Why you should choose Hong Kong SAR as your seat of arbitration

Hong Kong SAR has moved up the ladder to be the favourite seat for respondents in Asia Pacific according to the latest Queen Mary survey, and has retained its place across the full respondent pool as the third most preferred seat for arbitration globally, after London and Singapore. The number of cases in Hong Kong SAR is also soaring. In 2024, the Hong Kong International Arbitration Centre (HKIAC) reported its highest ever caseload, reaching 352 cases – a 25% increase from the previous year. Most arbitrations filed with the HKIAC in 2024 were international, featuring parties from 53 jurisdictions, compared to 45 the previous year

When parties choose Hong Kong SAR as a seat, the arbitration procedure is governed by Hong Kong's Arbitration Ordinance (‘the Arbitration Ordinance’) and Hong Kong becomes the ‘legal home’ of the arbitration, which is distinct from the venue where hearings may take place. The seat courts exercise supervisory jurisdiction and oversee critical aspects of the arbitration process, including the constitution of the tribunal, the conduct of proceedings, and the setting aside of awards. The Arbitration Ordinance is a well-structured example of arbitration legislation that contains arbitration-friendly provisions to supplement the UNCITRAL Model Law that are flexible and in line with international best practices. Moreover, the Hong Kong courts are supportive of arbitration proceedings at all stages of the process while maintaining minimal curial intervention and safeguarding the integrity of the arbitral process.

Surveys of arbitration users consistently show that the factors that make a seat popular include neutrality and the pro-arbitration stance of the local legal system – in other words, the courts’ track record on supporting arbitration proceedings and enforcing arbitral awards. Arbitration’s most often chosen seats – London, Singapore and Hong Kong – all meet these requirements. However, they each retain their own respective advantages. Distinctive features of Hong Kong’s arbitration law and institutional rules as well as its special arrangements with mainland China, among other things, make Hong Kong more suitable to particular types of disputes and more attractive to certain users.

Dealing with emergency relief

Shared power to order and enforce interim injunctions

Hong Kong SAR was the first UNCITRAL jurisdiction to adopt the 2006 revisions to the Model Law, allowing arbitral tribunals to grant interim measures in support of arbitration with the same binding effect as court-ordered measures (article 17 of the Model Law, given effect by article 45 of the Arbitration Ordinance).

Article 45(3) of the Arbitration Ordinance grants the Hong Kong SAR courts power to grant interim measures irrespective of whether similar powers may be exercised by an arbitral tribunal in relation to the same dispute. This applies to both foreign and domestic arbitrations, and whether or not the arbitral proceedings have commenced, effectively broadening the circumstances in which a Hong Kong court can grant measures to protect the status quo until an arbitral award is rendered. The Hong Kong courts retain greater powers under article 45 of the Arbitration Ordinance to order interim measures in relation to arbitration proceedings when compared to other jurisdictions. In contrast, in Singapore, for example, the courts may only order interim measures in relation to an arbitration if the applicant can establish that there is urgency to preserve evidence or assets and in circumstances where the tribunal has no power or is unable to grant the request (Section 12 of the Singapore International Arbitration Act).

Under the revised 2024 HKIAC rules (Schedule 4, para 20) an applicant may seek emergency relief under the emergency arbitrator procedure under Schedule 4 based on the requirements of urgency or, in addition or alternatively, may also apply to the courts at any time for interim or conservatory measures. Under ICC rules (article 28.4) and LCIA rules (article 25.3), resorting to the court for interim measures after the tribunal is constituted may only be done in “appropriate” (ICC) or “exceptional” (LCIA) circumstances.

