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class="locatorlarge">Knowledge</font><!--3 --></font></td> </tr> <tr> <td width="165" valign="top">&nbsp;</td> <td valign="top" width="500">&nbsp;</td> </tr> <tr> <td width="165" valign="top"><img src="../images/cmn/spacer.gif" width="165" height="1"></td> <td width="500" align="left"> <table width="350" border="0" cellspacing="0" cellpadding="1"> <tr> <td width="101"><b><font face="verdana,helvetica,arial,sans-serif" size="2" class="knowledgeheading1">Author:</font></b></td> <td width="245"><font face="verdana,helvetica,arial,sans-serif" size="2" class="knowledgecontent1"> <a href="/eng/ourpeople/KwokKitCheung.htm"><font color="#0000CC">Cheung Kwok Kit</font></a> </font></td> </tr> <tr> <td width="101"><b><font face="verdana,helvetica,arial,sans-serif" size="2" class="knowledgeheading1">Service Area:</font></b></td> <td width="245"><font face="verdana,helvetica,arial,sans-serif" size="2" class="knowledgecontent1"> <a href="/eng/ourservices/services_4.htm"><font color="#0000CC">Construction & Arbitration</font></a> </font></td> </tr> <tr> <td width="101"><b><font face="verdana,helvetica,arial,sans-serif" size="2" class="knowledgeheading1">Date:</font></b></td> <td width="245"><font face="verdana,helvetica,arial,sans-serif" size="2" class="knowledgecontent1"> April 2007 </font></td> </tr> <tr> <td width="101"><b><font face="verdana,helvetica,arial,sans-serif" size="2" class="knowledgeheading1">Country:</font></b></td> <td width="245"><font face="verdana,helvetica,arial,sans-serif" size="2" class="knowledgecontent1"> <a href="/eng/aboutus/overview.htm"><font color="#0000CC">Hong Kong</font></a> </font></td> </tr> </table> </td> </tr> <tr> <td width="140" background="/eng/images/knowledge/symbol.gif"></td> <td width="500" valign="top"> <hr> <table width="500" border="0" cellspacing="0" cellpadding="0"> <tr> <td>&nbsp;</td> </tr> <tr> <td> <TABLE cellPadding=2 width=500 border=0> <TBODY> <TR> <TD> <P align=left><B><A name=contents><U><FONT face=Verdana color=#0000ff size=4>A Simple Guide to Arbitration in Hong Kong and Mainland China</FONT></U></A></B></P> <P align=left><B><FONT face=Verdana color=#000000 size=2>SUMMARY OF CONTENTS</FONT></B></P> <DIV align=left> <TABLE height=1 cellPadding=2 width=500 border=0> <TBODY> <TR> <TD vAlign=top align=left width=517 height=18> <P><FONT face=Verdana color=#008080 size=2><B>HONG KONG</B></FONT></P></TD></TR> <TR> <TD vAlign=top align=left width=523 height=90> <P><FONT face=Verdana size=2><B><a href="#intro(A)">Introduction</a><BR><a href="#LoA?">Litigation or Arbitration?</a><BR><a href="#CA">Commencement of Arbitration</a><BR><a href="#PFA(A)">Procedures for Arbitration</a><BR><a href="#EAA(A)">Enforcement of the Arbitration Award</a><br> <a href="#EMC">Enforcement in Mainland China</a><BR><a href="#CAE(A)">Costs and Expenses</a><BR><a href="#ADR">Alternative Dispute Resolution</a><BR><a href="#MHKAIAC">Model Hong Kong and International Arbitration Clauses</a></B></FONT></P></TD> </TR> <TR> <TD vAlign=top align=left width=517 height=18> <P><FONT face=Verdana color=#008080 size=2><B>MAINLAND CHINA</B></FONT></P></TD></TR> <TR> <TD vAlign=top align=left width=523 height=108> <P><FONT face=Verdana size=2><B><a href="#intro(B)">Introduction</a><BR><a href="#AA">The Arbitration Agreement</a><BR><a href="#CIETAC">CIETAC</a><BR><a href="#AFA">Application for Arbitration</a><BR><a href="#AOA">Appointment of Arbitrators</a><BR><a href="#PFA(B)">Procedures for Arbitration</a><br> <a href="#PFDA">Procedures for Domestic Arbitration</a><BR><a href="#EAA(B)">Enforcement of the Arbitration Award</a><BR><a href="#EHK">Enforcement in Hong Kong</a><BR><a href="#CAE(B)">Costs and Expenses</a><BR><a href="#MCAC">Model CIETAC Arbitration Clauses</a></B></FONT></P></TD> </TR> <TR> <TD vAlign=top align=left width=523 height=28></TD> </TR></TBODY></TABLE></DIV> <P><SPAN lang=EN-US style="mso-bidi-font-size: 15.0pt"><B><FONT face=Verdana color=#008080 size=2><A name=intro(A)>HONG KONG</A></FONT></B></SPAN></P> <P><FONT face=Verdana size=2><SPAN lang=EN-US style="mso-bidi-font-size: 13.0pt"><B><a name="INTRODUCTION">INTRODUCTION</a> </B></SPAN></FONT></P> <P align=justify><SPAN lang=EN-US><font face="Verdana" size="2">Arbitration is a method for resolving disputes between parties in private as an alternative to litigation in the courts. It may be agreed by the parties before or after the dispute arises. The arbitration agreement is usually incorporated as part of the contract from which the dispute arose. However, even when there is no arbitration clause in the contract in dispute, an arbitration agreement can also be made after a dispute has arisen if the parties prefer not to go to Court. If there is no arbitration agreement, mutual agreement is necessary, as one cannot force another party to &quot;arbitrate&quot; a dispute if there is no arbitration clause.</font></SPAN></P> <P align=right><SPAN lang=EN-GB><a href="#contents"><FONT face=Verdana size=1>Back to Top</FONT></a></SPAN></P> <P align=left><B><FONT face=Verdana size=2><SPAN lang=EN-US style="mso-bidi-font-size: 13.0pt"><a name="LoA?"><SPAN style="mso-bidi-font-size: 13.0pt">LITIGATION OR ARBITRATION?</SPAN></a></SPAN></FONT></B></P> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">Parties to a contract usually refer their disputes to arbitration simply because there is an arbitration clause in the contract.