The Arbitration (Amendment) Bill 2013 (the
"Bill") was gazetted by the government of the
Hong Kong Special Administrative Region ("Hong
Kong") on March 28, 2013. The Bill contains a number of
proposed amendments to the Hong Kong's Arbitration
Ordinance (Cap. 609) (the "Arbitration
Ordinance"), the most significant being the introduction
of new provisions relating to the enforcement of arbitration awards
made in the Macao Special Administrative Region of China
("Macao"). Another proposed amendment of great
significance to arbitration practitioners is the introduction of
provisions related to the enforcement of emergency relief granted
by an emergency arbitrator. This Commentary discusses the
purpose and key features of these two amendments proposed under the
Bill.
Enforcement of Macao Arbitration
Awards
Although Macao enacted a modern international arbitration law in
1998 (Decree-Law 55/98/M) based largely on the UNCITRAL model law,
Macao has never been considered an attractive place for
international arbitration. This is undoubtedly due to issues
concerning the enforcement of Macao arbitration awards in other
states and other regions of the People's Republic of China
(the "PRC"). Before looking at the proposed
amendments to the Arbitration Ordinance, it is worthwhile to review
the background concerning these enforcement issues.
Enforcement of Macao Awards in Other States. The
ability to enforce an arbitration award in a state other than where
the award was made is a very important factor in choosing an
appropriate place to hold an arbitration, particularly where the
arbitration is of an international nature (for example, one or both
of the parties, or their assets, are located in a state other than
where the arbitration is held). In this regard, it is important
that the award be rendered in a state that is a party to the
Convention on the Recognition and Enforcement of Foreign Arbitral
Awards 1958 (the "New York Convention"), which
greatly facilitated the mutual enforcement of arbitration awards
among its 148 member states.
Although Portugal acceded to New York Convention in 1995, it was
not until late 1999 that Portugal declared to the United Nations
that the New York Convention would apply to Macao (which was at
that time under Portuguese rule) and would take effect as of
February 10, 2000. Macao was, however, returned to the PRC on
December 20, 1999 (the "Handover"), and although
the PRC was also a party to the New York Convention at that time,
the PRC did not confirm to the United Nations that it would apply
the New York Convention to Macau until July 19,
2005.
Thus, it was not until mid-2005 that it could be said with
certainty that the New York Convention applied to arbitration
awards made in Macao.
Enforcement of Macao Awards in Mainland China.
The enforcement of Macao arbitration awards within other regions of
the PRC is another important factor to consider in choosing Macao
as a forum for arbitration. There are three separate legal regimes
within the PRC, namely mainland China, Hong Kong, and Macao. The
New York Convention applies only as between states and is therefore
of no use to a party seeking to enforce an arbitration award made
in one region of the PRC in another region of the
PRC.
As with the return of Hong Kong to the PRC in 1997, a legal vacuum
was created upon the return of Macao to the PRC in 1999, in that an
arbitration award made in Macao was no longer considered to be a
"foreign award"when it came to enforcement in
mainland China. Whereas Hong Kong was quick to fill this legal
vacuum by way of the Arrangement for Mutual Enforcement of Arbitral
Awards between the Mainland and the Hong Kong SAR signed in June
1999 (the "Hong Kong Arrangement"), Macao did not
fill this vacuum until January 1, 2008 upon the signing of the
Arrangement between the Mainland and the Macau SAR on Reciprocal
Recognition and Enforcement of Arbitral Awards (the "Macau
Arrangement").
Therefore, until 2008, there was no effective mechanism for
enforcing a Macao arbitration award in mainland
China.
Enforcement of Macao Awards in Hong Kong. Having
rectified its enforcement deficiencies in respect of other states
and mainland China, there still remained an obvious gap in the
mutual recognition and enforcement of arbitral awards between Hong
Kong and Macau. Finally, on January 7, 2013, an agreement called
the Arrangement Concerning Reciprocal Recognition and Enforcement
of Arbitral Awards between the Hong Kong SAR and the Macao SAR (the
"HK-Macao Arrangement") was signed. The HK-Macao
Arrangement is similar to the Hong Kong Arrangement and the Macau
Arrangement and completes the missing piece of the puzzle for
mutual recognition and enforcement of arbitral awards within all
three legal regimes of the PRC.
The HK-Macao Arrangement is in the spirit of the New York
Convention and provides that the Hong Kong courts shall recognize
and enforce arbitration awards made in Macao pursuant to the laws
of arbitration of Macao, and, conversely, the courts of Macao shall
recognize and enforce arbitration awards made in Hong Kong pursuant
to the laws of arbitration of Hong Kong.
The amendments proposed under the Bill serve to enshrine the
HK-Macao Arrangement in the Arbitration Ordinance. In particular, a
new section (Section 98A) will be added entitled
"Enforcement of Macao Awards,"setting out the
formal requirements for enforcing Macao awards in Hong Kong, along
with grounds for refusing such enforcement. The grounds for
refusing to enforce a Macao award are identical to those for
refusing to enforce to an award covered by the New York Convention
and for mainland China awards. Thus, for all practical purposes,
arbitration awards made in Macao are placed on the same footing as
awards made in a New York Convention state when it comes to
enforcement.
