d5s19 - NI HKG

logo HK branch
HK flag
Go to content
archive > archive documents
 
Nautical Institute Hong Kong Branch Seminar
2001
The Port of Hong Kong- Past, Present and
Future
30 November 2001
Marco Polo Hong Kong Hotel
Arbitration in Hong Kong
Christopher To
Abstract
It has been 16 years since the doors of the Hong Kong International Arbitration Centre
GIKIAC) opened for business. During this period, there have been many ground breaking
developments as well as set backs but on the whole Hong Kong has stood the test of time and
has proven to be a significant regional and intemational arbitration centre that commands the
respect of the intemational community at large.
Why should this be, considering Hong Kong merely occupies 1,095 sq.km. in area. In fact,
Hong Kong is uniquely placed to provide dispute resolution services. Its empathy with the
Asian traditions of mediation and its skill at blending the best of east and west have created
the prime centre in Asia for the resolution of disputes. Geographically convenient, on the
South Eastern tip of China, surrounded by the South China Sea. Hong Kong is indeed
superbly well served in communications transport and accommodation, it has for some time
been and continues to be the international Shipping and financial capital of Asia. According
to the Trade Development Council statistics’, Hong Kong is ranked the world’s 2"“ highest per
capita holding of foreign currency, the 2"“ largest source of outward foreign direct investment
in Asia, the world’s 3“ largest foreign exchange reserves holding, the world’s most service-
oriented economy and the world’s freest economy.
_______________________________________________________________________
Adapted from a paper written by the author for the Inter-Pacific Bar Association 11 Annual Meeting and
Conference April 22-26,
2001, Tokyo.
2 Secretary General of the Hong Kong International Arbitration Centre.
3 See website : www.tdctrade.com/maim/economic.htm



With China’s imminent entry to the World Trade Organisation and the forthcoming 2008
summer Olympic Games in Beijing, Hong Kong is without doubt in a prime position to
capitalise on its expertise in the various service sectors, and in particular in the field of
arbitration. For example, according to Article 21 “ Surveillance of Implementation of
Recommendations and Rulings” of the WTO’s “Understanding on Rules and Procedures
Goveming the settlement of disputes“ binding arbitration shall be the means in which
disputes between Governments (members of WTO) are resolved.
This paper will focus on the developments of arbitration generally in Hong Kong and that at
the Hong Kong International Arbitration Centre (HKIAC) with particular emphasis on its
achievements and its vision for the future.

Introduction
Arbitration in Hong Kong began its roots as early as in 18345, when Hong Kong was then the
major trading port for traders and British Merchants in the Asia Pacific Region. It is not so
difficult to visualise the arbitration process in those days. Two traders of different
nationality in dispute over the quality of flour delivered, would turn to a third person whom
they both respected and trust for his advise and decision:
"Commercial arbitration must have existed since the dawn of commerce. All
trade potentially involves disputes, and successful trade must have a means of
dispute resolution other than force. From the start, it must have involved a
neutral determination, and an agreement, tacit or otherwise, to abide by the result,
backed by some kind of sanction. It must have taken many forms, with mediation
no doubt merging into adjudication. The story is now lost forever. Even for
historical times it is impossible to piece together the details, as will readily be
understood by anyone who nowadays attempts to obtain reliable statistics on the
current incidence and varieties of arbitrations. Private dispute resolution has
always been resolutely private. "
__________________________________________

5 See Derek Roebuck, Captain Charles Elliot RN, Arbitrator : Dispute Resolution in China Waters 1834-1836, 14
Axb.Int’l s9-116 (1998).





Fonnal legislation7 did not emerge in Hong Kong until 19638. This legislation in principle
mirrored on the then English Arbitration Act 1950 and was based on a unitary system,
whereby both the domestic and international arbitrations came under the same legal
framework. From this point, the arbitration process in Hong Kong began to lose its
simplicity. Through time, it has become more adaptive, more complex, and more legalistic
and more structured thus making Hong Kong an impressive and robust arbitration venue for
international arbitrations.

In 1979, the then Attorney General, John Griffiths QC began a process of reinvigorating a less
than active Law Reform Commission. England had than recently modernised its law on
arbitration” and one of the first tasks that the newly revitalise Law Reform Commission was
given to consider if Hong Kong should follow in that matter. Detailed research and analysis
into the subject resulted in the Commission publishing a report that recommended, inter alia,
the adoption of a modern arbitration regime with suggestions to tailor the proposed new law
to local conditions. As a result, the Arbitration (Amendment) Ordinance 1982 came into
force in October 1982. Key features of the 1982 Arbitration Ordinance include the
 
distinction between domestic arbitrations and international arbitrations”, pennitting foreign
counsel to handle international arbitrations in Hong Kong on behalf of their clients“ and
allowing the same conciliatorn to subsequently act as arbitrator if the conciliation process
breaks down“. All these were aimed at making Hong Kong an ideal place to conduct
international arbitrations and mediations.

In 1972, the Hong Kong Branch of the Chartered Institute of Arbitrators was formed, and it
was reported that those members of the branch who were active as arbitrators conducted five
arbitrations annually between 1978 and 1980. While during the same period, the Hong
Kong General Chamber of Commerce" conducted four arbitrations yearly. This giving a
figure of less than ten arbitrations per year. Members of the Law Reform Commission
__________________________________________________________________________________
6 Mustill, Arbitration : History and Background, Journal of Intemational Arbitration, Page 43, (1989).
7 Arbitration Ordinance (Chapter 341), see www.justice.gov.hk for the text of the Ordinance.
E See Robert Morgan, The Arbitration Ordinance of Hong Kong: A Commentary (Hong Kong: Butterworths
Asia, 1997).
9 English Arbitration Act 1979.
‘° See Arbitration Ordinance, 1982, Ch 341 (HK), reprinted in [ Commercial Arbitration Law in Asia and the
Pacific] Int’l Corn. Arb. (Oceana Publications) No.4, HK 1 (September 1987).
“ See Arbitration Ordinance, 1982. Ch 341 (BK) section 20.
“ See Arbitration Ordinance, 2000, Ch 341 (BK) section 2 “conciliation” includes mediation.
" See Arbitration Ordinance, 1982. Ch 34l(I-1K) section 2A.
“‘ Acting as an agent on and behalf of the International Chamber of Commerce




believed that the main reason for few arbitrations taking place in Hong Kong was the lack of
suitable and convenient arbitration facilities to assist disputants and their legal
representatives“ should such disputes arise. With this in mind, the Attorney General then
considered if there might be a possibility of Hong Kong developing into an
International/Regional Arbitration Centre. In order to test this possibility, a Steering
Committee was established on the 10 December 1982 under the Chairmanship of Mr. Justice
Hunter to advise on ways and means by which Hong Kong could become a leading Centre for
the conduct of both domestic and international commercial arbitrations.

On 17 January 1983, the Steering Committee had its first meeting and established two sub-
committees, one for Rules and the other for the Structure and Finance of a proposed Hong
Kong International Arbitration Centre. Both sub-committees met on a regular basis and
reported their findings to the Steering Committee, which resulted in an Interim Report being
published on 15 December 1983. Some of the Key findings of the report were :-

. The suggested adoption of the United Nations Commission on International
 
Trade Law (UNCITRAL)' 6 Arbitration Rules for International Arbitrations;
. Adoption of Rules for domestic arbitration” which include a provision for the
proposed Centre to be appointed as Nominating Authority for Arbitrators;
.The need to solicit support from the Hong Kong professional and business
communities for the proposed Centre as well as the Hong Kong Government;
. The proposed Centre should be legally established as a company limited by
guarantee under the name of the "Hong Kong International Arbitration
Centre Limited
. The proposed Centre should be operated by a Co-ordinator Administrator;
and
. The recognition of the need to compile a list of suitable arbitrators.
_________________________________________________________
" See the Law Reform Commission of Hong Kong, Repon on Commercial Arbitration, 11 December 1981, at 4-
S and 31.
‘“ The UNCITRAL Model Law on Intemational Commercial Arbitration adopted by the United Nation
Commission on Itttemational Trade Law on the 21 June 1985.