</font></SPAN></p> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">In the context of private sector building contracts, the arbitration agreement is commonly found in clause 35 of the standard form of building contract jointly drawn by the Hong Kong Institute of Architects, the Royal Institution of Chartered Surveyors (Hong Kong Branch) and the Society of Builders, Hong Kong (commonly known as the &quot;HKIA&quot; or &quot;RICS&quot; form). For subcontracts, the arbitration agreement is found in clause 22 of the standard form of subcontract for use where the subcontractor is nominated pursuant to the HKIA or RICS forms (commonly known as &quot;the Green Form&quot;).&nbsp;</font></SPAN></p> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">If parties have agreed to go to arbitration, with limited exceptions stated below, they cannot repudiate the agreement by going to Court unless both parties agree. Under the Arbitration Ordinance, if one party to an arbitration agreement commences legal proceedings in any Court against the other party, the latter may insist on arbitration and apply to that Court to stay the proceedings commenced.&nbsp;<br> The Hong Kong Court will only refuse to stay the proceedings in one of the following situations:</font></SPAN></p> <ul> <li> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">The defendant has submitted its first statement on the substance of the dispute (acknowledgement of service and application for extension of time for filing the defence not included).&nbsp;</font></SPAN> </li> <li> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">The arbitration agreement is ineffective, e.g. it is not in writing, null and void, inoperative or incapable of being performed.&nbsp;</font></SPAN> </li> </ul> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">Before the Arbitration (Amendment) Ordinance in 1997, plaintiffs sometimes argued that the defendant had no genuine defence to the plaintiff s claims as a ground to ask the court not to stay the proceedings to arbitration. In the context of construction disputes, plaintiff subcontractors sometimes argued that there was no genuine defence to the obligation of the main contractor to pay the subcontractor, the main contractor having received the amount due under an architect s certificate from the employer. Therefore the subcontractor would contend that the Court proceedings commenced were proper. The defendant would however insist that there was a dispute between the parties which had to be resolved by arbitration. In such circumstances, the plaintiff subcontractor would usually cross-apply for summary judgment to be dealt with by the Court at the same time as the defendant s application for stay of proceedings. The application for summary judgment, if successful, would enable the plaintiff to be paid without the need to wait for a full trial which might not take place for many months.</font></SPAN></p> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">However, after the Arbitration (Amendment) Ordinance came into operation, this argument is bound to fail, since the Court now no longer has the discretion to refuse a stay when there is an arbitration agreement. Some subcontractors believe that they might still have certain tactical advantage in suing the main contractor despite the arbitration agreement. Subcontractors who wish to litigate as opposed to arbitration in a similar situation should seek legal advice first before making that decision.&nbsp;</font></SPAN></p> <P align=right><SPAN lang=EN-GB><a href="#contents"><FONT face=Verdana size=1>Back to Top</FONT></a></SPAN></P> <P align=justify><FONT face=Verdana size=2><B><A name=CA><SPAN lang=EN-US style="mso-bidi-font-size: 13.0pt">COMMENCEMENT OF ARBITRATION&nbsp;</SPAN></A></B></FONT></P> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">The procedures to be followed to commence arbitration are frequently embodied in the arbitration agreement. Usually a written notice to the other party specifying the general nature of the dispute is sufficient. If the rules of arbitration have been chosen in the arbitration agreement, they must be followed. Unlike litigation, no special procedure is necessary for overseas service of the notice of arbitration on a foreign party. Simplicity and informality are two distinct advantages of using arbitration as a means to resolve disputes. It can cost considerable money and time to effect service of a Writ overseas. For arbitration proceedings, it is sufficient to fax the notice unless the arbitration agreement provides otherwise.&nbsp;</font></SPAN></p> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">For example, in construction disputes, the Green Form provides that where there is a dispute arising under the subcontract between the main contractor and the subcontractor, the following procedures shall be undertaken:</font></SPAN></p> <ul> <li> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">The party who wishes to refer the dispute to arbitration should give a written notice to the other party that the dispute shall be referred to arbitration in accordance with clause 22 of the subcontract. The notice of the dispute will become the terms of reference of the arbitration. Care must be taken to make sure that the dispute is described in a sufficiently wide manner in the notice to enable the arbitrator to deal with all issues in dispute between the parties.&nbsp;</font></SPAN></li> <li> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">The Claimant should also propose his own choice of arbitrator to the Respondent for his agreement either in the notice of arbitration or by a separate notice to concur on the appointment of arbitrator.