Drafting of contract is the time to make crucial choices

In the first part of this column in last month’s Dispute Digest, the preparation of the dispute resolution clause in a contract was examined with particular regard to the optimal timing for entering into an agreement, as well as whether there should be conditions precedent to the final binding process, and whether to have institutional or ad hoc arbitration. In the final part of this column I look at how to choose the right institution, some of the choices available, and offer a few insights on requirements in a contract that may save time and cost in the long term.

If institutional arbitration is selected, deciding on the right arbitral institution should be done at the same time as the decision on the seat of the arbitration is made. The seat dictates the legal framework under which the arbitration is to be conducted. The arbitration law of the seat must therefore be carefully considered to ensure it meets the parties’ needs. The most popular seats for arbitration in Asia are Hong Kong and Singapore. When looking at arbitration, for example in Hong Kong, many parties note that Hong Kong has an advanced arbitration law which allows very limited interference by the courts in the arbitral process. The Hong Kong courts are also very pro arbitration in many respects. Parties also look at the arbitration infrastructure. Hong Kong’s arbitral facilities are first class. There is a pool of good and experienced arbitrators, a substantial pool of arbitration practitioners and very good arbitration venues. An award issued in Hong Kong will generally be enforceable where the other party has assets due to Hong Kong’s accession – as part of China – to the New York Convention on the enforcement of arbitral awards.

Hong Kong is particularly well suited to disputes involving mainland China parties. It is seen by many parties as an ideal compromise between arbitration in mainland China and arbitration at the home of the other party to the contract. Hong Kong has its own enforcement arrangements with mainland China, giving it an advantage over many other jurisdictions.

The author, Philip Nunn, is the head of litigation & arbitration, Asia, for Fried Frank Harris Shriver & Jacobson, and a member of China Business Law Journal’s editorial board.