Thus, the Hong Kong SAR courts have a wide discretion when ordering interim measures in relation to arbitration proceedings, which gives parties reassurance that they can have the support of the seat court in circumstances where, for example, the arbitral tribunal is unable to grant the measure sought; an ‘ex parte’ procedure is required, or where the tribunal’s orders are not being complied with. In a recent decision, the Hong Kong Court of First Instance issued interim relief restraining a company from disposing of assets over which its opponent intended to enforce an award in the arbitration proceedings when the arbitral tribunal’s (five) orders on the parties to reach agreement on the matter were ignored. However, other cases have shown that the Hong Kong courts are unlikely to grant an application for an interim measure which is duplicative of the power of the arbitral tribunal when there is a risk of dilatory tactics aimed at derailing the arbitration proceedings.

Interim measures, including anti-suit injunctions ordered by an arbitral tribunal, are considered procedural orders falling within the procedural discretion of the arbitral tribunal and not subject to review by the Hong Kong courts. This means that the courts will enforce anti-suit injunctions without looking at the merits of the tribunal’s decision. For example, in 2024 in, the Hong Kong Court of First Instance granted an anti-suit injunction against a Russian bank that had initiated court proceedings in Russia despite an arbitration agreement providing for Hong Kong arbitration. A year before, the Hong Kong court also granted relief against another sanctioned Russian party. These decisions show the Hong Kong courts’ willingness to take robust action in support of arbitration.

Specific arrangements with mainland China on interim relief

Under the Interim Measures Arrangement between Mainland China and Hong Kong (‘the interim measures arrangement’), which came into force in October 2019, parties to a Hong Kong-seated arbitration administered under certain institutions (including HKIAC, ICC and CIETAC) can obtain interim relief in mainland China prior to the arbitration being commenced, or during the arbitration proceedings. If the arbitration is administered by HKIAC and a party wishes to obtain interim relief once the proceedings have started, that party can submit the interim relief application directly to the HKIAC which then forwards it to the competent Intermediary People’s Court in mainland China. Under PRC law, the PRC court must make a ruling on an interim measure application made in advance of arbitration with 48 hours. Hong Kong is the only seat to date benefiting from this special arrangement, which gives Hong Kong a distinctive advantage when the dispute involves Chinese parties or assets located in China.

HKIAC case statistics report a significant increase in applications by parties under the interim measures arrangement. In 2024 alone, HKIAC processed 40 applications made to 21 different mainland Chinese courts seeking to preserve evidence, assets or conduct worth a total of RMB 9.1 billion (US$1.2 billion) in mainland China. This is more than double the 19 applications processed in 2023, reflecting a growing reliance on the mechanism to secure applicants’ claims.

Of all the applications made in 2024, around 28.9% were made by parties from mainland China and 71.1% by parties outside of mainland China. In the 31 known cases, the mainland Chinese courts issued orders to preserve a total of RMB 6.3 billion worth of assets.

Ease of enforcement of interim measures and provisional awards

An interim order may take the form of a procedural order or a provisional award. As above, an order granting an interim measure by a Hong Kong seated arbitral tribunal has the same binding effect as a court-ordered interim measure and is not subject to appeal. Provisional awards are enforceable in the same way as final awards under the Arbitration Ordinance and rules (article 35 of the HKIAC rules), which is not always the case in other jurisdictions where the issue of enforceability of such orders is less clear making this a fertile area for dispute.

The courts in Hong Kong SAR have also granted leave for ‘ex parte’ enforcement of emergency arbitration orders. In one recent case where the claimant had obtained an emergency arbitration order which restrained the respondent from dissipating his property, the court granted leave to the claimant based on an ex parte application.

Efficacity of the HKAIC emergency arbitrator procedure

Most arbitration institution rules have emergency arbitrator provisions. However, the HKIAC rules provide one of the fastest resolution processes. The appointment of the emergency arbitrator occurs within 24 hours of the Secretariat receiving the application deposit compared to two and three days under the ICC and LCIA rules respectively.

In addition, HKIAC is one of only two institutions – along with SIAC- to expressly provide “interim-interim relief”: that is, the possibility to obtain an order preserving the status quo immediately after the nomination of the emergency arbitrator, and prior to the decision.