&nbsp;</font></SPAN></li> <li> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">The Respondent may counter-propose his own arbitrator. If the parties fail to reach an agreement on who to appoint or the Respondent fails to respond to the notice to concur in the appointment of arbitrator, the Claimant may request the appointing authority (i.e. the President or Vice-President for the time being of The Hong Kong Institute of Architects and the President or Vice-President for the time being of the Hong Kong Institute of Surveyors) to appoint an arbitrator for the parties. In the outdated edition of the Green Form, the appointing authority is named as the RICS (Hong Kong Branch), which was dissolved in 1997. In such case, it is submitted that the application for appointment of arbitrator should be made to the Hong Kong International Arbitration Centre (HKIAC) pursuant to section 12 of the Arbitration Ordinance. In our experience, the appointment may take one to two months.&nbsp;</font></SPAN></li> </ul> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">Unless the required qualifications and/or experience of the arbitrator are specified in the arbitration agreement, it is possible to appoint anyone (i.e. not necessarily a lawyer) as arbitrator, though a person who has training and experience as an arbitrator or experience in the issues in dispute is usually preferred. If an appointment is made jointly by the Hong Kong Institute of Architects and the Hong Kong Institute of Surveyors, a surveyor who has the appropriate experience and qualifications will usually be appointed as the arbitrator. One of our partners is also on the list of arbitrators of the Hong Kong Institute of Surveyors.&nbsp;</font></SPAN></p> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">The number of arbitrators (normally one or three) is decided by such matters as the arbitration agreement, whether it is a domestic or international arbitration, and the procedural rules adopted.</font></SPAN></p> <P align=right><SPAN lang=EN-GB><a href="#contents"><FONT face=Verdana size=1>Back to Top</FONT></a></SPAN></P> <P align=justify><FONT face=Verdana size=2><SPAN lang=EN-US style="mso-bidi-font-size: 13.0pt"><B><A name=PFA(A)><SPAN style="mso-bidi-font-size: 13.0pt">PROCEDURES FOR ARBITRATION</SPAN></A></B></SPAN></FONT></P> <P align=justify><SPAN lang=EN-US><FONT face=Verdana size=2>There are no fixed procedures for the conduct of arbitration proceedings. Procedural rules should be informal. The arbitrator generally has control over the procedures. If the arbitration agreement sets out the applicable rules, the arbitrator must follow them. If none have been agreed, he may propose a well recognised set of rules to be followed by the parties. For domestic arbitrations, we generally recommend that parties adopt the Domestic Arbitration Rules of the HKIAC.&nbsp;</FONT></SPAN></P> <P align=justify><SPAN lang=EN-US><FONT face=Verdana size=2>There is also no particular venue prescribed for the hearing of the arbitration. The parties can agree to meet at any convenient place, such as the office of the lawyers for either party. The HKIAC (at 38/F, Two Exchange Square, 8 Connaught Place, Hong Kong) also provides good facilities for arbitration hearings at reasonable charges.&nbsp;</FONT></SPAN></P> <P align=justify><SPAN lang=EN-US><FONT face=Verdana size=2>The usual procedures are as follows:&nbsp;</FONT></SPAN></P> <ul> <li> <p align="justify"><SPAN lang=EN-US><FONT face=Verdana size=2>The Claimant will ask the arbitrator to hold a preliminary meeting with the parties. During the preliminary meeting, the arbitrator will decide the rules to be used for the arbitration (if none have been agreed), his fee structure (if this has not already been agreed) and most importantly, the timetable for service of pleadings, exchange of lists of documents and exchange of witness statements.&nbsp;</FONT></SPAN></li> <li> <p align="justify"><SPAN lang=EN-US><FONT face=Verdana size=2>The preparation of pleadings is similar to that in court, except that the style can be less formal and in many cases, supporting documents will be annexed to the pleadings to assist each party to understand the other s case. That will also save considerable time by dispensing with the need for formal discovery.&nbsp;</FONT></SPAN></li> <li> <p align="justify"><SPAN lang=EN-US><FONT face=Verdana size=2>The exchange of lists of documents can be limited to certain types of documents or completely dispensed with, especially where the parties have annexed all supporting documents to their pleadings. We normally recommend dispensing with the exercise of exchanging lists of documents to reduce the time and cost of resolving the dispute.&nbsp;</FONT></SPAN></li> <li> <p align="justify"><SPAN lang=EN-US><FONT face=Verdana size=2>Either party may ask the arbitrator to fix a date for the main hearing at any time. It may be fixed at the directions hearing before the arbitrator. Usually, the main hearing will be fixed after the completion of documents submission or whenever the parties are ready for it. It is also possible to agree on a  documents-only arbitration for which no hearing is required. This may be appropriate where only the law, rather than the facts, is in dispute.&nbsp;</FONT></SPAN></li> <li> <p align="justify"><SPAN lang=EN-US><FONT face=Verdana size=2>It is usual in most arbitrations for evidence (both factual and expert) to be exchanged in advance of the hearing. The arbitrator may direct that the experts meet to see if there is common ground, or if facts can be agreed. Opening submissions of the parties may also be exchanged in advance of the hearing. These measures can frequently reduce the time required in the actual arbitration hearing with possible cost savings.