Updated Hong Kong International Arbitration Centre Rules – continued refinement of efficiency and good practice

The Hong Kong International Arbitration Centre (HKIAC) has recently released its updated Administered Arbitration Rules, which take effect on 1 June 2024 (HKIAC 2024 Rules), updating the rules which the HKIAC last released in 2018 (HKIAC 2018 Rules). This is just one of the updates of major arbitral institution's rules in 2024 with the Singapore International Arbitration Centre (SIAC) expected to release its next iteration of its rules during the course of this year after concluding its consultation period in late 2023.

Efficiency

Efficiency is always one of the key issues in the updates to any institutional rules. Arbitrators under the HKIAC 2018 Rules already had the power (under Article 43) to make an early determination of a matter. However, now a new Article 13.6 expressly clarifies that the arbitral tribunal has the broad discretionary power, in consultation with the parties, to determine preliminary issues or otherwise adopt procedures to decide the case efficiently.

Several other updates in the HKIAC 2024 Rules are directed at promoting efficiency, including:

• A broad overarching power to HKIAC to take any measure necessary to preserve the efficiency or integrity of the arbitration after consulting with both the parties and the relevant arbitral tribunal.
• The ability for HKIAC to revoke the appointment of an arbitrator who cannot fulfill his or her functions under the rules (and within the prescribed time limits) is expressly outlined in the new rules as one example of action HKIAC may take when exercising its broad powers for preserving the efficiency and integrity of the arbitration (Article 13.10).
• A requirement that tribunals and parties consider information security when adopting procedures for the conduct of the arbitration (Article 13.1), and the empowerment of the tribunal to make directions and order sanctions for information security breaches (Article 45A).

Time limit for closing proceedings and rendering awards

The HKIAC 2024 Rules impose more rigorous time limits on tribunals in respect of closing proceedings, with the introduction of a 45-day limit on the period allowed for an arbitral tribunal to declare proceedings (or a relevant phase of such) closed following the last directed substantive submissions (Article 31.1). After that time, no further submissions, arguments, or evidence may be tendered, save for submissions on costs, or a discretionary re-opening of proceedings (Article 31.4). However, the date of rendering the award remains three months (at the latest) from the date of closure (Article 31.2).

Model arbitration clause

The model arbitration clause published by the HKIAC now features:

• the "law of this arbitration clause shall be … (Hong Kong Law)". This is an important clarification as to the law under which the arbitration clause is to be interpreted and applied. In light of the doctrine of separability generally found in relation to arbitration agreements, there is a distinction between the law of the contract and the law of the arbitration agreement and this sentence directs parties to think about the applicable law to their arbitration agreement. SIAC also recently introduced this addition to their model clause; and
• an option to select how the tribunal's fees will be calculated, being on at an hourly rate or on ad valorem. While this can provide certainty as to the future method, it will not be clear at the time of the agreement what the nature of disputes arising from the contract may be, and therefore which method is more 'cost effective' for the parties. We would recommend obtaining advice prior to implementing this feature into future arbitration clauses.

Costs

Further guidance has been provided as to the factors the tribunal takes into account when exercising its discretion to award costs. Whilst the HKIAC 2018 Rules already provided for the existence of a third-party funding arrangement as a factor, the HKIAC 2024 Rules clarify that the following factors must be considered:

• the relative success of the parties;
• the scale and complexity of the dispute;
• the conduct of the parties;
• the existence of any outcome-related fee structure arrangement
• any adverse environmental impact.

Diversity, inclusion and environment

Other notable updates which reflect advancing social norms include:

• a requirement that both the tribunal and parties consider the environmental impact of adopting various procedures for the conduct of the arbitration (Article 13.1), and the empowerment of tribunals to consider any adverse environmental impacts arising out of parties' conduct when allocating costs (Article 34.3(f)); and
• a requirement that HKIAC is to take diversity into account when appointing arbitrators (Article 9A).