 
The only major hurdle that the Steering Committee perceived which could hinder the
establishment of the proposed Centre was the securing of funding to sustain the organisation’s
long-term viability. The then Financial Secretary, Sir John Bembridge, was not sympathetic
to the idea of having Govemment Funds channelled for use in assisting the establishment of a
Centre of such nature. However, with the persuasive assistance of the then Secretary for
Economic Services, Sir Piers Jacobs, and the exceptional negotiation skills of Mr. Justice
Hunter, the Hong Kong Government agreed to assist on the basis that for every dollar raised
from the private sector, the Government would match it. That was indeed a challenge for the
Steering Committee, given that the economy at the time was facing hard times.
Nevertheless a break-through came when 13 leading professional and business organisations
contributed initial funds. That, together with a Hong Kong Government grant and an offer to
make available premises at a nominal rent in the Old Central Magistracy Building for the
proposed Centre’s day-to-day operations, all happened within a short period of time. As a
result, the Hong Kong International Arbitration Centre (HKIAC) was established on 21 May
1985. As a not-for-profit company limited by guarantee and which on 5 July 1985 was
granted charitable status. In the first year of operation the Centre handled 9 cases. This
compares to 298 cases in 2000.

Three years after its establishment, the Centre was faced with the problem that its initial funds
were running out. On the 21 June 1989, the Finance Committee of the Hong Kong
Legislative Council (LegCo) endorsed a proposal from the Hong Kong Government to make a
grant of HK$19.1 million“ to the I-IKIAC, the income from which plus a certain amount of
the capital would be utilised to cover the Centre’s operations. With those injected funds, the
financial independence of the IH(IAC became secure.

Arbitration Law Reforms
In 1985 the United Nations adopted the UNCITRAL Model Law. While in 1986, the United
Kingdom, the Departmental Advisory Committee on Arbitration Law did not feel that the
adoption of the Model Law” was appropriate at the time. Hong Kong once again, did not
follow in the footsteps of the United Kingdom and on the recommendation of the Law Reform

'7 See HKIAC Website maM.hkiac_o.tg for details of the HKIAC Domestic Arbitration Rules.
‘K Reported in the South China Morning Post on 22 June 1989.
1’ See Robert Morgan, The Arbitration Ordinance of Hong Kong: A Commentary ( Butterworths Asia, Hong
Kong, 1997), at 6,9.





Commission further refinements to the Arbitration Ordinance” came into force on 6 April
1990. One of these refinements included the adoption of the UNCITRAL Model Law with
only three minor changes in Hong Kong for international arbitrations. These minor changes
were:-
l. The word "commercial" in the definition “international commercial
arbitration” was omitted.
2. The power of an arbitrator to award interest and costs, was made clear.
3. Chapter 8 of the Model Law (dealing with the arbitration agreement and the
substantive claim before the Court) was excluded.

Prior to this enactment, there were fears expressed by in the legal community, that the Courts
would be beset with applications involving the interpretation of the Model Law, especially
Article 1, which deals with the scope of applicability. These fears however have proven to
be groundless and in fact the Model Law has been shown to be a highly effective law for
international commercial arbitration.

“The committee [HKIAC] takes the view that the Model Law has proved
eflective and relatively trouble free in international arbitrations and that
its incorporation in the Arbitration Ordinance in 1989 has undoubtedly
assisted in elevating Hong Kong to a prominent position in the global
community as a venue favourable to international arbitration Part of
the attraction of the [UNCITRAL] Model Law is that it is accessible to
the consumers, both arbitrators and parties themselves; it is a logically
arranged code of provisions which may be understood without recourse
to extensive case law and the role of the courts is strictly limited. It is
also attractive because it gives a sufiicient degree of control to
arbitrators whilst respecting always the autonomy of the parties.
Moreover, it operates according to principles, which are known and
respected worldwide. It is regarded, therefore as an attractive balance
between total party autonomy, on the one hand, and protection of the
 
public interest, on the other. "21
________________________________________________________________
20 The Arbitration (Amendment)(No.2) Ordinance (No.64 of 1989) received the Govemor’s assent on 23
November 1989 and took effect on the 6 April 1990.
21 See the HKIAC — Report of the Cornmitiee on Arbitration Law, Page 3 at 1.1.8.


 
This has, in turn, led to the widespread citation and application of foreign judicial authority in
the Courts of Hong Kong in considering the meaning and application of the Model Law.
Furthermore, Hong Kong case law is widely cited in the courts and arbitration textbooks of
other countries and forms a large and significant part of UNCITRAL’s own case law
database“. Nevertheless the Model Law was not as perfect as all would have thought,
criticisms of the Model Law include:-
- The definition of “agreement in writing” in article 7(2) of the Model Law can
cause difficulties, especially when the agreement may have been in writing but
for the lack of a signature from either party may be fatal”. The article also did
not take into consideration modern principles of business dealings“, especially
when contractual documents or a written contract containing an arbitration
clause does not require a signature”;

- The problems of appointing three arbitrators under article 10(2) of the Model
Law, especially when the procedural expense involved in appointing three
arbitrators could be significant to the extend that a weaker party may be deterred
fi'om prosecuting or defending its case for fear of the costs being out of all
proportion to the amount in dispute;

- Under article 11 of the Model Law, the former High Court had the statutory
jurisdiction to make default appointments of arbitrators in international cases
where the parties had failed to agree or where the appointment mechanism had
broken down either through one party not co-operating in the process or the
designated default appointing authority fails to carry out its filnction as
stipulated in the contractual agreement. By allowing the Court to perform
these functions had in fact added extra expense, unnecessary bureaucracy and
not to mention the time taken to get an arbitrator appointed had been severely
delayed, especially when there is a need to serve the application and the court’s
order out of the jurisdiction.
____________________________________________________________
22 See Website www.uncitral.org/en-index.htm for the case law on UNCITRAL texts (CLOUT) and Yearbook
Commercial Arbitration (Klumer, The Hague), the annual publication of the Intemational Council for
Commercial Arbitration.
23 See H Slnal Ltd v Goldroyce Garment Ltd [l994]2 HKC 526.
1" See Neil Kaplan’s Goff Lecture of 1995: Is the Need for Writing as expressed in the New York Convention
and the Model Law out of step with Commercial Practice? (1996)5 APLR 1,1-23. See also Neil Kaplan: The
Essentials of Any New Arbitration Law (1997) 5 APLR 2, 1-13.





- Under article 17 of the Model Law, there is no precise definition as to what powers
the tribunal may have to order interim measures of protection.
- One crucial factor conceming any arbitral appointing authority is the issue of
immunity from prosecution for its self and its arbitrators.

These criticisms were not intentional, in fact UNCITRAL wanted the Model Law to be
adaptive to address certain aspects of the arbitration process, while diverse enough to
encompass different legal cultures and norms. Each country’s procedural law would handle
issues, which have not been catered for in the Model Law, individually.
After three years of debating as to whether to adopt the Model Law, England began to favour
adopting the Model Law within its new Arbitration Act“.

