ALTERNATIVE DISPUTE RESOLUTION (ADR)

II. Arbitration

I. Introduction

In Hong Kong, a person, a company, or the Government can be a party in a civil litigation [Bringing & Defending a Civil Case]. They may be either complainants (the party bringing the litigation) or defendants. In a litigation, each party presents their case to the court in order for the court to determine whether or not the legal rights and obligations of one (or more) of the parties are being infringed, and if so, to obtain appropriate compensation and remedy for that party.

The judge will act as an umpire and make decisions concerning the case after considering the evidence and hearing the arguments from the parties involved. The judge will normally order the losing party to pay the costs of the court action to the winning party. These court costs are in addition to and separate from whatever amount the court may order the losing party to pay the winning party as a result of the judgment. These court costs are the expenses that the winning party has had to spend on the preparation and hearing of the case, including their expenses for the solicitors and barristers representing them. The amount of these costs can be substantial, depending on various factors including the complexity of the case, the work required for preparation of the hearing and the length of the hearing.

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. 

E.  Arbitration agreements

C. Advantages and disadvantages of arbitration 

Advantages 

(i) Confidentiality and privacy 

Unlike court proceedings, which are typically public, arbitration is a private process. Section 18 of the Arbitration Ordinance (Cap. 609) imposes a statutory duty of confidentiality, prohibiting parties from disclosing information relating to the proceedings or the award unless agreed otherwise or required by specific exceptions (such as protecting a legal right). Furthermore, arbitration-related court hearings in Hong Kong are, by default, heard otherwise than in open court. 

(ii) Neutrality 

Arbitration allows parties to avoid the potential “home-court advantage” of a counterparty’s national legal system by choosing a neutral seat and an independent tribunal. 

(iii) Enforceability 

Arbitral awards are often more easily enforced internationally than court judgments. Under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which applies to Hong Kong, over 170 contracting states are obliged to recognize and enforce foreign arbitral awards. In Hong Kong, an award is enforceable in the same manner as a judgment of the court with the leave of the Court of First Instance of the High Court. 

(iv) Finality 

One of the most significant differences from litigation is the absence of a general right of appeal on the merits. The court’s role is restricted and supportive, generally only intervening to provide assistance (such as granting interim measures) or to set aside an award on very narrow grounds, such as lack of a valid agreement or serious procedural injustice. 

Disadvantages 

(i) Costs 

A significant weakness of arbitration is that it can be as expensive as litigation, and sometimes more so. Unlike litigation, where the judge and court facilities are a public expense, parties in arbitration must pay the arbitrator’s fees and the costs of hiring a hearing venue and related support services, such as interpreters. Additionally, arbitration may involve high legal costs if the parties adopt complex, court-style pleadings and lengthy oral hearings. 

(ii) Inability to bind third parties 

Because arbitration is founded on a consensual agreement, the tribunal’s authority is generally limited to the parties to that agreement. This means that a tribunal usually cannot make orders that bind third parties, such as joining them to the proceedings or ordering them to produce evidence, without their consent. In complex commercial projects involving multiple contractors and sub-contractors, this can lead to fragmented disputes and the risk of inconsistent decisions. 

(iii) Limited recourse and the risk of error  

The finality of arbitration is a double-edged sword. While it prevents delay, it also means that parties accept the risk of a wrong decision that cannot be readily corrected. Under the standard Hong Kong regime, the court will not review the merits of an award or correct errors of fact or law. Recourse is generally limited to narrow procedural grounds, such as lack of jurisdiction or a violation of public policy. 

(iv) Scheduling and availability 

Highly qualified and experienced arbitrators are often in high demand and may be booked for long periods in advance. This can lead to difficulties in fixing hearing dates acceptable to all parties and tribunal members, potentially causing substantial delays. Such delays can be exacerbated in three-person tribunals where the schedules of three busy professionals must be coordinated. 

