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Popular seats of consideration around the world (1)
International commercial arbitration is a process by which parties from different countries can settle disputes objectively by arbitrators appointed by both parties. The result is a binding arbitration award that is valid in other countries due to the New York Convention. While judges are appointed by the state, the arbitrator’s appointment results from the mutual agreement between the disputing parties. Therefore, it is possible to select and appoint an arbitrator suitable for both parties’ needs. The parties can also select one or three arbitrators [LG1] depending on what the parties have agreed upon [1] and the qualifications of the arbitrators. In addition, the parties also have greater flexibility in setting the procedure for arbitration. Therefore, arbitration is the best method for resolving business disputes on an international level [2]. One of the major advantages of arbitration is that the disputing parties can control how the dispute can be settled. In this regard, when drawing up an arbitration agreement before and after the dispute has occurred, both parties can agree on some of the key aspects of the arbitral proceedings, such as selecting the seat of arbitration and the arbitration institution.
Seat of Arbitration
The Seat of Arbitration refers to the place where the legal arbitration proceedings are undertaken. By choosing a seat of arbitration, the parties will also be choosing the law to be used in the arbitration and which court will have jurisdiction to oversee the arbitration process. For example, if the parties choose Paris to settle the dispute, Articles 1442 to 1527 of the French Civil Code will enter into force. Additionally, any arbitral process related to a court proceeding, such as an appointment of an arbitral tribunal, or revocation of an award, will also be subjected to French law.
However, since today’s popular seats of arbitration have become much modernized and convenient, parties should therefore be aware of the differences between jurisdictions, including the characteristics of the seats of considerations, which may be of strategic importance in the dispute [3].
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In this article, we will discuss 5 seats of considerations: namely, Hong Kong SAR, London in England, Paris in France, Singapore, and Stockholm in Sweden.
Hong Kong Special Administrative Region (SAR)
Hong Kong is one of the most popular seats of considerations. This is especially true in the case of international disputes with China. Hong Kong arbitration is governed by the Arbitration Ordinance (AO), or The Ordinance, where arbitration proceedings are conducted in accordance with the UNCITRAL model law, whereby the parties are free to agree on the matters of settlement. In addition, by law, Hong Kong courts have very limited authority to interfere with the arbitration process.
Court Guidelines to Arbitration
In general, courts in Hong Kong favor arbitration without any interference (Hand-off Approach). There are only a handful of limited circumstances in which courts will intervene to assist in the arbitration process.
Arbitration Institutions
The Hong Kong International Arbitration Center (HKIAC), which was established in 1985, is widely regarded as one of the most trusted arbitral institutions in Asia, with the other being the Singapore International Arbitration Center.
Reasons for objection to an award
According to Hong Kong law, limitations to the grounds for objection to an award are stated in Section 81 of The Arbitration Ordinance, consistent with the UNCITRAL Model Law. Grounds such as a defect in the ability of the parties to arbitrate or disputes conducted through the arbitration process is incomplete and cannot be enforced under the law agreed by the parties, or either party was not notified of the appointment of the arbitral tribunal, or the arbitration process was not conducted within a reasonable time, etc. However, an Error of Law is not considered a cause for objection.
Enforcement of the award
The New York Convention applies to Hong Kong, including the enforcement of arbitral awards. An arbitral award made in a state that is a party to the New York Convention is considered valid in Hong Kong.
London, England
The Arbitration Act 1996 lays down all the arbitration principles based in England, Wales, and Northern Ireland. It applies to both domestic and international arbitration proceedings. The Act was enacted to make arbitration law more accessible and user-friendly, establish British laws to be in line with modern standards in international arbitration, and be consistent with the UNCITRAL Model Law.
The core principle of the Act is that arbitrators should resolve disputes fairly, impartially, and without unnecessary delay or expenses. The courts have limited to no power at all to intervene in the arbitration process.
Court Guidelines to Arbitration
British courts have their own guidelines in advocating for arbitration. The courts have a broad interpretation of the arbitration agreement. This includes an oral agreement to resolve the dispute by arbitration with reference to the written agreement or conditions. The House of Lords affirms this in the Premium Nafta verdict. On the other hand, British courts are also strict regarding objections to arbitration awards, as there are only three reasons that an award can be objected to: the arbitral tribunal’s jurisdiction, material defects, or exceptional events, which is or may cause injustice to the applicant, and legal issues.
Arbitration Institutions
London is home to the London Court of International Arbitration (LCIA), other sector-specific arbitration institutions, and trade and commodities associations, each with its own regulations and procedures. These bodies of arbitration regulations often require that arbitration be conducted in London, including:
AIDA Reinsurance and Insurance Arbitration Society (ARIAS);
London Maritime Arbitration Association (LMAA);
Federation of Oils, Seeds and Fats Association (FOSFA);
Grain and Feed Trade Association (GAFTA); and
London Metal Exchange (LME)
Confidentiality
Recognizing that confidentiality is an indispensable feature of arbitration proceedings, the Court has therefore developed a solid general legal basis that all documents made or created for the purpose of the arbitration proceedings are considered confidential, except for certain conditions.
Enforcement of an Arbitration Award
Under this Arbitration Act, an arbitration award made in England, Wales, and Northern Ireland, can be enforced in the United Kingdom in the same manner as a court order or ruling [LG2]. Enforcement outside the UK is facilitated by the fact that the UK is currently a member of the New York Convention.
- [1] This is because the law has provided broad flexibility that disputing parties can appoint one or more arbitrators.
- [2] https://www.claytonutz.com/ArticleDocuments/178/Clayton-Utz-Guide-to-International-Arbitration-2012.pdf.aspx?Embed=Y
- [3] https://files.klgates.com/files/upload/guidetoleadingarbitralseatsandinstitutions.pdf