With the transfer of sovereignty over Hong Kong from the United Kingdom to the People’s
 
Republic of China, Hong Kong’s arbitration law was again reviewed and, in January 1992, at
the request of the then Attomey General, a Committee” of the HKIAC was established under
the Chairmanship of Mr. Justice Kaplan, with the objective of considering if the Arbitration
Ordinance should be amended once again in light of amendments made to the Arbitration Act
in England and Wales which finally became part of the Arbitration Act 1996,
The Committee’s terms of reference were defined as :-
“To  consider whether the Arbitration Ordinance requires any, and if so, what
amendments particularly in the light of the I May I991 draft of a new Arbitration
Act prepared by Basil Eckersley or any subsequent versions thereof "29

Other legislative reforms including the Netherlands Arbitration Act 19863” and the
Singapore International Arbitration Act“ were reviewed and considered by the Committee.
__________________________________________________________
25 Examples include Bills of Lading, Shipbrokers’ notes and Ll0yd’s Open Form salvage agreement.
26 See Robert Morgan, The Arbitration Ordinance of Hong Kong: A Commentary (Butterworths Asia, Hong
Kong, 1997), at 9.
27 HKIAC Arbitration Law Committee.
28 See the text of the Arbitration Act at www.epms.nl/arbit/England_Arbit1ation_Act_l996.html .
29 See the HKIAC — Report of the Committee on Arbitration Law, Page 1 at 1.1.1.
30 See Pieter Sanders and Albert Jan van den Berg, The Netherlands Arbitration Act 1986 : English text and
notes ( Deventer; Boston: Kluwer Law and Taxation Publishers, 1987).
31 See the Singapore International Arbitration Act (Chapter 143A) passed in 1994 and took effect on 25
 
January 1995 at www.siac.org.sg/cl43a.html .

 
On 18 December 1996, the Arbitration (Amendment) Ordinance 1996 was passed“, just two
days following the English Arbitration Act 1996 (Commencement No.1) Order 1996 being
issued”. The 1996 Ordinance enacted the proposals of the Committee to harmonise Hong
Kong’s domestic and intemational arbitration laws by introducing provisions of common
application to both domestic and intemational arbitrations and applying certain provisions of
the UNCITRAL Model Law to domestic arbitrations“. The main reasons for such
suggestions stem from the domestic provisions of the Arbitration Ordinance. In that the
domestic provisions were not set out in a logical, systematic order and did not provide for
fimdamental powers in the tribunal such as the power to decide whether or not there should be
an oral hearing in the absence of party agreement.

Based on these, the newly enacted provisions aimed to provide and to promote greater party
autonomy, ensure the primacy of the arbitral tribunal’s authority to conduct proceedings
effectively and expeditiously and to minimise the power of the Courts to intervene in
arbitrations or to scrutinise awards once made.

Some of the points covered in those amendments were” :-
1. Stay of legal proceedings in relation to arbitration.
2. Appointment of arbitrators and umpires.
3. Decision on the number of arbitrators.
4. Overriding duties of the arbitral tribunal.
5. Powers of the arbitral tribunal.
6. Provisions relating to awards.
7. The fees and expenses of the tribunal and limitation of the cost of the
arbitration.
8. Immunity from legal action of arbitrators, umpires and arbitral institutions.
__________________________________________________________________
32 Received the Governor’s assent on 24 December 1996 and took effect on the 27 June 1997.
33 See 12 Mealey’s 1nt’l Arb. Report ( January 1997), at E-1.
34 See Robert Morgan, Hong Kong Arbitration in Transition: The Arbitration (Amendment) Ordinance 1996, 13
Mealey’s Int’l Arb. Report. 18 (April 1998).
35 See Robert Morgan, Hong Kong Arbitration in Transition: The Arbitration (Amendment) Ordinance 1996 Part
I and II in Sweet and Maxwell Int’l Arb. Law Review.




That newly enacted legislation includes provisions allowing parties who have entered into
arbitration agreements but have not agreed on an appointing authority to apply directly to the
I-IKIAC if they are unable to agree a tribunal. The Committee consulted the views of
arbitration practitioners“ and considered that the dual system of arbitration law had work well
in Hong Kong but were of the view that greater harmonisation between the domestic and
international provisions of the Ordinance, leading to a unitary system of arbitration law based
on the Model Law would simplify the arbitration process, making Hong Kong a highly attract
place to continue to conduct both domestic and international arbitrations.

On the 1 July 1997, the People’s Republic of China (P.R.C.) resumed sovereignty over Hong
Kong and the transition has proven generally to be successful. However, there was an issue,
which affected arbitration in Hong Kong which took two years to resolve and that was the
mechanism by which arbitral awards made in the Hong Kong Special Administrative Region
Q-IKSAR) could be enforced in the P.R.C. and vice-versa. This issue was highlighted by the
decision of Findlay J in Ng Fung Hong Ltd v ABC", one of the few reported cases where an
application to enforce an arbitration award has failed at the initial ex parte stage. Justice
Findlay held that section ZGG” of the Arbitration Ordinance did not avail the enforcement in
Hong Kong of Mainland arbitration awards. This matter was finally resolved in 21 June
1999, whereby a Memorandum of Understanding was signed by both the P.R.C. and the
HKSAR Governments to ensure that arbitral awards made in the HKSAR could be enforced
in the P.R.C. and vice-versa”. On the 5 January 2000, the LegCo passed the Arbitration
(Amendment) Bill 1999 to implement the Memorandum of Understanding” and the
Arbitration Ordinance was once again revised“ to provide for the reciprocal enforcement of
arbitral awards in such matter that it mirrored in all the most important aspects that which
existed prior to the transfer of sovereignty“ and took the form of an insertion to the existing
Arbitration Ordinance“.
_____________________________________________________
36 See the “Peard Questionnaire” of the I-lKI.AC-Report of the Committee on Arbitration Law, Page 1 at 1.1.2.
37 [1998]1HKC 213.
38 Added by the Arbitration (Amendment) Ordinance 1996.
39 Judicial assistance agreement made under article 95 of the Basic Law.
40 See Website www.legco.gov.hk/yr98-99/english/bills/c177_e.htm for details of the Bill.
41 Arbitration (Amendment) Ordinance No. 2 of 2000
42 See Michael Moser, China-Hong Kong Enforcement Arrangement Becomes Effective, Mealey’s Int‘l Arb
Report, March 2000.
43 A new Part IIIA, sections 40A-40G were added.




 
On the 24 January 2000, the Supreme People’s Court issued an armouncement“, in the form
of a judicial interpretation to the same effect Legislation became effective in the Mainland
and HKSAR on 1 February 2000 and was given retrospective effective from from 1 July 1997.
Statistics from the Department of Justice indicate that 40 cases“ have been referred to the
Hong Kong Courts for enforcement of which, 10 arbitral cases have been enforced ( some
pending cases for enforcement are currently going through the motions in the Hong Kong
Courts) since the introduction of the mechanism for reciprocal enforcement of arbitral awards.
Another significant development was the passage of the Arbitration (Amendment) Bill 2000“
on the 14 June 2000 to facilitate the enforcement in Hong Kong of awards made in countries
or territories that are not parties to the New York Convention” including Taiwanese awards.
Prior to 27 June 1997, Taiwanese awards if brought to Hong Kong for enforcement are
usually enforced at the Court’s discretion under the summary procedure provided by the now-
repealed section 2H of the Arbitration Ordinance and those, which govern the enforcement of
domestic awards. The Ng Fung Hong case discussed above, also had an impact on
Taiwanese awards and section ZGG did not avail their enforcement either. The effect of this
new Bill, helps to amend section ZGG making available the enforcement in Hong Kong of all
awards, wherever made. This mechanism finally puts the last piece of the puzzle for Hong
Kong arbitration together, or does it?

In March 1998, the Hong Kong Institute of Arbitrators“ (HKIArb)"9, with the support of the
Secretary for Justice, Ms Elsie Leung, established a Committee on Hong Kong Arbitration
Law under the Chairmanship of Mr. Robin Peard” to continue with the work done by the
HKIAC Committee on Arbitration Law, which was disbanded shortly afier the passage of the
1996 Arbitration Ordinance. The terms of reference of the new HKIArb Committee was
based upon a paragraph in the HKIAC Committee on Arbitration Law report of April 19965‘
as follows :-
___________________________________
44 See Website www.nnfyb.com.cn/html/2000/01/28/00120000128021.htm for details of the arrangement as
passed on 18 June 1999, at the 1069“ meeting of the Judicial Committee of the Supreme People’s Court.
45 As from 1 February 2000 to 31 October 2001.
46 Arbitration (Amendment) (No.2) Ordinance (No.38 of 2000).
47 See Website www.nfo.gov.hk/gia/general/200006/14/0614234.htm for details of the Bill.
48 Formed in 1995, on the reconunenclation of the Steering Group of the then Hong Kong Branch of the
Chartered Institute of Arbitrators (now “The East Asia Branch”).
49 In co-operation with the HKIAC.
50 Deputy Chairperson of the Hong Kong International Arbitration Centre.
51 As submitted to the Attorney General of Hong Kong.




