Lower cost makes arbitration a more attractive option

There might be many reasons that prompt lots of parties to resolve their disputes through arbitration, but a relatively low cost is probably one of the most important. Therefore, many arbitral institutions around the world are making continual and strenuous efforts to introduce new rules, procedures and administrative reforms to tackle the cost problem, and the Hong Kong International Arbitration Centre (HKIAC) is no exception.

For the purpose of cost control, the HKIAC has introduced several mechanisms. One of its most effective measures is to allow parties to choose how to pay their arbitrators – either by hourly rates (capped at HK$6,500 [US$840] per hour) or based on the amount in dispute. The benefit of this is that the parties can first assess the value and complexity of their dispute and choose the most cost-saving method to pay the arbitral tribunal.

For example, for a high-value and straightforward case, the parties can choose to pay the arbitrators by hourly rates, whereas for a low-value and long-running case, the parties can choose to pay the arbitrators by reference to the amount in dispute. If the parties cannot agree to the fee method within the applicable time limit under the 2013 HKIAC rules, the tribunal will be paid by hourly rates. This is a unique feature of HKIAC arbitration.

Joe Liu is the managing counsel at the Hong Kong International Arbitration Centre