&nbsp;</FONT></SPAN></li> <li> <p align="justify"><SPAN lang=EN-US><FONT face=Verdana size=2>After considering the evidence and the parties submissions, the arbitrator will make an award, which may be provided with or without reasons, depending on the prior request of the parties. The arbitrator will also deal with the question of the costs of the arbitration after submissions from both parties. Typically the losing party will have to bear the costs reasonably incurred by the winning party and the arbitrator s fees. The arbitrator will take into account whether the losing party has made any offer of settlement.&nbsp;</FONT></SPAN></li> <li> <p align="justify"><SPAN lang=EN-US><FONT face=Verdana size=2>The arbitrator s award is final and binding, subject to a limited right of appeal to the Court under section 23 of the Arbitration Ordinance for domestic arbitration. Successful appeal of an arbitrator s award is rare. The legal costs awarded by the arbitrator are subject to taxation either by the arbitrator or the Court. Taxation is a process used in litigation by which the Court assesses a fair amount of legal costs to be paid by the losing party. As a rule of thumb, the  taxed costs will be about two-thirds of the actual costs spent by the winning party in the arbitration.&nbsp;</FONT></SPAN></li> </ul> <p align="justify"><SPAN lang=EN-US><FONT face=Verdana size=2>The parties will however have to note that unlike Court proceedings, where the Court does not charge the parties for the service of the judges or the provision of the courtroom, arbitrators require the parties to pay, usually on an hourly basis. Leading arbitrators in Hong Kong can charge HK$5,000 per hour or more and the average that we have seen is between HK$3,000 and HK$4,000. Until an award on costs, both parties normally bear half of the interim bills for the arbitrator s fees.</FONT></SPAN></p> <P align=right><SPAN lang=EN-GB><a href="#contents"><FONT face=Verdana size=1>Back to Top</FONT></a></SPAN></P> <P align=justify><FONT face=Verdana size=2><SPAN lang=EN-US style="mso-bidi-font-size: 13.0pt"><B><A name=EAA(A)><SPAN style="mso-bidi-font-size: 13.0pt">ENFORCEMENT OF THE ARBITRATION AWARD</SPAN></A></B></SPAN></FONT></P> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">Section 2GG of the Arbitration Ordinance states that an arbitration award may, except in very limited circumstances, be enforced in the same manner as a judgment of the High Court.</font></SPAN></p> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">As Hong Kong is a party to the &quot;1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards&quot; by virtue of China's accession to that treaty, an award obtained in Hong Kong is enforceable in other countries that are signatories to the New York Convention.&nbsp;</font></SPAN></p> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">After 14 June 2000, even if the award is given in a country which is not a party to the New York Convention, the winning party may apply to the Hong Kong Court for enforcement pursuant to section 2GG. However, it is not clear whether such award will be dealt with in the same way as a New York Convention Award.</font></SPAN></p> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">If the losing party has no assets in Hong Kong but does in another jurisdiction, an arbitration award may be more valuable than a judgment of the Court if the foreign state where the assets of the losing party are situated has no reciprocal judgment enforcement arrangement with Hong Kong but is a signatory to the New York Convention. Notably such states include the United Kingdom, the United States of America and Japan, the three major trading partners of Hong Kong. If one happens to be doing business with entities in these three countries, arbitration as a means to resolve disputes that may arise can be chosen rather than going to Court in Hong Kong.</font></SPAN></p> <P align=right><SPAN lang=EN-GB><a href="#contents"><FONT face=Verdana size=1>Back to Top</FONT></a></SPAN></P> <P align=justify><FONT face=Verdana size=2><SPAN lang=EN-US style="mso-bidi-font-size: 13.0pt"><B><A name=EMC><SPAN style="mso-bidi-font-size: 13.0pt">ENFORCEMENT IN MAINLAND CHINA</SPAN></A></B></SPAN></FONT></P> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">Since 1 July 1997 when sovereignty of Hong Kong returned to China, Hong Kong awards have become domestic awards for the purposes of enforcement within China. We understand that applications for enforcement of Hong Kong awards in Mainland China had been held up pending the signing of an agreement for mutual recognition of arbitration awards between Hong Kong and Mainland China (the Agreement) and making of the appropriate changes to the arbitration law to reflect the contents of the Agreement.&nbsp;</font></SPAN></p> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">The Agreement was signed on 21 June 1999 and reflects the provisions in the New York Convention in addition to restoring enforcement procedures in place prior to the handover.</font></SPAN></p> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">Pursuant to the Agreement, there are only limited grounds for refusing to enforce a Hong Kong award, which mirror the grounds for refusal in the New York Convention. The most controversial of these is that an award will not be enforced if the enforcement would be contrary to the public policy or interests of China. If the losing party is a state-owned company, such a defence may be raised. However, a defendant could just as easily raise the defence of state immunity in Court, so it is a problem that may have to be faced in litigation or arbitration.