“The [HKIAC] committee therefore proposes that the Arbitration Ordinance,
Cap 341, as amended by the 1996 [Ordinance], should be completely redrawn in
order to apply the [UNCITRAL] Model Law equally to both domestic and
international arbitrations, and arbitration agreements, together with such
additional provisions as are deemed, in the light of experience in Hong Kong and
other Model Law jurisdictions, both necessary and desirable. In the process
the legislation would keep pace with the needs of the modern arbitration
community, domestically and globally, and would free Hong Kong fiom the
outdated and illogically arranged English Arbitration Acts [1950-1979, now
repealed], and the large body of case law on which their interpretation
depends. "52

Although the report of the HKIArb Committee will not be available until the second half of
2001, questions so far considered by the Committee include:-

- Whether the Model Law could be applicable to both domestic and
international arbitrations — The concept of a unitary system of arbitration law,
with the Model Law governing both domestic and intemational regimes”. This
in effect will remove the present provisions permitting parties to opt in or opt
out of either the domestic or the international regime.

- Whether amendments incorporated in the New Zealand Arbitration Act would
be used as the basis to form the new structure of the Ordinance.

- Whether Hong Kong should continue to operate as a Model Law jurisdiction
with elements of ‘add-on’ provisions, which apply to both domestic and
international arbitrations.

- Whether the Hong Kong Arbitration Law should be codified.
_____________________________________________
52 See the HKIAC- Report of the Committee on Arbitration Law, Page 3 and 4 at l.l,9.
53 Refer to paragraph 47 of the United Kingdom Departmental Advisory Committee on Arbitration Law, 1997
Supplementary Report on the Arbitration Act 1996 (1997), which favours the abolition of the distinction
between domestic and international arbitration and the application of the intemational regime throughout.




These questions are a mere tip of the ice-berg towards making the entire Hong Kong
arbitration law unique that commands the respect of the international arbitration community
in terms of user-friendliness, up to date and modern, and above all has the full support of the
judiciary, when such need is required in terms of providing interim measures of support to the
arbitral tribunal, to the enforcement of the arbitration award. On 5 October 2001, Singapore
passed a new Arbitration Bill, which shall be enacted as the Arbitration Act“. This new
Arbitration Act closely aligns the law applicable to domestic arbitration with the provisions of
the Model Law and the Intemational Act, as well as provisions of the Arbitration Act 1996 of
the United Kingdom. In essence, Hong Kong is ahead of Singapore in regards to the
development of the arbitration law.

In the recent Chief Executive of the Hong Kong Special Administrative Region Policy
Address”, The Honourable Tung Chee Hwa mentioned the need to upgrade Hong Kong’s sofl
infiastmcture to take account of the changing global economic landscape with particular
emphasis on the service sector, which account for over 80% of Hong Kong’s Gross Domestic
Product of which professional services such as arbitration are a value-added element.

“the Government has assisted the legal profession in arranging visits to Beijing
for local professional bodies in a bid to extend the market for their services. The
Secretary for Justice has also proposed developing litigation and arbitration
business in Hong Kong to enable Mainland enterprises to negotiate and sign
contracts with foreign enterprises here. If necessary, they could approach our
courts and arbitration bodies to settle contractual disputes. Not only will
Mainland and foreign investors benefit, but new opportunities will be opened up
for our legal profession. This will enhance Hong Kong ’s role as an international
financial and services centre. "56

Addressing the 17"‘ Biennial Law Asia Conference in Christchurch, New Zealand”, The
Honourable Ms. Elsie Leung Oi-sie, Secretary of Justice said, the Hong Kong Government is
committed to providing a favourable environment for promoting Hong Kong as a legal
services hub upon China’s imminent accession to the World Trade Organisation. She believes
____________________________________________________
54 The new Arbitration Act will repeal and replace the existing Arbitration Act (Cap 10) in its entirely.
55 At the Legislative Council Meeting on the 10 October 2001.
56 The 2001 Policy Address — Building on our Strengths Investing in our Future, Paragraph 75.
57 5 October 2001.



that Hong Kong’s Legal system offered a reassuring setting for arbitration, litigation,
mediation and other forms of altemative dispute resolution.
“This will be of particular assistance to those businessmen and investors with
contracts with Mainland organisations "

Ms. Leung added that
“if disputes in the Mainland are to be resolved in Hong Kong, overseas
businessmen will have confidence that their contracts are underpinned by reliable,
independent, and unbiased legal sanctions”

In an article in the South China Morning Post, the Honourable Ms. Margaret Ng Ngoi-yee, a
legislator representing the legal profession stated that

‘Hong Kong is already a thriving centre for intemational arbitration and awards
by mainland arbitration bodies are enforced by Hong Kong courts without
difliculty. Enforcement of Hong Kong awards in Chinese courts is more complex
but fiorts have been made by mainland courts to improve the situation. "
With negative comments floating around in the media such as “Foreign businesses are being
urged by their lawyers not to go to China ’s oflicial arbitration commission” Hong Kong
stance as a regional international arbitration and alternative dispute resolution centre can only
continue to gain prominence in the Asia Pacific Region. The real recipe for success lies in the
cooperation between various stakeholders with the objective of making Hong Kong shine in
the eyes of the international community, as the slogan clearly puts it — “Hong Kong City of
Life 59
In saying this, is Mainland of China’s arbitration system, in particular the enforcement of
arbitration awards as doom and uncertain as one pictures it, especially when one hears of
many distressing stories of investors whose arbitration awards were not enforced“, it is easy
_______________________________________________
58 As reported in the South China Morning Post.
59 Slogan of the Hong Kong Tourism Board to promote Hong Kong tourism.
 
60 Revpower v. Shanghai Far Est Aero-Technology Import and Export Corporation is one of the most publicised
examples of where enforcement was problematic. The Shanghai Court dismissed Revpower’s application for
enforcement on the grounds that the respondent had in the interim filed for bankruptcy and that there was no
assets against which the arbitration award could be enforced.

 
to forget that many awards are enforced. One example where an award was enforced by the
Beijing Intermediate People’s Court involved an arbitral award totalling more than US$ 2
million in favour of Food Industries Planning and Servicing Ltd of Switzerland against China
Huayang Trading Corporation for the sale and purchase of a tum-key food processing plant.
The Beijing Intermediate People’s Court granted the application for enforcement in
November 1997, two years afler the filing of the application. Although it took two years for
enforcement, it shows that the system has indeed worked as it should. One must bear in mind
that, under the Civil Procedure Law of the People’s Republic of China, it does not stipulate a
time period within which an award must be enforced.

Enforcement of arbitral awards is a problem, though not as large a problem as the media ofien
suggests. There are successes as well as disappointments but in many cases the losing party
often abides by the arbitration award rendered by the arbitral tribunal, which results in the
winning party not having to instigate enforcement provision as stipulated in Chapter 6,
Articles 62 to 64 of the Arbitration Law of the People’s Republic of China“.