Enforcement of Emergency Relief Granted by an Emergency
Arbitrator
The Need for Emergency Relief. The ability to
obtain interim measures in arbitration proceedings, for example
orders to preserve evidence or assets, or orders to obtain security
for costs, is a very important aspect of arbitration and, as with
enforcement issues, plays a key role in establishing the
suitability of a place to hold an arbitration. Unlike litigation,
where a judge is available to order interim relief as soon as a
writ is served (or sometimes even before a writ is served), upon
commencing arbitration proceedings it typically takes anywhere from
two weeks to three months to establish the arbitral tribunal. In
the meantime, the parties may be able to make applications to the
courts for interim measures in support of the arbitration, such as
the preservation of evidence and property; however, such
court-ordered interim measures are not possible in every
jurisdiction.
In view of the time lag between commencing arbitration proceedings
and the establishment of the arbitral tribunal, there is a trend
for international arbitration rules to incorporate emergency
arbitrator procedures under which an arbitrator can be appointed at
short notice by the relevant arbitration institution and can
proceed to hear the parties and make orders for so-called
"emergency relief." This applies to the 2010
Arbitration Rules of the Singapore International Arbitration Centre
("SIAC"), as well as the 2012 Rules of
Arbitration of the International Chamber of Commerce
("ICC").
Proposed Amendments to the HKIAC Administered Arbitration
Rules. The recent proposed amendments to the Hong Kong
International Arbitration Centre ("HKIAC")
Administered Arbitration Rules (which are anticipated to come into
effect in May 2013) also incorporate a provision for the
appointment of an emergency arbitrator. Under these rules, an
application for the appointment of an emergency arbitrator can be
made concurrent with, or following, the filing of a Notice of
Arbitration.
An application for emergency relief under the proposed amendments
to the HKIAC rules will need to include details such as the
description of the circumstances giving rise to the application and
the underlying dispute, why emergency relief is sought, and why the
applicant cannot wait until the tribunal is constituted. An
emergency arbitrator will normally be appointed within two days
following the HKIAC's acceptance of the application, and a
decision on the application will normally be made within 15 days
from the date on which the emergency arbitrator received the file
from the HKIAC. There are also new procedural measures, including
those relating to an emergency arbitrator's power to
conduct proceedings, the effect of his decision, his ability to act
as an arbitrator in subsequent proceedings, and the availability of
judicial remedies.
Proposed Amendments to the Arbitration Ordinance.
The Arbitration Ordinance is currently silent on the subject of
emergency arbitrators, and it is debatable as to whether or not the
definition of "arbitral tribunal"would include an
emergency arbitrator. This is significant because under Section 61
of the Arbitration Ordinance, an order or direction of an
"arbitral tribunal"is enforceable in the same
manner as an order or direction of the Court. The amendments
introduced by the Bill foreshadow any legal debate on this issue by
introducing a new part entitled "Part
3A—Enforcement of Emergency Relief"that
expressly provides that emergency relief granted by an
"emergency arbitrator"(whether in or outside of
Hong Kong) is enforceable in the same manner as an order or
direction of the court. An "emergency
arbitrator"is defined broadly—it not only covers
emergency arbitrators appointed under the arbitration rules of a
permanent arbitral institution (such as the ICC or the SIAC), but
also under whatever arbitration rules have been agreed to or
adopted by the parties.
As with the enforcement of orders or directions of an arbitral
tribunal, leave of the Hong Kong court is required to enforce
emergency relief made by an emergency arbitrator. However, in
contrast to the existing provisions concerning the enforcement of
orders or directions of an arbitral tribunal, the proposed
provisions for the enforcement of emergency relief provide that the
Hong Kong court may refuse to grant leave for enforcement unless
the party seeking to enforce the emergency relief can demonstrate
that the temporary measures ordered by the emergency arbitrator do
one or more of the following:
(b) take action that would prevent, or refrain from taking action that is likely to cause, current or imminent harm or prejudice to the arbitral process itself
(c) provide a means of preserving assets out of which a subsequent award made by an arbitral tribunal may be satisfied;
(d) preserve evidence that may be relevant and material to resolving the dispute;
(e) give security in connection with anything to be done under paragraph (a), (b), (c) or (d);
(f) give security for the costs of the arbitration."
Thus the scope of emergency relief ordered by an emergency
arbitrator that the Hong Kong court will enforce is somewhat more
limited than that ordered by an arbitral tribunal, which has no
such restrictions. This is perhaps a reflection that the measures
ordered by an emergency arbitrator should actually be
"emergency"in their nature and will prevent abuse
of the emergency arbitrator procedure.
Conclusion
The amendments to the Arbitration Ordinance proposed under the
Bill complete the missing piece of the enforcement regime for
arbitration awards made within different regions of the PRC by
putting arbitration awards made in Macao on the same footing as
those made in mainland China or New York Convention states for the
purpose of enforcement. The amendments also reflect the growing use
of emergency arbitrators and clarify that emergency relief ordered
by an emergency arbitrator will be enforceable in Hong Kong in
broadly the same way as orders and directions of an arbitral
tribunal.
The proposed amendments will be welcomed by the international
arbitration community and demonstrate Hong Kong's
proactiveness in maintaining itself as a leading regional
arbitration center.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