</font></SPAN></p> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">Applications for the recognition and enforcement of foreign arbitral awards should be filed with the Intermediate People's Court in the place where the Respondent is domiciled or has property. If the place where the Respondent is domiciled or the place where the Respondent has property falls within the jurisdiction of different Intermediate People s Courts, the applicant may apply to any People s Court but is not permitted not apply to more than one People s Court.&nbsp;</font></SPAN></p> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">One major limitation under the Agreement which is not found in the New York Convention is that the applicant is not entitled to file applications in both Hong Kong and Mainland China at the same time. Only when the result of the enforcement of the award by the court of one place is insufficient to satisfy the liabilities may the applicant apply to the court in another place for enforcement of the outstanding liabilities. This restriction may pose difficulties to an applicant when choosing the jurisdiction in which it should first file the application.&nbsp;</font></SPAN></p> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">The time limits for enforcement of arbitration awards under the Chinese law are one year for claims by individuals and six months for companies or legal persons. In view of such relatively short time limits, it may be safer to file an application for enforcement of the Hong Kong award in Mainland China first before doing the same in Hong Kong.&nbsp;</font></SPAN></p> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">Parties to cases which the Mainland Court had, between 1 July 1997 and the coming into force of the Agreement (21 June 1999), refused to handle or to enforce the award, will be allowed to make a fresh application for enforcement. The Supreme People s Court issued a notice on 24 January 2000 to give effect to the Agreement commencing from 1 February 2000. We understand from our clients that their pending applications for enforcement of Hong Kong Award were approved shortly after the issue of the notice. It should be noted that if one has not applied for enforcement of the award from 1 July 1997 to 1 February 2000, application for enforcement must have been made within six months and one year after 1 February 2000 for legal and natural persons respectively. This requirement is not found in the Arbitration Ordinance of Hong Kong giving effect to the Agreement.</font></SPAN></p> <P align=right><SPAN lang=EN-GB><a href="#contents"><FONT face=Verdana size=1>Back to Top</FONT></a></SPAN></P> <P align=justify><FONT face=Verdana size=2><SPAN lang=EN-US style="mso-bidi-font-size: 13.0pt"><B><A name=CAE(A)><SPAN style="mso-bidi-font-size: 13.0pt">COSTS AND EXPENSES&nbsp;</SPAN></A></B> </SPAN></FONT></P> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">Although legal representation is not required in arbitration, parties often retain lawyers to represent them, especially in complicated disputes. Sometimes, lawyers will be involved when interlocutory matters arise, which have to be dealt with by the Construction and Arbitration division of the High Court of Hong Kong.&nbsp;</font></SPAN></p> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">As with litigation, we charge on an hourly basis. While the costs of arbitration depend on how strenuously the claim is resisted by the other party, we are flexible in our fee arrangements. In appropriate cases, we can agree to charge a fixed amount up to a particular stage of the proceedings, regardless of the actual time spent, so that clients can have a definite budget for the proceedings.&nbsp;</font></SPAN></p> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">Arbitrators usually charge on an hourly basis as well, though during a hearing it may be on a daily basis. As discussed above, their rates normally range from HK$3,000 to HK$4,000 per hour depending on experience and expertise. Some arbitrators also charge a lump sum fee for initial appointment which is not refundable even if the dispute is later settled, without involving the arbitrator.&nbsp;</font></SPAN></p> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">If the appointing authorities are involved, they will charge a nomination fee. The HKIAC s current nomination fee is HK$4,000.&nbsp;</font></SPAN></p> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">Some lawyers argue that arbitration is not necessarily cheaper than litigation, bearing in mind that the Court does not charge substantial fees, but the arbitrator may. While we agree to a certain extent, one should note that the progress of an arbitration can be faster than Court proceedings because the arbitrator s directions can be obtained more quickly than the Court s directions. Applications for interlocutory matters can frequently be dealt with by correspondence, and an earlier hearing date can usually be obtained with an arbitrator. These savings in time eventually mean savings in money, and we believe arbitration is generally more cost-effective than traditional Court proceedings. Also of particular importance, especially for technical disputes, is the fact that the parties are free to select their arbitrator(s), with qualifications and experience to match the dispute. One cannot, however, choose his own judge in the Court.