides that the Centre may extend the six-month deadline for the issuance of the award from the date when HKIAC transmitted the case file to the arbitral tribunal, where it finds that "appropriate circumstances" exist, in opposition to the previous "exceptional circumstances" under the 2018 HKIAC Rules which is undisputedly a lower threshold.8 Moreover, the tribunal may henceforth request the non-application of the expedited procedure, according to the new Article 42.3.
The new provision regarding the closure of the proceedings should also contribute to enhancing the efficiency of the arbitral process, as the HKIAC Updated Rules impose more stringent time limits on tribunals.9 Article 31.1 of the Rules now includes a 45-day deadline for the closure of the proceedings from the last directed substantive oral or written submissions (excluding submissions on costs), provided that the tribunal is satisfied that the parties have had a reasonable opportunity to present their case. The deadline for tribunals to deliver their award remains the same, i.e., three months from the closure of the proceedings under Article 31.2 of the Updated HKIAC Rules.
Diversity, Environmental and Other Considerations
The HKIAC Updated Rules introduce a new provision, Article 9A, on diversity. The parties and co-arbitrators are now expressly encouraged to take considerations of diversity into account when designating arbitrators (Article 9A.1) as well as the HKIAC when appointing arbitrators (Article 9A.2). Accordingly, the HKIAC "joins a growing group of institutions which include diversity-related language in their rules" (such as the Belgian Centre for Arbitration and Mediation (CEPANI) (Article 15 of the CEPANI Rules) and the Singapore International Arbitration Centre (SIAC) which has consulted on the proposed inclusion of similar language in the upcoming edition of its Rules).10
Moreover, under Article 13.1, the tribunal is expressly required to adopt suitable procedures for the conduct of the arbitration in order to avoid unnecessary delay or expense, having regard to "information security" and "environmental impact" in addition to the complexity of the issues, the amount in dispute and the effective use of technology as previously provided under the same provision. Further, Article 34.4 provides that any "adverse environmental impact arising out of the parties' conduct in the arbitration" may be taken into account by the tribunal when assessing costs.
With growing concerns pertaining to environmental, social and governance issues (ESG issues), these provisions constitute an attempt to address expectations of users that arbitral institutions and tribunals take these issues into account.11
Preliminary and Other Procedural Issues
Under Article 13.6 of the HKIAC Updated Rules, the tribunal can now "in its discretion" but after having consulted the parties, decide upon any "preliminary issues" or "bifurcate the proceedings", "conduct the arbitration in sequential stages and decide the stage at which any issue or issues shall be determined". These important powers, previously accepted in practice, are now expressly included in the Rules.12 Under Article 43 of the 2018 HKIAC Rules, it was only possible for the tribunal to decide, at the request of one party (and after consultation with the other party), upon "one or more points of law or fact by way of early determination procedure". Therefore, the new Article 13.6 extends the tribunal's powers in this regard.
Costs, Fees and Expenses
In relation to costs, the HKIAC Updated Rules now provide, under Article 34.4, a list of explicit factors that tribunals can take into account when deciding upon the costs of the arbitration:
- the relative success of the parties;
- the scale and complexity of the dispute;
- the conduct of the parties;
- the existence of any outcome-related fee structure agreement;
- any third-party funding arrangement (already provided under Article 34.4 of the 2018 HKIAC Rules);
- any adverse environmental impact.
Regarding the tribunal's fees and expenses, the Centre is empowered, according to paragraph 5.1 of Schedule 2, to review and adjust the fees and expenses of the tribunal when its remuneration is based on hourly rates. Moreover, according to paragraph 5 of Schedule 3, the Centre now has the final word in determining the amount of fees and expenses to be paid to the arbitrators when their remuneration is based on the sum in dispute, taking into consideration the work done by the tribunal and the complexity of the subject matter. These provisions will undoubtedly bring more confidence into the arbitral process. They have been described as a "safety valve".13
According to the Centre, many changes in the HKIAC Updated Rules "reflect and codify HKIAC's existing practice" and are now fully in line with the Centre's approach regarding diversity and environmental concerns.14
Footnotes
1. HKIAC, HKIAC releases 2024 Administered Arbitration Rules (effective 1 June 2024), available at https://hkiac.org/news/hkiac-releases-2024-administered-arbitration-rules-effective-1-june-2024 (last accessed 31 May 2024).
2. Herbert Smith Freehills, HKIAC Launches Updated Rules, available at https://www.herbertsmithfreehills.com/notes/arbitration/2024-05/hkiac-launches-updated-rules/ (last accessed 31 May 2024).
3. Herbert Smith Freehills, HKIAC Launches Updated Rules, available at https://www.herbertsmithfreehills.com/notes/arbitration/2024-05/hkiac-launches-updated-rules/ (last accessed 31 May 2024).
4. T. Tse, The 2024 HKIAC Rules and ICCA Congress 2024: A Leap Forward, https://www.cliffordchance.com/insights/resources/blogs/arbitration-insights/2024/05/the-2024-hkiac-rules-and-icca-congress-leap-forward.html (last accessed, 31 May 2024).
5. HKIAC, HKIAC releases 2024 Administered Arbitration Rules (effective 1 June 2024), available at https://hkiac.org/news/hkiac-releases-2024-administered-arbitration-rules-effective-1-june-2024 (last accessed 31 May 2024).
6. T. Fisher, HKIAC Releases New Rules, available at https://globalarbitrationreview.com/article/hkiac-releases-new-rules (last accessed 31 May 2024).
7. 2018 HKIAC Rules, Article 13.7, which only provided for communication of "any change or addition"; Herbert Smith Freehills, HKIAC Launches Updated Rules, available at https://www.herbertsmithfreehills.com/notes/arbitration/2024-05/hkiac-launches-updated-rules/ (last accessed 31 May 2024).
8. Herbert Smith Freehills, HKIAC Launches Updated Rules, available at https://www.herbertsmithfreehills.com/notes/arbitration/2024-05/hkiac-launches-updated-rules/ (last accessed 31 May 2024).
9. T. Fisher, HKIAC Releases New Rules, available at https://globalarbitrationreview.com/article/hkiac-releases-new-rules (last accessed 31 May 2024).
10. Herbert Smith Freehills, HKIAC Launches Updated Rules, available at https://www.herbertsmithfreehills.com/notes/arbitration/2024-05/hkiac-launches-updated-rules/ (last accessed 31 May 2024).
11. Herbert Smith Freehills, HKIAC Launches Updated Rules, available at https://www.herbertsmithfreehills.com/notes/arbitration/2024-05/hkiac-launches-updated-rules/ (last accessed 31 May 2024).
12. Herbert Smith Freehills, HKIAC Launches Updated Rules, available at https://www.herbertsmithfreehills.com/notes/arbitration/2024-05/hkiac-launches-updated-rules/ (last accessed 31 May 2024).
13. Herbert Smith Freehills, HKIAC Launches Updated Rules, available at https://www.herbertsmithfreehills.com/notes/arbitration/2024-05/hkiac-launches-updated-rules/ (last accessed 31 May 2024).
14. HKIAC, HKIAC releases 2024 Administered Arbitration Rules (effective 1 June 2024), available at https://hkiac.org/news/hkiac-releases-2024-administered-arbitration-rules-effective-1-june-2024 (last accessed 31 May 2024).
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