IMechE Seminar Arbitration & Engineering

IMechE Seminar Arbitration & Engineering Presented by Man Sing Yeung FHKIS, FRICS, FCIArb Chartered Arbitrator Accredited Mediator/Adjudicator, Solicitor, Partner of Li & Partners

Arbitration & Engineering Part 1 Introduction to Arbitration

What is arbitration? A method by which disputes are resolved judicially, with binding effect, by an impartial arbitral tribunal, not a Court of Law

What is arbitration? A method by which disputes are resolved judicially, with binding effect, by an impartial arbitral tribunal, not a Court of Law e.g. monetary claims, injunctions, demand for action,etc.

What is arbitration? A method by which disputes are resolved judicially, with binding effect, by an impartial arbitral tribunal, not a Court of Law Award recognized and can be enforced by Court

What is arbitration? A method by which disputes are resolved judicially, with binding effect, by an impartial arbitral tribunal, not a Court of Law A sole arbitrator or a panel of arbitrators the umpire

What is arbitration? A method by which disputes are resolved judicially, with binding effect, by an impartial arbitral tribunal, not a Court of Law Private forum instead of a conventional court

Difference with litigation By consent only Only possible if the disputing parties all agree by arbitration agreement or clause Consent can be pre-dispute or post-dispute

Difference with litigation Autonomy in dispute resolution Civil procedures in litigation are rigid Arbitration procedures are flexible and tailor-made so long as all parties agree

Difference with litigation Award is usually final Decision in District Court and Court of First Instance (High Court) can be appealed to the Court of Appeal and Court of Final Appeal Arbitration agreement usually provides award to be final and binding

Advantages of arbitration Confidentiality Flexibility Expertise Finality of awards Enforcement internationally

Advantages of arbitration Confidentiality c/f court proceedings which are usually open to the public and media Commercial considerations on company reputation Flexibility Expertise Finality of awards Enforcement internationally

Advantages of arbitration Confidentiality Flexibility Tailor-made procedures by consent Expertise Finality of awards Enforcement internationally

Advantages of arbitration Confidentiality Flexibility Expertise Arbitral tribunal with professional knowledge Especially important in certain industries such as construction and engineering Finality of awards Enforcement internationally

Advantages of arbitration Confidentiality Flexibility Expertise Finality of awards No appeal quick resolution Enforcement internationally

Advantages of arbitration Confidentiality Flexibility Expertise Finality of awards Enforcement internationally Hong Kong is a signatory of New York Convention Award is enforceable in all signatory countries

Disadvantages of arbitration Not necessarily quicker or cheaper Awards cannot bind a third party Court s assistance required for interim relief (e.g. urgent injunction) Does not establish a binding precedent for future cases

Arbitration in Hong Kong s20 Arbitration Ordinance (Cap. 609): 1) A court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed. 2) Where an action referred to in paragraph (1) of this article has been brought, arbitral proceedings may nevertheless be commenced or continued, and an award may be made, while the issue is pending before the court.

Arbitration in Hong Kong s20 Arbitration Ordinance (Cap. 609): Therefore in general a Court will: 1. Stay a court proceeding 2. Refer the matter to arbitration 3. Honour an award in arbitration

Arbitration & Engineering Part 2 The Process of Arbitration

Types of Arbitration Arbitration Institutional Ad Hoc International Rules Domestic Rules Institutional Rules Custommade Rules

Institutional or Ad Hoc Institutional arbitration Administered by arbitration institutions (e.g. HKIAC, CIETAC, etc.) Professional services (including appointment of arbitrators if parties cannot agree) Tried-and-tested set of procedural rules Administration fees

Institutional or Ad Hoc Ad hoc arbitration Not administered Custom-made procedural rules or adopt institutional rules May be cheaper Difficult to agree on rules after dispute has arisen

Institutional Rules Used by institutional arbitration Can be opted by domestic arbitration also E.g. HKIAC Arbitration Rules International Rules or Domestic Rules

International or Domestic Main features International - 1 or 3 arbitrators - The Arbitration Ordinance and HKIAC International Rules mainly adopted the UNCITRAL Arbitration Rules - Enforcement worldwide Domestic - Sole arbitrator - Courts had greater power : Power to consolidate 2 or more related arbitrations Power to determine point of law Possible to appeal on question of law

Arbitration Process HKIAC Arbitration Source: http://www.hkiac.org/en/arbitration/arbitration-process

Arbitration & Engineering Part 3 Arbitration Clauses

When will a Court recognize an arbitration agreement? s19 Arbitration Ordinance (Cap. 609): 1. There is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.

When will a Court recognize an arbitration agreement? s19 Arbitration Ordinance (Cap. 609): 2. May be in the form of an arbitration clause in a contract or in the form of a separate agreement

When will a Court recognize an arbitration agreement? s19 Arbitration Ordinance (Cap. 609): 2. May be in the form of an arbitration clause in a contract or in the form of a separate agreement usually pre-dispute usually post-dispute

When will a Court recognize an arbitration agreement? s19 Arbitration Ordinance (Cap. 609): 3. Must be in writing

What if the dispute is whether the contract is valid? Even if the arbitration clause is a clause in the contract, it is treated as a separate and stand-alone clause An arbitration clause can be valid even if the whole contract does not have effect anymore

What if the dispute is whether the contract is valid? Therefore: 1. The arbitration clause applies to disputes of validity of the contract 2. The arbitration clause survives termination of the contract 3. Paradox is avoided

Principles of drafting an arbitration clause Precise, clear and unambiguous Ambiguous or defective arbitration clauses can lead to lengthy litigation, which would defeat the primary purpose of an arbitration agreement

Essential elements of an arbitration clause Agreement to arbitrate Scope of arbitration Finality of awards

Essential elements of an arbitration clause Agreement to arbitrate Must express the parties clear intention to arbitrate instead of going to a Court

Essential elements of an arbitration clause Agreement to arbitrate Shall be referred to arbitration May be referred to arbitration Shall be referred to an expert

Essential elements of an arbitration clause Scope of arbitration Usually as wide as possible in order to catch all (except when the parties wanted to limit the scope) Otherwise some parts of an dispute may fall outside the scope and require to be submitted to Court which defeats the whole purpose

Essential elements of an arbitration clause Scope of arbitration All disputes, controversies and differences Each dispute May lead to more than A dispute 1 arbitration required

Essential elements of an arbitration clause Scope of arbitration arising out of or in connection with this contract arising out of this contract Tort or other non-contractual claims not covered

Essential elements of an arbitration clause Finality of awards Should allow no appeal against an award, particularly appeal in Court Finally settled Finally resolved

Other elements of an arbitration clause Institution Seat of arbitration Arbitrators Procedural rules Language Etc.

An example of well-drafted arbitration clause "Any dispute, controversy, difference or claim arising out of or relating to this contract, including the existence, validity, interpretation, performance, breach or termination thereof or any dispute regarding non-contractual obligations arising out of or relating to it shall be referred to and finally resolved by arbitration administered by the Hong Kong International Arbitration Centre (HKIAC) under the HKIAC Administered Arbitration Rules in force when the Notice of Arbitration is submitted. The law of this arbitration clause shall be Hong Kong law. The seat of arbitration shall be Hong Kong. The number of arbitrators shall be three. The arbitration proceedings shall be conducted in English. Source: http://www.hkiac.org/en/arbitration/model-clauses

Arbitration & Engineering Part 4 Q & A