</font></SPAN></p> <P align=right><SPAN lang=EN-GB><a href="#contents"><FONT face=Verdana size=1>Back to Top</FONT></a></SPAN></P> <P align=justify><FONT face=Verdana size=2><SPAN lang=EN-US style="mso-bidi-font-size: 13.0pt"><B><A name=ADR><SPAN style="mso-bidi-font-size: 13.0pt">ALTERNATIVE DISPUTE RESOLUTION</SPAN></A></B></SPAN></FONT></P> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">In recent years, other methods of dispute resolution such as mediation and adjudication have been developed as an alternative to litigation and arbitration.&nbsp;</font></SPAN></p> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">Mediation is used in the contract conditions for Hong Kong Government construction projects and the Airport Core Programme. It is a non-binding process in which an independent person (the mediator) assists both parties to reach a negotiated settlement. A characteristic of mediation is that the approach is not confrontational, and thus parties who wish to maintain their commercial relationship may elect to enter mediation. With the assistance of the mediator, parties can reach a settlement by exploring different options which may not be available in litigation or arbitration.&nbsp;</font></SPAN></p> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">Adjudication was adopted by the Airport Authority for resolving disputes under its contracts when building Hong Kong s new international airport. A Dispute Review Panel consisting of internationally-recognised experts from various disciplines was appointed for resolving disputes. The Panel met quarterly and was briefed on the progress of the new airport. When disputes arose, parties were free to nominate one or more experts from the Panel to act as adjudicator(s) to resolve the problem(s). The difference between adjudication and mediation is that the adjudicator issues a binding decision that may only be challenged in arbitration after completion of the works, whereas the recommendation of a mediator is not binding. The adjudication process has the advantage that the process is relatively quick and the parties need not divert too many resources from the project, which could affect its progress.</font></SPAN></p> <P align=right><SPAN lang=EN-GB><a href="#contents"><FONT face=Verdana size=1>Back to Top</FONT></a></SPAN></P> <P align=justify><FONT face=Verdana size=2><SPAN lang=EN-US style="mso-bidi-font-size: 13.0pt"><B><A name=MHKAIAC><SPAN style="mso-bidi-font-size: 13.0pt">MODEL HONG KONG AND INTERNATIONAL ARBITRATION CLAUSES</SPAN></A></B></SPAN></FONT></P> <P align=justify><SPAN lang=EN-US><FONT face=Verdana size=2>Before compelling the other side to go to arbitration, one needs to have an arbitration clause in the contract. Below are some model clauses for parties to adopt in their contracts. Our experience is that much time and money will be wasted if one does not have a proper arbitration clause. Therefore, it is very important to get the arbitration clause right at the beginning. These clauses are recommended for Hong Kong parties and have been drafted with to maximise the benefits of arbitration proceedings in terms of speed and expense savings.&nbsp;</FONT></SPAN></P> <ul> <li> <p align="justify"><SPAN lang=EN-US><FONT face=Verdana size=2>Arbitration clause for domestic arbitration<br> &quot;Any dispute, difference or claim arising out of or in connection with this contract, shall be referred to and determined by arbitration in Hong Kong using the law of the Hong Kong Special Administrative Region as the governing law and in accordance with the Domestic Arbitration Rules of the Hong Kong International Arbitration Centre.&quot;</FONT></SPAN></p> </li> <li> <p align="justify"><SPAN lang=EN-US><FONT face=Verdana size=2>Arbitration clause for international arbitration&nbsp;<br> &quot;Any dispute, difference or claim arising out of or in connection with this contract, shall be referred to and determined by arbitration in Hong Kong using the law of the Hong Kong Special Administrative Region as the governing law. The Domestic Arbitration Rules of Hong Kong International Arbitration Centre shall apply to the arbitration proceedings. The place of arbitration shall be in Hong Kong. There shall be only one arbitrator. The language of the arbitration shall be [English/Chinese] [delete whichever is inappropriate].&quot;</FONT></SPAN></p> </li> </ul> <P align=right><SPAN lang=EN-GB><a href="#contents"><FONT face=Verdana size=1>Back to Top</FONT></a></SPAN></P> <P align=justify><FONT face=Verdana color=#008080 size=2><SPAN lang=EN-US style="mso-bidi-font-size: 15.0pt"><B><A name=intro(B)><SPAN style="mso-bidi-font-size: 15.0pt">MAINLAND CHINA</SPAN></A></B></SPAN></FONT></P> <P align=justify><FONT face=Verdana size=2><SPAN lang=EN-US style="mso-bidi-font-size: 13.0pt"><B><SPAN style="mso-bidi-font-size: 13.0pt">INTRODUCTION&nbsp;</SPAN></B> </SPAN></FONT></P> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">Contracts related to foreign investments in China usually provide that any disputes arising between the parties should be settled by friendly negotiation, failing which the disputes should be referred to arbitration. Resolution of disputes by arbitration is also recognised in foreign related laws of China. Foreign related arbitrations in the People s Republic of China are now mainly administered by China International Economic and Trade Arbitration Commission (CIETAC).