A common question is: can a Hong Kong International Arbitration Centre (HKIAC) hearing can take place in Shanghai or Beijing? The answer is yes.
This question reveals two common misunderstandings. The first is that choosing the HKIAC necessarily means having to hear the case in Hong Kong. But this is not the case. It’s common in international arbitration for the location of the arbitration institution to be different from the place of hearing. Virtual hearings became popular during the pandemic and continue in specific situations.
Also misunderstood is that the seat of arbitration is “pretty much the same” as the place of hearing. But in international arbitration, the seat is considerably different from the place of hearing, and has significant legal consequences, so extra caution should be taken in its selection.
SEAT IS A LEGAL PLACE
The seat of arbitration usually refers to the legal location of the arbitration. There are four points of legal significance when considering the seat.
First, the seat determines nationality of the arbitral award. If the seat is in London, the award will be English; if the seat is in Hong Kong, it will be a Hong Kong award. The nationality of an arbitral award is crucial when it comes to enforcement.
Courts in mainland China enforce an English award under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards; whereas a Hong Kong award is enforced under the Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and the HKSAR, and the Supplemental Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and the HKSAR.
Second, courts of the seat of arbitration have jurisdiction to set aside the award. Where the seat is in London, the English courts have jurisdiction; while the High Court of Hong Kong has jurisdiction over the seat in Hong Kong. Set-aside procedures for arbitral awards before the High Court of Hong Kong are currently conducted by the Honourable Madam Justice Mimmie Chan, who is the judge in charge of the Construction and Arbitration List.
Third, the law of the seat of arbitration usually dictates the governing law for arbitral proceedings, or lex arbitri. Parties have the autonomy to agree on a different lex arbitri, but this is rarely agreed upon separately. Therefore, if the seat is in London, the English Arbitration Act 1996 applies, if in Hong Kong, the Hong Kong Arbitration Ordinance applies.
Fourth, the seat is also the main connecting point for the governing law of the arbitration clause. For example, China’s Choice of Law for Foreign-related Civil Relations provides: “Parties may by agreement choose the law applicable to their arbitration agreement. Absent any choice … the law of the place where the arbitration institution locates, or law of seat of arbitration, shall be applied.”
Although Hong Kong has not established such applicable law, relevant judgments serve as precedents to apply the law of the seat of arbitration as governing law.
In addition, the seat has unique legal effects. For example, arbitration “seated in the HKSAR” satisfies one of the two elements required to qualify for the Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings by the Courts of mainland China and HKSAR. This arrangement is not applicable if the seat is in any other jurisdictions.
WHO DECIDES SEAT?
Given the multiple legal effects, the question of deciding seat of arbitration is crucial. What factors should parties consider when choosing?
In short, choose “pro-arbitration” jurisdictions, specifically, jurisdictions where local legislation is based on the UNCITRAL Model Law on International Commercial Arbitration, where consistent jurisprudence of local courts favours arbitration, and where a large number of professionals (lawyers and arbitrators) practise international arbitration, as well as reputed arbitration institutions.
In the event that parties cannot agree, institutional arbitration rules typically provide for a default seat of arbitration.
The HKIAC Administered Arbitration Rules (2018) provide: “Where there is no agreement as to the seat, the seat of arbitration shall be Hong Kong.” Hong Kong being the default seat means the Hong Kong Arbitration Ordinance (Cap. 609) – based on the 2016 UNCITRAL Model Law – will apply. Likewise, the London Court of International Arbitration (LCIA) Arbitration Rules (2020) make London the default seat.
When parties cannot agree, the default seat brings certainty to the arbitral process and corresponding judicial supervision.
Alternatively, the seat can be decided by arbitral tribunal. The Singapore International Arbitration Centre (SIAC) Rules (2016) provide that “failing such an agreement, the seat of the arbitration shall be determined by the Tribunal, having regard to all the circumstances of the case”.
Given that the seat has a great impact on both proceedings and enforcement of awards, selecting appropriate members of the arbitral tribunal is particularly important. Are they familiar with relevant procedural law and validity of arbitration clauses under laws of different seats?
Finally, the seat can be decided by the arbitration institution. In international arbitration, the International Chamber of Commerce (ICC) International Court of Arbitration is unique in leaving the seat to be determined by the arbitration institution, but this function is uncommonly exercised.
HEARING PLACE ‘PHYSICAL’
The place of hearing is merely the “physical” location where it takes place. Physical location and legal seat are separate, and the place has no legal significance compared to the seat.
No major arbitration institutions list “place of hearing” in their model arbitration clauses. The reasons for this are twofold: (1) it would make little sense in agreeing in advance on the place of hearing when locations of the parties remain unknown; and (2) leading arbitration institutions such as the HKIAC provide world-class hearing facilities providing location choice for hearings.
However, in arbitration in mainland China, there is no confusion between seat of arbitration and place of hearing. Generally, cases administered by arbitration institution A are usually heard at arbitration institution A.
But in international arbitration, parties, arbitrators and representatives are often from different jurisdictions. Therefore, even if the seat is A, the parties and arbitral tribunal may choose another place for hearing for reasons of convenience and economy.
In recent years, international arbitration has become much more flexible in terms of “place of hearing”. For example, the HKIAC often conducts hearings in a hybrid form with participants attending remotely from their own respective jurisdictions.
As a result, HKIAC hearings attract many non-Hong Kong arbitration cases, with facilities also rated by the Global Arbitration Review as best hearing place in terms of location, perceived value for money, helpfulness of staff, and IT services.
Yang Ling is the deputy secretary-general of the HKIAC and the chief representative of its Shanghai office