05 December 2014

Client Question: Differences between various arbitration institutions and rules

Article written by Lily Ma

At the outset, there must be an agreement between the parties to the contract to refer any disputes between them to arbitration. Absent any arbitration clause/agreement, the parties cannot refer disputes to arbitration but must instead rely on the court system to resolve their differences. While it is possible for parties to agree to refer disputes to arbitration after a dispute arises, that rarely happens in practice.

The parties are free to draft arbitration agreements to include any terms they choose (provided such terms are compatible with mandatory laws). Generally, parties would consider the following issues when drafting an arbitration agreement:

  • the agreement to arbitrate;
  • the scope of the disputes submitted to arbitration;
  • the use of an arbitral institution or “ad hoc” arbitration;
  • the rules of arbitration and whether choice of institution limits the choice of rules;
  • the seat of the arbitration;
  • the method of appointment, number, and qualifications of the arbitrators;
  • the language of the arbitration;
  • choice of law of the arbitration agreement;
  • costs of legal representation;
  • interest and currency of an award;
  • disclosure or discovery powers of tribunal;
  • fast-track or other procedural rules;
  • state sovereign immunity waivers; and
  • confidentiality.

In institutional arbitration, an arbitral institution will usually be responsible for coordinating the constitution of the arbitral tribunal and providing administrative support throughout the arbitration under its own rules. In contrast, ad hoc arbitrations are run without the involvement of an administrative authority.

In terms of arbitration institutions, the Hong Kong International Arbitration Centre (“HKIAC”) and Singapore International Arbitration Centre (“SIAC”) have long been viewed as the Asian institutions of choice for disputing parties.

The total number of new cases handled by SIAC in 2013 hit 259, up from 235 in 2012 and just 99 in 2008. In comparison, the HKIAC saw 260 new cases in 2013, continuing in a consistent range which saw 293 in 2012 and 275 in 2011. HKIAC is a popular choice with Chinese and foreign parties because of its proximity to Mainland China, its long-established reputation and Hong Kong’s strong legal support for arbitration. In contrast to HKIAC, most of SIAC’s arbitrations are administered arbitrations, and many of the arbitrations at SIAC do not involve local parties. Singapore is also seen as being in a geographically convenient location and is supported by necessary physical resources as well as a legal and political infrastructure that, like Hong Kong, is sophisticated, skilled, and of high integrity.

In China too, arbitration has increased in the past decade with the China International Economic and Trade Arbitration Commission (“CIETAC”). Established in 1956, CIETAC is headquartered in Beijing and has also recently set up an arbitration centre in Hong Kong.

In any event, if institutional arbitration is desired, the parties’ arbitration agreement must select and refer to an arbitral institution and its rules. In general, arbitral institutions provide their own model arbitration clauses; parties wishing to employ the institution’s rules should ordinarily use that institution’s model clause as the basis for their agreement, departing from it only with care and for considered reasons.

In addition to these institutions, ad hoc arbitration under the United Nations Commission on International Trade Law (“UNCITRAL”) rules is widely recognised in Asia and in fact is the basis upon which both the HKIAC and SIAC rules were drafted. In cases where the parties do not wish to agree to institutional arbitration, they will sometimes select in their arbitration agreement a pre-existing set of procedural rules designed for ad hoc arbitrations (such as the UNCITRAL Rules). Institutions such as the HKIAC and SIAC administer arbitrations under the UNCITRAL Arbitration Rules.

Refer to Appendix 3 for a comparison of the CIETAC, HKIAC, SIAC and UNCITRAL arbitration rules

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