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Hong Kong InternatIonal arbItratIon Centre CHartered InStItute of arbItratorS (eaSt aSIa branCH) Hong Kong InStItute of arbItratorS Hong Kong MedIatIon CounCIl

Contents

ArbitrAtion & ADr in AsiAIncreasing Influence of Asia in International ArbitrationProfessor Julian DM Lew QC

Enforcement of Foreign Arbitral Awards, Issue Estoppel and Comity: Developments in AustraliaAlbert Monichino SC & Alex Fawke

Will Emergency Arbitration Find a Place under PRC Law?Lei Shi

Obtaining Security in Malaysia for Maritime Claims in ArbitrationAhalya Mahendra

In-hOuSE COunSEL FOCuSChallenges to Arbitrators for Bias: how Concerned Should We Be?Nerys Jefford QC

nutS & BOLtS LECtuREFactual and Expert Evidence in ArbitrationJohn Cock

MEDIAtIOnthe Impact of a Mediator’s Conduct on Disputing PartiesDr Lim Lan Yuan

CASE nOtESDefining the Scope of an Arbitral tribunal’s Authority and Setting Aside of Awards in Cases Involving a State PartySuraj Sajnani

treatment of Arbitration Provisions in Illegal PRC ContractsMargaret Tsau

book review essAyMediation in Asia-Pacific: A Practical Guide to Mediation and its Impact on Legal SystemsMediation Ordinance: Commentary and Annotations

news

events

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Editorial BoardPeter Caldwell (Editorial Board Chairman) (Hong Kong International Arbitration Centre)Chiann Bao (Hong Kong International Arbitration Centre)Paul Barrett (Chartered Institute of Arbitrators, East Asia Branch)YK ChanJohn ChoongKhong Cheng YeeWilliam Leung (Chartered Institute of Arbitrators, East Asia Branch)Julian stargardt (Hong Kong Mediation Council)Mary thomsonChristopher toPaul Varty samuel Wong (Hong Kong Institute of Arbitrators)

Asian Dispute Review is sponsored by:Hong Kong International Arbitration CentreChartered Institute of Arbitrators, east Asia BranchHong Kong Institute of ArbitratorsHong Kong Mediation Council

thE PuBLIShInG tEAM

Romesh Weeramantry Robert Morgan John Choong

Lexisnexis(A division of Reed elsevier (Greater China) Ltd)3901, 39/F, Hopewell Centre,183 Queen’s Road east, Hong Kongtel: (852) 2965 1400 Fax: (852) 2976 0804www.lexisnexis.com.hk

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PuBLIShER

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Copyright in all material published in the Asian Dispute Review is retained by the Hong Kong International Arbitration Centre (HKIAC) on behalf of the sponsoring organizations. no part of this journal may be reproduced or transmitted in any form or by any means, including recording and photocopying without the written permission of HKIAC, application for which should be addressed to HKIAC. Written permission must also be obtained before any part of this publication is stored in a retrieval system of any nature. the journal does not accept liability for any views, opinions, or advice given in the journal. Further, the contents of the journal do not necessarily reflect the views or opinions of the publisher, the editors, or HKIAC or the other sponsoring organizations and no liability is accepted in relation thereto.

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All enquiries relating to Asian Dispute Review should be directed to Bruce Andrews ([email protected])

FTI ConsultingConstruction Solutions Asia PacificWhat We DoWe are a group of internationally recognised construction industry professionals, engaged for our delivery of service excellence. We offer a broad range of contract advisory services to assist owners, contractors and construction law firms in the prevention, mitigation or resolution of construction disputes.

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With backgrounds in both commercial contracting and professional practice, our consultant are experienced in technical, commercial and legal matters, enabling them to identify the key issues quickly and to find the optimum solutions for our clients.

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CRITICAL THINKING AT THE CRITICAL TIME™

Construction advert 210 x 280.indd 1 13年12月23日下午12:50

Nerys Jefford QCKeating ChambersLondon

Margaret TsauChambers of Andrew Liao SChong Kong

Suraj Sajnanihong Kong

Robert MorganBarrister (England & Wales, Queensland) Consulting Editor, Asian DR, hong Kong

Albert Monichino SCBarrister, Arbitrator and MediatorMelbourne, Australia

Ahalya MahendraChartered ArbitratorMalaysia

Lei ShiClifford Chancehong Kong

We have great pleasure in introducing readers to this January 2014 issue of the Asian Dispute Review. It is the third issue of the Review in which the new-look format has been adopted. In the past two issues, we have made various adjustments to the Review's design, article layout and paper quality. the publishers have been very helpful in implementing these refinements and in taking on board suggestions from readers and the Editorial Board. We now have a standard format which will be carried through to future issues of the Review. nonetheless, we remain open to further suggestions and comments on the look and feel of the Review, so please do keep these coming.

In this issue, we commence with the Keynote Address of Professor Julian Lew QC, delivered at the Inaugural ICC-hK / hK 45 event held in 2012. the Address has already created a good deal of interest and was cited, for example, by Rimsky Yuen SC, hong Kong's Secretary for Justice, in a Keynote Address in 2013. Also included in this issue is an article by Albert Monichino SC and Alex Fawke on the recent Gujarat case in Australia, involving attempts to resist enforcement of an award, on the same grounds as were unsuccessfully used when challenging the award at the seat of the arbitration; an article by Lei Shi on potential problems that may occur in enforcing emergency arbitrator decisions in the PRC; an article by Ahalya Mahendra on obtaining security in the Malaysian courts (such as in the arrest of vessels), for satisfying maritime arbitration awards; and an article by Dr Lim Lan Yuan, on the importance of mediator conduct. Our In-house Counsel Focus section is written by Nerys Jefford QC, who provides a practical insight into the ever increasing challenges to arbitrators on the ground of bias. the nuts & Bolts Lecture for this issue is by John Cock and features an informative analysis of factual and expert evidence in arbitration. the case notes are on a case in Malaysia arising out of the Thai-Lao Lignite Co arbitration against Laos, contributed by Suraj Sajnani, and an English case that dealt with enforcing an arbitration agreement in a contract that was illegal in the PRC, written by Margaret Tsau. Finally, Robert Morgan has written a Book Review Essay on two new publications on mediation in Asia.

We hope you enjoy the contributions in this issue, and we take this opportunity to wish you all the very best for 2014.

edItoRIAL

ContRIButoRs

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General Editors

Dr Lim Lan YuanSenior Master MediatorSingapore

John CockEC Harrishong Kong

Alex Fawke Linklaters LLPDubai

Professor Julian DM Lew QCBarrister and ArbitratorLondon

ArbitrAtion & ADr in AsiA

4

Increasing Influence of Asia in International Arbitration

this article discusses the factors that have led since the 1990s to the increasing profile of Asia in international commercial arbitration and offers prognoses for future development. It is an edited version of the author’s Inaugural ICC-hK/hK45 Keynote Address delivered at the Royal hong Kong Yacht Club on 15 October 2012, during hong Kong Arbitration Week 2012.

Professor Julian DM Lew QC

IntroductionI would like to explore and share with you some thoughts about

the changing world of international arbitration and how the

activities of business, and economic and industrial development,

have and will continue to influence and bring about changes

to the way in which and where international arbitration is

conducted around the world. This, I suggest, may increasingly

be the case in Asia.

Asia is a big place – with different languages, political, cultural

and economic systems and different stages of economic

development. That is, however, also true of Europe and

elsewhere, and yet the arbitration world has grown with and

perhaps despite those differences.

This subject is important because, unlike national legal systems

and procedures, international arbitration is autonomous and

grows organically rather than being developed and controlled

by legal and political bodies. Commercial realities are the real

drivers of its structure. Arbitration is based on party autonomy.

Over time, arbitration has provided real value. Hence its ever

increasing acceptance in all corners of the world.

The real strengths of international arbitration have been its

existence within the confines of national legal systems, and

yet at the same time its free regulation through non-national

instruments and international conventions. It has managed to

remain relatively free from the control, strictures and prejudices

of national laws. Developments and changes come because

they are made by parties, arbitration institutions and arbitrators,

and national laws follow because they must.

The changes that have occurred over the past few years may

inform both the short and long term approaches to how the

business world will see and use arbitration in Asia, how the law

has and will continue to develop, and what lawyers will need

to do to serve their clients best and help develop international

arbitration practice.


5[2014] Asian Dispute Review

Key pointsI will deal briefly with four key points:

(1) The changed political backdrop.

(2) The realignment of economic power.

(3) The development of international arbitration in Asia.

(4) Challenges to international arbitration in Asia.

I start with two historical facts:

(1) International arbitration has been led by European and

Western countries.

(2) International arbitration has been Eurocentric in terms

of the principal arbitration institutions and the five major

arbitration seats.

Economic and political power over many generations has resided

with Western and former colonial powers, which controlled large

swathes of the world, politically and economically. In recent years,

however, there has been a shift of economic power from the so-

called rich world to the emerging world, ie from the West to the

South and East.

The changed political backdropI suggest three factors have driven the changes. Firstly, the

unravelling of the colonial system. Secondly, the former colonial

countries have reduced their dependence on the former colonial

powers. They have developed their own independent political

and economic characters and made new and different friends.

Thirdly, the emergence of successful political and economic

groups, including in particular the BRIC countries.

Realignment of economic power In the past two decades, the balance of economic power has

moved from the so-called developed world to the emerging

economies.

The Economist has reported that GDP in the ‘Rich’ countries is

still below its 2007 level, whereas emerging economies have

grown by over 20% in that period. The combined output of

emerging economies has doubled since 1990, which means

a commensurate reduction in the output of the developed

countries. Commodity consumption is where the emerging

countries lead the world. They consume 60% of the world’s

energy, 65% of all copper and 75% of all steel, and in 2011 were

expected to account for 50% of capital spending. Emerging

economies are responsible for only 19% of world debt. That is a

telling figure at a time when the economies of Europe and the

USA are reeling from the pressures caused by excessive debt.

Asia is the world’s fastest growing economic region. The

economy of Asia comprises more than 60% of the world’s

population, living in 46 different States. China is the largest

economy in Asia and the second largest in the world. Other

large economies in Asia, in terms of both nominal and gross

domestic product, are Japan, India, South Korea and Indonesia.

The effect of this, put simply, is that economic power, ie the

need to do business, has moved to the emerging economies

and Asia in particular. Manufacturing has become too expensive

and is outsourced primarily to Asia, where costs are lower. Sales

opportunities are greater in Asia, with green field markets for

goods and services.

This translates to a negotiating power for Asian businesses:

they have options for doing business with partners who offer

the best terms, including the applicable of law and the form and

venue of international arbitration.

… [I]nternational arbitration … has managed to remain

relatively free from the control, strictures and prejudices of

national laws. Developments and changes come because

they are made by parties, arbitration institutions and

arbitrators, and national laws follow because they must.


6

Development of international arbitration in Asia Asia’s past contribution to international arbitration has

been small. The Asian region was largely a bystander to

the development of international arbitration and had little

influence and perhaps little interest. In the process of adopting

international treaties, there was insufficient participation from

Asian developing countries.

The watershed for the development of arbitration law in Asia

came with the adoption of the UNCITRAL Model Law in

1985. This was at the time many Asian countries recognised

that international commerce was essential to their economic

development and stability, and that there was no reason always

to resolve disputes in Western fora.

Unlike major arbitration fora in the West, many Asian

jurisdictions have based their arbitration legislation on

the UNCITRAL Model Law. In fact, Asia has the highest

concentration of Model Law-based arbitration laws. This may,

in future, result in Asian countries being reluctant to submit to

arbitration in countries that have not enacted the Model Law.

This will present a different relationship between business

partners in Model Law countries in Africa, Europe and Latin

America and those in Asia.

This should place the countries that have adopted the Model

Law in the vanguard of the development of “a free-standing

global substantive arbitration law”, to adopt the words of Chief

Justice Menon of Singapore in his Keynote Address to the ICCA

Congress in Singapore in 2012.1 This will be effected through

reliance on the Model Law and the development of its principles

the watershed for the development of arbitration law in Asia came with the

enactment of the unCItRAL Model Law in 1985. … In fact, Asia has the highest

concentration of Model Law-based arbitration laws. this

may, in future, result in Asian countries being reluctant to

submit to arbitration in countries that have not enacted the

Model Law.

YEAR HKIAC AAA CIETAC ICC JCAA KCAB KLRCA LCIA SIAC

1997 218 320 723 452 13 51 5 52 43

2000 298 510 543 541 10 40 19 81 41

2010 291 888 1325 793 22 52 N/A 237 140

2011 275 899 1435 795 17 77 N/A 224 188

2012 293 891 1060 759 18 85 N/A 277 235

International Arbitrations at Institutions: 1997 – 2012

Statistics show continued growth for arbitration in Asian

centres:

when necessary through the courts of Model Law countries. This

will result in conformity in legal application and understanding

among its adopters. It may also leave the traditional arbitration

countries and venues on the side.

Asian venues have long been part of international arbitration,

but the growth in recent times has been significant. In particular,

we see the cementing of Hong Kong and Singapore as powerful

commercial and financial centres and attractive and acceptable

arbitration seats. Other fast-growing arbitration institutions

and centres include CIETAC, Japan, Korea, Australia and Kuala

Lumpur.



Other statistics from the ICC are equally interesting:

• Between2000and2010,thepercentageofAsianparties

involved in ICC arbitrations doubled from 10% to 20%.

• ThenumberofAsian-basedarbitratorsincreasedfrom6

in 1992 to 87 in 2010.

• Asianplacesofarbitrationincreasedfrom8in1992(there

were 40 Asian parties), to 46 in 2000 (out of 149 Asian

parties), to 50 in 2010 (out of 255 Asian parties).

What is not recorded in these figures is the number of arbitrations

under the UNCITRAL rules and at LCIA India. This is probably

the reason why the number of arbitrations in Asian arbitration

institutions has not grown even faster. Of course, all statistics

should be looked at with care and some scepticism, as it is often

suggested that one can present statistics to prove anything. In

this case, I believe there are hard facts to support the increased

acceptance of Asian fora as desirable arbitration seats.

Other developments recognising the importance and power of

Asia and the move of arbitration influences to Asia include the

following.

(1) Since 2002, Hong Kong has hosted the Asian component

of the Willem C Vis Moot competition, which had

previously been organised only in Vienna.

(2) In 2006, the AAA/ICDR and SIAC formed a joint venture

in Singapore.

(3) In 2007, the Permanent Court of Arbitration signed an

agreement with the Singapore Government to set up its

first Asian facility in Singapore.

(4) In 2008, the ICC International Court of Arbitration opened

an office of its Secretariat in Hong Kong. This was the first

ICC case administration team located outside of the main

headquarters in Paris.

(5) In April 2009, LCIA launched its first independent

subsidiary in India.

(6) 2010 saw the establishment of Maxwell Chambers in

Singapore.

(7) The ICCA Congress was held in Singapore in 2012 (it has

been held twice in India and also in Beijing).

the question is whether … [prospective new Asian venues] have, and can persuade others

that they have, a supportive arbitration regime, the

infrastructure, a strong legal profession, and the necessary

support facilities such as arbitration venues, translators, transcription services, and no need for (or at least no delays in) obtaining visas to attend

hearings. Even more important, is there a supportive, efficient and accessible court system that will uphold the arbitration agreement, enforce awards

and not seek to second-guess the chosen tribunal?


8

(8) In May 2013, the Seoul International Dispute Resolution

Centre (IDRC) was established.

Moreover several institutions have recently refined their

arbitration rules to reflect the requirements and expectations of

users. This includes in particular the 2012 CIETAC Rules, and

the 2013 Rules of both HKIAC and SIAC. These refinements

are introducing new cutting edge arbitral procedures such as

emergency arbitrator appointments.

Challenges for international arbitration in AsiaThere is a need, I suggest, for at least one additional neutral

seat for international arbitration in Asia in addition to Hong

Kong and Singapore and, of course, China. India, Japan, Korea,

Malaysia and Indonesia are all candidates. There is a vacuum to

be filled.

The question is whether these countries have, and can persuade

others that they have, a supportive arbitration regime, the

infrastructure, a strong legal profession, and the necessary

support facilities such as arbitration venues, translators,

transcription services, and no need for (or at least no delays

in) obtaining visas to attend hearings. Even more important, is

there a supportive, efficient and accessible court system that will

uphold the arbitration agreement, enforce awards and not seek

to second guess the chosen tribunal?

We all know of jurisdictions whose courts by reputation are slow,

inefficient, cumbersome, erratic, unpredictable and expensive,

both generally and in respect of international arbitration. Some

have been consistently hostile to international arbitration.

Increasingly with the adoption of the Model Law, and

recognising that arbitration generates significant financial and

reputational benefits in its own right, national courts in some

countries have recognised the special character of international

arbitration and sought to uphold it.

For example, in May 2012, the Hong Kong Court of Appeal

unanimously held that there had been no “serious” or even

“egregious” procedural violations by a tribunal that had ordered

a sequential exchange of submissions in place of a previously

ordered simultaneous exchange. The Court emphasised that

Hong Kong courts would not readily interfere with the decisions

of arbitral tribunals.2

Indian courts have always been very heavily criticised for brazen

interference in international arbitration practice, even where

arbitrations have been held in a venue outside India. They could

not resist interfering where Indian law or an Indian party were

involved. This was changed by the decision of the Supreme

Court of India in Bharat Aluminium Co Ltd v Kaiser Aluminium

Technical Service Inc.3 The Supreme Court held that Indian courts

did not have supervisory authority over and the right to annul

foreign arbitrations, and affirmed that the law of the seat of

arbitration governs the conduct of the arbitration in accordance

with the principles of the Model Law.

This decision will not have resolved many of the arbitration-

unfriendly approaches of the Indian courts, but it was in clear

language that the Supreme Court held that the separate and in

part autonomous nature of arbitration must be respected.

The Supreme Court of Singapore in AJU v AJT4 also made

clear the very limited bases on which a court can reopen the

decision of an arbitral tribunal, even on an issue of public policy.

This ‘minimal review’ of awards approach by Singapore courts

recognises the autonomy of the arbitration process and that



the courts should only review the award in specific and limited

circumstances.