Some successes have happened across the straits in Taiwan, in fact prior to 1997, there were
at least two cases of Hong Kong arbitral awards being enforced by Taiwanese Courts. One
relates to Wu-Ho Shiping C0. v E-li Vessel Co Ltd (No.1) [ 1985 ], in which the Taipei District
Court enforced a Hong Kong arbitral award on the basis of international courtesy with a view
to promote judicial cooperation between Taiwan and Hong Kong. Another case involving the
same parties, in which the Taipei District Court dismissed the appeal by E-li Vessel Co. Ltd,
as the proposed grounds of appeal were not legally nor factually justified. The Court affirmed
its decision to enforce the Hong Kong arbitral award. Whereas there were some non-
enforcements, one example involves the Kaohsiung District Court refusal to enforce a Hong
 
Kong arbitral award on two grounds. Firstly, the applicants failed to discharge their burden of
proof regarding service and receipt of arbitration notice. Secondly, failure by the arbitrator to
comply with the procedure provided by the arbitration agreement rendered the resultant
arbitral award defective and hence was not capable of enforcement.
_________________________________________

61 Adopted at the 9”‘ Session of the Standing Committee of the 8"‘ National People’s Congress of the People’s
Republic of China, and promulgated by the President, on August 31, 1994, effective from September 1, 1995,

The above cases were pursuant to the Commercial Arbitration Act 1961 (CAA) of Taiwan.
Subsequently Taiwan revised its arbitration law, which took effect on 24 December 1998. It is
closely modelled on the UNCITRAL Model Law“ and Article V of the New York
Convention regarding the recognition and enforcement of arbitral awards rendered outside
Taiwan has been incorporated into the current version of the arbitration law of Taiwan, even
though Taiwan is not a party to the New York Convention on the Recognition and
Enforcement of Foreign Arbitral Awards.

Although the Mainland of China and Taiwan have a direct means of reciprocal enforcement
of arbitration awards, as far as the author is aware, this means has not been pursued, due to
factors which some might put down to as political sensitivities.

In accordance with Article 74 of the “Regulations on Relations Across the Strait of Taiwan”
which govern civil matters between the Mainland of China and Taiwan, there are provisions
which provide:-
> Judicial recognition of the final and irrevocable civil judgements and arbitral awards
rendered in the Mainland of China may be applied in Taiwan, provided that they are
not contrary to the public order and good morals of Taiwan;

> If a judgement or arbitral award which has been judicially recognised as described
above is for a payment or performance, execution order for such judgment or award
may be applied;

> However, the provisions described above are applicable only in circumstances where
final and irrevocable civil judgments and arbitral awards rendered in Taiwan may
apply for judicial recognition or execution order in the Mainland of China.
__________________________________________
62 Expansion of the term “Foreign Arbitral Award” (Article 47 of the Arbitration Law) is in line with Article 35
of the UNCITRAL Model Law.

Hong Kong is not subject to the “Regulations on Relations Across the Strait of Taiwan” but is
subject to the “ Regulations on Hong Kong and Macau Relations”53 which provides“ that
with respect to an arbitral award rendered in Hong Kong, its binding power, judicial
recognition and suspension of enforcement shall be governed by the provisions on Foreign
Arbitral Awards in the Arbitration Law of Taiwan.

It is anticipated that recent changes in cross-strait economic relations will undoubtedly
increase trade between Taiwan and the Mainland of China while at the same time Hong
Kong’s role as a “third tenitory” will diminish. Nevertheless as the Greater China market
expands, the likelihood is a win-win situation for all in the long term. In particular when it
comes to the selection of a venue for the settlement of possible disputes if they occur, one
cannot think of a better location than Hong Kong.

Hong Kong’s ability to enforcement convention and non-convention arbitral awards together
with it’s highly respected common law system, independent judiciary and a hands ofi‘
Government approach to business, one can only imagine what else can this dynamic and
world class city offer that will attract business people to come back for more. The simple
answer is to excel to the highest possible standards by strengthening our co-operation with
various entities both domestically and internationally while at the same time raising our
overall image as the multidisciplinary service centre in the Asia Pacific Region. This vision
equally applies to arbitration as the saying goes “ There can be no progress if people have no
faith in tomorrow "65. We at the HKIAC have such faith and we believe we have the
necessary tools to succeed in not just making ourselves the Arbitration Centre in Asia but the
Global International Arbitration Centre that all come to rely. As John F. Kennedy puts it
" World peace, like community peace, does not require that each man love his neighb0ur- it
requires only that they live together with mutual tolerance, submitting their disputes to a just
and peacefill settlement "66. Hong Kong has indeed such a system- Arbitration and Alternative
Dispute Resolution, and with the recent mentioned statements within the Chief Executive’s
policy address — “Building on our Strengths Investing in our Future “, one can safely assume
that Hong Kong is indeed a force to be reckoned with in this increasingly competitive global
market place for arbitration services.
_________________________________________________
63 Promulgated on 2 April 1997.
64 Article 42.
65 By John F. Kennedy, Page 76 Distilled Wisdom, Compiled and Edited by M.P. Gopalan, 1997.
66 By John F. Kennedy, Page 80 Distilled Wisdom, Compiled and Edited by M.P. Gopalan, 1997.


Developments in Mediation
Mediation in Hong Kong really began in 1982, when the Arbitration Ordinance was amended
to make specific reference to ‘conciliation’. This led to the introduction in 1984 by the Hong
Kong Government of a “Trial Mediation Scheme” as a method for it to attempt to settle
contractual disputes in 16 selected civil engineering contracts to which it was a party. This
Scheme was administered by the Hong Kong Institution of Engineers (HKIE) under the HKIE
Mediation Services Rules, 1985 edition. Those Rules were first used successfully in 1986
on a private sector dispute and in 1989; a revised set of the Rules was issued together with
administrative guidelines to assist those involved with the process. An option provided of
referring to mediation disputes in all Govemment related works contracts with a value of
more than HK$6 million.

At approximately the same time the Arbitration Ordinance was once again amended in order
to facilitate ‘conciliation’. The word ‘conciliation’ and ‘mediation’ presented some
problems at first, as the difference between the two terms was unclear.

Nevertheless, under the Arbitration Ordinance, ‘conciliation’ included ‘mediation"7. As time
passed the term ‘mediation’ gradually became to be accepted and for the purposes of this
paper the two words are treated as interchangeable.

With interest in mediation growing, in November 1990 the HKIAC in conjunction with the
Hong Kong Construction Association (HKCA) organised a 5 day General and Construction
Mediation Workshops under the expert guidance of Professor Eric Green and Mr. Eric Van
Loon. The course was a success and as a result the Government began a process of
reviewing the use of mediation in Government works contracts. Discussions with the HKCA,
HKIE and Government led to the transfer of the administration of mediations in which
Government was involved from the HKIE to the HKIAC. Subsequently, in May 1991, new
Government mediation rules and administrative guidelines were issued. Shortly therealter
HKIAC published its own rules, which were closely based on the Hong Kong Government
Mediation Rules of May 1991.
______________________________
67 Refer to the Arbitration Ordinance Chapter 341 s 2(1) and www.justice.g0v.hk for details of the Arbitration
Ordinance.


An important milestone for mediation in Hong Kong came in June 1992 when the PHGAC
was named to administer the dispute resolution system for the Hong Kong Government
Airport Core Programme. That multi-billion dollar project was one of the largest
construction projects in the world. The dispute resolution scheme as set out in the Standard
Conditions of Contract“ consisted of 4 separate dispute mechanisms, starting with the
decision of the Architect/Engineer, followed by compulsory mediation, which if unsuccessful,
would be followed by optional adjudication“ and finally arbitration”. Under this
programme, arbitration could not commence until completion of the construction works.
The Airport Core Programme (ACP) Mediation Rules (1992 Edition) goveming the mediation
procedures were closely modelled on I-[KIAC’s own 1991 Mediation Rules.

In relation to the airport site itself, such as the terminal building, the runways, the aprons,
roads and all associated buildings and systems, a Provisional Airport Authority (PAA) was set
up by the Hong Kong Government. The PAA, with the agreement of contractors established
a Dispute Review Group (DRG) with a view of finding a quick, less expensive and less
adversarial method of dispute resolution particularly in the case of large infiastructure projects
In 1994 HKIAC undertook administration of the DRG for the PAA. Mr. Neil Kaplan QC
was appointed as convenor of the DRG.

The DRG has proven to be an effective dispute avoidance method and is currently being used
by the World Bank in relation to its infrastructure projects.