(v) Absence of specific remedies and safeguards 

Unlike court proceedings, arbitration may not automatically offer certain procedural safeguards. For example, legal aid is generally unavailable for arbitration, which may be a barrier for parties involved in minor disputes. Furthermore, specific procedures like summary judgment for indisputable claims may not be available unless specifically agreed upon or provided for in the chosen institutional rules. There is also a perceived risk that tribunal secretaries could overstep their administrative role and become “fourth arbitrators”, potentially exerting inappropriate influence on the substantive merits of the case. 

III. Mediation

A. Overview

Mediation is a flexible, confidential, and consensual process in which a neutral and impartial person, known as a mediator, actively assists the parties in working towards a negotiated resolution of their dispute or difference. The parties remain in ultimate control of both the decision to settle and the terms of any settlement. The mediator does not adjudicate the dispute, impose a decision, or determine who is right or wrong. 

In Hong Kong, mediation has developed from an informal dispute resolution practice into a structured and legally recognised process. The Mediation Ordinance (Cap. 620), which came into effect on 1 January 2013, provides a statutory framework for mediation while preserving the flexibility that is central to the process. The Ordinance is intended to give mediation a proper legal foundation without creating a rigid “strait-jacket” that would undermine its practical and facilitative nature. 

Mediation is especially valued because it is informal, consensual, and facilitative. It allows parties to preserve relationships, explore practical solutions, and reach outcomes that may not be available through court proceedings. In the Asian cultural context, mediation and conciliation have also traditionally been regarded as attractive means of resolving disputes because they encourage harmony and may help parties preserve dignity and “face”.

C. Advantages and disadvantages of mediation 

Mediation is widely recognized in Hong Kong as a highly effective alternative dispute resolution process, though it possesses both significant benefits and notable drawbacks that parties must consider before engaging in the process. 

Advantages 

The primary advantages of mediation center on its efficiency, the control it grants to the parties, and the protection of their private and commercial interests. 

(i) Substantial cost savings 

One of the most frequently cited benefits is the potential for significant savings in legal and administrative costs. By reaching an earlier settlement, parties avoid the ballooning expenses associated with prolonged litigation, extensive discovery, and trial preparation. 

(ii) Speed and efficiency 

Mediation typically resolves disputes much faster than the court system. Many sessions are concluded within a few hours or a single day, whereas litigation can take years to reach a final judgment. 

(iii) Preservation of relationships 

Unlike adversarial litigation, which often “liquidates” business or personal ties, mediation is non-confrontational and focuses on restoring or restructuring relationships. This is particularly valuable in family matters, long-term commercial partnerships, or construction projects where cooperation must continue. 

(iv) Confidentiality and privacy 

Mediation is a private forum, protecting sensitive commercial information, trade secrets, and personal dignity from public scrutiny and media attention. Communications made during the process are generally inadmissible in evidence, encouraging parties to speak freely and make concessions without fear that these gestures will be used as "weapons" against them if the process fails. 

(v) Party autonomy and control 

Parties remain the ultimate decision-makers. They have the power to shape the process, select the mediator, and decide the final terms of the settlement, rather than having a decision imposed by a judge or arbitrator. 

(vi) Creative and workable solutions 

Mediators help parties explore interests and needs beyond their strict legal rights, allowing for unique solutions that a court lacks the power to order. This might include renegotiating a contract, offering an apology, or substituting different performance obligations. 

(vii) High user satisfaction 

Empirical evidence from Hong Kong and internationally shows that users are generally very satisfied with the process, feeling heard and in control of the outcome. 

Disadvantages 

While beneficial, mediation has inherent weaknesses, particularly regarding its voluntary nature and its unsuitability for specific legal issues. 

(i) Dependency on cooperation 

The success of mediation relies entirely on the willingness of both parties to participate in good faith and commit to the process. If one party is intransigent or only "paying lip service" to the process, settlement is unlikely. 

(ii) Lack of formal discovery 

Unlike litigation or arbitration, mediation does not require a formal “discovery” of documents. Parties must rely on the other side’s honesty regarding the strengths and weaknesses of their case, which is open to abuse if a party uses the session merely to find weaknesses in their opponent’s case for future use in court. 

(iii) Unsuitability for law-based disputes 

Mediation is not appropriate for all conflicts, particularly those that require a definitive legal ruling or a judicial precedent to resolve future disputes. It is generally unsuitable for cases involving the proper interpretation of a deed or a complex point of law. 

