A. Overview

A. Overview

Arbitration is a private dispute resolution process by which a dispute or difference between two or more parties regarding their mutual legal rights and liabilities is referred to and determined in a judicial manner, with binding effect, by the application of law by one or more persons (the arbitral tribunal) instead of by a court of law. The final decision rendered by the tribunal is usually called an award.  

In Hong Kong, the principal statute governing this process is the Arbitration Ordinance (Cap. 609), which created a unitary regime for both domestic and international arbitrations based on the UNCITRAL Model Law. 

When arbitration is used 

Arbitration is mainly used in commercial disputes. It is especially common in industries where parties value specialist expertise, efficiency and confidentiality, such as construction, shipping, finance, and insurance. Its use is particularly prevalent in cross-border and international commercial disputes. 

Consent and party autonomy 

Arbitration is based on agreement. A tribunal generally has jurisdiction only where the parties have agreed to refer their dispute to arbitration. This agreement is known as an arbitration agreement and usually takes one of two forms: 

1. Arbitration clause: A provision included within a wider commercial contract to resolve future disputes arising under that contract. 
2. Submission agreement: A separate agreement entered into after a dispute has already arisen where no prior arbitration clause existed. 

Because arbitration is consensual, an arbitrator has no authority to decide a dispute unless the parties have agreed to arbitrate. 

Arbitral tribunal and procedure 

The parties enjoy extensive party autonomy. They can agree on the rules, the language of the proceedings, the number of arbitrators, and the seat of the arbitration. 

Parties can choose independent third parties based on specialized subject-matter expertise (such as engineering or shipping knowledge) rather than relying on generalist judges. If parties cannot agree on an appointment, the Hong Kong International Arbitration Centre acts as the statutory default appointing authority. 

Parties may choose their own rules, language, and the seat of arbitration. Failing such agreement, the tribunal has a wide discretion to conduct proceedings in a manner it considers appropriate, subject to a mandatory duty to act fairly and impartially and give each party a reasonable opportunity to present its case. 

The tribunal is empowered to rule on its own jurisdiction, including any objections regarding the existence or validity of the arbitration agreement.