Finally, a recent Pakistani case, whilst not really arbitration-

friendly, does show a recognition by the Pakistan Supreme Court

of the nature and role of international arbitration. Pakistan has

long taken its own approach to arbitration – ordering arbitrators

outside Pakistan to stop proceedings and restraining parties

from proceeding with or participating in an arbitration outside

Pakistan. In this latest case, generally known as Reko Diq,5 the

Supreme Court, instead of ordering the party that initiated the

arbitration to restrain from prosecuting it, ordered that party

to request the ICC not to take further steps and appoint the

tribunal so that the Supreme Court could review and finally

dispose of the matter. Nothing has really changed, but some

commentators suggest there may be a softening of approach on

the part of the Supreme Court of Pakistan towards international

arbitration.

One swallow may not mean summer – but if not here, it’s

coming, hopefully swiftly.

There are other factors which, I suggest, show the enormous

increase in expectations for international arbitration in Asia.

Many leading so-called international law firms, from Europe

and the US, have expanded and are continuing to place

arbitration specialists in their Asian offices. Asian ‘home grown’

firms have begun providing expert advice for international

arbitration proceedings in the region. Asian practitioners have

become active in international arbitration proceedings, more

often as Counsel. Still, there are many fewer Asian arbitrators

compared to the pool of Western arbitrators.

An ever increasing number of Asian students are studying

abroad. In the School of International Arbitration’s main LLM

course on International Commercial Arbitration at Queen Mary,

University of London, more than one-third of students are from

Asian countries. International arbitration is now taught all over

the world, including in many Asian universities.

ConclusionThese are both challenging and changing times for international

arbitration in Asia. The growing economy is driving the growth

of international arbitration in this part of the world. Asia will

continue to become an attractive venue for arbitration so long as

the influence of government and national courts in arbitration

is limited but at the same time helps to ensure a level and fair

playing field. In short, in my view there are exciting opportunities

ahead for international arbitration in Asia. adr

1 Editorial note: see the Hon Chief Justice sundaresh Menon, International Arbitration: The Coming of a New Age for Asia (and Elsewhere) at para 17 – http://www.arbitration-icca.org/media/0/13398435632250/ags_opening_speech_icca_congress_2012.pdf. Reprinted in A.J. vanden Berg (ed.) International Arbitration: The Coming of a New Age (2013, Wolters Kluwer) at pp 6-27.

2 see Grand Pacific Holdings Ltd v Pacific China Holdings Ltd (in liq) (No 1) [2012] 4 HKLRd 1. (since this lecture was delivered, this decision was upheld by the Hong Kong Court of Final Appeal: see Pacific China Holdings Ltd v Grand Pacific Holdings Ltd [2013] HKeC 248 (21 February 2013), unreported.)

3 (2012) 9 sCC 649.4 [2011] sGCA 41 (22 August 2011), unreported.5 Editorial note: See Supreme Court seeks time from ICC to settle Reko

Diq case, the express tribune (Pakistan), 7 February 2012 – http://tribune.com.pk/story/332965/supreme-court-seeks-time-from-icc-to-settle-reko-diq-case; umer Akhram Chaudry, Pakistani Court Interference in Arbitration Proceedings – Yet Again!, Kluwer Law International – http://kluwer.practicesource.com/blog/2012/pakistani-court-interference-in-arbitration-proceedings-yet-again and hyperlink to the Court’s order at http://www.supremecourt.gov.pk/web/user_files/File/C.P.796of2007.pdf.


10

Enforcement of Foreign Arbitral Awards, Issue Estoppel and Comity: Developments in Australia

this article discusses, by reference to recent Australian case law, the vexed question of whether a party who fails to set aside an arbitral award at the seat of the arbitration should be permitted to rerun its failed arguments in resisting enforcement overseas, and questions whether the court of the seat has a special status in international commercial arbitration.

Albert Monichino SC & Alex Fawke

IntroductionSpeed, finality and ease of enforceability are said to be among

the great advantages of arbitration. So long, that is, as one

wins. Once a party loses, however, these features become

much less attractive. And so, time and again, the award debtor

cannot help but seek a second (and sometimes third) bite of

the arbitral apple.

One manifestation of this phenomenon is where an award

debtor who unsuccessfully challenges the award before a

court at the seat of the arbitration proceeds undeterred to

resist enforcement in another jurisdiction on similar grounds.

This gives rise to the question: when, if ever, should a party

be able to rerun an unsuccessful challenge made at the seat?

This question has been answered in various ways across

jurisdictions. The latest case to consider it, Gujurat NRE Coke

Ltd v Coeclerici Asia (Pte) Ltd1 indicates that, at least in Australia,

the answer is only in “exceptional” cases.

The facts of GujuratAn award was made by an arbitral tribunal in London in

favour of a Singaporean company against an Indian company

and its managing director. The award debtor unsuccessfully

sought to have the award set aside in England on the basis

that it was not given a reasonable opportunity to present its

case.2 Application was then made to enforce the award in

the Federal Court of Australia under s 8 of the International

Arbitration Act 1974 (Cth) (the ‘IAA’), which gives effect to art

V of the New York Convention. The award debtor held shares

in Australian companies. The award creditor sought orders,



in aid of enforcement, appointing receivers over the shares in

question in order to avoid their dissipation.

The parties’ submissionsThe award debtor resisted enforcement of the award on two

bases. First, it submitted that it was not permitted a reasonable

opportunity by the arbitral tribunal to put its case in the

arbitration proceedings (s 8(5)(c) of the IAA). Secondly, and in

the alternative, it submitted that the said failure by the tribunal

meant that there was a breach of the rules of natural justice in

connection with the making of the award and consequently it

would be contrary to the public policy of Australia to enforce

the award (ss 8(7)(b) and 8(7A)(b) of the IAA).

The decision at first instance Foster J found on a brief review of the facts that the award

debtor had been given a reasonable opportunity to present

its case. In doing so, he noted that the lex arbitri (the English

Arbitration Act 1996) and procedural rules chosen by the

parties (the LMAA Terms (2012 Edn) of the London Maritime

Arbitrators Association) required speed, efficiency and a

minimum of formality in the arbitral procedure.3

Separately, Foster J noted that an application had been

made by the award debtor at the seat of the arbitration to set

aside the award on the basis that it was infected by “serious

irregularity”.4 In doing so, the award debtor relied upon the

same facts and matters relied on to resist enforcement of

the award in Australia.5 In the circumstances, His Honour

held that an issue estoppel precluded the award debtor

from raising the same arguments to resist enforcement of

the award.6 That is, the award debtor was precluded from

advancing the same arguments to resist enforcement as it had

raised (unsuccessfully) before the English court. In reaching

this conclusion, His Honour did not rely on any authority in

support of the proposition that issue estoppel applied in the

enforcement of foreign arbitral awards.7

Foster J proceeded to say:

“The English High Court of Justice is the court of the

seat of the arbitration. Under the [New York] Convention

and the IAA, any application to set aside the Award must

be made in that Court. Even if there were no issue estoppel

or res judicata, it would generally be inappropriate for this

Court, being the enforcement court of a Convention country,

to reach a different conclusion on the same question as that

reached by the court of the seat of the arbitration. It would be

a rare case where such an outcome would be considered

appropriate.”8 (Emphases added)

Consequently, His Honour enforced the award and appointed

receivers over the shares in question.

The decision on appealThe Full Court of the Federal Court (comprising Allsop CJ,

Besanko and Middleton JJ) affirmed Foster J’s decision.9 It

found it unnecessary to determine whether an issue estoppel

applied, observing that the question whether issue estoppel

applies in an application to enforce an international arbitral

award is “one of importance and difficulty [and] is not resolved

in a clear way by any authority binding on this court” [at 64].

It also said that:

“ … [A]t the very least, the primary judge was correct

to hold that it will generally be inappropriate for … the

enforcement court of a Convention country to reach a

different conclusion on the same question of asserted

procedural defects as that reached by the court of the seat

of arbitration.” [at 65]. (Emphasis added)

The Court endorsed and applied the following observations

by Colman J in Minmetals Germany GmbH v Ferco Steel Ltd10 as

to the weight to be given to the views of the court at the seat:

“ … [O]utside … exceptional cases [for example, where

the powers of the supervisory court are unduly limited,

or where the supervising court is corrupt] any suggestion

that under the guise of allegations of substantial injustice,

procedural defects in the conduct of an arbitration

which have already been considered by the supervisory


12

court should be reinvestigated by the English courts

on an enforcement application, is to be most strongly

deprecated” (Emphasis added)

CommentThe Full Court declined to decide whether the legal doctrine

of issue estoppel operates in the context of enforcing a foreign

arbitral award, but nevertheless held that (as a matter of legal

policy) principles of international comity should generally lead

an enforcement court to follow decisions of the court of the

seat on the same issue – certainly where the issue concerns

fairness of the arbitral process.

The relationship between the enforcement court and the court

at the seat of the arbitration has been debated for many years

in international arbitration jurisprudence. Most notably the

question has arisen in circumstances when the enforcement

court is called upon to enforce an award that has been set aside

(ie annulled) by the court at the seat of the arbitration. There

are numerous conflicting cases and commentaries on this

point.11 The question in the Gujurat case was slightly different

(ie whether the enforcement court is compelled to follow the

earlier decision of the court of the seat). In this regard, there

have been cases in which an enforcement court has refused to

enforce an award even if the court at the seat has rejected the

same argument advanced by the award debtor as a ground for

setting aside the award. For example, in Gao Haiyan v Keeneye

Holdings Ltd,12 the Hong Kong Court of First Instance refused

to enforce an award from Mainland China on public policy

grounds, even though the Xi’an Intermediate People’s Court

had refused to annul the award when presented with similar

arguments. However, the Hong Kong First Instance decision

was reversed on appeal.13

At the abstract level, the Gujurat case gives rise to the same

debate as to whether the court at the seat has any special role

in international commercial arbitration. In other words, is the

enforcement court bound to follow the decision of the court at

the seat or is it free to come to its own conclusions?

There is something to be said for each view. On the one hand,

it should be recognised that the parties chose (directly or

indirectly) the seat of arbitration. They therefore consented

to the authority of a particular judicial system to supervise

their arbitration, including to invalidate the award. That choice

should be respected.14 Further, the principle of comity is both

long standing and valuable. Other things being equal, courts

in the international arena should endeavour to respect each

other’s decisions.15 Moreover, this view promotes certainty and

finality. That is, if parties know that a decision of the court at

the seat will essentially bind enforcement courts, the award

debtor is less likely to resist enforcement in other jurisdictions

on the same grounds.

Conversely, some court decisions are so manifestly wrong or

unjust that it is undesirable for other courts to defer to them.

… [W]here an award debtor … unsuccessfully

challenges the award before a court at the seat of the arbitration [and] proceeds

undeterred to resist enforcement in another jurisdiction on similar

grounds … [, t]his gives rise to the question: when, if

ever, should a party be able to rerun an unsuccessful

challenge made at the seat?



The most extreme example of this situation is a court decision

tainted by corruption.16 Understandably, an enforcement court

may not wish to support and give effect to such decisions

and, similarly, one can sympathise with an award debtor

in that situation who seeks to resist enforcement of the

award on the same basis as proved unsuccessful before the

court of the seat. Moreover, the English-language version

of the New York Convention says that an enforcement court

“may” refuse enforcement of an award set aside at the seat,17

suggesting (according to some courts and commentators) that

enforcement courts have such discretion.

The debate is particularly interesting because it feeds into

the larger contest over the juridical nature of an arbitral

award. Professor Gaillard famously articulated three

alternative models to explain the theoretical underpinnings of

international commercial arbitration, each ascribing different

emphasis to the importance of the seat:18

(1) the first model emphasises the importance of the seat

(chosen by the parties);

(2) the second model holds that international commercial

arbitration is rooted in multiple national legal orders,

including the seat, but also all other systems in which the

award may be recognised or enforced; and

(3) the third model postulates that international commercial

arbitration is a distinct transnational legal order,

independent of any national legal order, wherein the

arbitrator’s authority is derived from the consent of the

parties.

As can be seen, it is only under the first model that the court of

the seat is uniquely significant. On this view, the award exists

only because of, and is thus tied to, the national legal order at

the seat of the arbitration.20 The other models would allow for

deviation by the enforcement courts from the decision of the

court at the seat.

While the Full Court in Gujurat was not inclined, or required,

to enter into this theoretical debate, it did seek to strike

something of a balance between the competing views on

whether an enforcement court is bound to follow the court of

the seat. That is, the enforcement court should ordinarily follow

decisions of the court at the seat, but this is not absolute. The

Full Court endorsed an English authority21 which held that

“exceptional circumstances” (such as corruption) are required

before an enforcement court should depart from a decision of

the court at the seat. This allows for the award debtor to have

some recourse against particularly outrageous decisions of

courts of the seat, but should deter opportunistic attempts by

award debtors to rerun a failed challenge.

Subsequent to the Gujurat case, the Chief Justice of the Federal

Court of Australia (who presided over the appeal in the Gujurat

case) made the following extra-curial remarks:

“Perhaps what should be developed is a broad and

flexible approach by enforcing courts…[t]his will involve

a fresh look at comity and the need for courts to be willing,

on proper evidence with the necessary degree of cogency,

to examine the reliability and quality of justice in other

jurisdictions.”22 (Emphasis added)

With respect, this suggestion23, entailing the spectre of adducing

evidence before an enforcement court as to the reliability and

quality of justice before the courts at the seat, may go too far.

While one suspects that enforcement courts subconsciously

… [t]he Gujurat case gives rise to the same debate as to whether the court at the seat has any special role

in international commercial arbitration. In other words, is the enforcement court

bound to follow the decision of the court at the seat or

is it free to come to its own conclusions?


14

consider such matters, the idea that there should be an overt

forensic examination of the quality of justice before the court

of the seat, and that the enforcement court should rule upon

it, is a slippery slope. Certainly, such a review should not be

undertaken unless there is a specific allegation of corruption

or the like. A separate, and difficult, question is the complexion

of the evidence that might be adduced in respect of the

reliability and quality of justice in a particular jurisdiction. In

the authors’ view, as a matter of comity, enforcement courts

should be extremely loath to embark upon a general review of

the quality of justice in the courts of the seat.

A further question is whether the enforcement court should

follow decisions of earlier enforcement courts, where the

award is sought to be enforced in more than one place.24 This

question does not give rise to the same theoretical debate

concerning the supposed primacy of the court of the seat in

international commercial arbitration. It does, however, give

rise to similar questions of international comity.

ConclusionIt remains controversial in international arbitration

jurisprudence whether the court at the seat has any special

role to play, such that the enforcement court is bound to

follow decisions of that court on disputed questions agitated

before both courts. The decision in Gujurat, while not resolving

this conundrum, provides a sensible position from a policy

perspective. There will always be stubborn award debtors

who refuse to acknowledge a lost cause. This decision should,

however, mean that the wise ones will know when it is time

to be satisfied with just one bite of the arbitral apple. It is to be

hoped that future enforcement courts will follow the Gujurat

decision and insist on truly exceptional circumstances before

departing from decisions of courts of the seat on the same

issues. adr

1 [2013] FCAFC 109, 30 september 2013, unreported.2 Gujurat NRE Coke Ltd v Coeclerici Asia (Pte) Ltd [2013] eWHC 1987

(Comm), 10 July 2013, unreported.3 Coeclerici Asia (Pte) Ltd v Gujarat NRE Coke Ltd [2013] FCA 882 at

[92], 30 August 2013, unreported.

4 under ss 68(2)(a) and (c) of the english Arbitration Act 1996. 5 Coeclerici Asia (Pte) Ltd v Gujarat NRE Coke Ltd (note 3 above) at

[89].6 Ibid, at [102]. Indeed. His Honour opined that "the matter is probably

also res judicata."7 His Honour simply relied on authority for the proposition that

issue estoppel is capable of application when the issue has been determined in a prior judgment of a foreign court: see Armacel Pty Ltd v Smurfit Stone Container Corp (2008) 248 ALR 573 at [56] – [82] per Jacobson J (Federal Court of Australia).

8 Coeclerici Asia (Pte) Ltd v Gujarat NRE Coke Ltd (note 3 above) at [103].

9 note 1 above.10 [1999] 1 All eR (Comm) 315 at 331.11 see, for example, Société Hilmarton Ltd v Société Omnium de

traitement et de valorisation (OTV) (French Cour de cassation, 23 March 1994, Case no 92-15.137); Société PT Putrabali Adyamulia v Société Rena Holding (French Cour de cassation, 29 June 2007, Case no 05-18.053 and Case no 06-13.293); Yukos Capital SARL v OAO Rosneft (Court of Appeal of Amsterdam, 28 April 2009, Case no 200.005.269/01); Yukos Capital SARL v OJSC Rosneft Oil Coy [2012] eWCA Civ 855; Karaha Bodas Company LLC v Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, 364 F 3d 274. For the views of leading commentators, see AJ van den Berg, Enforcement of Awards Annulled in Russia (2010) 27(2) J Int’l Arb 179 and emmanuel Gaillard, Enforcement of Arbitral of Awards Set Aside in the Country of Origin (1999) 14 ICsId Review 16.

12 [2011] 3 HKC 157. 13 Gao Haiyan v Keeneye Holdings Ltd [2012] 1 HKLRd 627. see also

Dallah Real Estate & Tourism Co v Ministry of Religious Affairs of the Government of Pakistan [2010] 3 WLR 1472 (uK supreme Court).

14 FA Mann, ‘Lex Facit Arbitrum’, in P sanders (ed), International Arbitration, Liber Amicorum for Martin Domke (1967, Leiden: Martinus nijhoff), pp 157-162.

15 Alan Redfern et al, Redfern and Hunter on International Arbitration (5th edn, 2009, oxford university Press), p 649 [11.86].

16 In the Yukos cases (note 11 above), for example, the suggestion was that the Russian state had essentially ordered the Russian court to annul the award (made in Russia), as part of its campaign against Yukos and its private owner.

17 Article V(1) of the new York Convention.18 see emmanuel Gaillard, Legal Theory of International Arbitration

(2010, Leiden: Martinus nijhoff).19 Under this view, French courts have justified enforcing international

arbitral awards notwithstanding that they have been set aside by the court of the seat. see Christopher Koch, The Enforcement of Awards Annulled in their Place of Origin: the French and US Experience (2009) 26(2) J Int’l Arb 267.

