HKIAC Arbitration in Hong Kong – A Case Illustration 27 March 2014 Joe Liu, Assistant Managing Counsel, HKIAC

Three On-demand Bank Guarantees in favour of A Sub-Contract D India CONTRACT Date of delivery: 27 April 2024 Tour OperatorJet Builder Court proceedings against D C China Temporary close down Payment Request Setting the scene … * The Contract and Sub-Contract each provides for HKIAC arbitration seated in Hong Kong. * Each Bank Guarantee provides for HKIAC arbitration seated in London.

Applicable arbitration law and rules –What is the applicable arbitration law? The Arbitration Ordinance (Cap. 609) (“AO”) – modern and user- friendly »Commenced on 1 June 2011, subsequently amended in 2013 »Based on UNCITRAL Model Law, as amended in 2006 »One legislation applies to international and domestic arbitrations –What are the applicable arbitration rules? 2013 HKIAC Administered Arbitration Rules (“HKIAC Rules”) – one of the best developments of 2013, nominated by GAR »Came into force on 1 November 2013 »Effective control of time and costs »Well catered to high-value and complex international arbitrations

The supervisory courts and arbitral institution –Which courts have the supervisory jurisdiction? The Hong Kong courts – long-established reputation for supporting arbitration »Judicial independence »Ranked 4 th out of 148 countries in the index of judicial independence in the World Economic Forum’s “Global Competitiveness Report ” »Retained the common law system since 1841 »Specialist judge under the “Construction and Arbitration List” »Extremely supportive of arbitration and reluctant to intervene »Excellent track record in enforcement of arbitral awards –Which institution administers the arbitral proceedings? HKIAC – a leading arbitral institution in the world »Established in 1985 »Independent and non-profit organisation »Multilingual and experienced Secretariat, featuring “light touch” approach »One-stop services, including arbitration, mediation, and domain name dispute services »State-of-the-art facilities located in the centre of Hong Kong

Division of responsibilities between HKIAC and the HK courts –Examples of HKIAC’s functions under the AO: »Determining the number of arbitrators »Appointing arbitrators and mediators –Examples of the HK courts’ functions under the AO: »Deciding challenge of an arbitrator if such challenge was rejected in the first instance »Reviewing an arbitral tribunal’s decision that it has jurisdiction over a dispute »Issuing interim relief in support of arbitration »Assisting in taking evidence »Enforcing orders and directions of an arbitral tribunal and emergency relief of an emergency arbitrator »Enforcing arbitral awards and deciding challenge to arbitral awards »Opt-in functions, including: »Consolidating arbitral proceedings and ordering concurrent hearings »Deciding challenge to awards based on serious irregularity »Deciding appeal against awards on question of law

Turning to the case … – What HKIAC arbitration in Hong Kong can offer?

The dispute between A and B –Arbitral proceedings & awards and related court proceedings are confidential (Sections 16 to 18 of the AO; Article 42 of the HKIAC Rules) –A wide range of interim relief by the arbitral tribunal and courts available, including: »Various forms of interim measures, including injunctive relief »Preliminary orders »Security for costs »Court-ordered interim relief in support of foreign arbitrations which have been or are to be commenced (Part 6 and section 56 of the AO; Articles 23 and 24 of the HKIAC Rules) –Emergency relief available (Articles 23.1 and Schedule 4 of the HKIAC Rules) –Expedited procedures available, provided that: »the amount in dispute does not exceed HK$ 25 million; »the parties so agree; or »in cases of exceptional urgency (Article 41 of HKIAC Rules)

The dispute involving C –Consolidation of multiple arbitrations »A, B or C may apply to HKIAC to consolidate the arbitration between A and B and the arbitration between A and C, provided that: »A common question of law or fact arises in both arbitrations »The relief claimed arises out of the same or series of transactions »The arbitration clauses in both contracts are compatible »The Hong Kong Court of First Instance can consolidate the arbitrations or order concurrent hearings, if the parties opted in the relevant provisions of the AO in writing (Article 28 of the HKIAC Rules; section 2 of Schedule 2 of the AO) –Med-Arb and/or Arb-Med procedures available (sections 32 and 33 of the AO)