</font></SPAN></p> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">As the volume of international trade grows in China, arbitration is becoming more and more frequent. The China International Economic and Trade Arbitration Commission (CIETAC) handled 850 cases in 2004 and 979 cases in 2005. Out of the cases it handled in 2004, 462 were foreign related. It is commonly believed that CIETAC is now the busiest arbitration institution in the world.</font></SPAN></p> <P align=right><SPAN lang=EN-GB><a href="#contents"><FONT face=Verdana size=1>Back to Top</FONT></a></SPAN></P> <P align=justify><FONT face=Verdana size=2><SPAN lang=EN-US style="mso-bidi-font-size: 13.0pt"><B><A name=AA><SPAN style="mso-bidi-font-size: 13.0pt">THE ARBITRATION AGREEMENT&nbsp;</SPAN> </A></B></SPAN></FONT></P> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">According to the Arbitration Law of China, the arbitration agreement (which is usually set out as one of the clauses in the contract) must be in writing and contain the following particulars:&nbsp;</font></SPAN></p> <ul> <li> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">an indication of the intention to apply for arbitration;&nbsp;</font></SPAN></li> <li> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">the arbitral matters; and&nbsp;</font></SPAN></li> <li> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">the selected arbitration commission.&nbsp;</font></SPAN></li> </ul> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">In drafting the arbitration agreement, the naming of the arbitration commission is very important. If the arbitration commission is not named or named improperly, the parties must reach a supplementary agreement on the proper arbitration forum, failing which the arbitration agreement is void.&nbsp;</font></SPAN></p> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">For foreign economic contracts, the parties are generally free to choose whether to arbitrate their disputes in China or elsewhere. Chinese parties are now more willing to accept arbitration in foreign countries. In 1996, the State Council clarified that domestic arbitration commission established under the Arbitration Law can also deal with foreign related arbitration if both parties to the dispute agree. However, we recommend that arbitration in China which is foreign related should still be referred to CIETAC or in case of maritime related disputes, to Chinese Maritime Arbitration Commission (CMAC). Companies or individuals from Hong Kong and Macau are regarded as foreign parties for this purpose.</font></SPAN></p> <P align=right><SPAN lang=EN-GB><a href="#contents"><FONT face=Verdana size=1>Back to Top</FONT></a></SPAN></P> <P align=justify><FONT face=Verdana size=2><SPAN lang=EN-US style="mso-bidi-font-size: 13.0pt"><B><A name=CIETAC><SPAN style="mso-bidi-font-size: 13.0pt">CIETAC&nbsp;</SPAN> </A></B></SPAN></FONT></P> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">The CIETAC has been known by several names. Established in 1956 as the Foreign Trade Arbitration Commission of the China Council for the Promotion of International Trade, and later renamed as the Foreign Economic and Trade Arbitration Commission of the China Council for Promotion of International Trade, the CIETAC settled on its current moniker in 1988. Since 2000, the CIETAC has also used the Court of Arbitration of the China Chamber of International Commerce as its name.</font></SPAN></p> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">While in the past, the CIETAC only accepted cases involving international or foreign-related disputes, the 2000 Arbitration Rules of the CIETAC extended the jurisdiction of the CIETAC to include disputes related to Hong Kong, Macau and Taiwan as well as domestic disputes.&nbsp;</font></SPAN></p> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">At present, the headquarters of the CIETAC are located in Beijing, with sub-commissions in Shanghai and Shenzhen. There are also nineteen liaison offices located throughout China.&nbsp;</font></SPAN></p> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">The parties may choose the place of arbitration and specify such in their arbitration agreement. If the arbitration agreement does not specify the place of arbitration, the CIETAC will decide for the parties.&nbsp;</font></SPAN></p> <p align="justify"><SPAN lang=EN-US><font face="Verdana" size="2">Although Mandarin is the official language of CIETAC, if the parties have agreed otherwise to use a different language, their agreement shall prevail. In our experience, CIETAC is perfectly capable of communicating with all parties in English. If necessary, CIETAC may also provide interpretation services.</font></SPAN></p> <P align=right><SPAN lang=EN-GB><a href="#contents"><FONT face=Verdana size=1>Back to Top</FONT></a></SPAN></P> <P align=justify><FONT face=Verdana size=2><SPAN lang=EN-US style="mso-bidi-font-size: 13.0pt"><B><A name=AFA><SPAN style="mso-bidi-font-size: 13.0pt">APPLICATION FOR ARBITRATION</SPAN></A></B></SPAN></FONT></P> <P align=justify><SPAN lang=EN-US><font face="Verdana" size="2">The procedures for arbitration are laid down in the CIETAC Arbitration Rules (the current edition is effective from 1 May 2005). The process should begin with an arbitration application. The arbitration application should be submitted to CIETAC with the following:</font></SPAN></P> <TABLE cellPadding=2 width=500 border=0> <TBODY> <TR> <TD vAlign=top align=left width=21> <UL> <LI> <P>&nbsp;</P></LI></UL></TD> <TD vAlign=top align=left width=465 colSpan=2> <P><SPAN lang=EN-US><font face="Verdana" size="2">An arbitration application signed by the Claimant or its attorney specifying:</font></SPAN></P></TD></TR> <TR> <TD vAlign=top align=left width=21> <P></P></TD> <TD