20 see van den Berg (note 11 above). 21 Minmetals Germany GmbH v Ferco Steel Ltd (note 10 above) at 331,

per Colman J. 22 the Hon James Allsop, The Authority of the Arbitrator, 2013 Clayton

utz sydney university International Arbitration Lecture, sydney, 29 october 2013 – http://www.claytonutz.com.au/ialecture/2013/speech_2013.html.

23 Which appears to be inspired by Yukos Capital SARL v OJSC Rosneft Oil Co (note 11 above) at [125].

24 this was addressed by the english Court of Appeal in Yukos Capital SARL v OJSC Rosneft Oil Co (note 11 above), as a dutch court had already refused enforcement (ibid). the Court of Appeal held that there was no issue estoppel, as the question of whether dutch public policy had been violated was a separate question to whether there had been a violation of english public policy.



Will Emergency Arbitration Find a Place under PRC Law?

this article discusses whether (1) emergency arbitration (EA) decisions are enforceable in Mainland China, and (2) EA will affect the enforceability of final awards in Mainland China.1

Lei Shi

IntroductionAn interesting yet common feature of recent amendments

to major international arbitration rules is the adoption of

emergency arbitration (EA) procedures. Among others, the

Hong Kong International Arbitration Centre (HKIAC)2, the

International Chamber of Commerce (ICC)3, the Singapore

International Arbitration Centre (SIAC)4 and the Stockholm

Chamber of Commerce (SCC)5 have all incorporated EA

procedures in their latest rules.

For many of these institutions, PRC-related disputes have

significantly increased over the past few years.6 Many arbitral

awards are and will be enforced in Mainland China. It is

therefore opportune to consider how EA procedures will be

treated under the PRC legal framework.

Are emergency arbitration decisions enforceable in Mainland China?

Almost all major arbitration rules that have adopted

EA procedures treat decisions under them as interim or

conservatory measures.7

One view is that interim measures are not ‘awards’ under

the Convention on the Recognition and Enforcement of

Foreign Arbitral Awards 1958 (the New York Convention).8

Contracting States are therefore under no treaty obligation to

enforce interim measures.9 Rather, it is left to them to decide

how to deal with interim measures under their municipal laws.

Mainland China's position is that it will not enforce interim

measures granted by a foreign tribunal. This is reflected in

Mainland China’s comments on UNCITRAL’s draft legislative

provisions on interim measures10:

“The terms ‘interim measures’ and ‘preliminary orders’ are

similar in meaning to ‘preservative measures’ known in

China’s legal system, which include preservative measures

towards property and preservative measures with regard to


16

evidence … The Chinese law has not accorded the arbitral

tribunal the power to order preservative measures, nor

the power to order interim measures or issue preliminary

orders. In this connection, therefore, the present draft is in

conflict with the relevant provisions of the Chinese civil

procedure law and the arbitration law. There is no legal

basis for courts in China to recognize and enforce interim

measures and preliminary orders from foreign arbitral

tribunals.”11

The “provisions of the Chinese civil procedure law and

arbitration law” referred to above are art 256 of the then PRC

Civil Procedure Law (now art 272 following the amendments

of 2012) and arts 28, 46 and 68 of the PRC Arbitration Law.

Under these provisions, PRC courts retain an exclusive power

to grant so-called “preservative measures” in Mainland China.

Whilst an arbitral institution may receive applications for

preservative measures, it must submit them to a competent

court for determination.

seek interim measures either directly from the court (before

arbitration is commenced) or by submitting the application

to the court via the relevant arbitration institution (following

commencement of the arbitration). The amended Civil

Procedure Law neither authorises arbitral institutions or

tribunals to grant interim measures,13 nor requires courts to

enforce interlocutory awards or orders made by them.

Secondly, whilst the law is not entirely clear, it is doubtful

that PRC courts would grant interim measures in support of

offshore arbitration. The Supreme People’s Court of the PRC

has expressed this view in an extrajudicial commentary on the

amended Civil Procedure Law.14

Thirdly, the expansion of the courts’ powers to grant interim

measures may further narrow arbitral tribunals’ corresponding

powers. Previously, it might have been argued that PRC

courts only monopolise powers to grant asset and evidence

preservation measures in all cases and injunctions in

intellectual property cases, so that arbitral tribunals could grant

other types of interim measures. (This argument is, however,

controversial and a tribunal-ordered interim measure, even

if granted, cannot be enforced if a party does not voluntarily

comply with it.) By contrast, under the Civil Procedure Law

as amended, PRC courts appear to retain exclusive powers to

grant all types of interim measures in all types of cases.

Whilst the 2012 amendments to the PRC Civil Procedure

Law enhance the availability of interim measures in support

of arbitration,12 these improvements do not apply to the

enforceability or availability of interim measures in support of

offshore arbitration.

Firstly, the amendments do not change the exclusivity of the

PRC courts’ powers to grant interim measures. Parties must

Contracting States [to the new York Convention] are

… under no treaty obligation to enforce interim measures.

Rather, it is left to them to decide how to deal with

interim measures under their municipal laws.



Will the use of emergency arbitration affect the enforceability of final awards in Mainland China?This raises the question of whether and to what extent the use

of EA may affect the enforceability of final awards in Mainland

China.

The most relevant ground for considering refusal of

enforcement of an award in this context is public policy.15

PRC courts have been cautious in relying on this ground to

refuse recognition and enforcement of foreign arbitral awards

generally. Nonetheless, the only case in which PRC courts

have relied on this ground is one that related to interim

measures.

court proceedings and should compensate the Claimants

for damages caused by the asset preservation measure. The

arbitral tribunal held that Yongning had breached the JV

contract and caused the failure of the JV company by initiating

the court action and obtaining the measure. The Claimants

were awarded damages.

The Claimants then sought to enforce the arbitral award in

Jinan. Both the Jinan Intermediate People’s Court and the

Shandong Higher People’s Court were inclined not to recognise

and enforce the award, so the case was referred upwards to

the Supreme People’s Court under the PRC pre-reporting

mechanism. In support of the views of the lower courts, the

Supreme People’s Court commented, most pertinently, that:

“the ICC tribunal violated the judicial sovereignty of

China and the jurisdiction of Chinese courts by arbitrating

the disputes between Yongning and Jinan-Hemofarm

concerning the lease contract, as a Chinese court had

already made several civil orders concerning the disputes

between Yongning and Jinan-Hemofarm and had made

a civil ruling on the interim measures concerning Jinan-

Hemofarm’s property.”17

The fact pattern of the Hemofarm case appears to be unique

and distinguishable from ordinary cases involving EA

decisions. In that case, the arbitral tribunal in effect directly

challenged the interim measures already granted by the PRC

courts. This seems to be more serious than a case in which

an arbitral tribunal grants an interim measure that arguably

can only be granted by PRC courts, but before any court has

In Hemofarm DD, MAG International Trade Holding DD & Suram

Media Ltd v Jinan Yongning Pharmaceutical Co Ltd,16 the parties

entered into a joint venture contract which was governed

by PRC law and subject to ICC arbitration. A dispute arose

between the joint venture (JV) company and Yongning, the

Chinese JV partner. Yongning sought an asset preservation

measure from the Jinan local court and was granted that interim

measure despite a jurisdictional challenge by the JV based on

the arbitration clause in the JV contract. Foreign JV partners

Hemofarm, MAG and Suram (‘Claimants’) commenced

arbitration proceedings against Yongning, claiming (inter alia)

that Yongning had breached the JV contract by initiating the

Whilst the 2012 amendments to the PRC

Civil Procedure Law enhance the availability of interim measures in support of arbitration,

these improvements do not apply to the enforceability

or availability of interim measures in support of

offshore arbitration.


18

dealt with the same issue. Furthermore, the challenge to the

Jinan court’s asset preservation measures in the Hemofarm

case was reflected in the final award that the Claimants sought

to enforce. By contrast, where an interim measure is granted

by an emergency arbitrator, even if the EA decision is deemed

to have interfered with the exclusive powers of the PRC courts

to grant such measures, this will not necessarily render the

arbitral tribunal’s final award unenforceable.

The author has found no records of other cases indicating

refusal by PRC courts to recognise and enforce a foreign arbitral

award simply on the ground that the arbitral tribunal granted

interim measures (though equally, nor has the author found

any clear records of PRC courts having agreed to recognise

and enforce an award of a foreign arbitral tribunal granting

interim measures that are within their exclusive powers18).

Similarly, it appears unlikely that a PRC court would refuse to

recognise and enforce a foreign arbitral award simply because

the emergency arbitrator in that case grants a decision in the

nature of an interim measure.

The risks of non-enforcement may, however, be enhanced if

some special circumstances exist. For example, by comparison

with a general interim measure, one that specifically targets

assets and evidence in Mainland China is exposed to higher

risks of being deemed to have interfered with the PRC courts’

exclusive powers and violated the public policy of Mainland

China.

Risks will be even more significant if a party first seeks an

interim measure before a PRC court but is refused (for reasons

other than lack of jurisdiction due to the arbitration clause,

or the lack of a legal ground for granting interim measures

in support of a foreign arbitration), and then that party or an

affiliate seeks and is granted a similar interim measure by

an emergency arbitrator. Such a scenario may arise where,

for example, a joint venture company controlled by a foreign

shareholder sues the Chinese shareholder under a contract

that is subject to the jurisdiction of a PRC court, seeks interim

measures from the PRC court, but fails for substantive reasons.

The foreign shareholder then sues the Chinese shareholder

under the joint venture contract, which is subject to a foreign

arbitration clause, seeks a similar interim measure and

succeeds. This hypothetical fact pattern is opposite to that in

the Hemofarm case, yet is more common in practice and thus

should attract more attention.

Finally, risks may extend to the final award if there is a link

between the emergency decision and the final award: for

In [the Hemofarm] case, the arbitral tribunal in

effect directly challenged the interim measures

already granted by the PRC courts. this seems

to be more serious than a case in which an arbitral tribunal grants

an interim measure that arguably can only be

granted by PRC courts, but before any PRC

court has dealt with the same issue.



instance, where the final award directly incorporates parts of

the EA decision or grants reliefs in respect of a party’s failure

to comply with the EA decision.

ConclusionInnovative EA procedures bring both opportunities and

challenges to PRC-related disputes. Whereas parties now

have a strong weapon with which to deal with urgent

circumstances, however, it remains uncertain, in the light of

the above discussion, how the PRC legislature, judiciary and

parties will react to this new trend. adr

1 this article does not purport to be comprehensive or constitute legal or other advice.

2 HKIAC Administered Arbitration Rules (2013 edn), art 23 and schedule 4.

3 ICC Rules of Arbitration (2012 edn), art 29 and Appendix V. 4 sIAC Rules (2013 edn), art 26 and schedule 1.5 sCC Rules (2010 edn), Appendix II.6 For example, the highest number of filings with the SIAC in 2012 was

generated by Mainland China parties (http://www.siac.org.sg/images/stories/documents/siac_annual_report_2012_new.pdf (last visited on 1 october 2013)). the HKIAC is also well known for handling many cases involving Mainland China parties.

7 HKIAC Administered Arbitration Rules (note 2 above), schedule 4, art 16; ICC Rules (note 3 above), art 29; sIAC Rules (note 4 above), art 26.2; sCC Rules (note 5 above), Appendix II, arts 1(2) and 8.

8 Editorial note: see, for example, Resort Condominiums International Ltd v Bolwell [1995] 1 Qd R 405 (supreme Court, Queensland) (since superseded by the adoption of the interim measures provisions of the 2006 version of the unCItRAL Model Law in Australian international and domestic arbitration law).

9 see discussions in unCItRAL, International Commercial Arbitration: Possible future work in the area of international commercial arbitration, Note by the Secretariat (A/Cn.9/460), para 121 - http://daccess-dds-ny.un.org/doc/undoC/Gen/V99/827/50/IMG/V9982750.pdf?openelement (last visited on 1 october 2013).

10 Draft declaration regarding the interpretation of article II (2) and VII (1) of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (A/Cn.9/609/Add.1, 4 May 2006).

11 Whilst these comments are made in the context of the new York Convention, Mainland China is likely to adopt the same approach with respect to the Arrangement concerning Mutual enforcement of Arbitral Awards between the Mainland and the Hong Kong special Administrative Region 1999. (‘Mainland-Hong Kong Mutual Arrangement’), which in essence mirrors the new York Convention.

12 The two most significant changes are as follows: (1) parties are now allowed to seek interim measures in support of prospective arbitration in a similar way to that of pre-litigation measures (arts 81 and 101); and (2) besides the existing asset and evidence preservation measures, the amended Civil Procedure Law has also introduced new types of interim measure with similar effect to mandatory and prohibitory injunctive relief (arts 100, 101 and 104).

13 some practitioners consider that the China International economic and trade Arbitration Commission (CIetAC) Arbitration Rules (2012 edn) allow tribunals to grant interim measures. Art 21.2 states: "At the request of a party, the arbitral tribunal may order any interim measure

it deems necessary or proper in accordance with the applicable law, and may require the requesting party to provide appropriate security in connection with the measure. the order of an interim measure by the arbitral tribunal may take the form of a procedural order or an interlocutory order.” this power can, however, only be exercised when it is “necessary and proper in accordance with the applicable law.” In fact, this provision was introduced mainly for CIetAC arbitrations with seats in foreign jurisdictions whose laws may allow tribunals to grant interim measures: see interview with Mr Yu Jianlong, secretary General of CIETAC, at http://finance.chinanews.com/cj/2012/04-05/3796028.shtml (last visited on 1 october 2013)).

14 Understanding and Application of the Amended Provisions of the Civil Procedure Law of the People’s Republic of China (《<中华人民共和国

民事诉讼法>修改条文理解与适用》), edited by the supreme People’s Court’s Civil Procedure Law Amendment Research Group (最高人民法

院民事诉讼法修改研究小组), People’s Court Press (2012), pp 577-578.15 Art V.2(b) of the new York Convention and art 7.3 of the Mainland-

Hong Kong Mutual Arrangement.16 note 17 below.17 supreme People’s Court’s Reply to the shandong Higher People’s

Court’s Request for Instruction regarding the non-recognition and non-enforcement of the Arbitral Award Rendered by International Chamber of Commerce (最高人民法院关于不予承认和执行国际商会仲裁院仲裁

裁决的请示的复函), 2 June 2008, [2008] Min si ta Zi no 11 ([2008]民四他字第11号). the english translation is taken from http://www.newyorkconvention1958.org/index.php?lvl=notice_display&id=836 (last visited on 1 october 2013): see p 1.

18 the author cannot exclude this possibility because PRC court records that are available to the public are not complete. Whilst most of the enforcement cases that have been referred upwards to the supreme People’s Court under the pre-reporting mechanism are publicised, some (if not many) of the cases in which lower courts agreed to enforce awards and consequently did not report to the supreme People’s Court are not available in public domain. Furthermore, most court rulings do not contain detailed descriptions of the procedures in the arbitration proceedings, so it is difficult to ascertain whether and what kind of interim measures may have been granted by arbitral tribunals.


20

Obtaining Security in Malaysia for Maritime Claims in Arbitration

this article discusses the mechanisms for obtaining security in Malaysia for maritime claims in arbitration under both the now repealed Arbitration Act 1952 and the Arbitration Act 2005, and the orders that may be made by the courts.

Ahalya Mahendra

Introduction: arbitration legislation in MalaysiaThe practice of maritime arbitration in Malaysia is still in its

infancy compared with London, New York and Hong Kong.

The Malaysian government has, however, taken steps in the

last decade to develop and improve this aspect of arbitration

practice by enacting modern legislation.

Legislative history

The Arbitration Act 1952 (the 1952 Act)1 was in force at the

time Malaysia gained independence in 1957. The 1952 Act

was based on the English Arbitration Act of 1950. On 30

December 2005, Malaysia enacted the Arbitration Act 2005

(the 2005 Act),2 which adopted the UNCITRAL Model Law on

International Commercial Arbitration 1985 and took effect on

15 March 2006.

Leading commentators WSW Davidson & Sundra Rajoo3 have

described the approach of the 2005 Act as follows:

“ … [T]he new Act recognizes that some distinctions

between these domestic and international regimes are

required in the local circumstances, but only for limited

purposes, using the Model Law definition for international

arbitrations as the yardstick for the distinction. It would

seem that the basic reasoning behind this is that, on the

international side, parties would not want any more local

court intervention than is prescribed and allowed under

the Model Law; while on the domestic side there is still a

need for the courts’ supervisory jurisdiction in the matter

of appeals on points of law, bearing in mind that the

majority of domestic arbitrations are conducted before lay

arbitrators under standard from construction contracts.

The primary difference between the two regimes is the

extent of judicial supervision, which is significantly greater

under the domestic arbitration regime.”

Court decisions on the 2005 Act began to appear in the



law reports from 2007 onwards. A combination of drafting

imperfections and judicial interpretations of the 2005 Act

resulted in its amendment by the Arbitration (Amendment)

Act 2011 (the 2011 Act)4.

Which of the principal Acts apply?

In order to determine which of the principal Acts apply to

a maritime arbitration, reference must be made to the 2005

Act and relevant case law. Section 51(2)5 of the 1952 Act

provides, and the Malaysian Court of Appeal decision in

Renault SA v Inokom Corporation Sdn Bhd & Anor6 confirmed,

that the date of commencement of arbitration proceedings

determines whether the 1952 or 2005 Act applies. Thus, if the

proceedings were commenced before 15 March 2006, the 1952

Act is applicable, whereas the 2005 Act applies to proceedings

commenced on or after that date.

The ambit of judicial intervention under the 2005 Act

The ambit of the Malaysian High Court’s powers of intervention

in arbitrations under the 2005 Act is set out in s 87 of that Act.

Two Malaysian High Court decisions and one of the Malaysian

Court of Appeal gave rise to different and conflicting judicial

interpretations of the phrase “Unless otherwise provided,…”

in that provision.

In summary, the conflicting interpretations proposed that, in

order to intervene in arbitrations governed by the 2005 Act,

either (i) the jurisdiction and the power of the Malaysian High

Court had to be expressly legislated,8 or (ii) the Malaysian

High Court had, above and beyond the provisions of the 2005

Act, either an inherent jurisdiction9 or, alternatively, residual

powers10 of intervention.

These conflicts were resolved by the amendment of s 8 of the

2005 Act by the 2011 Act. Its effect is that the extent of judicial

intervention in arbitrations is now solely governed by the

provisions of the 2005 Act.