As mediation gathered momentum, HKIAC in January 1994 decided to establish the HKIAC
Mediation Group to promote the development and use of mediation as a method of resolving
disputes. Mr. Niels Kraunsoe was appointed as Chairperson and the Group became
instrumental in promoting the use of mediation within the construction industry in Hong Kong
and developed ties with the general business community.
__________________________________
68 The General Conditions of Contract for the Airport Core Programme (ACP) Civil Engineering Works (1992
Edition), clause 92 (Settlement of Disputes) and Schedule 9.
69 The adjudication procedure allows for an interim review of any dispute by an independent adjudicator. The
adjudicator will be free to conduct his/her enquires in any matter he/she thinks fit and his/her decision will be
binding until completion of the construction works.



Subsequently the Group expressed the need for a clear identity and in 1999 the Group
transformed itself into the Hong Kong Mediation Council (HKMC) a division of HKIAC.

The HKMC has actively promoted the use of mediation in fields
such as commercial, construction, community and family. Under the
leadership of first Mr. Colin Wall as Chairman and currently Mr.
Les Leslie.

On the 1 February 1999, the Hong Kong Govemment compiled a new set of Construction
Mediation Rules (1999 Edition) and Administrative Guidelines with the HK.IAC acting as the
appointing authority when parties fail to agree on the appointment of a suitable mediator, and,
at the same period, a new set of Mediation Rules" were published by the HKIAC for use in
private sector disputes. Those rules have had widespread acceptance.

In October 1997, the Chief Justice of Hong Kong, The Honourable Chief Justice Andrew Li
appointed a working group to consider if a pilot scheme for mediation in family law litigation
should be introduced. The working group was given the task of compiling a proposal for a
practical, cost-eflective pilot scheme. Afier much deliberation, a pilot scheme for the
introduction of mediation into family law litigation was set up on 1 May 2000. The HKIAC
Mediator Accreditation Committee accredits mediators” for the scheme while the HKMC,
with the assistance of The Law Society of Hong Kong, provides the training element for those
who anticipate being accredited. As of 31 October 2001, a total of 534 cases” have been
referred to the scheme.

In building up this interest in mediation, the HKIAC and the HKMC together with the
Chartered Institute of Arbitrators — East Asia Branch and the Hong Kong Institute of
Arbitrators jointly put forward a trial scheme in June 2001, whereby disputes involving
domestic water seepage and water related disputes in buildings would in fact be resolved in a
pro bono mediation scheme. The scheme has a lot of potential if proven to be successful, take
for example accredited mediators would have the opportunity and ability to put theory into
_______________________________
70 Arbitration may not commence until completion of the construction works.
71 HKIAC Mediation Rules, eflective from 1 August 1999 refer to www.hkiac.org for the text of the rules.
72 Refer to HKIAC website www.hkiac.org for details of the HKIAC Mediator Accreditation Process.

practise, whereas disputants would be given a platform to air their grievance in a cost
effective and confidential matter, the Water Works Department of the HKSAR Govemment
would be able to focus its limited resources into areas that are crucial to their overall business
needs“. A “Win-Win” situation for all. On another front the HKIAC together with the Hong
Kong Reprographic Rights Licensing Society” are developing a scheme to assist copyright
owners in Hong Kong and the region a platform to resolve possible differences over royalty
claims. The scheme will be unique, as it will provide a quick and relatively effective way of
enforcing the legitimate rights of copyright owners. An area that has long traditions of using
litigation rather than Alternative Dispute Resolution as a means of resolving copyright
disputes.

At the same time the Government is in the process of reviewing the current legal environment
with the aim of tabling a proposal for public consultation some time in November 2001. Some
hints have been floating in the community, suggesting that mediation could play a significant
role in the reform of the legal process. Seeing is believing and for promoters of mediation,
this will indeed be an added boost in assisting them in promulgating the true benefits of
mediation across the entire community of Hong Kong.

In a recent report in the media”, it stated that the total number of complaints referred to
Consumer Council in the first nine months of this year alone has increased to 15,483”
compared to 14,385 in the entire year of 2000 (a rise of eight percent on last year figures).
Some believe that as the economic downtum continues, disputes will become a fact of life.
Having a forum whereby such disputes can be resolved in an economic, efficient, effective
and confidential manner would be in the interest of all concerned.

Given that Mediation in Hong Kong is beginning to take some prominence in the way
disputes are resolved. Time will tell whether this informal method of resolving disputes
would indeed be successful.
__________________________________________
73 From 2 May 2000 to 31 October 2001.
74 It is estimated that over 4000 water seepage disputes were referred to the Water Works Department
75 The association serves the interests of both copyright owners and the public by providing an economical,
efficient one-stop shop for licensing the works of creators and publishers around the world. m:M.h.kn'ls_Qr,g .
76 As reported in the South China Moming Post dated Wednesday, October 31, 2001. Page 7.
77 Figures are from January 2001 to September 2001
.

E-Commerce and Cyber-Dispute Resolution
Contrary to the negative media coverage of business-to-consumer (B2C) e-commerce, 50
percent of B2C businesses are profitable". In fact in China, B2C transactions for the year
2001 is expected to account for more than US$190 million.

“China online business-to-consumer market will grow to reach US$190 million
this year, according to a report released by the China E-Commerce Association
and China Network Evaluation Center: The report predicts that the business
volume of this market will reach US$3.2 billion by 2004. The total volume of
online purchases was US$629 million in 2000, an increase of 250 percent from
the previous year The survey shows that 90 percent of Intemet users want to
participate in e-commerce despite security concerns over online transactions,
according to an April 9 story by Xinhuashe flXinhua News Agency). 79

In terms of business-to-business (B2B) transactions, this accounts for more than 99 percent of
China’s e-commerce volume for 2000, according to a survey by CCID Consulting”.
Without doubt companies of all sizes and shapes are becoming aware of the potential
commercial market that the Internet plays in marketing its goods and services. On this
assumption, the HKIAC established an E-commerce Committee in April 2000 with the
objective of promoting the use of Alternative Dispute Resolution (ADR) in B2B and B2C
contracts, to promulgate ADR to the intemet community by providing seminars and training
courses and to develop a process/policy on the issue of “on-line Arbitration” and “ on-line
Mediation”. Building on this philosophy, the HKIAC together with the assistance of the Hong
Kong Society of Accountants (HKSA) is in the process of devising a dispute resolution
programme to cater for the HKSA Web Trust Programme“, a platform whereby B2B and B2C
disputes can be easily and effectively resolved on-line within a secured and reliable dispute
resolution system.
_______________________________
78 This was the conclusion of “online success” intemet survey conducted by U.S.-based Act.ivMedia Research
79As reported by China Online- “Survey: China’s online b-to-c market to top US$ 190M this year’ on l7 April
2001 at website site address www.chinaon1ine.com/topstories/01041 1/ 1/C0l0409l2.asp.
80 A division of the Ministry of Information Industry of the People’s Republic of China.
81 A comprehensive e-commerce assurance service that provides businesses with e-commerce ‘best practice’
designed to build trust and confidence in the electronic marketplace”.




