HKIAC Arbitration in Hong Kong – A Case Illustration

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

2. 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. Payment Request C China D India Three On-demand Bank Guarantees in favour of A Sub-Contract CONTRACT Temporary close down Date of delivery: 27 April 2024 Court proceedings against D Jet Builder Tour Operator

3. 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

4. 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 4th out of 148 countries in the index of judicial independence in the World Economic Forum’s “Global Competitiveness Report 2013-2014” • 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 leadingarbitral 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

5. 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

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

7. 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)

8. 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-Arband/or Arb-Med procedures available (sections 32 and 33 of the AO)

9. 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)

10. 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)

11. 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

12. Enforceability of arbitral awards (2) • Statistics of enforcement of awards in Hong Kong from 2008 to July 2013

13. 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 enforceablein 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 innovativemechanism particularly suitable for disputes in Mongolia?

14. Thank You World’s Prime Location for Dispute Resolution Services • WEBSITEwww.hkiac.org • ADDRESS38th Floor, Two Exchange Square Central, Hong Kong • TEL (852) 2525 2381 • FAX (852) 2524 2171 • EMAILadr@hkiac.org