Security for claims in arbitrationIt is well settled that that the main purpose of arresting a

vessel is to obtain satisfaction of a judgment in a court claim.11

Sometimes, in lieu of arresting or subsequently detaining the

vessel, shipowners will provide alternative security, such as a

bail bond, a bank or insurance guarantee, or a Protection and

Indemnity (P&I) Club Letter of Undertaking.

In order to arrest a vessel for security in Malaysia, the arresting

party must invoke the Admiralty jurisdiction of the Malaysian

High Court. Admiralty jurisdiction is provided under s 24(b)

of the Malaysian Courts of Judicature Act 196412 (‘CJA 1964’),

which states that the Malaysian High Court has “the same

jurisdiction and authority in relation to matters of admiralty

as is had by the High Court of Justice in England under the

United Kingdom Supreme Court Act 1981.”

In brief, the Admiralty jurisdiction is invoked once the vessel

is within the jurisdiction of the Malaysian High Court and

the maritime claim falls within the categories set out in the

English Supreme Court Act 1981 (the SCA 1981).13 Thereafter,

the Court can issue a Warrant of Arrest for the vessel named in

the in rem action.14

As to whether a putative claimant may arrest a vessel in

Malaysian waters as security for an arbitral award, the

answer to this question depends on the applicable arbitration

legislation.

Claims under the 1952 Act or the pre-amendment 2005 Act

The Malaysian High Court held in The Norma Splendour15 that

the High Court did not have jurisdiction to arrest a vessel as

security for an arbitral award16. The judge, went on, however,

to apply the English decision in The Rena K17 in his judgment.

It is well settled that that the main purpose of arresting a vessel is to obtain satisfaction

of a judgment in a court claim.


22

The effect of The Rena K is that where the High Court’s

Admiralty jurisdiction has been validly invoked, and the vessel

arrested as security for a judgment in Court, the Court shall

stay the Admiralty proceedings for arbitration. Furthermore,

in dealing with the arrested vessel, the Court has discretionary

power to maintain the arrest, or retain security in lieu as

security for the arbitration award, where it can be proved that

any arbitral award in the plaintiff’s favour is unlikely to be

satisfied by the defendant.

Claims under the 2005 Act as amended

As at 1 July 2011 (the effective date of the 2011 Act), the

2005 Act as amended expressly provides for the provision of

security for the satisfaction of maritime arbitration awards in

two situations:

(1) in circumstances where Admiralty proceedings are stayed

under s 10(1) of the 2005 Act; and

(2), where an interim measure of protection is sought pursuant

to s 11(1)(e) of that Act.

Mechanisms for obtaining security: jurisdiction and ordersSection 10(2A) of the 2005 Act, which has its roots in s

11 of the English Arbitration Act 1996, applies where the

putative claimant, having successfully invoked the Admiralty

jurisdiction of the Malaysian High Court and obtained

security for its claim, seeks a stay of the judicial proceedings

on the basis of an agreement to arbitrate.18 Under s 10(2A), the

putative claimant can apply to the Malaysian High Court to

order either (i) the retention of the arrested property to stand

as security for the satisfaction of any arbitral award, or (ii) that

alternative security be provided in lieu.

By virtue of the addition of s 10(4) to the 2005 Act by the 2011

Act, the Malaysian High Court also has jurisdiction to stay

proceedings over international maritime arbitrations held

outside Malaysia. As a result, the Court’s power under s 10(2A)

extends to international maritime arbitrations with foreign seats.

In circumstances where a maritime arbitration is under way,

the claimant may avail itself of an interim measure provided

for under s 11(1)(e) as amended of the 2005 Act. The power

of the Malaysian High Court under this provision to make an

order “securing the amount in dispute” originates from s 11(1)

(e) of the 1952 Act, which was in turn based on s 12(6)(f) of the

English Arbitration Act 1950.

Mustill and Boyd19 have described the equivalent power under

the English 1950 Act as follows:

“(iv) Securing the sum in dispute. Where the right of a

party to a specific fund is in dispute in a reference, the

Court has power to order the fund to be paid into Court

or otherwise secured. The forms of security most likely

to be ordered are the provision of a bank guarantee or

the payment of the fund into a bank account in the joint

names of the parties or their advisers. It is probable that

the Court alone, and not the arbitrator, has power to make

such an order.

“It will be noted that this power does not enable a party

to recover sums on account of damages in advance of the

hearing, even if liability is undisputed and it is clear that

some monetary award will be made. The power exists

only where an identified fund is in dispute – as where, for

example, it is alleged that the respondent is trustee for the

claimant in respect of a specific sum of money.”

It is unlikely that the Malaysian High Court, when faced with

an application for this interim measure, would depart from

As to whether a putative claimant may arrest a vessel

in Malaysian waters as security for an arbitral award, the answer to this question depends on the applicable

arbitration legislation.



the original purpose of this power, which is only to secure

funds and not to enable a party to recover sums on account of

damages in advance of the hearing (ie provisional damages).20

For a putative or actual claimant in a maritime arbitration to

avail itself of an interim measure under s 11(1)(e) of the 2005

Act, it must establish that (i) the vessel is within the jurisdiction

of the Malaysian High Court, and (ii) the maritime claim falls

within the categories set out in the SCA 1981.21 The Malaysian

High Court will then issue a Warrant of Arrest against the

vessel identified in the suit.

Thereafter, the Admiralty proceedings in Court will have to

be stayed in favour of arbitration. It is at this stage of those

proceedings that the putative or actual claimant can apply to

the Malaysian High Court to exercise its powers to “secure the

amount in dispute” under s 11(1)(e) of the 2005 Act by either

continuing the detention of the vessel or ordering security in

lieu.

Finally, s 11(3) of the 2005 Act as amended vests jurisdiction

in the Malaysian High Court to order interim measures before

or during international maritime arbitrations seated outside

Malaysia. This is in line with the Court’s general jurisdiction

to grant a stay in such cases under s 10(4) of the 2005 Act as

amended.

ConclusionThe practice of maritime arbitration, both domestic and

international, received a much needed boost in Malaysia with

the enactment of ss 10(2A), 10(4), 11(1)(e) and 11(3) of the

2005 Act as amended. As a result, parties in both domestic and

international maritime arbitrations, whether with Malaysian

or non-Malaysian seats, can now obtain security in Malaysia

for their claims in arbitration. The author wishes to thank Dato’

E Sreesanthan for assistance received in writing this article. adr

1 Revised Act 93.2 Act 646.3 The New Malaysian Arbitration Regime 2005 [2006] 4 MLJ cxxx.4 Act A1395. the 2011 Act received Royal Assent on 23 May 2011 and

came into effect on 1 July 2011.5 the Malay text of s 51(2) was amended by the 2011 Act to state that

the date of commencement of the arbitration proceedings determines which statutory regime applies to the proceedings.

6 [2010] 5 CLJ 32.7 section 8, as originally enacted, states: “unless otherwise provided,

no court shall intervene in any of the matters governed by this Act.”8 Aras Jalinan Sdn Bhd v Tipco Asphalt Public Company Ltd & Ors

(2008) 5 CLJ 654 (Malaysian High Court).9 Albilt Resources Sdn Bhd v Casaria Construction Sdn Bhd (2010) 7

CLJ 785, per Abdul Malik Ishak JCA (Malaysian Court of Appeal).10 Innotec Asia Pacific Sdn Bhd v Innotech GMBH (2007) 8 MLJ 304

(Malaysian High Court).11 An in rem action, as opposed to one that is in personam, is an action

against the ship.12 Act 91.13 Editorial note: this refers to s 21(2)-(4) of the sCA 1981. the 1981 Act

is an english, not a uK, Act.14 Malaysia has not acceded to the International Convention for the

Unification of Certain Rules Relating to the Arrest of Sea-Going ships (Brussels, 1952). the issuance of a Warrant of Arrest by the Malaysian High Court is therefore pursuant to s 24(b) of the CJA 1964, referencing the sCA 1981: see note 13 above.

15 (1999) 6 MLJ 652.16 For criticism of this decision, see Jeremy M Joseph, Ship Arrest As

Security for Arbitration Claims [2001] MLJ xxxvii.17 [1978] 1 Lloyd’s Rep 545.18 section 10(1) of the 2005 Act.19 Commercial Arbitration (2nd edn, 1989, London: Butterworths), p 332.20 Ibid.21 Editorial note: see note 13 above.

under s 10(2A) [of the 2005 Act as amended], the putative

claimant can apply to the Malaysian high Court to order either (i) the retention of the arrested property to stand as security for the satisfaction of any arbitral award, or (ii) that

alternative security be provided in lieu. By virtue of … s 10(4) of the

2005 Act [as amended], the … Court also has jurisdiction to stay

proceedings over international maritime arbitrations held outside

Malaysia.

In-house counsel focus

24

Challenges to Arbitrators for Bias: How Concerned Should We Be?

this article discusses the reasons underlying the risk of an increase in the incidence of challenges to arbitrators for lack of impartiality and independence, notwithstanding the influence of the IBA Guidelines on Conflicts of Interest in International Arbitration. the principles applicable to determining such challenges, and the uncertainties that may nevertheless arise from them, are discussed by reference to hong Kong and English case law.

nerys Jefford QC

IntroductionChallenges to arbitral appointments for actual or perceived bias

is a vogue topic in international arbitration. Whilst nothing new,

recent years have seen a marked increase in the regularity with

which they have been made. The ICC, for example, recorded

an increase from an average of 20 per year in the 1990s to an

average of 30 per year by 2009.

This trend may be the product of the use of challenges for

strategic reasons or tactical advantage. It may, however, also

reflect more complex commercial and professional relationships

within the international legal market. This means both that

arbitrators have been increasingly affected by conflicts of interest

and that there may be a growing sense that such challenges will

be successful.

The incidence of arbitral conflicts of interest So far as lawyers are concerned, gone are the days when a

young man fresh from law school joined a firm and expected

to stay there for the rest of his working life. Just as unusual

these days are companies who always use the same law firm

for all their legal work. A global legal market features frequent

moves of personnel between firms, mergers of firms, multi-

disciplinary organisations and significant competition for legal

work. The instances where some relationship can be identified

that might cause genuine concern, or found the basis for a

tactical challenge to an arbitrator’s appointment, are therefore

increasingly prevalent. Further, the global market encourages

relationships between lawyers from diverse jurisdictions who

work together or (for example) are involved in international

organisations together or speak at conferences together.

The IBA Guidelines on Conflicts of InterestThe view that this international market gives rise to increasing

concerns is supported by the International Bar Association’s

Guidelines on Conflicts of Interest in International Arbitration

(2004) (the Guidelines), which state that –

in-house counsel focus


“The growth of international business and the manner

in which it is conducted, including interlocking corporate

relationships and larger international law firms ...

have created more difficult conflict of interest issues to

determine”.1

The Guidelines, which were prepared by a working group

representing 14 jurisdictions, seek to bring greater clarity and

understanding to this issue in the international context. The most

important part of the Guidelines is the section entitled Practical

Application of the General Standards, which comprises a list of

specific circumstances in which an arbitrator’s independence or

impartiality may be compromised:

(1) The Non-Waivable Red List contains examples of situations

where an arbitrator should not even act with the consent

of all the parties.

(2) The Waivable Red List contains examples of potential

conflicts that may be waived by agreement, including that

the arbitrator is a lawyer in the same law firm as counsel

and previous involvement of the arbitrator’s firm in the

case or more generally with one of the parties.

(3) The Orange List sets out situations which, in the eyes

of the parties, may give rise to justifiable doubts as the

arbitrator’s impartiality or independence. The purpose of

the list is to enumerate situations that should be disclosed,

whilst recognising that the proper conclusion may be that

there is no basis for justifiable doubt as to independence

or impartiality. These include where the arbitrator has

himself acted for or against one of the parties or been

frequently appointed by one of them, along with the issue

that troubles the independent Bar in various jurisdictions,

namely where counsel and the arbitrator are members of

the same Chambers.

(4) The Green List contains examples of situations where no

appearance of conflict of interest arises from an objective

viewpoint.

Applicable principlesSo what are the principles at play here? Within the UNCITRAL

Model Law and the UNCITRAL Arbitration Rules are the

sibling, if not twin, concepts of impartiality and independence.

The distinction commonly drawn between the two is that

independence is something to be judged objectively, whereas

impartiality is a subjective matter involving consideration of the

mind of the arbitrator. In any circumstances, however, where

the test of ‘impartiality’ involves consideration of whether there

is objectively an appearance of bias, the distinction is, in practice,

one without much of a difference.

The appearance of bias

At its simplest, bias or partiality is the actual (and subjective)

predisposition to decide a dispute in a particular way, but the

objective appearance of bias is generally regarded as equally

material. As the House of Lords put it in Porter v Magill:2

“The question is whether the fair-minded and informed

observer, having considered the facts, would conclude that

there was a real possibility that the tribunal was biased.”

Such an appearance of bias may arise either from a relationship

between the arbitrator and one of the parties or their legal

representatives or from a relationship between the arbitrator

and the subject matter of the dispute. The argument is most

commonly that this relationship gives rise to the real possibility

… [M]ore complex commercial and professional

relationships within the international legal market … means both that arbitrators

have been increasingly affected by conflicts of

interest and that there may be a growing sense that such challenges will be

successful.


26

Within the unCItRAL Model Law and the

unCItRAL Arbitration Rules are the sibling, if not twin,

concepts of impartiality and independence.

that the arbitrator may favour one party or, occasionally, be

predisposed against the party. Challenges on this basis typically

arise where the arbitrator has a formal and continuing business

relationship with one of the parties or their legal representatives,

or even where such a relationship has existed in the past or is

contemplated in the future.

Justifiable doubts about impartiality or independence

(1) Hong Kong

In Hong Kong, s 24 of the Arbitration Ordinance (Cap 609)

gives effect to art 12 of the UNCITRAL Model Law. A person

approached to act as arbitrator must, at that time and thereafter,

disclose any circumstance likely to give rise to justifiable doubts

as to his impartiality or independence and an arbitrator’s

appointment may be challenged if circumstances exist that give

rise to such justifiable doubts.

In Jung Science Information Technology Co Ltd v ZTE Corporation,

this provision was considered by the Court of First Instance in

the context of a an arbitration between a South Korean claimant

and a respondent PRC corporation. JSIT challenged the

continued appointment of Mr Philip Yang as tribunal chairman

on the basis of the relationship between this highly experienced

chairman and Mr Michael Moser, who was initially (and,

until his retirement) the partner handling the matter for the

respondent. The relationship was that both sat on the Council

of the HKIAC; they spoke at seminars and meetings together;

and it was suggested they were friends. Mr Yang clarified that

they had known each other a long time but their relationship

was professional and social in arbitration-related matters and

similar to his relationship with many law firms in Hong Kong.

In considering the submission that there could be justifiable

doubts about Mr Yang’s impartiality, Deputy High Court Judge

Lisa Wong SC applied the test of the “objective fair-minded and

informed observer” and asked the question whether there was a

cogent and rational link between the association of an arbitrator

and a party’s legal representative and its capacity to influence

the arbitrator’s decision. Relying on the English authority of

Taylor v Lawrence4 and pointing to like traditions and culture,

she also concluded that the objective onlooker would be

expected to be aware of the legal traditions and culture that had

played an important role in ensuring high standards of integrity

on the part of both the judiciary and the legal professions and

would be aware of the contact between the two. The learned

judge regarded that culture as extending to the wider world of

dispute resolution. Perhaps unsurprisingly the challenge failed,

but it highlighted the potential difficulties with close contact

between those, not by any means exclusively lawyers, involved

in the arbitration world.

(2) England & Wales

In England & Wales, the Arbitration Act 1996 (the 1996 Act)

explicitly requires the impartiality of arbitrators in arbitration

proceedings. Section 33(1)(a) of the Act imposes upon arbitrators

the general duty “to act fairly and impartially as between the

parties”. Under s 24(1)(a), an arbitrator may be removed by the

Court where “circumstances exist that give rise to justifiable

doubts as to his impartiality”. Under s 68(2)(a), an award can be

set aside on the basis of serious irregularity, including failure to

comply with the duty to act fairly and impartially.

in-house counsel focus


On its face, however, the 1996 Act does not impose any obligation

to be independent or provide for the removal of an arbitrator

where there are justifiable doubts as to his independence.

This was no oversight and followed a recommendation of the

Departmental Advisory Committee on Arbitration Law in 1996.

That position was, however, complicated by the UK’s adoption

of the European Convention on Human Rights through the

Human Rights Act 1998. Article 6 of the Convention provides

the right to a “fair and public hearing ... by an independent

and impartial tribunal”. The English courts have equated “the

common law test of bias and the requirements under Article

6”.5 There is also no obligation of disclosure of circumstances

that may give rise to justifiable doubts as to impartiality, but a

failure to disclose such circumstances may itself give rise to such

doubts.

The LCIA Rules (1998 Edn) similarly provide in art 10.3 for

challenge to the appointment of an arbitrator “if circumstances

exist that give rise to justifiable doubts as to his impartiality”.

Approaches to ‘justifiable doubts’So, despite the adoption of the common expression “justifiable

doubts”, and as the ZTE case demonstrates, what circumstances

may give rise to justifiable doubts is a vexed question, particularly

for proceedings which involve arbitral tribunals and parties of

different nationalities and from different legal backgrounds.

While justifiable doubts as to an arbitrator’s independence or

impartiality may be readily agreed upon by two people from the

same legal system, an interpretation of this may differ widely if

the background and culture of the individual analysing these

two points are different. Whilst the IBA Guidelines may assist in

judging the international view, they remain simply guidelines.

In 2011, the LCIA added considerably and informatively to

the body of understanding of how it approached challenges

on the grounds of alleged justifiable doubts as to impartiality

and independence by publishing a special edition of Arbitration

International which contained digests of over 30 reasoned

decisions on challenges. All the decisions related to arbitration

with their seat in England. These digests provide a series

of fascinating, if often familiar, examples of the complex

interrelationships that exist between parties in this international

legal market. An arbitrator who had briefly and some years

earlier been a partner in a firm now engaged as counsel

for the respondent was unobjectionable, but an arbitrator

whose partners had worked for companies associated with

a respondent was successfully challenged. An arbitrator in

the same Chambers as a barrister appearing before him was

unobjectionable, but not an arbitrator who had acted both for

and against the respondent. The fact that an arbitrator was

regularly nominated on the recommendation of one of the

firms acting in the arbitration was not thought to be a ground

for challenge.