In Fact HKIAC is not alone in pursuing and developing B2B and B2C dispute resolution
management best practises, the American Arbitration Association (AAA) recently announced
that they have developed, in collaboration with key industry leaders, a new B2B eCommerce
dispute management protocol“. The London Cotu't of Intemational Arbitration (LCIA) on
the other hand, announced in one of their newsletter” that it has chosen the e-commerce
company, IDENTRUS, as administrator of their dispute resolution procedures. These include
conventional arbitration, fast-track arbitration, and mediation, all of which will come under
the administrative wing of the LCIA’s London Secretariat. While the Intemational Chamber
of Commerce (ICC) has recently decided not to pursue having its own online ADR services
for now but to concentrate on developing an internet-based system that will guide parties in e-
commerce disputes toward an appropriate online dispute resolution provider:

“The Chamber [ICC] decided to develop the clearinghouse system rather than
its own online ADR system because it supports the idea of competition in the
marketplace and believes that enough [online ADR] services exist already to
provide parties with the necessary redress mechanism for business-to-consumer
disputes in e-commerce. "84

Steve Abernethly, President and Chief Executive Ofiicer of online ADR provider SquareTrade,
has a different perspective than ICC:

“Given the amount of online ADR providers out there it would be dlflicult for
them [ICC] to stay on top of things. "85

Only time will tell whether such a facilitative service will have its merits in the marketplace.
On another European initiative, the Electronic Consumer Dispute Resolution O-ZCODIR), a
European Commission-funded group has recently“ launched an electronic consumer dispute
resolution service for Intemet transactions in the European Union, offering some form of
negotiation and mediation process for consumers pursuing remedies in disputes over on-line
purchases. In particular disputes over non-delivery of goods purchased on the Intemet,
__________________________________
83 LCIA Newsletter Volume 5, Issue 3 (2000).
84 Morgan Baker, Policy Manager for e-Commerce and Intellectual Property at ICC as reported by Justin Kelly
of ADRWor1d.com on 5 April 2001.
85 As reported by Justin Kelly of ADRWorld.com on S April 2001
86 As reported by Justin Kelly on 31 October 2001 at ADRWorld.com.

overcharges for products and other transactional disputes related to online purchases. The
project is offered initially on a free of charge basis until 25 June 2002 whereby the aim is to
enhance consumers’ confidence in online transactions. It is anticipated, that once the pilot
phase is complete ECODIR could be funded by charging companies rather than consumers for
ADR services related to electronic transactions. If you are a company, would you fimd an
organisation that charges you for ADR services relating to your products raised by third
parties, who do not have to commit financially. One would guess that if you want to create an
image that puts the customer “first” then this approach would without doubt be beneficial in
achieving such an aim. In saying this, some companies may be tempted to fimd the service
with the view of launching their products on-line for the purpose of generating wider market
segments, which in turn results in profitable sales. As Peter Drucker clearly puts it

‘Marketing is the whole business seen fi'0m the point of view of its final
result, that is from the customer ’s point of view ""7

Turning to the east and nearer to home, the China Internet Network Information Centre
(CNNIC) in January 2001 issued its 7"‘ report on China’s Internet developments as of the end
of 2000. The report showed a steady increase in Intemet users. The number of Intemet
uses who browse the Web for at least one hour per week has grown fi'om 16.9 million to 22.50
million within a 6-month period. The majority of users are from the more developed areas in
east and south China. The report also states that 31.67 percent of Internet users shopped
online and less than 10 percent of users have ever taken part in online auctions“. The China
International Economic and Trade Arbitration Commission (ClETAC)89, a leading
international ADR provider was authorised by CNNIC in January 2001 to create a centre to
help resolve disputes in relation to Chinese-Language domain name disputes ending with the
suffix .cn”. Currently 244 “country code top level domains” attribute a two-letter code to
countries and territories. The codes are based on an intemational standard” and include .cn
for People’s Republic of China, .uk for the United Kingdom and .us for the United States of
America.
_________________________________
87 Refer to Page 2 of Common marketing for non-marketers by Alison Baverstock, 1997, Judy Piatkus
(Publishers) Ltd.
88 Obtained from IPR Strategic Business Information Database.
89 Refer to CIETAC’s website www.ARBITRATION.org.cn for further details.
90 This relates to a country code top-level domain name (cc'I'LD), for example   for
CIETAC.




While in Hong Kong, the Hong Kong Domain Name Registration Company Limited
(HKDNR)” was set up in April 2001 with the sole responsibility for the registration and
assignment of .hk domain names. HKDNR has introduced a dispute resolution policy
incorporating mandatory arbitration proceedings, whereby the decision rendered by the
arbitration panel appointed by the HKDNR-ADR service provider shall be final and binding.
The HKIAC is the ADR service providers that will administer such proceedings. As of today
two cases have been referred to the HKIAC for determination and the panel decisions have
been posted on HKIAC website under www.hkiac.org . The dispute resolution policy is
unique in a sense that it is governed in accordance with the well-structured and intemationally
recognised Arbitration Ordinance” of Hong Kong.

A complainant seeking relief under this dispute resolution policy“ must demonstrate that all
of the following three elements are present in their dispute:-

“4. Mandatory Arbitration Proceeding
Yhis Paragraph sets forth the type of disputes for which you are required to submit
to a mandatory arbitration proceeding. These proceedings will be conducted
before one of the Dispute Resolution Service Providers [HKIAC] approved by us
[HKDNR] (each, a “Provider”).
a. Applicable Disputes. You are required to submit to a mandatory arbitration
proceeding in the event that a third party (a “Complainant") asserts to the
applicable Provider [HKIAC], in compliance with the Rules of Procedure and the
Supplemental Rules of such Provider [HKIAC], that :-

(i) your domain name is identical or confusingly similar to a trademark or
service mark in Hong Kong in which the Complainant has rights; and
(ii) you have no rights or legitimate interests in respect of the domain name; and
(m) your domain name has been registered and is being used in bad faith ”95
______________________________________
91 Derived from the Intemational Standards Organisation (ISO) list 3166-1.
92 A spin off, non-profit-making company from the Joint Universities Computing Centre, see website
www.jucc.edu.hk for further details.
93 Refer to website w_\1w.jnstice_go1.hk for details of the Arbitration Ordinance Chapter 341.
94 HKDNR Domain Name Dispute Resolution Po1icy- the Dispute Resolution Policy section 4a.
95 Quoted from the HKDNR - dispute resolution policy, section 4. to be effective on the 1 June 2001.

The HKIAC has developed a set of rules - HKIAC Supplemental Rules to assist in
administering a .hk domain name arbitration proceeding.
The HKIAC is currently in discussions with a hardware and software organisation to develop
a fully automatic on-line system for arbitration and mediation, once having had the experience
of administering the less complex matter of domain name dispute administration. This will
indeed be an interesting and challenging new avenue for the HKIAC. Whereas in July 2001
in Singapore, the Singapore Network Information Centre (SGNIC) issued its drafi version of
the domain name dispute resolution policy for public consultation. The policy is similar in
form to that of the HKDNR policy. Judging from this, Hong Kong is indeed ahead of
Singapore in the development of domain name dispute resolution techniques
.

In the early l990’s, the administration of the creation and allocation of domain names has
been essentially the responsibility of national govemmentsgfi. In keeping with the dynamic
nature of the Intemet, importing changes have been taking place in the administration of
domains. In the United States, the govemment took the view that the creation and
administration of domains should not be a governmental responsibility and should be
internationalised to the greatest extent possible. To this end it encouraged the creation of an
independent non-govemment body the Intemet Corporation For Assigned Names and
Numbers (ICANN)97.

On 13 June 2000, HKIAC submitted a proposal to the ICANN to be approved as one of the
providers of dispute resolution for .com, .org and .net Top-level domain name” disputes.
There are currently four Organisations” approved to provide dispute resolution services under
the ICANN Uniform Dispute Resolution Policy (UDRP)‘°° and as of the 18 October 2001, a
total of 4581 proceedings have gone through the UDRP procedure, involving somewhere
between 6000 and 7000 domain names‘101.
____________________________________________
96 In the United States of America, it is the Department of Commerce (DOC) and in Hong Kong, it is the Joint
Universities Computer Centre (IUCC).
97 ICANN is a global non-profit corporation formed to oversee and coordinate the technical management of the
Intemet’s domain name system, the allocation of Intemet protocol address space, the assignment of protocol
parameters, and the management of the root server system. See  g for further details.
98 A domain name is an internet address identifying a computer site connected to the internet in the same way
that a telephone number uniquely identifies a telephone line connected to the telephone network. No two
organisations can have the same domain name and no two people can have the same telephone number.
99 The four Organisations approved are CPR Institute for Dispute Resolution, Disputesorg/eReso1ution
Consortium, The National Arbitration Forum and the World Intellectual Property Organisation.
100 See Website  for details of the UDRP.
101 See Website   for the statistics on the “ Summary of Status of
Proceedings”.




