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Hong Kong Arbitration: 2024 – An exciting year ahead

Briefing
10 May 2024
7 MIN READ
1 AUTHOR

2023 has been an exciting year of arbitration in Hong Kong. Important arbitration events were back in full swing following the lifting of all COVID measures, facilitating lively exchanges between delegates at events including the 2023 Hong Kong Summit on Commercial Dispute Resolution and the 2023 Hong Kong Arbitration Week, both of which took place in October 2023. Consultation sessions on proposed amendments to the HKIAC’s 2018 Administered Arbitration Rules (the HKIAC’s Rules) (which will be further discussed below) also took place in late 2023.

Also in October 20231, the HKIAC announced receipt of the 100th application under The Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings by the Courts of the Mainland and the Hong Kong Special Administrative Region (which came into force on 1 October 2019) (the Arrangement). Under the Arrangement, parties to Hong Kong-seated arbitrations can seek interim relief directly from mainland courts with acceptance letters issued by the HKIAC. Among the 100 applications with acceptance letters issued, 69 decisions were issued by mainland courts which had granted interim relief in 65 applications preserving assets totalling RMB 15.8 billion.

Landmark arbitration-related judgments were also handed down by the Hong Kong courts in 2023, including:

  • C v D [2023] HKCFA 16: the Court of Final Appeal (the CFA) confirmed that in absence of a contrary agreement, compliance with pre-arbitration conditions is a matter of admissibility of a particular claim to arbitration which is not amendable to review by the court, limiting judicial intervention in the arbitral process2;
  • Guy Kwok-Hung Lam v Tor Asia Credit Master Fund LP [2023] HKCFA 9: the CFA made its landmark decision that the court should not exercise its jurisdiction in a bankruptcy petition if the underlying disputed debt is subject to an exclusive jurisdiction clause (Guy Lam Approach), paving the way for the extended application of arbitration clauses in winding-up proceedings (which will be further discussed below);
  • Song Lihua v Lee Chee Hon [2023] HKCFI 1954: the Court of First Instance (the CFI) confirmed that an arbitrator will not be compelled to give evidence in proceedings which challenge his or her awards, upholding the independence and immunity of arbitrators; and
  • Sky Power Construction Engineering Limited v Iraero Airlines JSC [2023] HKCFI 1558: the CFI upheld the case management power of arbitral tribunals to hold fully virtual arbitration hearings.

Looking ahead to 2024

A number of important events have already taken place so far in 2024, with more to come:

on 3 May 2024, the HKIAC announced its new Rules which come into effect on 1 June 2024. Major amendments and their implications are discussed below;

  1. Joanne Lau, an experienced arbitration specialist, joined the HKIAC as Secretary-General with effect from 26 February 2024;
  2. the HKIAC released its Hong Kong arbitration statistics for 2023 on 6 March 2024;
  3. more interim measures in aid of Hong Kong arbitral proceedings will likely be granted by mainland courts;
  4. the application of the Guy Lam Approach in winding-up proceedings involving arbitration clauses was clarified by the Court of Appeal on 23 April 2024 (see below); and
  5. more landmark international arbitration events were held in Hong Kong including the Congress of International Council for Commercial Arbitration (ICCA) from 5 to 8 May 2024, further emphasising the importance of Hong Kong as an international arbitration centre.

Amendments to the HKIAC’s Rules

Major amendments include:

  • additional provisions which encourage diversity when appointing arbitrators;
  • enhancement of the HKIAC’s role and powers to preserve the efficiency and integrity of arbitrations;
  • additional provisions addressing information security and environmental considerations in arbitrations;
  • clarification of arbitral tribunals’ case management powers to make preliminary determinations on issues that it considers would dispose of all or part of the case and adopt efficient procedures;
  • strengthened mechanism to proceed with a single arbitration under multiple contracts; and
  • revised provisions to include additional factors to consider when determining costs of arbitration in awards.

With the proposed adoption of factors including outcome related fee arrangements (ORFA) in costs consideration under the HKAIC’s Rules, the number of arbitrations under flexible fee arrangements in Hong Kong will likely continue its rising trend in 2024, maintaining Hong Kong arbitration’s competitiveness with other jurisdictions where ORFA arrangements are highly popular.

More interim measures in aid of Hong Kong arbitral proceedings

As of 26 January 2024, HKIAC has issued acceptance letters for 106 applications where assets with total value of RMB 27 billion were requested to be preserved. Among the 106 applications, 80.7% of the applicants were from foreign applicants and 71 decisions were issued by mainland courts, granting interim relief in 67 applications, preserving assets totalling RMB 16.3 billion.

With the rising trend of applications and the high success rate of obtaining interim relief in mainland courts, we anticipate that the number of applications for interim relief measures under the Arrangement will continue to increase in 2024. The effective mechanism of the Arrangement may also attract more foreign parties to choose Hong Kong as their preferred seat of arbitration and commence their arbitration in Hong Kong for disputes involving parties which hold substantial mainland assets.

Further clarification of the application of Guy Lam Approach

Despite the CFA’s decision on the Guy Lam Approach, whether the approach would extend to general arbitration clauses in winding-up proceedings was uncertain with inconsistent CFI decisions in second half of 2023.

In Re Simplicity & Vogue Retailing (HK) Co., Ltd [2023] HKCFI 1443, Linda Chan J held that the Guy Lam Approach would not apply to general arbitration clauses in winding-up proceedings and made a winding-up order against the company on basis of failing to pay security in time despite the existence of an arbitration clause in the underlying bond and guarantee documents. However, subsequently in Re Shandong Chenming Paper Holdings Limited [2023] HKCFI 2065 (Re Shandong Chenming), Harris J took a different view and held that the Guy Lam Approach would equally apply to an arbitration clause in a winding-up petition.

The Court of Appeal’s judgments of 23 April 2024 will be the subject of a separate article. However, in summary the court held that the Guy Lam Approach could be applied to cases concerning arbitration agreements and that the approach to be taken by the court should be ‘multi-factorial’.

Conclusion

2024 is anticipated to be another important and exciting year of arbitration in Hong Kong. The number of international arbitrations taking place in Hong Kong will likely increase and Hong Kong will remain a leading choice of seat for international arbitration.

Footnotes

  1. Highest Court in Hong Kong Clarifies the Limits of Judicial Intervention in the Arbitral Process, HFW International Arbitration, October 2023
  2. HKIAC receives 100th application under PRC-HK Interim Measures Arrangement
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