A similar approach was also taken by the English Commercial

Court (Flaux J) in A & Others v B & X,6 which arose out of an

LCIA arbitration. Mr X QC was appointed as arbitrator. He had

previously received instructions in unrelated cases from the

firms representing both of the parties to the arbitration. One

such case appeared to have been settled, but the settlement

unravelled and Mr X was instructed again to act. Through

inadvertence, he failed to disclose the fact immediately.

As well as a challenge to his continued appointment made

to the LCIA (which was rejected), an application to remove

… [D]espite the adoption of the common expression

“justifiable doubts”, … what circumstances may give

rise to justifiable doubts is a vexed question, particularly

for proceedings which involve arbitral tribunals and parties of different nationalities and from

different legal backgrounds.


28

him was made to the Court. Flaux J adopted the test that “the

question is whether the fair-minded and informed observer,

having considered the facts, would conclude that there was a

real possibility that the tribunal was biased”.

In addressing this issue, Flaux J gave detailed consideration

to the IBA Guidelines, whilst making clear that they could

not override national law. He rejected arguments that the

arbitrator would unconsciously not want to disappoint the firm

instructing him and that the arbitrator would unconsciously

place particular confidence in that firm. He did not consider that

any financial relationship was relevant since it had not affected

the arbitrator’s fee in the litigation.

What, however, is most interesting about this case is the Court’s

exposition of three aspects of the overarching test. Firstly, the test

is an objective one and is not dependent upon the characteristics

of the parties, such as their nationality. Instead, “the issue

is whether the impartial objective observer, irrespective of

nationality, would conclude from those facts that there was a

real possibility that the arbitrator was biased”. Secondly, Flaux

J emphasised that the test assumes that the impartial observer

is “fair-minded” and “informed”, in possession of all the facts

and not unduly sensitive or suspicious. Thirdly, although this

observer is not to be regarded as a lawyer, he is expected to be

aware of the way in which the legal profession in this country

operates in practice. Each of these tests echoes and elucidates

the approach in the ZTE case.

The last point, in particular, alludes to a common international

perception of and concern about the way in which the English

legal profession operates in terms of the relationships between

barristers and between barristers and solicitors. Barristers in

Chambers together share resources and premises – and some

international observers find it inconceivable that an arbitrator

can be seen to decide a case impartially where a party is

represented by a member of his own Chambers. At least in

English law, both the second and third of Flaux J’s principles

go some way to addressing this issue by making the relevant

observer someone familiar with how the relevant legal system

works in practice. The irony of the position is that English judges

are internationally regarded as independent and impartial, even

though (and particularly in specialist areas of practice) they

routinely come from the same Chambers as those appearing

before them – an observation that does not require much more

than a casual observer.

ConclusionThe approach taken by Flaux J in A & Others v B & X is clearly

in line with that taken in Hong Kong, or perhaps vice versa.

Whether there are justifiable doubts as to an arbitrator’s

impartiality or independence will always be a question of fact

and degree, but it may be hoped that the information that the

respected LCIA has provided as to its approach, in tune with

that of the courts in England and Hong Kong, might point a

way towards a workable test on the international stage. adr

1 Introduction, para 1.2 [2002] 2 AC 357, per Lord Hope at [103].3 [2008] 4 HKLRd 726.4 [2003] QB 528 (Court of Appeal).5 Lawal v Northern Spirit Ltd [2003] uKHL 35 at [14].6 [2011] eWHC 2345.

MMMAAASSSTTTEEERRR OOOFFF LLLAAAWWWSSS IINN AARRBBIITTRRAATTIIOONN AANNDD DDIISSPPUUTTEE RREESSOOLLUUTTIIOONN

TTHHEE UUNNIIVVEERRSSIITTYY OOFF HHOONNGG KKOONNGG

FFAACCUULLTTYY OOFF LLAAWW

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nuts & bolts lecture

30

Factual and Expert Evidence in Arbitration

this article is a primer on the fundamental principles and concepts of the law and practice of evidence generally and of expert evidence in arbitration. It focuses on the common law system as applied in domestic arbitration in hong Kong. the article is an edited version of the nuts & Bolts Lecture delivered to the Chartered Institute of Arbitrators (East Asia Branch) at the hKIAC on 19 March 2013.

John Cock

IntroductionPut simply, evidence is material or information presented to the

tribunal to support or refute the parties’ respective contentions

of the facts of the matter being tried. Evidence relates to facts

and must therefore be distinguished from points of law, which

must be decided based on the parties’ submissions following

relevant authority.

Rules of evidence have been developed down the centuries to

govern the scope and nature of evidence that may be presented

(or adduced) to courts and tribunals. The rules of evidence

(particularly in courts) tend to be restrictive, in that they

generally operate to exclude or limit the presentation of certain

types of material as evidence. Essentially, evidence is required to

be both relevant and admissible in order to be presented.

Relevance and admissibility of evidenceEvidence is relevant “if it is logically probative or disprobative

of some matter which requires proof” and “makes the matter

which requires proof more or less probable”.1 The question

of relevance therefore refers to the relationship between the

material the party wishes to present and the facts it wishes

to prove or disprove thereby. That test requires not only the

evidence to be relevant to the alleged facts, but also those

alleged facts to be relevant to the issues in contention.

Admissibility, on the other hand, is a question of law rather than

fact and depends on the application of the relevant rules under

the applicable law of evidence. As such, admissibility “has

nothing to do with the probative or logical relationship between

the evidence tendered and the fact to be proved”.2

Relevance is therefore a prerequisite for, but does not guarantee,

admissibility.

Nature and form of evidenceTo begin with, evidence may be classified in terms both of its

form and its nature.

Evidence to be presented to the tribunal may take three forms.



Oral evidence

Evidence given by a witness is referred to as oral evidence, as

it was traditionally delivered in the proceedings by a person

speaking from the witness box.3 More recently, and particularly

in arbitrations, witness evidence is also often taken by way

of written witness statements or affidavits, and sometimes

by means such as video or telephone link. Such evidence is,

however, still referred to as oral evidence. This is because,

whatever the medium and means of communication employed,

it is evidence ‘spoken’ by the witness.

Documentary evidence

Documentary evidence takes the form of the contents of

documents presented to the tribunal. These may be letters,

emails, contracts, reports and other written communications.

Documentary evidence also includes evidence conveyed

by the contents of other forms of communication, such as

photographs, films, audio and video tapes, drawings and so

on. Similarly, the term ‘document’ refers not only to physical

media but also to an ever expanding range of electronic media.

These include digital files of all types, such as emails, text

messages, spreadsheets, word processing documents, digital

images, electronic models and so on.

Real or physical evidence

‘Real’ or physical evidence is anything from which the tribunal

must use its own senses to draw conclusions or inferences in

relation to the alleged facts. Common examples are samples

of materials or objects alleged to be damaged or defective and

inspections (or ‘views’) by the tribunal of sites or premises.

Documents may also be presented as real evidence if their

existence, physical form or condition somehow conveys

evidence beyond that of their contents. Thus, for example, an

original report by a testing laboratory may be presented as real

evidence that testing was performed, while the report’s contents

may be documentary evidence of the test results.

The nature of evidence refers to its substantive character with

respect to the facts to which the evidence relates.

Direct or circumstantial evidence?

Direct evidence is evidence which, if accepted as true, proves the

fact in contention itself without anything further. Circumstantial

evidence, on the other hand, first requires the tribunal to accept

the evidence as true, and then to draw inferences from that

evidence to draw conclusions about the alleged fact.

Percipient or hearsay evidence?

Percipient evidence is first-hand, in that it is something which

the witness perceived or experienced personally with his/her

own senses.4 Hearsay evidence, by contrast, is evidence which

the giver of the evidence did not personally perceive, but learned

from another party. Hearsay is therefore second-hand evidence.

Primary or secondary evidence?

This classification relates to documentary evidence. An original

document would be primary evidence for the purpose of proving

its contents. If only a copy is presented (in whatever form), that

would be secondary evidence. An admission of the document’s

contents would also be primary evidence, whereas oral evidence

of the document’s contents presented by a witness would be

secondary evidence.

Presumptive or conclusive evidence?

This classification generally arises out of statute, or as a creature

of the parties’ contract. Presumptive evidence (also referred to

as prima facie evidence), is evidence which is declared to be

sufficient proof of a fact, unless the opposing party adduces

contradictory evidence sufficient to rebut the presumption.

Conclusive evidence is deemed to be sufficient proof of a fact

and may not be rebutted. Although relatively rare, conclusive

Put simply, evidence is material or information

presented to the tribunal to support or refute the parties’ respective contentions of the facts of the matter being tried.


32

evidence may be found, for example, in the Final Certificate

under some building contracts.5

By way of simple illustration of these concepts, the table below

presents examples of evidence that might be presented in a case

of alleged armed robbery.

(1) s 47(1) gives effect to art 19(1) of the UNCITRAL Model

Law, by which the parties are free to agree as to procedure;

(2) failing such agreement, the tribunal may conduct the

arbitration in the manner that it considers appropriate (s

47(2)); and

(3) the tribunal “is not bound by the rules of evidence and

may receive any evidence that it considers relevant”,

but must give the evidence adduced the weight that it

considers appropriate (s 47(3)).

Absent any agreement by the parties to the contrary, therefore,

the admissibility of evidence in arbitration is a matter for the

tribunal’s discretion rather than of the application of any strict

or prescribed rules. As with many other aspects of arbitration,

however, the parties may ‘agree’ by adopting rules, either as part

of the arbitration agreement itself or following commencement

of the arbitration. The HKIAC Domestic Arbitration Rules (2012

Edn), for example, include a number of provisions relating to

Scenario NatureForm

Oral Doc Real

1Witness says he saw a man running from the bank with wads of cash

Percipient Circumstantial

ü

2Another witness says he heard at the pub that the man had a gun

Hearsay Circumstantial

ü

3A customer at the bank says he saw the man draw the gun and demand cash

Percipient Direct

ü

4CCTV video from the bank shows the man with a gun robbing the bank

Directü ü

5A gun is found in the next street soon after the incident with the man’s fingerprints on it

Direct (that the man had held the gun) Circumstantial (about the robbery)

ü

Procedural matters relating to evidence in arbitrationAs already stated, the admissibility of evidence is a question of

law and depends on the applicable rules of evidence in each

case. The law of evidence forms part of the applicable arbitral

law, though modern laws usually relax the strict rules of evidence

in their application to arbitrations. Thus, s 47 of the Hong Kong

Arbitration Ordinance (Cap 609) governs determination of the

rules of procedure as follows:

the law of evidence forms part of the

applicable arbitral law, though modern laws

usually relax the strict rules of evidence in their application to

arbitrations.



the presentation and taking of evidence.6

The arbitral law, together with any particular agreements of

the parties and any applicable rules, thus create a framework

within which the tribunal must deal with evidence. Orders for

Directions are the normal means by which tribunals exercise

their powers and communicate procedural matters, including

those relating to evidence. While such orders may and indeed

often should make reference to the applicable law and rules,

their purpose is not to restate those provisions but to issue

specific directions in accordance with them. Examples of these

may include orders:

(1) limiting oral evidence;

(2) specifying timeframe and procedures for production and

service of witness statements;

(3) for disclosure and production of documents (sometimes

referred to as ‘discovery’7);

(4) for preparation and delivery of expert evidence;

(5) for conduct of hearings.

Witness statements and oral evidence of factAs mentioned above, written witness statements may be ordered

and in current practice such orders are almost universal. Their

primary purpose is to save time at the hearing by avoiding the

need to have the witness recite the entirety of his/her evidence

into the record. Instead, written statements are exchanged prior

to the hearing, which can be read in advance by the parties and

the tribunal.

No particular form is required for such statements, save as may

be prescribed by rules or the orders of the tribunal. The tribunal

may also order that such statements be signed or made by way

of affidavit.

At the hearing, each witness will be asked to confirm and, if

evidence is to be taken on oath or affirmation, to swear to or affirm

the truthfulness of the contents of his/her witness statement.

The witness statements are thereby adopted as the evidence-

in-chief of each witness, without the necessity for that evidence

to be recited in full to the tribunal. The witnesses may then be

cross-examined on their evidence by opposing counsel and may

also be re-examined by their own party’s counsel. This process is

commonly referred to as ‘testing’ the witnesses’ evidence.

Expert evidenceExpert evidence refers to opinion evidence as opposed to

evidence of fact. It may include both written reports and

evidence presented orally at hearings. Expert opinion evidence

may be called to assist the tribunal to interpret or understand the

factual evidence presented and/or to offer opinion of what the

facts may have been in the absence of sufficient other evidence.

Generally speaking, expert evidence may only be called from

witnesses who possess both specialist knowledge and relevant

experience. Traditionally, experts were required to be members

of a recognised profession, such as doctors, architects, engineers

etc. While that is still generally the case, the scope of activities

and expertise now accepted for the purposes of giving expert

evidence has become much broader (though by no means

unlimited) and continues to develop. Examples of more recently

accepted professions include programming/delay and forensic

IT experts.

The other key difference with expert evidence is that, whereas

evidence of fact may essentially be presented as of right (subject

to certain limitations), expert evidence always requires leave of

the tribunal to be presented.

Briefly stated, and with some variations, the process for

presentation and testing of expert evidence in arbitration is

typically as follows.

(1) Exchange of expert reports, which may be either ‘open’

(ie disclosed to the tribunal and presented in evidence)

or ‘without prejudice’ (ie disclosed only to the parties and

the experts and not to the tribunal).

(2) ‘Without prejudice’ meetings of experts of like discipline

will then normally be conducted, to agree points and

narrow the scope of any differences of opinion. All the


34

communications at and arising from such meetings are

without prejudice to the parties’ positions, and must be

treated confidentially and not disclosed to the tribunal.8

(3) Joint reports will then be prepared. These typically set out

the points on which the experts are agreed, the points on

which they disagree and the reasons for disagreement.

From the without prejudice meetings, only the joint report

will be presented to the tribunal.

(4) In the event that the experts continue to disagree on

some or all points, supplemental individual reports may

also be ordered. The form of these may differ, depending

upon whether the experts’ original individual reports were

exchanged openly or without prejudice. If the former,

supplemental reports may be brief, dealing only with

points of disagreement in the joint report that have not

previously been addressed. If the latter, the individual

reports will have to deal with all points of disagreement

and will therefore be longer and more detailed.

(5) As with witnesses of fact, opinion evidence presented

in the experts’ joint and individual reports is generally

adopted at an oral hearing, and tested by cross- and re-

examination. This may not, however, be necessary in cases

where the experts agree on all or most points. It may also

not be necessary in cases where the differences between

the experts and the reasons for them are clear from the

reports. In such cases, cross-examination may be of little

value in testing the evidence and the tribunal may instead

proceed to a decision on the basis of the reports alone.

Weighing evidence and decision-makingHaving been presented with the evidence, the tribunal is

required to pull it all together to reach conclusions about the

facts in contention in order to decide what happened. In so

doing, the tribunal must have regard to the concepts of burden

and standard of proof.

‘Burden of proof’ simply refers to the question of which party

is responsible for proving any particular fact in contention. The

simple answer is contained within the maxim that ‘he who

alleges must prove’. In practice, this generally means that the

claimant is required to prove its claims and is therefore said to

have the burden (or onus) of proof. The respondent, by contrast,

is fundamentally not required to prove anything, or to disprove

the claimant’s claims. To the extent that the respondent relies on

positive points of defence (as opposed to bare denials or non-

admissions) or if it raises a counterclaim, however, it will have

the burden of proving the alleged facts on which its defence

and/or counterclaim rests.

‘Standard of proof’, on the other hand, refers to the extent or

degree to which the tribunal must be satisfied that a fact has

been proved. In arbitration, as in all civil cases, the standard of

proof is ‘the balance of probabilities’. This simply means that,

based on the evidence, the tribunal is satisfied that the alleged

fact is more likely to be true than not. This contrasts with the

much higher standard of ‘beyond reasonable doubt’ required in

criminal cases. Proof is therefore more difficult to demonstrate

in criminal than in civil proceedings.

In order to reach conclusions and findings on the facts, the

tribunal will need to weigh the evidence. This means deciding

which version of the facts each piece of evidence tends to

support, and to what extent.

Using the common analogy of the scales of justice, each piece of

evidence is treated like a weight which is placed on one side of

the scale or the other. When all the evidence has been weighed,

the scales tip in one party’s favour – even if the ratio is only 51:49

– indicating which facts have been proven. If the scales balance



evenly – 50:50 – the alleging party has failed to prove the alleged

fact and the benefit of the doubt goes to the other party.

Generally speaking, direct evidence will be given greater weight

than circumstantial evidence. Conflicting percipient evidence

of two opposing witnesses considered in isolation may be of

equal weight. One witness’s version of the facts may, however,

be supported by contemporaneous documents, such as emails

or site reports. In that case, the documentary evidence may add

weight to the witness evidence on one side of the scale, so that

it tips one way or the other.9

The tribunal uses the evidence thus weighed to find which of the

alleged facts are proven. The relevant legal principles are then

applied to the facts as found to decide the issues in contention

and are expressed as holdings in the award. In so doing, the

tribunal will also take into consideration the parties’ closing

submissions in the case. These are simply the parties’ (or their

respective counsels’ or advisors’) oral or written contentions

of how the evidence adduced should be considered to have

proved or disproved the alleged facts, and of the relevant legal

principles.

ConclusionEvidence is a huge field, about which entire textbooks have

been written, and this article can only hope to skim the surface

of the subject. It is hoped that it may be helpful as a general

introduction, particularly for non-lawyers and those who are

new to the subject. adr

1 DPP v Kilbourne [1973] AC 729 at 756, per Lord simon of Glaisdale.2 Peter Murphy, Murphy on Evidence (1997, 6th edn, London:

Blackstone Press) p 18.3 such evidence is also often referred to as ’testimony’, particularly in

American practice. 4 somewhat confusingly, percipient evidence is also sometimes referred

to as ‘direct evidence’, as it refers to evidence directly perceived by the witness.

