Hong Kong is fast becoming a popular destination for maritime dispute resolution centres. This is due to its unique geographical location, business friendly policies and broad areas of international maritime expertise. An increasing number of shipping contracts provide for Hong Kong to be the seat of arbitration in their arbitration clauses.
To ensure a smooth Hong Kong arbitration it is vital that arbitration clauses must specify clearly its rules upon which the arbitration is to be conducted. A simple arbitration clause such as "Hong Kong arbitration English (or Hong Kong) law to apply" will lead to ambiguity, delay, and costs.
In the absence of arbitration rules
The problem with wording like the above starts at the beginning of a dispute. When one party has nominated their arbitrator and requested the other party to appoint their own one, the other party may either ignore the request or simply refuse to appoint. In this instance, the party who has nominated their arbitrator will have to apply to the Hong Kong International Arbitration Centre (HKIAC) for nominating the counter-party's arbitrator. This will (1) cause delay extra costs[1], and (2) the nominated arbitrators might not be experienced maritime arbitrators.
As such, it is highly suggested that shipping contracts specify that the Hong Kong arbitration be conducted in accordance with the terms of the Hong Kong Maritime Arbitration Group (HKMAG).
HKMAG
Incorporating the terms of HKMAG into the arbitration clauses has the following benefits:
First, the members of HKMAG are all experienced maritime arbitrators.
Second, the HKMAG Terms and Small Claim Procedures are substantially based on the well-known Terms and Small Claims Procedures of the London Maritime Arbitrators (LMAA) (with changes made to incorporate references to Hong Kong procedural law). Therefore, the terms and procedures are easy for the contracting parties, arbitrators, and lawyers to adapt to.
Last but not least, HKMAG is a qualified institution for application to the Chinese courts for interim measures. This allows the parties to apply for property, evidence, and conduct preservation from the Chinese courts before the arbitration award is issued. Hence, the HKMAG should be very attractive to those who want to protect their interests in Mainland China.
Suggested wording
HKMAG has developed its own Arbitration Clause. Parties may include either the long or short form in their contracts.
The BIMCO Law and Arbitration Clause 2020 Hong Kong also provides that the arbitration shall be conducted in accordance with the HKMAG Terms. Parties may also incorporate this clause in their contracts.
Should you have any comments or questions, then please do not hesitate to contact us at any time.
[1] The party who makes such requests will have to pay HKD 8,000 (about USD 1,000 or GBP 800) for HKIAC to appoint the counter-party’s arbitrator. If the contracting parties cannot agree on the number of arbitrators, a further HKD 8,000 will have to be incurred for HKIAC to determine the same.