As businesses transform from the traditional modes of operation to a more Intemet based
approach, ADR services will indeed be an important element in assisting those organisations
that encounter potential unavoidable disputes, a means of resolving those disputes in a
systematic and cost efi‘ective manner. In a sense with the increase in Global trade, a
mechanism needs to be in place whereby disputants will have a forum in which their
grievances can be resolved and enforced internationally. Such a forum may be a combination
of “mediation and arbitration” or purely “mediation” or “arbitration” [low cost, speed of
resolution, confidentiality, flexibility, perceived fairness and maintaining relationships]. For
arbitration to take place, one needs to insert an arbitration clause into one’s contract during the
drafting stage. Very ofien parties regret not having inserted such a clause, simply because of
their ignorance of not knowing such a mechanism exists.

The HKIAC hopes to develop sufiicient expertise in this growing aream with the view of
making Hong Kong Special Administrative Region of the People’s Republic of China the
one-stop shop of providing effective and efficient Information Technology Services within the
region and beyond. With the intension that all who have used our services, will be accustomed
to depend on us for their future business needs. This is line with the Government’s initiative
“ to enhance Hong Kong’s position as a leading digital city in the globally connected
world.103.

Maritime Arbitration
With Hong Kong’s long history in the field of Maritime related affairs, it was of the view
that this important area should not be lefi behind in the HKIAC’s promotional strategy. In
January 2000, a committee“ under the auspices of the HKIAC was formed with the view of
enhancing Hong Kong’s position as a leading maritime dispute resolution centre in pair with
that of London and New York. The committee began that the long hard road of identifying
issues and areas that would have a significant impact for those who are contemplating in
choosing a suitable arbitration venue to insert into their contractual agreements. One area that
frequently gets mentioned is that arbitration in Hong Kong does not provide a cost-effective
way of resolving disputes involving relatively small claims. This is of significance to shipping
______________________________________
102 Gamter estimates worldwide spending in the Year 2000 by IT services amounts to US$ 541.3 billion, whereas
hardware spending amounts to US$ 463.4 billion while soflware spending amounts US$ 187.6 billion as
reported in www.gorillasia.com/tc/printarticles?id=2632
103 See Pages 10 and 11 of 2001 Policy Address — Policy



disputes, as the majority of shipping disputes referred to the I-H(IAC during the last year1°5
involved sums in the region of US$ 40,000.00 and US$ 100,000.00. To address this issue, the
committee introduced two new procedures, one called the “PH(IAC Small Claims” procedure
and the other “HKIAC Documents Only” procedure. Both procedures are similar in nature to
that of the London Maritime Arbitration Association“ procedures. The reasons for such
similarity are to assure users, without them feeling uneasy and uncomfortable about using
something that is entirely new to them, as the LMAA procedures have indeed been tried and
tested. They are widely used throughout the shipping world. With this in mind, confidence
can be achieved whereby convincing users to include Hong Kong as their preferred place of
arbitration if disputes do arise would be much easier to market.
The HKIAC Small Claims procedure is designed with simplicity in mind, whereby there is
limited power to extend time for service of pleadings, limited discovery of documents,
hearing if any are limited to one day, no rights of appeal to the courts and in exceptional cases
the arbitrator has the liberty to depart from or vary the procedure at his own discretion. In
terms of costs, the procedure radically limits the fees payable to the arbitrator and limits the
costs recoverable by a successful party.

Costs of the HKIAC Small Claims Procedures:
> “The claimant must pay the arbitrator a fixed “ small claims fee ” of HK$ 15,000.
This covers the arbitrator ’s appointment fee, the costs of dealing with the
interlocutory exchanges, a hearing limited to one day, the preparation of the
award, and the assessment of any costs. Expenses are charged extra.
> If there is a counterclaim, and it exceeds the amount of the claim, the respondent
must pay an additional fee of HK$ 7,5 00.
> HKIAC charges HK$ 1,500 to appoint an arbitrator.
> The arbitrator has power to direct which party must bear ultimate responsibility
for the small claims fee and the tribunal ’s expenses, and the legal costs incurred
by the successfirlparty.
> The arbitrator may assess the recoverable costs. This is done on a “commercial
__________________________
104 Know as the “Hong Kong Maritime Arbination Group”.
105 Year 2000.
106 Herein known as LMAA.




basis ”, but the amount may not exceed HK$30, 000. ”' '77

With principles of speed and limited costs in mind the HKIAC Documents Only is designed
to cater for the needs of parties who have decided that a hearing may not be required, if
disputes do occur but rather a documents only procedure would be sufficient to their needs.
This procedure greatly limits the time for one to deliver a claim and necessary replies
associated with the claim and counterclaims thus ensuring that a fair and speedy resolution of
disputes by arbitration without unnecessary expense can be achieved. This is in effect in line
with the objectives and principles of the Arbitration Ordinance, section 2AA(l).

Vlfith Hong Kong’s determination to succeed as the supply-chain basew‘ linking the Mainland
of China and the world, supporting facilities together with means for parties to resolve their
possible disputes are crucial to achieving such success. The Shipping community and the
dedicated members of the Hong Kong Maritime Arbitration Group (HKMAG) have began
this process of positioning Hong Kong as the maritime arbitration hub in Asia by the
introduction of these simplified procedures.

The author is confident that the HKMAG will continue in promulgating Hong Kong as the
centre for shipping dispute resolution involving not just large scale disputes but also disputes
in areas such as non-complex charter hire disputes, non-payment of cargo shipped and
demurrage claims. With the necessary arbitration framework in place and the associated
supporting facilities, Hong Kong will continue to be an attractive place to entice other
industries, which without doubt will be conducive to their further development within the
Asia Pacific Region and beyond.

Conclusion
This report merely provides one with an overview of recent developments at the HKIAC.
One should always think about one’s options and whether they are appropriate for the
matter in hand.

In marketing, a basic technique that is ofien used to assess the potential marketing
_____________________________________
107 Refer to Page 13 of the “Maritime Arbitration in Hong Kong- A Practical Guide” as produced by the HKIAC
and the Hong Kong Maritime Arbitration Group.
108 As reported in the Chief Executive’s Policy Address 2001, “Building on our Strengths Investing in our
Future" Page 19 and 20.



strategy of different markets is the adopting of the tool Strengths Weakness
Opportunities Threats (SWOT) analysis. Drafiers of arbitration clauses should bear this
in mind when drafting, as it is an extremely useful tool to use, especially when one is
undecided on a particular arbitration venue to host their intended arbitration in the
future.

The strategy to adopt from a global perspective should always be the SMART“ way, as
J.P. Morgan told his son :-

“I hope that you will not be tempted into litigation, Lifie is too short for that.110 ”
On this note, one can truly say that Hong Kong, “City of Life" has the attributes in assisting
you in resolving your global disputes in a fair, impartial, efiicient, confidential and above all
cosmopolitan manner, that you have been accustomed. As Sir. Silliam Osler puts it

“The best preparation for tomorrow is to do today ’s work superbly well “111”

Do remember to insert “Hong Kong” as your preferred place for arbitration and alternative
dispute resolution in your firture contracts. A wise choice that will work for you.
_____________________________________________
109 SMART — Sensible Methodical Alternative Resolution Iechnique .
110 Quoted from Distilled Wisdom by M.P.Gopalan, Published by Communication Management Ltd, dated 1997,
Page 1 3 9.
111Quoted from Distilled Wisdom by M.P.Gopalan, Published by Communication Management Ltd, dated 1997,
Page 155.












Postal Address:

The Nautical Institute Hong Kong Branch
c/o StormGeo Ltd.
3603 Wu Chung House
213 Queen's Road East
Wan Chai, Hong Kong - S.A.R  P.R. China
Copyright ©2000 - 2022 The Nautical Institute Hong Kong Branch
updated
19 June 2022
Back to content