5 For example, cl 32.9 of the Hong Kong standard Form of Building Contract (2005 Edn) provides that the “Final Certificate shall be conclusive evidence in any proceedings arising out of the Contract whether by arbitration or otherwise” of certain facts, including in respect of materials and workmanship, adjustments to the Contract sum, extensions of time and additional payments for loss and expense, subject to certain defined exceptions. The exceptions include proceedings commenced under the dispute resolution provisions under cl 41 within 28 days of the issue of the Final Certificate, but only in respect of the matters to which those proceedings relate.

6 these include arts 6.3 (widest discretion allowed by law to conduct proceedings), 7 (written statements and documents), 9 (hearings), 11 (witnesses), 12 (tribunal-appointed experts and assessors) and 15 (general and additional powers of arbitrators, including powers relating to evidence).

7 Editorial note: this nomenclature is still used in the Arbitration ordinance: see s 56(1)(b). the terminology distinguishes discovery from the duty of disclosure that is required of parties in support of ex parte applications or applications for interim measures, as to which see ibid, s 41.

8 How materials are dealt with that are alleged to be inadmissible, because they are without prejudice or otherwise privileged, is beyond the scope of this article.

9 this does not mean that the witness whose evidence was not accepted has been lying, and arbitrators will usually take pains to avoid such a statement. Instead, witnesses whose evidence is not accepted are usually found to have mis-recollected events or to have been mistaken in their perception at the time.

When all the evidence has been weighed, the scales tip in one party’s favour – even if the ratio is only 51:49 – indicating which facts have been proven.If the scales balance evenly

– 50:50 – the alleging party has failed to prove the

alleged fact and the benefit of the doubt goes to the

other party.

mediation

36

The Impact of a Mediator’s Conduct on Disputing Parties

Dr Lim Lan Yuan

IntroductionMediations are conducted in a private setting and the

proceedings are not reported as they are confidential.

Therefore, how a mediator has performed in the mediation will

not be known unless the disputing parties provide feedback on

the entire process. Of course, mediators themselves will have

a sense of how the mediation has proceeded. Unfortunately,

mediators often go away with a lot of satisfaction when a

dispute is settled, believing that everything is in order.

The conduct of a mediator can, however, have an important

impact on the disputing parties. A party may unwillingly settle

the dispute because he feels helpless, or does not wish to

continue with the dispute. Such a settlement does not generate

satisfaction for the party but rather grievance or frustration. If

the ‘unhappiness’ is strong, and a party feels greatly aggrieved

because of the mediator’s conduct and behaviour, that party may

complain about the mediation or seek other forms of redress.

Conversely, parties may not complain, leave the matter as it is

and suffer in silence, and the mediator will be none the wiser.

Feedback from parties on how they believe the mediation

has proceeded therefore provides a valuable source for

understanding how mediators have performed and suggests

how they can improve their mediation performance in order

to generate satisfaction for the parties.

This article attempts to discuss some of the do’s and don’ts

this article puts a case for mediators obtaining feedback from parties as a matter of course in order that they may accurately gauge and improve their performance. A list of mediator ‘do’s’ and ‘don’ts’ is offered, particularly emphasising the need to avoid forcing or appearing to force settlement.

mediation


in mediation, based on feedback obtained by the author from

parties in the context of commercial mediations. The purpose

is to remind mediators of their basic role and functions, so that

they may better understand the proper conduct of mediation.

At the same time, such feedback will provide an opportunity

for mediators to appreciate their different approaches and

styles of mediation. The evaluation of the parties’ feedback

will eventually help to raise the level of professionalism and

competency of practising mediators.

Objectives in mediationMediators have different objectives and goals when mediating.

This can influence how they conduct mediations. Some of the

objectives are not necessarily compatible. Is mediation about

helping parties to resolve their problems only? Do mediators

also help parties to rebuild goodwill? Are they satisfied with

getting parties to clarify issues but not having the problem

settled? A mediator with the sole objective of achieving a

settlement will likely work towards helping parties to do so.

On the other hand, a mediator with other objectives, such as

helping parties to communicate better and understand each

other, may not be so forceful in achieving settlement.

There are undesirable effects in achieving settlement at all

costs. Mediators therefore need to avoid taking this approach.

Disputing parties are likely to feel coerced to settle. It is

necessary for the mediator to remove both the misperception

held and the apparent lack of trust.1 Even if the matter is

settled, parties may feel that it was resolved on an unfair basis.

Parties may also feel that the mediators were biased against

them. All of these can result in giving the impression that

mediators are lacking in professionalism.

Whatever the objectives in mediation, one suggestion is to

ensure that the mediator has tried his or her best: whether the

problem is settled or not is not crucial. It should, however, be

the best effort made by the mediator.

The mediator’s role as a neutral third partyThe conduct of a mediator should be neutral: that is, he or

she has no particular interest in which disputing party ‘wins’ or

‘loses’. The conduct of mediators should be seen as fair to the

parties through words, speech and actions. In other words,

mediators should (i) attempt to use neutral words, (ii) not

show bias, and (iii) not side with one party. Other actions that

might demonstrate neutrality include the following.

(1) showing sincerity to assist both parties;

(2) guarding against imposing the mediator’s value

judgements and deciding for the parties;

(3) being concerned about the way and manner of putting

across the mediator’s own ideas;

the conduct of a mediator can … have an important impact on the disputing

parties. A party may unwillingly settle the dispute because he feels helpless,

or does not wish to continue with the dispute. Such a

settlement does not generate satisfaction for the party but rather grievance or

frustration.

mediation

38

(4) being aware of any approach, action or conduct that will

show bias against the parties;

(5) being aware of prejudging based on limited information

and incomplete data from the parties.

Adverse comments on mediators’ conductAlthough many mediators conduct their mediations

appropriately, with integrity and skill, adverse feedback from

disputing parties is inevitable in view of misperceptions or

misunderstandings that can occur during the session. The

following are the more serious adverse comments that have

been received in the author’s study on mediators’ conduct. Developing good mediation practiceBased on the feedback received, it is necessary for mediators

to re-examine their conduct and improve their level of

competency. The following good practice can be developed for

mediation.

Proper opening of sessions

Mediators should conduct a proper opening for every mediation

session. This is important to ensure that the parties are educated

about the mediation process and what is expected from it. In

particular, mediators should emphasise their impartiality. The

importance of the mediator’s opening statement and its impact

on the mediation should not be underestimated.2

Show neutrality as well as impartiality

Mediators should show neutrality as well as impartiality, and

not side with either party. It is necessary not only to speak in

a neutral manner but also to show in action and conduct that

the mediator is unbiased and fair.

Show respect

Mediators should show respect and be polite to parties,

although they may need to be firm at times. The mediator

needs to create a positive atmosphere. The parties also need

reassurance about their having selected mediation as an

appropriate forum for their dispute.3

Professional conduct in co-mediation

In situations where co-mediation is adopted, it is important

Mediators might be perceived as biased or partial because of their

choice of words used, their tone of voice or the way

the message or statement is conveyed.

(1) Some mediators were perceived to be rude and

domineering during the mediation session.

(2) Parties felt pressurised to settle as mediators did not

appear to want to listen to them, so there was no point in

going further.

(3) Mediators were perceived to be telling a party that they

would encourage the other party to sue if the dispute

were not settled.

(4) Mediators prejudged the dispute based on the documents

they had reviewed, eg the contract between the parties,

and concluded that one party’s case had no merit.

(5) Mediators were clearly biased, arguing on behalf of one

party. They did not give sufficient opportunity for the other

party to explain the situation from its own perspective.

(6) Mediators, when acting as co-mediators, showed

disagreement with each other openly and in front of the

parties.

mediation


that mediators do not quarrel with their co-mediators, and

certainly not in front of the parties. Mediators need to conduct

themselves professionally.

Encourage but not force settlement

Mediators should attempt to encourage parties to settle but

should not force the issue. This is an important voluntary role

and purpose of mediation. Mediators should prevent coercion.4

Value judgments

Mediators should keep their value judgements to themselves,

that is, remain impartial, an objective that reflects an essential

role of a mediator.

Re-focusing on mediation fundamentalsTo perform well, mediators need to remind themselves of the

fundamentals in mediation. These are as follows.

(1) To communicate well, learn to rephrase, reframe,

summarise and use neutral language.

(2) Remember that the purpose of mediation is not about

finding out which party is right or wrong. The one who is

‘right’ can also offer to settle.

(3) Remind parties that it is difficult to satisfy the needs of

both of them fully, even when there is a settlement.

(4) Learn how to capture the essence of the dispute.

(5) Learn to identify opportunities for settlement and ways to

settle.

(6) Remember that there are always at least two sides to a

story, and at least one way of resolving the problem.

ConclusionThis discussion has emphasised the importance of mediator

conduct and how it can influence eventual settlement of a

conflict between disputing parties. Unless a concerted effort is

made to obtain feedback from the parties, however, mediators

often go away without knowing how they have performed

in helping parties arrive at a settlement (or not). Mediators

may be perceived as biased or partial because of their choice

of words used, their tone of voice or the way the message

or statement is conveyed. They need to be aware that their

conduct and behaviour can adversely affect disputing parties.

Based on complaints received from parties, valuable lessons

can be learnt. These have been highlighted in this article and

it is hoped that they will provide useful inputs for improving

mediation practice and conduct. adr

1 CW Moore, The Mediation Process – Practical Strategies for Resolving Conflicts (1986, Jossey-Bass Publishers, san Francisco).

2 LY Lim, The Theory and Practice of Mediation (1997, Ft Law and tax Asia Pacific).

3 R�Charlton�&�M�Dewdney,�The Mediator’s Handbook: Skills and Strategies for Practitioners�(1995,�LBC�Information�Services,�Sydney).�

4 J Folberg & A taylor, Mediation: A Comprehensive Guide to Resolving Conflicts without Litigation (1984, Jossey-Bass Publishers, san Francisco).

there are undesirable effects in achieving

settlement at all costs. Mediators therefore need to avoid taking

this approach. Disputing parties are likely to feel

coerced to settle. … Even if the matter is settled,

parties will feel that it was resolved on an unfair

basis.

case notes

40

Defining the Scope of an Arbitral Tribunal’s Authority and Setting Aside of Awards in Cases Involving a State PartySuraj Sajnani

IntroductionIn Government of Lao People’s Democratic Republic v Thai-Lao

Lignite Co Ltd & Honsa Lignite Co Ltd, the High Court in Malaya1

set aside an arbitral award on account of the arbitral tribunal

having exceeded and wrongly exercised its jurisdiction. The

judgment makes clear that even in an arbitration-friendly

jurisdiction such as Malaysia, the supervisory court will

ensure that an award handed down is within the tribunal’s

jurisdiction, even if this means granting an extension of time

to make a legitimate challenge to the award. The case has

implications for:

(1) participation in arbitrations by sovereigns;

(2) the proper scope of an arbitral tribunal’s jurisdiction; and

(3) time limits for making applications to set aside award.

Background and factsIn 1992, the Government of Laos (‘GoL’) entered into two

mining contracts with Thai-Lao Lignite Co Ltd (‘TLL’) and

Hongsa Lignite Co Ltd (‘HLL’) for the mining of lignite in

Hongsa, a region of Laos near the Thai border.

In 1994, a Project Development Agreement (the ‘PD

Agreement’) was entered into between GoL and TLL only,

granting TLL a concession to build a power plant at Hongsa

(the ‘Project’). The PD Agreement contained an arbitration

clause (the ‘Arbitration Agreement’), directing disputes to be

settled at the Kuala Lumpur Regional Centre for Arbitration

under the UNCITRAL Arbitration Rules (1976 Edn).

In 2006, the GoL purported to terminate the PD Agreement

and the two mining contracts on the grounds that “after

a decade: not a watt of electricity was produced and not an

ounce in weight of lignite was mined”.2

Challenging the termination, TLL and HLL invoked the

Arbitration Agreement in 2007. In 2009, a tribunal of three

arbitrators (the ‘Tribunal’) held that the GoL had improperly

and invalidly terminated both the PD Agreement and mining

contracts. Consequently, TLL and HLL were awarded US$56

million and costs (the ‘Award’).

case notes


The High Court judgment – Round One: the Court’s unfettered discretionThe GoL applied to the High Court in Malaya at Kuala

Lumpur,3 the supervisory court in this matter, to set aside the

Award (the ‘Application’). Under the Malaysian Arbitration Act

2005 (the ‘Act’), “an application for setting aside may not be

made after the expiry of ninety days from the date” of receipt

of the arbitral award by the Applicant.4 The Application was

made nine months after the expiry of this timeframe. As such,

the Application included a prayer that the Court exercise its

discretion under the Act to enlarge the time for making it, or

alternatively exercise its inherent power to extend time,5 on

the following grounds:

(1) the GoL was a foreign sovereign;

(2) the Award was made in excess of the Tribunal’s jurisdiction;

(3) the Tribunal wrongly exercised jurisdiction over third

parties;

(4) the GoL was not conversant with local law requirements

and did not receive competent advice from its legal

advisors;

(5) TLL and HLL would not be prejudiced if an extension

were granted, whereas GoL would be prejudiced if it were

not granted; and

(6) the GoL was being compelled to expend efforts and

resources on resisting enforcement applications in

England & Wales, France, Singapore and the USA.

At least half of these grounds are often found as a matter of

course in investor-State arbitrations. It was therefore likely that

the grounds which held particular weight in this matter were

those relating to jurisdiction ((2) and (3)) and that relating to

the inadequacy of legal advice given to the GoL ((4)).

The High Court held that the wording in the Act was ‘directory’

(on account of the use of the word “may”) rather than

‘mandatory’ (on account of the absence of the word “shall”).

Together with the Court’s inherent powers, the Act indicated

that the Court did have power to grant a party an extension of

time for applying to set aside an award. The merits of this case

did not, however, justify such an exercise of discretion because:

(1) the Court found that the GoL did in fact have adequate

legal representation;

(2) the delay was not merely nominal. Rather, it was

inordinate;

(3) the substantive merits of the Application were not an

essential consideration in determining an application that

sought to condone delay;

(4) Malaysian jurisprudence was inclined to adopt a

‘minimum court intervention’ approach.

The Application was therefore dismissed.

The ‘form over substance’ and ‘hands-off’ approaches taken by

the High Court in this decision arguably negate the benefit

that parties aim to achieve when choosing a seat with a strong

legal framework.

The Court of Appeal judgment: the benefits of bureaucracyThe GoL appealed against the High Court’s decision to the

Court of Appeal of Malaysia in Putrajaya.6 While echoing the

High Court’s view that the Court had “an unfettered discretion

to grant an extension of time”, the Court of Appeal held that

the overriding principle was that “justice must be done.” In

determining an application for an extension of time, the Court

reiterated, citing The Government of India v Cairn Energy India

Pty Ltd & Ors,7 that it must consider:

the case has implications for: (1) participation in

arbitration by sovereigns; (2) the proper scope of an

arbitral tribunal’s jurisdiction; and (3) time limits for

making applications to set aside awards.

case notes

42

the judgment makes clear that even in an arbitration-

friendly jurisdiction such as Malaysia, the supervisory court will ensure that an award

handed down is within the tribunal’s jurisdiction, even if this means granting an extension of time to make a legitimate challenge to

the award.

(1) the length of the delay;

(2) the reason for delay;

(3) the prospects of success of the underlying application

(judged on the standard of a ‘good arguable case’); and

(4) the degree of prejudice to the side opposing the extension

if one were to be granted.

The Court of Appeal held that it ought to exercise its discretion

in favour of granting an extension of time for, inter alia, the

following reasons:

(1) dismissal of the application was “tantamount to requiring

the GOL to pay out sums in respect of an award which is

in excess of jurisdiction” and “shutting out the GOL from

challenging [the Award] … in the only country competent

to hear the Application”; and

(2) the GoL’s delay was attributable to the fact that “implicit

in the nature of governmental functioning is procedural

delay incidental to the decision making process.”

The Court of Appeal thus added a further consideration, in

cases where the applicant is a sovereign, over and above

those laid down in Cairn Energy, namely the functioning of

government.

The Court also took into account the facts that (i) the GoL had

never intended to flout the provisions of the Act and (ii) had

expeditiously made the Application after it had been advised

of the need to do so.

With regard to the seat’s approach to arbitration, the Court of

Appeal stated that although Malaysia had prima facie accepted

the Model Law, this “does not in any way take away the powers

of the court in dealing with any application for extension of

time” – a matter that is not dealt with in the Model Law at all.

While finality and a lack of court intervention are propellers

of the speedy rise of arbitration, it is also “equally desirable to

ensure that arbitration is trusted and respected as a means of

resolving commercial disputes.”

The Court held that the cogency of GoL’s substantive

arguments for setting aside (elaborated further in the next

section) was good reason for extending time to make the

Application.

The matter was thus remitted to the High Court to reconsider

the substantive application to set aside the Award.

High Court judgment – Round Two: determining the substantive applicationBack in the High Court,8 Lee Swee Seng JC heard the

Application on the grounds that the Tribunal –

(1) had exceeded its scope by determining matters in relation

to the mining contracts;

case notes


… [t]he Court of Appeal stated that although Malaysia

had prima facie accepted the Model Law, this “does

not in any way take away the powers of the court in dealing

with any application for extension of time” – a matter that is not dealt with in the

Model Law at all.

(2) had wrongly exercised its authority over a third party; and

(3) had breached the rules of natural justice by not granting

the GoL an opportunity to be heard, other than by way of

objection, on an issue in dispute.

Lee JC quickly disposed of the third ground by noting that

not every breach of the rules of natural justice offends public

policy, and thus does not always stand as a ground for setting

aside.

On the two jurisdictional grounds, Lee JC noted that

the Model Law “does recognise and respect [the] court’s

interference where arbitrators have acted outside the scope

… and exceeded their jurisdiction.” He also pointed out the

clear distinction between the role of the supervisory court and

the enforcement court and that, ultimately, whether or not

the Award was valid was a matter for determination by the

former. This approach was echoed in enforcement proceedings

in this case brought in England and the US, where a decision

on the jurisdictional challenge was deferred to the Malaysian

court.9 It contrasts, however, with the approach of the Paris

Court of Appeal which, on jurisdictional grounds, overturned

the decision of the Paris Court of First Instance allowing

enforcement of the award.10

Resisting the Application, TLL and HLL contended that GoL

had participated in the Arbitration and was thus precluded

from raising a jurisdictional objection. The Court held, however,

that to raise an objection and then proceed to participate in

the proceedings in a ‘passive’ manner and challenge the award

after it had been made was “a perfectly legitimate course.” The

Court noted that whether or not a party was precluded from

raising an objection was a question of the degree and extent

of its participation and that, in the present case, the GoL

had not gone past the “point of no-return where estoppel,

acquiescence and waiver is concerned.”