Although the HKIAC rules do not provide an ex parte protective preliminary order (PPO) as, for example, per the new SIAC rules, Hong Kong is one of the few UNCITRAL jurisdictions which provides for the possibility of the arbitral tribunal making a preliminary order ex parte (under articles 17A, B, C and D of the Model Law). Thus, it would not be a stretch for the HKIAC to include an ex parte PPO in the next version of its rules.

Arbitration proceedings arising out of complex contractual relationships

Enforceability, including multi-tier dispute resolution clauses

Disputes on infrastructure and energy projects frequently incorporate multi-tiered dispute resolution clauses, requiring parties to engage in preliminary steps such as negotiation or mediation before escalating the dispute to arbitration or litigation.

In the context of such clauses, the position in Hong Kong following recent case law is that compliance with pre-arbitration steps, such as negotiation or mediation, is a matter of admissibility of the claim, not jurisdiction of the tribunal. This means that arbitral tribunals, rather than the courts, have the final say on whether a party has complied with any pre-arbitral steps and the associated legal consequences.

This pro-arbitration approach permits a swifter resolution of the dispute in one forum. The position is well settled in Hong Kong SAR, which is not the case in some other jurisdictions.

Multi-party, multi-contract arbitration proceedings

Complex infrastructure and energy disputes typically involve multiple parties and contracts. It is very rare that parties include a multi-contract multi-party arbitration clause: most of the time, each contract is governed by a separate dispute resolution clause and proceedings run in parallel with the risk of conflicting decisions and inefficiencies. For contractors in particular who may wish to make sure that one single tribunal decides all the disputes that it has against the employer and the subcontractor, consolidation and joinder are useful. For arbitrations seated in Hong Kong under the HKIAC rules, parties can benefit from the joinder and consolidation options offered by the HKIAC rules which are less restrictive than those of other institutional rules.

For example, article 10 of the ICC Rules only permits consolidation of proceedings among multiple parties to multiple contracts where the parties have entered into the same arbitration agreement. This restriction does not apply under the HKIAC rules, which permit consolidation even where the claims are made under more than one arbitration agreement. In practical terms, this means that a main contractor can consolidate an arbitration raised against a subcontractor with that raised against it by the employer, for example, which can lead to time and cost efficiencies.

The rules for joinder are also permissive. Under article 27 of the HKIAC rules, the HKIAC or the arbitral tribunal can decide on joinder without the consent of all parties provided the party to be joined is prima facie bound by the arbitration agreement. Other institutions, including the ICC, require the consent of all parties after the arbitral tribunal is constituted – including the joining party, which must accept the constitution of the arbitral tribunal and agree to any applicable terms of reference. The HKIAC provisions are highly beneficial where a respondent considers a third party under the arbitration agreement should bear liability for claims raised against the respondent, as in most circumstances the third party would otherwise refuse the joinder.

Consolidation or joinder is also difficult to achieve under the ICC and LCIA rules where different arbitrators have been appointed in more than one arbitration, given LCIA and ICC do not have the power to remove an arbitrator in this context. By contrast, the HKIAC rules provide that when HKIAC decides to consolidate two or more arbitrations, the parties are deemed to have waived their rights to designate an arbitrator, and HKIAC can appoint the arbitral tribunal with or without regard to any party’s designation. The SIAC rules do not give SIAC an equivalent power to designate the entire arbitral tribunal.

Enforcement of an arbitral award in Hong Kong SAR

In Hong Kong SAR, arbitration awards are final and cannot be appealed. There is an exception where schedule 2 of the Arbitration Ordinance, which permits limited appeal on questions of law and challenges to the award on the grounds of serious irregularity, applies – however, ts application is limited to only those parties that expressly opt-in to its application and to subcontracts where the subcontractor is a Hong Kong entity on a Hong Kong project. The unsuccessful party has only limited grounds to set aside an arbitral award, on the grounds of lack of jurisdiction, procedural irregularities, or public policy. Once the Hong Kong High Court has ruled on the setting aside application, an appeal is only possible with leave from the court. When an application to set aside fails, the unsuccessful party has to pay costs on an indemnity basis by default. This feature, unique to Hong Kong arbitration jurisprudence, is a strong deterrent against unmeritorious challenges.

