City University of Hong Kong

Arbitration – Rules and Procedures

Lecture 9
 Objectives of this part of the lecture
➢Identify and familiarise the components of the principle of lex arbitri
(law of the seat of arbitration) as well as the principle that “choice of
forum is choice of law”;

➢Understand the application of the principle of lex arbitri to the

arbitral procedure;

➢Appreciate the importance and relevance of the lex arbitri to the

arbitral process;

➢Identify other relevant rules, practices and guidelines applicable in

arbitration
 Arbitration Procedure
• To formalise/confirm the followings:
• Arbitration agreement & the appointment of arbitrator
Preliminary • Form of arbitration/preliminary timetable
meetings • Agreed bundle of documents and statement of facts and issues
• Hearing/award
• Payment in security of arbitration cost

• To set out the matters in dispute, the facts and the contractual/legal provisions relied upon
• The sequence:
• 1) Claimant – Statement of Claim
Pleadings • 2) Respondent – Statement of Defence (SOD) and Counter-Claim (CC) (if any)
• 3) Claimant – Reply to SOD and Defence to CC
• 4) Respondent – Reply to Defence to CC

• Lists of documents to be prepared by the parties for inspection

• Documents to be disclosed include (i) those relied upon by both parties, (ii) those which may be detrimental
Discovery to one party’s case or (iii) those of assistance to the other party’s case
• Strict duty to disclose all material
• Privileged documents should be listed but not made available for inspection
 Arbitration Procedure
• To collect and file the documents referred to in the hearing a logical sequence in several bundles
Agreed bundles • The bundles will be prepared by the claimant; further documents to be added by the respondent
• the completed files are known as “Agreed Bundles”

• Witness of fact
Witnesses • Expert witnesses

• Opening address
Hearing • Examination-in-chief, Cross-examination, Re-examination
• Closing address

Award • Awards can be challenged under limited grounds

 Laws & Rules of Arbitration
The difference between laws and rules:
➢ National Laws and Conventions – e.g. Arbitration Ordinance Cap. 609.
➢ Arbitration Rules – a matter of contract and party autonomy
The role of national laws
Many different national laws may have a bearing on an international arbitration –
a complex interaction of laws:
➢the law governing the arbitration proceedings, the procedure and conduct –
the lex arbitri (the law of the seat or the place of arbitration) – many
countries have adopted the UNCITRAL MODEL LAW
➢the law governing the substantive issues in dispute (generally described as
the “governing law of the contract”, the “proper law of the contract” or the
“substantive law”)
➢the law governing recognition and enforcement of the award at the place or
country of enforcement
The role of national laws
(cont'd)
➢the law governing the arbitration agreement (it may be different from the law
governing the underlying contract)
➢the law governing the parties’ capacity to enter into an arbitration agreement
➢Other laws (the above are not exclusive) may be relevant
 The UNCITRAL Model Law
➢ June 1985 – introduced by UNCITRAL as a “model” or uniform law
➢ Objective: to achieve harmonisation of the arbitration laws of different countries;
➢ a template for countries to adopt (usually as part of the lex arbitri)
➢To date legislation based on the Model Law has been adopted in 83 States in a total of
116 jurisdictions (including Hong Kong & Singapore)
➢ 2006 - Revisions were made to the Model Law by UNCITRAL (including changes to the
“written” requirement of an arbitration agreement to take into account electronic commerce
and the power of the tribunal to grant interim relief) [Note: The current HKAO extends the
application of the UNCITRAL Model Law to all arbitrations in HK and adopts the 2006 revisions
in terms of Option 1- Section 19 HKAO]

The United Nations Commission on International Trade Law (UNCITRAL)