Upholding the first two grounds of challenge and setting aside

the Award, therefore, Lee JC held that:

(1) having gone beyond the confines of the PD Agreement,

the Tribunal had exceeded its jurisdiction (which may be

contrasted with the situation where a tribunal correctly

exercises jurisdiction but makes an error of law, in which

case a supervisory court cannot not set aside an award on

jurisdictional grounds); and

(2) the Tribunal had wrongly exercised jurisdiction by

determining matters relating to third parties in an

arbitration that, on the face of the Arbitration Agreement,

was intended to apply to the parties to the PD Agreement

alone.

ConclusionThis judgment confirms that arbitrators need to tread carefully

when determining whether they have jurisdiction to hear

matters related to connected contracts or parties. Nevertheless,

the judgment ought not to stand generally as an authority

for parties to have a second shot at challenging a tribunal’s

jurisdiction.

The decision lends support to the increasing practice of arbitral

tribunals to:

(1) bifurcate proceedings into jurisdictional and merits stages;

and

(2) express the determination on jurisdiction not in the

form of a preliminary question, but instead in that of a

case notes

44

partial award, which may be efficiently challenged in a

supervisory court if need be, before expending time and

resources on having a tribunal hear the merits, which

would possibly be outwith the scope of its jurisdiction.

PostscriptTLL and HLL have appealed to the Court of Appeal of

Malaysia against Lee JC’s decision, so the saga continues.

At the time of writing, the judgment of the Court of Appeal

remains pending. adr

1 Editorial note: the High Court in Malaya, seated in Kuala Lumpur, is one of two High Courts of Malaysia, the other being the High Court in sabah and sarawak.

2 Press Release dated 29 January 2013, Ministry of Planning and Investment on behalf of the Government of the Lao People’s democratic Republic.

3 Government of the Lao People’s Democratic Republic v Thai-Lao Lignite Co Ltd & Hongsa Lignite Co Ltd (2012) 10 CLJ 399.

4 section 37(4).5 Courts of Judicature Act 1964, schedule, Item 8. 6 Government of the Lao People’s Democratic Republic v Thai-

Lao Lignite Co Ltd & Hongsa Lignite Co Ltd, Civil Appeal no W-02(nCC)-1287-2011.

7 [2003] 1 MLJ 348.8 Government of the Lao People’s Democratic Republic v Thai-Lao

Lignite Co Ltd & Hongsa Lignite Co Ltd [2013] 3 MLJ 409.9 Thai-Lao Lignite Co Ltd & Hongsa Lignite Co Ltd v Government of the

Lao People’s Democratic Republic, 10 Civ 5256, 2011 WL 3516154 (sdnY, 3 August 2011) (opinion and order); Thai-Lao Lignite Co Ltd & Hongsa Lignite Co Ltd v Government of the Lao People’s Democratic Republic, 11-3536-cv, 2012 WL 2866275 (2d Circuit, 13 July 2012); Thai-Lao Lignite Co Ltd & Hongsa Lignite Co Ltd v Government of the Lao People’s Democratic Republic [2012] eWHC 3381.

10 RG no 12/09983, Paris Court of Appeal (19 February 2013).

Invitation to Submit Articles for Publication in the Asian Dispute Review

the Asian Dispute Review journal seeks articles with an Asian focus on arbitration, mediation and ADR. We are also pleased to receive commentaries, case studies, book reviews, and regional updates from around Asia.

If you are interested in contributing, please note the following guidelines:

• Contributions should be written in a style that is easily understood by lay readers• Contributions should not focus on substantive law, although brief comment on substantive law may be included to the extent that it adds to the understanding of arbitration and ADR • Contributions should not have been previously published in or submitted to another journal or news letter for consideration, and should not be available online• Contributions should not be on a subject covered in depth by any paper in the previous two issues of Asian Dispute Review• Contributions should be no longer than 2,000 words.

Before writing or submitting an article, we recommend that you read a complete version of our Editorial Guidelines, and contact the Editors first.

Please contact the Editors at [email protected] to receive a copy of our Editorial Guide-lines or if you have any submission enquiries.

case notes


Treatment of Arbitration Provisions in Illegal PRC ContractsMargaret tsau

IntroductionIt is a trite statement of English law that a contract is

unenforceable if its object is illegal under the law of a friendly

foreign country. It is equally well-established that an arbitration

agreement is separate from its underlying contract.

If, however, a contract involves the performance of an

unlawful act in a foreign country, can the parties enforce

its arbitration provisions when a dispute arises? In Beijing

Jianlong Heavy Industry Group v Golden Ocean Group Ltd,1 the

Commercial Court of the Queen’s Bench Division held that

arbitration provisions embedded in unlawful guarantees were

enforceable.

BackgroundIn Beijing Jianlong, the Claimant was liable as guarantor for its

subsidiary’s repudiation under charterparties. The guarantees

were, however, unenforceable because their performance

would inevitably have broken certain PRC laws. The

Defendants therefore commenced arbitration proceedings in

London pursuant to the arbitration provisions. Various awards

were handed down against the Claimant.

The Claimant, which was incorporated in China, challenged

the awards pursuant to s 67 of the English Arbitration Act

1996 (‘the Act’) on the ground that the arbitral tribunal lacked

substantive jurisdiction. On such an application, the English

court may confirm, vary or set aside the award in whole or in

part.

During the hearing of the applications, the Claimant

submitted that (i) it was illegal under PRC laws for a Chinese

legal person to make a foreign guarantee in favour of a foreign

legal entity without having obtained prior authorisation of

the State Administration for Foreign Exchange, and (ii) it also

contravened PRC foreign exchange regulations to transfer

funds from China to meet any demand on the guarantees.

Furthermore, argued the Claimant, the parties were fully aware

of the illegality but still they conspired to evade PRC laws. On

this basis, the Claimant contended that the guarantees were

unenforceable, which the Defendants conceded.

Key issueWhile it was common ground in the applications that the

unlawful guarantees were unenforceable, the key issue for the

Court was whether the principle in Foster v Driscoll2 applied

case notes

46

to the arbitration provisions embedded in the guarantees.

In that case, the English Court of Appeal held that a bill of

exchange (which by itself was not illegal as it merely provided

for payment of a specified sum) was unenforceable because

it was entered into as part of a bundle of agreements giving

effect to an unlawful scheme. Applying similar reasoning,

the Claimant argued in the present case that the arbitration

provisions should not be enforced as they were part of an

unlawful scheme.

DecisionThe court rejected the Claimant’s approach to the principle in

Foster v Driscoll. First of all, the Court pointed out that it is

provided in s 7 of the Act that an arbitration agreement which

forms part of another agreement “shall not be regarded as

invalid, non-existent or ineffective” per se because such other

agreement is so vitiated, and shall be “treated as a distinct

agreement.”

Secondly, the Court applied the principle in Fiona Trust &

Holding Corporation v Privalov,3 in which the House of Lords

held that an arbitration agreement was to be treated as a

distinct and separable agreement from the contract of which it

formed part, and mere unenforceability of the contract would

not of itself result in the unenforceability of the arbitration

agreement. Nonetheless, the Court recognised in the present

case that it might be possible for an arbitration agreement to

be unenforceable if it were directly impeached on grounds

which related to the arbitration agreement itself. Therefore, in

order to challenge successfully the validity of the arbitration

provisions and thereby set aside the awards, the Claimant

had to establish that the arbitration provisions were directly

impeached. This is, as Lord Hope said in Fiona Trust, “an exacting

test.” Furthermore, the Court pointed out that in order to hold

the arbitration agreement unenforceable, that agreement must

involve an “intended commission of prohibited acts within the

territory of a friendly foreign country (whose laws prohibit

those acts)”, which was “an essential and necessary ingredient

of the principle in Foster v Driscoll”. Looking at the facts of

the present case, however, the arbitration provisions stipulated

that the arbitration was to be held in London, not in the PRC.

As such, no illegal acts whatsoever would be committed in a

foreign country by enforcing the provisions.

Thirdly, the Court noted that it was common ground that if

the public policy ground on which the underlying contract

was unenforceable also tainted the arbitration agreement, the

latter would similarly be unenforceable. On this public policy

point, the following two-step approach was adopted by the

Court.

(1) Would the policy of the illegality rule that invalidates the

underlying contract be defeated if the Court were to allow

a dispute to be determined by an arbitral tribunal chosen

by the parties?

… It is a trite statement of English law that a contract

is unenforceable if its object is illegal under the law of a friendly foreign

country. It is equally well-established that an arbitration agreement is separate from its underlying contract.

case notes


(2) If it would, this would have to be balanced against

powerful commercial reasons for upholding arbitration

provisions “unless it is clear” that to do so would offend

the policy of the rule. In this case, it was held that the

public policy ground did not tip in favour of the Claimant.

Effects of the decision on arbitration provisions in PRC commercial contractsThe significance of this English High Court decision is as

follows. Even if the Claimant could show that the policy of the

illegality rule would be defeated by enforcing an arbitration

agreement (which in effect would enable the parties to

circumvent applicable PRC laws), it still faced the hurdle of

rebutting the so-called “powerful commercial reasons” for

upholding arbitration provisions. By refusing the Claimant’s

applications to set aside the awards, this decision practically

says that international businesses may get away with by-

passing exchange controls by taking disputes to be arbitrated

elsewhere. To the English court, is the real risk of capital flight

faced by the PRC (as well as other developing countries with

foreign exchange regulations) a ‘commercial reason’ that is

not powerful enough? Or are the interests of international

businesses more powerful commercially? adr

1 [2013] 2 Lloydʼs Rep 61.2 [1929] 1 KB 470.3 [2007] Bus LR 1719.

Hong Kong has been institutionally separated from the United Kingdom for less than two decades. As recently as 25 years ago, it would have been difficult to perceive any appreciable emergence of a distinctly local Hong Kong common law. There were, however, some relatively early signs that the Crown Colony’s common law was adapting to Hong Kong conditions to better serve the local community. Professor Betty M Ho skilfully identified many of these earlier developments.

Last published in 1994, Betty Ho’s immensely popular contract law title hasbeen extensively revised and expanded, with a focus on Hong Kong developments which has been updated by Professor Stephen Hall of The Chinese University of Hong Kong.

This comprehensive, skillfully written and self-contained volume on contract law in Hong Kong has been updated with the latest developments, including a significant addition of new cases to aid practitioners. It also sets out the basic principles of contract law and provides practical examples of contract law at work, balanced with theory and policy insofar as it aids understanding.

Authors: Betty M Ho, Stephen HallISBN: 9789888231423Price: HK$ 1,500Format: Soft Cover BookPages: 895pp

About the Book

LexisNexis Hong Kong3901, 39/F, Hopewell Centre, 183 Queen’s Road East, Hong Kong

Tel: (852) 2179-7888 Fax: (852) 2976-0840E-mail: [email protected] Website: www.lexisnexis.com.hk

Book review essay

48

Mediation in Asia-Pacific: A Practical Guide to Mediation and its Impact on Legal Systems1

Mediation Ordinance: Commentary and Annotations2

In ways many and various, and to both greater and lesser degrees, mediation has substantially become part of the

worldwide dispute resolution order. Whilst its development is often associated in Western minds with the ‘access to justice’ movement in the US from the mid-1960s onwards, mediation (in a number of guises) is of ancient heritage, not least in Asia. Furthermore, whereas in the West, ADR in general (and mediation in particular) has been seen primarily as a way of reducing clogged court dockets, and promoting efficiency in and saving public expenditure on civil justice (apparently in the cause of ‘consumer choice’), Confucian ideas in some Asian jurisdictions have co-opted it more as a traditional means of maintaining social harmony and therefore public order. In the People’s Republic of China, for example, socialist law and public administration practice have, in the guise of conciliation, embellished the Confucian approach to dispute resolution so as to macro- and micro-manage the populace.

Two other broad – albeit general and perhaps even misleading – contrasts are apparent in approaches to ADR as between East and West ...

Firstly, whereas Europe and North America have a more homogeneous approach to ADR (as illustrated by, respectively, the EU Mediation Directive and the US Uniform Mediation Act, which is in turn influenced by the UNCITRAL Model Law on International Commercial Conciliation 20023), approaches in Asia have been more varied and divide between (i) jurisdictions that have been heavily influenced by Western practice, whether common law or civil law influenced (such as Hong Kong, Singapore, Malaysia and Japan), (ii) those governed by socialist law (such as the PRC and Vietnam) and (iii) those that have (at least in the past) subscribed to more ‘traditional’ and community-based ways of resolving disputes that is subject to

little or no foreign influence (such as Cambodia).

Secondly (and partly as a result of the first contrast), whereas Europe and the US now emphasise the importance of co-opting mediation into the civil justice system through court-annexed or court-adjunct mediation under rules of court, Asian jurisdictions have generally been slower in following suit, presumably because of the underlying principle that dispute resolution should be based upon settlement and not compulsion.

It is a common feature of court-adjunct mediation, in both West and East, that few jurisdictions have made it compulsory, preferring instead to give strong encouragement to parties to litigation to mediate whilst reserving the right to impose adverse costs orders on those who do not treat the mediation process seriously. On the Asian side of the Pacific Rim, Hong Kong has come closest to mandatory court-adjunct mediation, while two Australian jurisdictions (New South Wales and Queensland) have gone all the way. On the other side of the Rim, the US has for many years been the leading proponent of court-annexed ADR. Nevertheless, other Asian jurisdictions, notably Indonesia, Singapore and South Korea, have over the past 25 years adopted laws that, to greater or lesser degrees, co-opt mediation into the litigation system, particularly for commercial disputes.4

The overall picture is, therefore, one of regions in which developments and experiences have been mixed and the contrasts in fact far from stark. With this lesson in mind, Professor Wang Guiguo and Dr Yang Fan have launched their survey of mediation trends on both sides in the Asia-Pacific, Mediation in Asia-Pacific: A Practical Guide to Mediation and its Impact on Legal Systems. This title focuses on what is understood by ‘mediation’ in each of the jurisdictions surveyed, its history and features, how exactly their civil litigation systems have been affected by the mediation process and, particularly in relation to Asia, the influence of culture on dispute resolution.

The book is, in the main, admirably uniform in its approach as to breadth, depth and subject-matter, helped no doubt by Dr Yang’s comprehensive and thematic List of Questions to Contributors (Appendix 1), which the vast majority of contributors appear to have followed reasonably faithfully. There are, however, some criticisms. A somewhat glaring exception to Dr Yang's injunction

Reviews by Robert Morgan

Mediation O

rdinance

MediationordinanceClaire Wilson

H O N G K O N G P R A C T I C E S E R I E S

HONG KONG PRACTICE SERIES

Mediation ordinance

“Understanding the new mediation regime in Hong Kong, which is the subject of this publication, is extremely important for commercial organizations, lawyers and all those working in the dispute resolution field. Not only are the new developments important for Hong Kong but they are being closely watched in other Asian countries and internationally….”

“This work allows the reader to quickly gain an in-depth understanding of the Hong Kong legal context for mediation by commenting on the Mediation Ordinance, the way it has emerged from its traditional Chinese roots and how mediation practice [should now] be conducted…”

Danny McFadden LLM, FCIArbMediator, ArbitratorManaging DirectorCEDER (Centre for Effective Dispute Resolution) Asia Pacific

The enactment of the Mediation Ordinance in Hong Kong now cements its reputation as an international and regional dispute resolution centre. The two primary purposes of the newly enacted Ordinance are: (i) to promote and encourage mediation for the resolution of disputes in Hong Kong; and (ii) to put the confidentiality of mediation communications on a statutory footing.

This publication provides both a historical background and practical approach to the application of the mediation process here in Hong Kong. Both the courts and Government strongly advise that parties first participate in the mediation process before a matter is set down for trial. The Court has certainly given its stamp of approval for mediation as the suitable and preferred alternate dispute resolution process. In the landmark case of iRiver Hong Kong Ltd v Thakral Corp (HK) Ltd [2008] 4 HKLRD 1000, the Court stated that the legal profession ‘must acknowledge mediation’s value and should routinely consider whether their clients’ disputes can be resolved through mediation.’ A skilled mediator can see and provide solutions beyond the scope of what is provided by lawyers and the court. This rebuke was prompted by the fact that in this case, the damages were just over $1 million BUT the legal cost incurred were $4.7 million.

This publication will prove an invaluable resource to all those interested and involved with this new form of alternate dispute resolution whole-heartedly endorsed by both the courts and Government.

Book review essay


1 Wang Guiguo & Yang Fan (2013, CCH Hong Kong/Wolters Kluwer), IsBn 978-988-12216-0-5, xlv + 559 pp, casebound.

2 Claire Wilson (2013, sweet & Maxwell Asia/thomson Reuters). IsBn 978-, xxv + 444 pp, soft cover.

3 only 11 us states, together with Washington dC, are listed as Model Law jurisdictions by virtue of having adopted the uniform Mediation Act, while only two Canadian Provinces – nova scotia and ontario – are so listed. no Asian jurisdiction has adopted the Model Law: see http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/2002Model_conciliation_status.html.

4 exceptionally in Asia, thailand and Japan were (in 1935 and 1951 respectively) early converts to court-annexed conciliation.

is the chapter on Australia which, whilst addressing the principal theme of impacts, limits discussion to family dispute resolution instead of surveying the far wider scope of mediation in that country. The author of this chapter has regrettably wasted an opportunity to depict mediation in Australia in a wider Asia-Pacific context. At the other end of the scale, China is accorded a far greater proportion of the book than any other jurisdiction. A lesser criticism concerns the omission of any mention of the Hong Kong Mediation Ordinance (Cap 620), which may have been the result of a long lead in period to publication, though the Hong Kong Civil Justice Reform and Practice Direction 31–Mediation are discussed in some detail.

The General Editors have cast their net far and wide in defining ‘Asia Pacific’ by including India, though curiously there is a suggestion in their Preface that Canada and the US are not part of the Asia-Pacific (if by this we mean the Pacific Rim rather than Pacific Asia). Austria, whilst not a part of Asia, is included for general comparison. Its inclusion appears odd, however, and there are other European jurisdictions that might have made better comparators. It should also be noted that Cambodia, Laos, Vietnam and Malaysia are not included in the book. Treatment of the first three of these jurisdictions would have made for some very interesting comparisons, not least with regard to the traditional approaches to non-commercial mediation and the impact of socialist law and administrative practice on mediation/conciliation.

