Ad hoc arbitrations and their appointing authorities

By Yang Ling, HKIAC
Ad hoc arbitrations and their appointing authorities, 临时仲裁及其委任机构

According to the Arbitration Law, an arbitration agreement without specifying an arbitration institution is invalid, which means institutional arbitration is the only form of arbitration allowed in mainland China. Apart from institutional arbitration, however, ad hoc arbitration is widely used worldwide. That is, the parties submit their dispute to a temporarily constituted arbitral tribunal for its settlement. Take, for example, a typical arbitration clause reflecting ad hoc arbitration: Arbitration in Hong Kong.

As shown in the above-mentioned arbitration clause, ad hoc arbitration clauses generally only include the seat of arbitration without pointing to any specific arbitration institution.

Ad hoc arbitration has been the earliest form of arbitration and is still widely used in maritime, grain trade and other industries. If the disputing parties are willing to co-operate in the arbitral process, ad hoc arbitration can be quite advantageous in terms of efficiency, cost saving and enforcement of the award.

Nevertheless, parties to ad hoc arbitrations are likely to encounter a number of procedural barriers, which are most likely to happen during the constitution of the arbitral tribunal. For example, the parties may not be able to agree on the number of arbitrators, and the appointment of arbitrators. Another frequently occurring problem is who will deal with challenges and the withdrawal of arbitrators in ad hoc arbitrations.

Authorising an appointing authority

Different approaches to assisting arbitrations have been in place to resolve the “procedural deadlock” in ad hoc arbitrations to facilitate the smooth conduct of proceedings.

Authorising national courts to assist ad hoc arbitrations by legislation. French arbitration law empowers the “judge acting in support of the arbitration” to appoint arbitrators in arbitrations, deal with challenges to arbitrators, and extend procedural time limits.

Authorising arbitration institutions to assist ad hoc arbitrations by legislation. The Hong Kong Arbitration Ordinance authorises the Hong Kong International Arbitration Centre (HKIAC) to deal with the constitution of the tribunal in ad hoc arbitrations.

Agreeing on an appointing authority to assist the arbitration by the parties. Under the UNCITRAL arbitration rules, the parties may agree on the appointing authority, including the secretary-general of the Permanent Court of Arbitration (PCA) in The Hague. In the absence of such an agreement, the secretary-general of the PCA may, upon the request of any party, designate the appointing authority, taking into account the circumstances of the case. The HKIAC has been appointed by the secretary-general on a number of occasions.

HKIAC and ad hoc arbitrations

In addition to administering institutional arbitrations, the HKIAC is also the default statutory appointing authority under the Hong Kong Arbitration Ordinance in Hong Kong-seated ad hoc arbitrations. As a result, the HKIAC may exercise two functions – it may determine the number of arbitrators, and appoint arbitrators or mediators in an ad hoc arbitration seated in Hong Kong.

Granting statutory powers to a private arbitration institution such as the HKIAC is a vote of confidence in the international credibility, pool of arbitrators and experience in dispute resolution of that institution. Arbitration users can receive assistance in the constitution of the tribunal from a world-class international arbitration institution with a low charge, simply by sending an application for the appointment of an arbitrator by e-mail.

Since 2019, rather than charging a fee for each request, the HKIAC has charged a one-off fee of HKD8,000 (USD1,026) for performing all of its functions under the Hong Kong Arbitration Ordinance in arbitrations where the total amount in dispute is less than HKD2.5 million.

Constituting a tribunal is a technical task for which institutional safeguards are indispensable, in addition to experience. In this regard, the HKIAC has also assisted in the drafting and updating of the arbitration rules (appointment of arbitrators and mediators, and decision on number of arbitrators), and has published its Practice Notes on the Appointment of Arbitrators and the Challenge of an Arbitrator. These notes clarify the factors to be taken into account by the HKIAC when appointing arbitrators, and enhance the transparency of the process.

Yang Ling is deputy secretary-general of the HKIAC and chief representative of the centre’s Shanghai office