The lex arbitri
➢The law of the place or seat of the arbitration – the lex arbitri
➢The lex arbitri governs the conduct of the arbitration and procedural
matters and also generally the courts that will supervise the
arbitration and provide a supportive role
➢the terms “seat” and “place” of the arbitration are synonymous and
often used interchangeably (these terms are to be distinguished from
the venue or location of meetings or hearings)
➢if the seat of the arbitration is Hong Kong, then the lex arbitri would
be the arbitration laws of Hong Kong
The lex arbitri
➢where parties to an international arbitration choose a seat of arbitration, they
sometimes choose a place that has no connection with either themselves or their
commercial relationship – they may choose a ‘neutral’ place and one with good
arbitration laws – for example Hong Kong and Singapore.
➢the parties will usually make an express choice of the seat in the arbitration
agreement but if they do not, the choice may have to be made for them.
➢For example, the UNCITRAL Rules state “Unless the parties have agreed upon
the place where the arbitration is to be held, such place shall be determined
by the arbitral tribunal, having regard to all the circumstances of the
arbitration.” (see also the ICC Rules 2012, Art 18.1)
The lex arbitri
➢The lex arbitri may be a different law from the law governing the substantive
issues in dispute or the merits of the dispute
➢Each state will decide for itself what laws it wishes to lay down to govern the
conduct of arbitrations within its own territory. (e.g. many states have adopted
the UNCITRAL Model Law with or without some modifications.)
➢ One must check the exact position in each state, but the lex arbitri is likely to
extend to matters such as:
➢the definition and form of the agreement to arbitrate
➢whether the dispute is capable of being arbitrated (arbitrability of the
dispute)
➢the constitution of the arbitral tribunal and the grounds for challenge
The lex arbitri
➢the ability of the tribunal to rule on its own jurisdiction
➢equal treatment of the parties
➢freedom to agree on detailed rules of procedure
➢court assistance if required (supportive measures e.g. filling in a vacancy
in the tribunal, removal of a tribunal, interim measures, taking of evidence)
➢appointment of the tribunal if the parties cannot agree
➢powers of the tribunal generally
➢interim measures of protection by the tribunal
➢statements of claim and defence
The lex arbitri
➢hearings
➢form and validity of an award; its finality and the right to challenge or set it
aside in the courts at the seat

Different countries have different laws and it is therefore important to choose a

seat which has modern, user-friendly and transparent arbitration laws, and
courts.
Substance of dispute – Governing Law
The law governing the substantive issues in dispute - the “substantive law” or the
“governing law of the contract”, or the “proper law of the contract”
➢It is not enough to know what agreement the parties have made; it is also
essential to know what law is applicable to that agreement
➢This law governs the legal relationship between the parties and includes matters such as:
➢interpretation and validity of the contract
➢rights and obligations of the parties
➢implication of terms
➢mode of performance
➢consequences of breaches of the contract
Substance of dispute – Governing Law
➢The parties are generally free to choose for themselves the law governing or
applicable to their contract under the principle of party autonomy

➢ UNCITRAL Model Law, Art 28(1) “The arbitral tribunal shall decide the dispute in accordance
with such rules of law as are chosen by the parties as applicable to the substance of the
dispute…”

➢ Art 28(2) “Failing any designation by the parties, the arbitral tribunal shall apply the law
determined by the conflict of laws rules which it considers applicable.”
Substance of dispute – Governing Law
➢Most arbitration rules adopt the same position, for example:
➢UNCITRAL Rules, Art 33.1 “The arbitral tribunal shall apply the law designated
by the parties as applicable to the substance of the dispute.”
➢ICC Rules 2012, Art 21.1 “The parties shall be free to agree upon the rules of law
to be applied to the merits of the dispute. In the absence of any such
agreement, the arbitral tribunal shall apply the rules of law which it determines
to be appropriate.”
➢HKIAC Rules, Article 36.1 “The arbitral tribunal shall decide the substance of the
dispute in accordance with the rules of law agreed by the parties…. Failing such
designation..the arbitral tribunal shall apply the rules of law which it
determines to be appropriate.”
Substance of dispute – Governing Law
Although the parties are generally free to choose their own laws or legal rules
applicable to their contract, there are limits to this freedom:
➢ Some laws cannot be derogated from by way of contract e.g. certain competition
or anti-trust laws or where the issues constitute a matter of public policy
➢ Other sources of law or rules of law (other than the laws of one single state) that
may apply:
➢ Transnational law and the lex mercatoria; UNIDROIT Principles of International Commercial Law
➢ Trade usage “..shall take into account the usages of the trade applicable to the
transaction” e.g. Art 36.3 HKIAC Rules and UNCITRAL Model Law, Art 28(4)
Substance of dispute – Governing Law
➢Ex aequo et bono (application of principles other than legal rules)
➢Equity and good conscience (amiable compositeur ). There are
different interpretations of this term but generally understood to
mean that the arbitral tribunal should decide the matter according
to equity rather than a strict legal interpretation.
➢“The arbitral tribunal shall decide ex aequo et bono or as amiable
compositeur only if the parties have expressly authorised it to do.”
E.g. Art 36.2 HKIAC Rules and UNCITRAL Model Law, Art 28(3)
The 1958 New York Convention
The Role of Conventions and Treaties
➢ The Convention on the Recognition and Enforcement of Foreign Arbitral
Awards concluded in New York on 10 June 1958
➢166 countries are signatories
➢Sierra Leone become the 166th State party to the Convention on the Recognition and
Enforcement of Foreign Arbitral Awards, having deposited its instrument of accession
on 28 October 2020.
➢The New York Convention will enter into force for Sierra Leone on 26 January 2021.
➢ Regulates recognition and enforcement of arbitral awards made in
convention states in other convention states
➢ Only very limited grounds for resisting enforcement of arbitral awards
Arbitration Rules
The role of procedural “rules” in the conduct of an arbitration:
➢ Such arbitration rules regulate the arbitral procedure in conjunction
with the applicable procedural law (the lex arbitri)
➢ The choice of such rules is a matter of contract (the parties’
agreement to arbitrate)
➢ Generally parties have the freedom to choose their own rules (the
principle of party autonomy) subject to any limits set out in the
mandatory laws at the seat of the arbitration (the lex arbitri) or other
applicable laws
Arbitration Rules
➢ Parties may choose either certain institutional arbitration rules and an institution to administer
the arbitration or an ad hoc procedure which does not involve an administering institution
➢ Examples of Institutional arbitration rules: HKIAC, ICC, LCIA, AAA/ICDR, WIPO, SIAC, CIETAC,
CAAI
➢ An example of ad hoc procedures or rules: UNCITRAL Rules, which do not provide for an
administering body (but some institutions are agreeable to administering arbitrations under
these rules if parties so agree)
➢ The parties may draft their own bespoke ad hoc procedure but if it is not comprehensive, the
tribunal will have to decide or to supplement matters not covered (but within the limits set out in
the mandatory laws at the seat of the arbitration or other applicable laws)
“Soft Laws” - Practices and guidelines
The Role of international practices, standards, guidelines in
international arbitration:
➢ sometimes known as “soft laws”
➢ These are not laws but good practices, sometimes expressly incorporated into an
arbitration agreement or even when not so incorporated, the parties or the tribunal
may take into account.
➢ They cover procedural aspects such as –
➢ evidence
➢ conflicts of interest
➢ ethics and various practices.
“Soft Laws” - Practices and guidelines
Examples:
➢ Codes of Ethics for Arbitrators (e.g. CIArb Code of Conduct)
➢ IBA Rules on the Taking of Evidence in International Arbitration (29 May 2010)
➢ IBA Guidelines on Conflicts of Interest (2010)
➢ IBA Guidelines on Party Representation in International Arbitration (2013)
➢ UNCITRAL Notes on Organizing Arbitral Proceedings
➢ CIArb Guidelines and Protocols on various practice points (currently about 20
guidelines) such as interviewing prospective candidates for arbitrators
~ QUESTION? ~