(iv) Potential for tactical abuse 

Some parties may use mediation as a stalling tactic to delay judgment or exert pressure on a vulnerable opponent. Unexplained delays in implementing a mediation can also lead to frustration and conflict escalation. 

(v) Risk of wasted costs and time 

If mediation fails, the parties have incurred additional expenses and time that might have been better spent preparing for trial. A premature mediation, held before essential information is known to both sides, can waste resources and lead to a hardening of positions. 

(vi) Power imbalances 

Mediation may not be suitable if there is a severe power disparity or a history of intimidation (e.g., domestic violence) that prevents one party from negotiating on a level playing field. While skilled mediators can mitigate this, the process itself provides fewer protections than the formal judicial system. 

(vii) Enforceability challenges 

While mediated settlement agreements are binding as contracts, they are not as directly enforceable as court orders or arbitral awards. Enforcing them may require commencing a new legal action, which can face evidential barriers if the agreement was oral. 

(viii) Inappropriateness for fraud allegations 

In some contexts, cases involving allegations of fraud have been held to be intrinsically unsuitable for mediation, as they may require adversarial elements like cross-examination and formal evidence under oath. 

a. Practice Direction 31: Mediation

Encouragement of mediation in civil proceedings 

The Judiciary integrates mediation into the civil justice system through Practice Direction 31 (“PD 31”). PD 31 came into effect on 1 November 2014. While the Mediation Ordinance (Cap. 620) provides the statutory framework, PD 31 outlines the operational expectations for litigants.  

Under Order 1A of the Rules of the High Court (Cap. 4A), the court has a statutory duty to further the underlying objective of facilitating settlement by encouraging and facilitating the use of Alternative Dispute Resolution (ADR). ADR is defined as a process where parties appoint a third party to assist them. Direct settlement negotiations between parties do not constitute ADR in this context. 

Under the court’s active case management powers, the court has a role in encouraging parties to consider alternative dispute resolution, including mediation. The court does not force parties to settle their disputes, but it expects parties to consider mediation seriously where it may be suitable. PD 31 also emphasises that the court has a duty to help parties settle their case, and that the parties and their legal representatives have a corresponding duty to assist the court in discharging that duty. Other relevant Practice Directions echo the same general theme of encouraging ADR and settlement. 

Scope and procedural requirements 

PD 31 applies to all civil proceedings in the Court of First Instance and the District Court which have been begun by writ, except for the following proceedings: 

Court of First Instance 

1. Proceedings in the Construction and Arbitration List 
2. Proceedings in the Personal Injuries List 

District Court 

1. Proceedings in the Personal Injuries List 
2. Proceedings in the Equal Opportunities List under the Sex Discrimination Ordinance (Cap. 480), Disability Discrimination Ordinance (Cap. 487) and Family Status Discrimination Ordinance (Cap. 527) 
3. Proceedings to recover tax under the Inland Revenue Ordinance (Cap. 112) 

To ensure mediation is properly considered, PD 31 mandates several procedural steps: 

• Mediation Certificate: Within 28 days of the close of pleadings, alongside the timetabling questionnaire, legally represented parties must file a Mediation Certificate. This document must be signed by both the solicitor and the client. The solicitor certifies that he has explained the availability of mediation, the content of PD 31, and the cost advantages of mediation over litigation. The party acknowledges his understanding of these points and states whether he is willing to attempt mediation. 

• Mediation Notice and Response: A party wishing to mediate serves a Mediation Notice. The respondent must then serve a Mediation Response within 14 days. 

• Mediation Minute: Where parties reached an agreement on the specific details of a proposed mediation, the agreement is reduced to writing in the Mediation Minute. The Mediation Minute has to be signed by both parties or their solicitors, and filed to the court within 3 days after it has been signed. 

• Court directions: If the parties agree in principle to mediate but cannot agree on the practical arrangements, they may apply to the court for directions. The court may assist only in relation to limited matters, namely: the time for serving the mediation response, the mediation venue, timeframe, fees, and the minimum threshold for attempting mediation. However, the court cannot appoint a mediator or determine the rules of the mediation unless the parties are willing to have the court resolve their differences. 