The dispute involving D –Single arbitration under multiple contracts (Article 29 of the HKIAC Rules) »A may commence a single arbitration against D under the three bank guarantees, provided that: »A and D are bound by each arbitration agreement giving rise to the arbitration »A common question of law or fact arises under each arbitration agreement giving rise to the arbitration »The relief claimed arises out of the same or series of transactions »The arbitration agreements under which the claims are made are compatible –Joinder of an additional party, i.e. B (Article 27 of the HKIAC Rules) »An additional party may be joined if, prima facie, it is bound by an arbitration agreement under the HKIAC Rules giving rise to the arbitration »The arbitral tribunal has the power to join an additional party on a prima facie basis »HKIAC has the power to join an additional party on a prima facie basis, before the constitution of the tribunal –Enforceable emergency relief or interim relief available to restrain B from pursuing the court proceedings in India »Emergency relief and interim relief issued outside Hong Kong are enforceable in Hong Kong (sections 22B and 61 of the AO)

What are the costs? –Key components of the costs of an arbitration (Article 33 of the HKIAC Rules) »The fees of the arbitral tribunal »HKIAC’s administrative fees »Reasonable costs for legal representation »Reasonable costs of any expert advice and of any other assistance required by the tribunal »Reasonable travel and other expenses of any witnesses and experts –Twin-track regime for determining the fees of the arbitral tribunal (Articles 9&10 and Schedules 2&3 of the HKIAC Rules) »By hourly rates (default option) »By the amount in dispute »Standard terms and conditions –The arbitral tribunal may limit the recoverable costs to a specified amount (Section 57 of the AO; Article 33.3 of the HKIAC Rules) –The arbitral tribunal may award and allocate the costs of the arbitration (Section 74 of the AO; Article 33 of the HKIAC Rules) –HKIAC determines the costs of the arbitration when the arbitration is terminated or settled (Article 33.5 of the HKIAC Rules)

Enforceability of arbitral awards (1) –Arbitral awards made in Hong Kong are enforceable in the locations of all the parties and over 140 other jurisdictions »Enforceable in all contracting states of the New York Convention, e.g. Mongolia »Enforceable in mainland China and Macau (the relevant reciprocal arrangements in 1999 and 2013) »Enforceable in India (HK added to India’s list of gazetted jurisdictions for enforcement purposes in March 2012) –The HK courts’ approach to the enforcement of arbitral awards »Enforcement should be “as mechanistic as possible” »Narrow construction of grounds for non-enforcement »Residual discretion to enforce an award despite the proven existence of a valid ground »Indemnity costs principle

Enforceability of arbitral awards (2) –Statistics of enforcement of awards in Hong Kong from 2008 to July 2013 YearLeave to enforce award as judgment Leave granted without challenge Application to set aside order Successful application to set aside (granted ex parte by consent) (until July)9000

Mongolia Arbitration Law – areas for improvement Selected issues to be considered when amending the Arbitration Law of Mongolia –Following UNCITRAL Model Law, as amended in 2006 –Codifying the arbitration law into one legislation –Reviewing the provisions on arbitrability (Articles 6 & 7) –Permitting the delivery and receipt of electronic communications (Article 9) –Reviewing the restrictions on who can act as an arbitrator (Article 15.2) –Removing Mongolian as the default language of the arbitration (Article 26) –Clarifying the scope of the confidentiality provisions (Article 32) –Expressly allowing the Mongolian courts to issue interim relief in support of foreign arbitrations (Article 13) –Allowing orders or directions (including interim or emergency relief) issued by an arbitral tribunal or an emergency arbitrator in or outside Mongolia to be enforceable in Mongolia –Affording the arbitral tribunal greater flexibility in allocating costs (Article 41.4) –Expressly providing that the arbitration law apply to any arbitration agreement to which the Mongolian government is a party –Any innovative mechanism particularly suitable for disputes in Mongolia?

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