These are, however, relatively minor criticisms of what is otherwise a laudable work that will contribute immeasurably to comparative knowledge of mediation and its impacts on legal systems and scholarship throughout a vast swathe of the globe.

Of an altogether different order is Mediation Ordinance: Commentary and Annotations, by Claire Wilson, the latest title in Sweet & Maxwell Asia’s Hong Kong Practice Series. The subject-matter is the Mediation Ordinance (Cap 620), which represents Hong Kong’s minimalist or ‘thus far and no further’ approach to legislating for mediation. The first objective of the Ordinance, expressed in s 3(a), is “to promote, encourage and facilitate the resolution of disputes by mediation”, an objective which is based in broad principle on s 3(1) of the Arbitration Ordinance (Cap 609). Whereas the objective of the latter Ordinance is underpinned by a near comprehensive set of provisions, however, that of the former is underpinned by provisions that are few in number and limited in nature and subject-matter, being concerned primarily with rules as to confidentiality, admissibility and disclosure of mediation communications, pursuant to the second objective of the

Ordinance set out in s 3(b). The Mediation Ordinance therefore stands in great contrast to more comprehensive mediation legislation overseas, such as Malaysia’s Arbitration Act 2012.

Claire Wilson’s book is a detailed and carefully written section-by-section commentary on the Mediation Ordinance, discussing each provision by reference to its legislative origins and history, its aim(s), the words and phrases employed and their interpretation, the duties of lawyers and cross-references to related provisions. These are supported by extensive references to case law (primarily Hong Kong and English) and to opinions expressed on the Mediation Bill by the Administration in papers to the Legislative Council.

As one might expect, the book does not discuss the Ordinance in isolation from the system of which it forms part but discusses the history of mediation in China and Hong Kong and development of the mediation process and procedure in the context of Hong Kong, thus enabling the reader to see precisely how the Ordinance fits in. The author also provides illustrations of the mediation services and structures that have been provided in Hong Kong by dispute resolution and other institutions and by trade bodies, through court-adjunct mediation under the CJR and Practice Direction 31–Mediation and through court- and tribunal- related mediation under other Practice Directions.

Well over half of the book comprises appendices which set out the texts of the Ordinance, together with other instruments and materials, including all Practice Directions relevant to mediation, the Hong Kong Mediation Code, prescribed forms and the recommendations of the Secretary for Justice’s Working Group on Mediation (February 2010). In the context of this book, what this reviewer would normally regard as ‘filler’ in fact provides the reader with a single, accessible and comprehensive information resource on the Ordinance and its place in the spectrum of mediation post-CJR.

This book is an essential resource for all Hong Kong mediators, litigators and mediation practitioners. adr

NEWS

50

Effective date of amendments to Hong Kong's Arbitration Ordinance and subsidiary legislation

Opening of Palestine – Israel Arbitration Centre

Amendments made to the Arbitration Ordinance (Cap 609) pursuant

to the Arbitration (Amendment) Ordinance (No 7 of 2013) were reported in the July and October 2013 issues of Asian DR.1 Many, but not all, of the amendments came into force on 2 December 2013. The amendments that have been given effect are those relating to enforcement of emergency relief2 and various provisions relating to domestic and non-Convention foreign awards,3 Convention awards4 and Mainland

On 18 November 2013, the ICC Secretary-General and the

President and Secretary-General of the ICC International Court of Arbitration joined Israeli and Palestinian business leaders in Jerusalem to inaugurate the Jerusalem Arbitration Centre (JAC) and sign a memorandum of engagement. JAC is a joint venture between ICC Israel and ICC Palestine and is the first measure since the Oslo I Accord of 1993 to implement an internationally agreed mechanism for resolving commercial disputes between Israeli and Palestinian parties. The JAC will apply arbitration rules based upon the ICC Rules of Arbitration (2012 Edn).

awards.5 The provisions of a new Part 10, Division 4 of the Ordinance as to the enforcement of Macau awards in Hong Kong6 have not yet been given effect, however. For the time being, therefore, Macanese awards remain enforceable under Part 10, Division 1 of the Ordinance.

The Arbitration (Appointment of Arbitrators and Mediators and Decision on Number of Arbitrators) Rules (Cap 609C) also took effect on 2 December 2013 and replace the Arbitration (Appointment of

Arbitrators and Umpires) Rules (Cap 609B).

Both the updated Ordinance and the new appointment rules may now be viewed and downloaded in PDF format at the BLIS website.7 adr

1 Hong Kong Arbitration (Amendment) Bill [2013] Asian dR 107; Changes to Hong Kong arbitration legislation [2013] Asian dR 154.

2 Part 3A (ss 22A and 22B) of the principal ordinance, together with a consequential amendment to s 5(2) regarding the application of the ordinance.

3 Ibid, s 86(1)(a), (3) & (4).4 Ibid, ss 87(1) & (2), and 89(1), (2)(a), (4)

& (5).5 Ibid, ss 92(2), 93(2) and 95(1), (2)(a) &

(4).6 see Hong Kong Arbitration (Amendment)

Bill (note 1 above) and Reciprocal enforcement of awards between Hong Kong and Macau [2013] Asian dR 107.

7 http://www.legislation.gov.hk/eng/home.htm.

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NEWS


International institutional anniversariesin the adoption of the New York Convention, the most important multilateral treaty on international arbitration. The Court has also developed resolution mechanisms specifically conceived for business disputes in an international context.”2 These mechanisms have, over the years been expanded beyond arbitration to include such processes as expertise, mediation and dispute boards.

Permanent Court of Arbitration celebratescentenary of the Peace PalaceA seminar organised by the Permanent Court of Arbitration (PCA) and themed From Gunboat Diplomacy to Investor-State Arbitration was held on 11 October 2013 to celebrate the centenary of the

opening of the Peace Palace in The Hague. The Peace Palace was built to house the PCA, which had been established in 1899 under the Hague Convention on the Pacific Settlement of International Disputes of that year. Moderated by Judge Peter Tomka, President of the International Court of Justice (to which PCA members elect ICJ judges), the keynote address was delivered by the President of ICCA, Mr Jan Paulsson. adr

1 ICC, The merchants of peace – http://www.iccwbo.org/about-icc/history.

2 ICC, Arbitration – http://www.iccwbo.org/products-and-services/arbitration-and-adr/arbitration.

90th anniversary of the ICC InternationalCourt of Arbitration2013 marks the 90th anniversary of the establishment by the ICC of its arbitral arm, the International Court of Arbitration (the Court), four years after the foundation of the ICC in 1919.1 Instrumental in the Court’s foundation was the inaugural President of the ICC, Etienne Clémentel, a former French Minister of Commerce. Known originally as the Court of Arbitration (the appellation ‘International’ having been added to the Court’s name in 1989 by a decision of Council of the ICC), the Court was established in 1923 to “pioneer … international commercial arbitration as it is known today, initiating and leading the movement that culminated

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NEWS

52

New ICC Mediation Rules

The ICC unveiled its new Mediation Rules (the Rules) at a global launch

conference held in Paris on 4 December 2013.1 The Rules, which took effect on 1 January 2014, replace the ICC’s ADR Rules (2001), reflecting the reality that mediation was the process chosen in 90% of cases under those rules. The Rules,2 and accompanying Mediation Guidance Notes,3 a practical guide for users, were drafted by a Task Force for the Revision of the ICC ADR Rules (which comprised 90 ADR specialists – mediators, commercial mediation users, counsel and other dispute resolution experts – from 29 countries), and approved by the ICC Commission on

Arbitration and ADR. Unless the parties otherwise agree, cases filed for mediation with the ICC will be administered by the ICC International Centre for ADR, but with enhanced responsibilities. The Rules and Guidance notes are currently available in eight languages, including English, French and Chinese. adr

1 ICC press release, New ICC Mediation Rules unveiled at global launch event – http://www.iccwbo.org/news/Articles/2013/new-ICC-Mediation-Rules-unveiled-at-global-launch-event.

2 http://www.iccwbo.org/products-and-services/arbitration-and-adr/mediation/rules.

3 http://www.iccwbo.org/Products-and-services/Arbitration-and-AdR/Mediation/Rules/Mediation-Guidance-notes.

International institutional appointmentsICCMs Sylvia Tee, formerly of Singapore law firm Allen & Gledhill, was appointed by the ICC with effect from 12 November 2013 as Regional Director for Arbitration and ADR for Asia. Based in Singapore, Ms Tee will be responsible for promoting ICC arbitration and other dispute resolution services throughout Asia, as well as co-ordinating the activities of the ICC Young Arbitrators Forum across the region.

ICCAMr Albert Jan van den Berg, founding partner of Belgian law firm Hanotiau & van den Berg of Brussels and a Professor of Law at Erasmus University, Rotterdam, was on 1 November 2013 elected as the next President of the International Council for Commercial Arbitration (ICCA). Mr van den Berg is a renowned member of the international arbitration community, principally as author of his seminal text, The New York Convention of 1958, and as General Editor of the Yearbook Commercial Arbitration. His term of office will commence at the ICCA Congress in Miami (6-9 April 2014), on the retirement from office of Mr Jan Paulsson, who has held office since 2010. adr

NEWS


The second Hong Kong Arbitration Week, held on 21-24 October 2013,

was again an unequivocal success. The legal and commercial communities generously sponsored this event, which gathered over 350 arbitration practitioners, officials and scholars to engage in a lively and vibrant series of events on the development of arbitration across Asia.

Arbitrating in the BRICS: Developments& Challenges; What Role for the PCA;and ICC-HK/HK45 Evening Seminar & CocktailEvents on Monday, the first day, situated Asian arbitration in the larger global context. Meaningful dialogue took place on arbitration developments in Brazil, Russia, India, China and South Africa (BRICS), organised by the ICC-YAF (Young Arbitrators Forum) in the morning. Attention then turned to the role of the Permanent Court of Arbitration (PCA) in today’s world, with Deputy Secretary-General Brooks Daly surveying the background, recent cases and future trajectory of the world’s oldest dispute resolution centre. The first day concluded with the opening seminar and cocktail organised by ICC-HK and HK-45. Secretary for Justice Rimsky Yuen SC JP offered a policy perspective on the future of international arbitration culture in Asia and vowed that the Hong Kong Government would spare no effort to keep Hong Kong’s arbitral infrastructure up to date.1

Arbitration in Mainland China; HK Arbitration Charity BallOn Tuesday, the sold out seminar organised

Hong Kong Arbitration Week 2013

by the China International Economic and Trade Arbitration Commission (CIETAC) brought together eminent China experts to give practical recommendations on how to manage and conduct arbitration proceedings in China and to provide an overview of the Chinese judiciary’s approach towards arbitration and maritime arbitration. In the evening, over 300 delegates gathered together for the 2nd annual HK Arbitration Charity Ball and raised a total of HK$850,000. This year’s main beneficiary was the Society for Community Organization (SoCO), a local charity which provides care for up to 200,000 people who live in subsidised housing in Hong Kong. The other beneficiary was the Vis East Moot, which will receive approximately 25% of this year’s proceeds for work with developing countries to improve arbitral programmes. ADR in Asia ConferenceThe annual ADR in Asia Conference brought over 240 esteemed local and international practitioners together to witness HKIAC’s new Administered Arbitration Rules in practice. In a mock arbitration, Hong Kong’s first Emergency Arbitrator was appointed, and a tribunal considered whether to join an additional party to the arbitration and whether or not to consolidate multiple arbitrations – all powers enabled by the new HKIAC Rules, which took effect on 1 November 2013. The conference also discussed two particularly timely issues facing the arbitration community today: the regulation of ethics and third party funding.

3rd Annual GAR Live, AsiaThe Global Arbitration Review held its third annual GAR Live Asia to tie together the events of the week with a review of regional developments in China, Hong Kong, South Korea, Japan, India, and Southeast Asia as well as its first “yum cha” interview with two celebrated international arbitrators. The GAR event concluded with an Oxford Union-style debate between eminent practitioners. 2014 HK Arbitration WeekThe Hong Kong International Arbitration Centre (HKIAC) has established the Hong Kong Arbitration Week to celebrate the triumphs of and challenges to international arbitration while actively promoting the development of the practice in Asia. Through conferences, seminars and evening receptions, Hong Kong Arbitration Week seeks to provide a multitude of fora in which users and practitioners can come together to exchange ideas on how best to manage this increased demand for arbitration services. Save the dates for the 2014 HK Arbitration Week: 14–17 October 2014. adr

1 Editorial note: see The Future Development of Arbitration in Asia: The Policy Perspective – http://www.doj.gov.hk/eng/public/pdf/2013/sj20131021e1.pdf.

Contributors to thismonth’s News section:

Robert Morgankaren tan

EvEnts

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15 January 2014

The Future of Financial Transactions in Asia – Opportunities and ChallengesVenue: Hong KongOrganiser: HKIACWebsite: http://hkiac.org/index.php/en/2014

15 – 17 January

ICC Institute Masterclass for Arbitrators, SingaporeVenue: SingaporeOrganiser: ICC InstituteWebsite: http://www.iccwbo.org/Training-and-Events/All-events/Events/2014/ICC-Institute-Masterclass-for-Arbitrators,-Singapore

17 – 18 January

2014 ADNDRC Conference - Rethinking Domain Name Dispute Resolution in the Era of New gTLDsVenue: Kuala Lumpur, Malaysia Organiser: KLRCAWebsite: http://klrca.org.my/scripts/list-posting.asp?recordid=458

13 February

The Allocation of Costs in International ArbitrationVenue: Paris, FranceOrganisers: ICCWebsite: http://www.iccwbo.org/Training-and-Events/All-events/Events/2014/The-Allocation-of-Costs-in-International-Arbitration/?tab=programme

13 – 14 February

17th Annual IBA International Arbitration DayVenue: Paris, France Organiser: IBAWebsite: globalarbitrationreview.com/events/1652/17th-annual-iba-international-arbitration-day

28 February – 1 March

Vienna Arbitration Days 2014Venue: Vienna, AustriaOrganiser: Austrian Yearbook on International Arbitration/ICC – Austria/Vienna International Arbitration Centre/YAAP/Austrian Arbitration AssociationWebsite: http://www.viennaarbitrationdays.at

10 – 12 March

International Arbitration in the Middle East and North Africa (MENA)Venue: Dubai, UAEOrganiser: ICCWebsite: http://www.iccwbo.org/Training-and-Events/All-events/Events/2014/International-Arbitration-in-the-Middle-East-and-North-Africa-%28MENA%29/?tab=programme

26 – 28 March

10th Anniversary APRAG ConferenceVenue: Melbourne, AustraliaOrganiser: Australian Centre for International Commercial Arbitration (ACICA)Website: http://apragmelbourne2014.org

31 March–6 april 2014

11th Annual Willem C Vis (East) International Commercial Arbitration MootVenue: Hong KongWebsite: http://www.cisgmoot.org/index.html

6 – 9 april

ICCA Miami 2014: ‘Legitimacy: Myths, Realities, Challenges’Venue: Miami, USA Organiser: ICCAWebsite: http://www.iccamiami2014.com/index.php

12 – 17 april 2014

21st Annual Willem C Vis International Commercial Arbitration MootVenue: ViennaWebsite: http://cisgw3.law.pace.edu/cisg/moot/mootlist.html#top

MSc/PgD in Construction Law and Dispute Resolution Programme Code: 04001 (Mixed-mode programme)

Stream Code : LFM for MSc (Full-time) ; LFP for PgD (Full-time) ; LPM for MSc (Part-time) ; LPP for PgD (Part-time)

Features

Mixed mode gives students a choice of enrolling full-time or part-time Offered by the Faculty of Construction and Environment Supported by visiting practitioners, including Lawyers, Arbitrators, Mediators, experts from China & senior construction professionals *

Entry Requirements

Bachelor’s degree in a construction-related discipline or equivalent (including recognized professional qualifications) plus relevant work experience (preferably at least 2 years) ; orQualified lawyer.

Professional recognition

The PgD/MSc programme has full accreditation for membership (AHKIArb) from the Hong Kong Institute of Arbitrators Those students who opt to complete the mediation workshop of the programme will be exempted by various professional institutions in Hong Kong and overseas as achievement of approved mediation course leading to membership (subject to assessment) The MSc programme is accredited by the Royal Institution of Chartered Surveyors [RICS] as meeting their academic requirements

Programme Structure

Information related to the programme structure is available from the website (http://www.bre.polyu.edu.hk/frameset/frameset_course.html) or from the Programme Leader, Prof. Edwin H. W. CHAN (tel: 27665800, email: [email protected]).

Enquiries and Application Online application website : http://www.polyu.edu.hk/study

Enquiry Tel.: 3400 3819 Connie Yap (Dept. of BRE) or 2333 0600 (Academic Secretariat)

Application deadline : 28 February 2014

Some of our subjects are approved for Continuing Education Fund

Programme Aims

Integrate the necessary knowledge in construction management and law for the needs of construction professionals Cut through disciplinary barriers by integrating the various skills and strengths of the different professions to produce a specialized contribution to the construction industryApply theory to practice by providing training on key dispute resolution skills offered by approved trainers Attract construction graduates and lawyers who wish to specialize in construction law and alternative dispute resolution

* Scholarship from Industry : A scholarship is provided by Davis Langdon & Seah to recognize the student with the highest mark in the subject of Construction Law. In addition, there is a Prize donated by the Society of Construction Hong Kong for the outstanding graduating student (Details to be decided).

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ADR Journal 210x280v4B_OP.pdf 1 17/12/2013 15:31:12

Master of Mediation and Conflict ResolutionWorld class. Be part of it.International faculty and student cohort, cross-cultural, flexible delivery, intensive semestersCommences June 2014Programme EnquiriesWebsite: http://www.hksyu.edu/lawbus/iicer/index.htmlTel.: 2806 7337 (Ms Connie Yu)Email: [email protected] to the Programme will only be accepted upon confirmation of accreditation by HKCAAVQ and the approval of the CE in Council

Hong Kong Shue Yan UniversityDepartment of Law and Business

http://www.hksyu.edu/lawbus/iicer

Master of Mediation and Conflict Resolution

adr jan 2014 text combine

Documents

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