vAlign=top align=left width=25> <P><SPAN lang=EN-US style="mso-tab-count: 1"><FONT face=Verdana size=2>(a)</FONT></SPAN></P></TD> <TD vAlign=top align=left width=434> <P><SPAN lang=EN-US><font face="Verdana" size="2"> the relevant contact information of the Claimant and the Respondent;</font></SPAN></P></TD></TR> <TR> <TD vAlign=top align=left width=21> <P></P></TD> <TD vAlign=top align=left width=25> <P><SPAN lang=EN-US><FONT face=Verdana size=2>(b)</FONT></SPAN></P></TD> <TD vAlign=top align=left width=434> <P><SPAN lang=EN-US><FONT face=Verdana size=2>reference to the arbitration agreement involved;</FONT></SPAN></P></TD></TR> <TR> <TD vAlign=top align=left width=21> <P></P></TD> <TD vAlign=top align=left width=25> <P><SPAN lang=EN-US><FONT face=Verdana size=2>(c)</FONT></SPAN></P></TD> <TD vAlign=top align=left width=434> <P><SPAN lang=EN-US><font face="Verdana" size="2"> the facts of the case and the main issues in dispute; and</font></SPAN></P></TD></TR> <TR> <TD vAlign=top align=left width=21> <P></P></TD> <TD vAlign=top align=left width=25> <P align=justify><SPAN lang=EN-US><FONT face=Verdana size=2>(d)<SPAN style="mso-tab-count: 1">&nbsp;&nbsp;</SPAN> </FONT></SPAN></P></TD> <TD vAlign=top align=left width=434> <P><SPAN lang=EN-US><font face="Verdana" size="2">the claim and the facts and evidence on which its claim is based.</font></SPAN></P></TD></TR> <TR> <TD vAlign=top align=left width=21> <UL> <LI> </LI></UL></TD> <TD vAlign=top align=left width=465 colSpan=2> <P><SPAN lang=EN-US><font face="Verdana" size="2">Relevant documentary evidence in support of the claim (i.e. no exchange of lists of documents will be required).</font></SPAN></P></TD></TR> <TR> <TD vAlign=top align=left width=21> <UL> <LI> </LI></UL></TD> <TD vAlign=top align=left width=465 colSpan=2> <P><SPAN lang=EN-US><font face="Verdana" size="2">The arbitration fee calculated according to the CIETAC Arbitration Fee Schedule.</font></SPAN></P></TD></TR> <TR> <TD vAlign=top align=left width=21> <UL> <LI> </LI></UL></TD> <TD vAlign=top align=left width=465 colSpan=2> <P><SPAN lang=EN-US><font face="Verdana" size="2">A Power of Attorney, if a lawyer or representative is appointed by the Claimant.</font></SPAN></P></TD></TR></TBODY></TABLE> <P align=justify><SPAN lang=EN-US><font face="Verdana" size="2">Upon review of the above documents, the CIETAC will decide whether to accept the application. If the CIETAC chooses to accept the application, a Notice of Arbitration together with the CIETAC Arbitration Rules (2005), a List of the Panel of Arbitrators and the Arbitration Fee Schedule will be sent to the Claimant and Respondent. The arbitration application and its supporting documents as submitted by the Claimant will also be sent to the Respondent.</font></SPAN></P> <P align=justify><SPAN lang=EN-US><font face="Verdana" size="2">Within 45 days of receiving the Notice of Arbitration, the Respondent should file:</font></SPAN></P> <TABLE cellPadding=2 width=500 border=0 height="1"> <TBODY> <TR> <TD vAlign=top align=left width=21 height="1"> <P align="left"><SPAN lang=EN-US><font face="Verdana" size="2">1.</font></SPAN></P></TD> <TD vAlign=top align=left width=465 height="1"> <P><SPAN lang=EN-US><font face="Verdana" size="2"> A written Statement of Defence signed by the Respondent or its attorney, including the following:</font></SPAN></P> <ul> <li> <p><SPAN lang=EN-US><font face="Verdana" size="2"> the relevant contact information of the Respondent;&nbsp;</font></SPAN></p> </li> <li> <p><SPAN lang=EN-US><font face="Verdana" size="2"> the defence to the arbitration application, complete with the facts and grounds serving as basis for the defence; and</font></SPAN></p> </li> <li> <p><SPAN lang=EN-US><font face="Verdana" size="2"> evidence supporting the defence.&nbsp;</font></SPAN></p> </li> </ul> </TD></TR> <TR> <TD vAlign=top align=left width=21 height="34"> <SPAN lang=EN-US><font face="Verdana" size="2">2.</font></SPAN></TD> <TD vAlign=top align=left width=465 height="34"> <P><SPAN lang=EN-US><font face="Verdana" size="2">Any counterclaim(s), in writing, along with supporting documents; and&nbsp;</font></SPAN></P></TD></TR> <TR> <TD vAlign=top align=left width=21 height="1"> <SPAN lang=EN-US><font face="Verdana" size="2">3.</font></SPAN></TD> <TD vAlign=top align=left width=465 height="1"> <P><SPAN lang=EN-US><font face="Verdana" size="2">A Power of Attorney, if a lawyer or representative is appointed by the Respondent.</font></SPAN></P></TD></TR> </TBODY></TABLE> <P align=justify><SPAN lang=EN-US><font face="Verdana" size="2">Upon approval, the CIETAC will submit the counterclaim(s) and supporting documents to the Claimant, who will have 30 days from the date of receipt to submit a Statement of Defence. If either the Respondent or the Claimant fails to submit a Statement of Defence, the arbitration will proceed as normal.</font></SPAN></P> <P align=justify><SPAN lang=EN-US><font face="Verdana" size="2">The main feature of CIETAC arbitrations is that they are  administered by CIETAC. Practically, that means all correspondence must provide the CIETAC with five copies of the above documents and statements for distribution to the three arbitrators in the tribunal, the other party and for filing with CIETAC. If the Claimant and Respondent agree to have only one arbitrator in the arbitral tribunal, only three copies of the above documents need to be provided.</font></SPAN></P> <P align=right><SPAN lang=EN-GB><a href="#contents"><FONT face=Verdana size=1>Back to Top</FONT></a></SPAN></P> <P align=justify><FONT face=Verdana size=2><SPAN lang=EN-US s