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Drafting an Arbitration Agreement
The Arbitration Agreement
The agreement to arbitrate:
➢It is the foundation stone of any arbitration – often parties may incorporate
institutional arbitration rules
➢Must be a valid agreement to arbitrate otherwise recognition and enforcement
of the award may be refused if the parties were under some incapacity or the
agreement was not valid under its own governing law
➢Two types:
➢ the agreement to refer future disputes, and
➢ the agreement to refer existing disputes (the so-called “submission agreement”)
The Arbitration Agreement
Word of
Caution
The agreement to arbitrate:
➢It is the basic source of the powers of the arbitral tribunal
➢It also establishes the jurisdiction of the arbitral tribunal – it is the only source
from which the jurisdiction can come
➢Parties may draft their own arbitration agreement
➢Often parties will adopt institutional rules as part of their arbitration agreement
➢Parties may also adopt an ad-hoc procedure (either devising their own rules or
using the UNCITRAL RULES)
The Arbitration Agreement - Example

“ Disputes hereunder shall be referred to

arbitration, to be carried
out by arbitrators named by the International
Chamber of Commerce in Geneva in accordance
with the arbitration procedure set forth in the
Civil Code of Venezuela and in the Civil Code of
France, with due regard to the law of the place of
arbitration. ”

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Magic Formula

“Any dispute, controversy, or claim arising out of or in connection with

this contract, including any question regarding its existence, validity,
or termination shall be finally resolved by arbitration under the Rules
of [rules/institution].

The tribunal shall consist of [a sole/three] arbitrator(s).

The place of arbitration shall be [city]. ”

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OTHER USEFUL POINTS
◆ Language
◆ Expertise and special requirements of arbitrators
◆ Discovery
◆ Multi party proceedings
◆ Costs
◆ Confidentiality
◆ Med-arb, ADR
◆ Sovereign immunity waiver

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Points to Consider when Drafting an Arbitration Clause

Agreement to Arbitrate

Require Negotiation, Mediation and

Conciliation?

If so, Fix Time Limit

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Points to Consider when Drafting an Arbitration Clause/Agreement (cont’d)

Select Rules

Ad Hoc Institutional

UNCITRAL No Rules
AAA

Centre for Public

HKIAC ICSID Other
Resources ICC LCIA

Comm Arb Rules Int’l Arb

Name appointing Authority (“AA”) Rules

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 Points to Consider when Drafting an Arbitration Clause/Agreement (cont’d)

straight forward
case,
smaller amount
Determine Number of Arbitrators Large amount
in dispute
in dispute

1
1 Period for agreement by parties 3
Claimant nominates several Each side picks Institution / AA selects
from pre-determined Exchange lists of Requiring meeting
one all 3
acceptable category; Defendant names
picks one Selection by No Rules
Institution / AA Default: If party fails to
appoint Institution / AA
appoints
Pre-designated list; Defendant
picks one Fix time period; if no
agreement
Fix time period Institution / AA selects Fix time
3rd period?
Party designated selects 3rd
Restrictions on choice (i.e.
nationality)
AAA-style list Require consultation
Fix time period procedure? with parties?