By comparison, in Singapore, whilst the right to appeal on a point of law is unavailable, parties can appeal the court’s decision on the setting aside of the arbitral award ‘as of right’ without leave from the court. If the application to set aside is unsuccessful, the default rule is that costs are awarded on a standard basis. The Singapore government is currently considering reforms to the International Arbitration Act and has considered these differences and observed some of the benefits of the regime in Hong Kong SAR compared to that of Singapore.

The Singapore Ministry of Law has observed that the limited right of appeal on a point of law in Hong Kong may increase the suite of options available to commercial parties and enhance party autonomy and flexibility. In addition, the requirement for leave to appeal a setting aside decision in Hong Kong SAR may discourage applicants from pursuing frivolous or unmeritorious appeals with the intention to evade enforcement. Similarly, the onerous rules on allocation of costs in Hong Kong against an unsuccessful applicant may deter applicants from pursuing unmeritorious applications to delay proceedings.

As a result of the robust pro-arbitration approach of the Hong Kong courts, the enforcement rate in Hong Kong SAR is very high. While Hong Kong does not have a specific court such as the Singapore International Commercial Court (SICC), it is presided over by specialist judges from both Hong Kong and abroad who are experienced in dealing with arbitration-related cases. In 2024, 100 applications to enforce were made, 16 applications to set aside were issued and only one order to set aside was granted, based on HKIAC data. According to the judge in charge of the Construction and Arbitration List, Ms Justice Minnie Chan: “the primary aim of the court is to facilitate the arbitral process and to assist with enforcement of arbitral award”. Recent rulings in Hong Kong over applications to set aside arbitral awards have highlighted courts’ continued reluctance to intervene in arbitration outcomes. In 2024, Hong Kong courts rejected a noticeable number of attempts by parties to set aside awards.

In addition, in 2012, the Hong Kong Court of Appeal clarified that when reviewing an arbitral award challenged on due process grounds, a court will only agree to set aside the award if the conduct complained of is sufficiently serious or egregious so that one could say a party has been denied due process.

In the unlikely event that the court considers that the challenge to the award is meritorious, the court may choose, when applicable, to remit the issue to the arbitral tribunal under section 81 of the Arbitration Ordinance rather than set aside the award.

Under the China-Hong Kong mutual enforcement agreement, parties granted an arbitral award may commence enforcement proceedings in both jurisdictions simultaneously, provided that the total amount to be recovered does not exceed the amount of the award. This enhances the parties’ chances of recovery, a welcome development for Chinese companies and their counterparties.

Further practical advantages of Hong Kong as a seat

Two other practical factors reduce obstacles for parties involved in international arbitration in Hong Kong SAR.

Firstly, an immigration facilitation scheme allows short-term entry into Hong Kong SAR for individuals participating in arbitral proceedings in the jurisdiction – including  arbitrators, expert and factual witnesses, legal representatives and parties involved in arbitration. This ensures the accessibility to leading practitioners and professionals that is essential for high-quality proceedings. The scheme was recently presented as a distinct advantage of Hong Kong in an amicus brief from the Russian Arbitration Association.

Parties resolving their disputes through arbitration in Hong Kong SAR can also benefit from two key funding mechanisms: third-party funding (TPF) and outcome-related fee structures (ORFS). Since 2019, Hong Kong has permitted third-party funders to finance arbitration proceedings in exchange for a share of the award. It is commonly used in high-value commercial disputes and helps parties pursue claims without upfront legal costs.

ORFS was introduced in 2022 to allow lawyers to offer flexible fee arrangements, such as conditional fee arrangements and damages-based agreements, for arbitration proceedings. ORFS not only places Hong Kong in line with other jurisdictions in the arena of international arbitration, it may also help alleviate clients’ cash-flow issues or other cost pressures that would traditionally arise in arbitration proceedings.