Provide that arbitrators shall

be independent and impartial?

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Points to Consider when Drafting an Arbitration Clause/Agreement (cont’d)

Select Seat

Factors : NY Convention ratification; limited mandatory

procedural rules; absence of restrictions on counsel.
arbitrators; good facilities; limited judicial intervention

City in Defendant’s Home

Place of Performance Neutral Place
Country

Provide that hearings may be held anywhere arbitrators

find convenient?

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Points to Consider when Drafting an Arbitration Clause (cont’d)

Choose Governing Law

Procedural Law = Seat of Arbitration

Substantive Law

Non Specified Specify National Law “General Principles of

International Law”

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 Points to Consider when Drafting an Arbitration Clause (cont’d)

Provide Optional Procedural Matters (Specify on or more)

Provide time limits Consolidation Think about

other possible
Discovery Tribunal – Appointed
procedures
Expert(s)
(i.e. after
Documents Depositions determination of
liability each
Require ability for
Arbitrators’ No Restrictions side submits
parties to cross-
Discretion damages
examine or to comment
proposed and
Language arbitrators must
pick one)
Provide limits?

Only one Two, neither dominant

Two, but require translation to one
dominant

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Points to Consider when Drafting an Arbitration Clause (cont’d)

Issuance of Award

Permit partial awards Final award only

Injunctive relief

No injunctive relief No injunctive

relief

Permit court action for Permit arbitrators to

injunction to maintain status issue injunction
quo pending arbitration

All awards final and binding on parties

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 Points to Consider when Drafting an Arbitration Clause/Agreement (cont’d)
All awards final and binding on parties

Permit arbitrators to act as Permit specific performancePermit arbitrators to adapt

amicable compositeurs contract

arbitrators may award costs

All to winner As arbitrators may

determine

award interest ?

Pre-judgment Post-judgment

rate ?

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Points to Consider when Drafting an Arbitration Clause (cont’d)

Provide for judgment currency?

Award may be enforced…

In any court having Designate specific court and

jurisdiction thereof consent to jurisdiction

Waive sovereign immunity if

necessary

Exclude court appeal?

In England & Switzerland: yes In other countries,

optional 39
Matters covered by arbitration rules & the lex arbitri (Examples)
HKIAC Rules Model Law
➢ Appointment of arbitrators ➢ Appointment of arbitrators
(Articles 7, 8, 9) (Arts 10 - 15)
➢ Detailed provisions as to the Notice of ➢ Statements of Claim and Defence (Art
Arbitration, Response, Statements of 23 )
Claim and Defence (Articles 4, 5, 16,
17)
➢ None
➢ Multi-party appointment of arbitrators
(Articles 27, 28, 29)
➢ Whether hearings should be repeated
in the event of a replacement of an ➢ None
arbitrator
(Article 12)
Matters covered by arbitration rules & the lex arbitri (Examples)

HKIAC Rules Model Law

➢ Witnesses and how evidence may ➢ Limited – (but see Art 19(2) and Art 24
be given (Article 22) and Art 27)

➢ Emergency Arbitrator interim relief ➢ No EA Procedure but see Art 17

(Article 23) ➢ None
➢ Expedited Procedure (Article 42)
➢ Conduct of the proceedings – ➢ Wide powers given to the tribunal as
wide powers to the tribunal (Article regards conduct of the proceedings (Art
13) 19)
➢ Corrections and additional Awards ➢ Similar with minor differences (Art 33)
(Articles 38, 40)
Matters covered by arbitration rules & the lex arbitri (Examples)
HKIAC Rules Model Law

➢ Tribunal’s fees (Article 10) ➢ None

Tribunal’s powers to award costs
of the arbitration - in specific and
detailed terms (Article 34)

➢ None
➢ Confidentiality (Article 45)
Matters covered by arbitration rules & the lex arbitri (Examples)
HKIAC Rules Model Law
➢ Silent on setting aside an award but ➢ Recourse against award A court may
parties waive rights to any recourse set aside an award in limited
insofar as any such waiver can be circumstances (Art 34)
validly made (Article 32)

➢ Tribunal may allow joinder of parties in ➢ Silent

certain circumstances (Article 27)

➢ Challenges and procedure (Article 11)

➢ Challenges and procedure (Art 12, 13)
 End of Lecture

Thank you for listening

~ QUESTION? ~

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