Costs consequences 

A significant feature of the judicial framework is the possibility of costs sanctions. Courts apply a policy of “soft compulsion”, using their discretion over costs to penalize parties who unreasonably refuse to participate in mediation. If a party unreasonably refuses or fails to engage in mediation, the court may take that conduct into account when making costs orders. 

This means that a party may be penalised in costs if it has acted unreasonably in relation to mediation, even if it is otherwise successful in the litigation. Silence in the face of an invitation to mediate is considered unreasonable. Furthermore, refusing to mediate based on “commercial reasons” or a belief that one has a “strong case” is often insufficient to avoid sanctions. 

However, a party will not necessarily be penalised simply because mediation did not result in settlement. PD 31 and related Practice Directions make clear that the court will not make an adverse costs order against a party on the ground of unreasonable failure to engage in mediation where: 

1. The party has engaged in mediation to the minimum level of participation agreed by the parties or directed by the court before the mediation; or 
2. The party has a reasonable explanation for not engaging in mediation. 

A reasonable explanation may include the fact that active “without prejudice” settlement negotiations between the parties are progressing, or that the parties are actively engaged in some other form of ADR to settle the dispute. However, once such negotiations or the ADR process has ceased or failed, that explanation may no longer be sufficient, and the parties should then consider whether mediation is appropriate. 

In other words, if a party has not engaged in mediation to the agreed or court-directed minimum level of participation, and has no reasonable explanation for not doing so, that party may face an adverse costs order. 

The refusing party bears the burden of proving that he did not unreasonably refuse or fail to mediate.

b. Practice Direction 18.1 & 18.2: Personal Injuries List & Employees Compensation Cases

Personal Injury and Employees Compensation cases are not covered by PD 31. Practice Direction 18.1 and Practice Direction 18.2 covers these types of cases and lays down far more detailed provisions. The idea is to encourage early settlement by way of mediation.

Before the commencement of proceedings, parties should explore settlement by making genuine attempts to engage in settlement negotiations by without prejudice correspondence, by structured without prejudice face-to-face meetings, or by any other manner agreed to by the parties.

If such negotiations do not result in any settlement after a reasonable time, the parties should proceed to explore ADR by mediation or some other form of ADR.

It is expressly stated that settlement negotiations that take place only between the parties themselves, without an arbitrator or mediator present, do not amount to ADR.

In exercising its discretion on costs, the Court takes into account all relevant circumstances. These circumstances would include any unreasonable failure of a party to engage in mediation where this failure can be proven by materials that are admissible to the court. Legal representatives should advise their clients of the possibility of the Court making an adverse costs order where a party unreasonably fails to engage in mediation.

Similar to PD 31, the Court will not make any adverse costs order against a party on the grounds of unreasonable failure to engage in mediation where:

(1) The party has engaged in mediation to the minimum level of participation agreed to by the parties or as directed by the Court prior to the mediation.

(2) A party has a reasonable explanation for not engaging in mediation. If active without prejudice settlement negotiations are currently going on between the parties, this would be likely to provide such a reasonable explanation. However, where such negotiations have broken down, the basis for such explanation will have gone and the parties should then consider the appropriateness of mediation. If the parties are actively engaged in some other form of ADR to settle the dispute, this may also provide a reasonable explanation for not engaging in mediation in the meantime.

The Court may, on the application of one or more of the parties or on its own motion, stay the proceedings or any part thereof for the purpose of mediation for such period and on such terms as it thinks fit.

Where the Court stays the proceedings, the Plaintiff must promptly inform the Court if a settlement is reached and the parties should take the necessary steps to conclude the legal proceedings formally.

For details, please go to the Judiciary’s website.

c. Practice Direction 3.3: Voluntary Mediation in Petitions Presented under Section 724 of the Companies Ordinance, Cap. 622 and Section 177(1)(f) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, Cap. 32

Practice Direction 3.3 sets out the provision for voluntary mediation in respect of petitions presented under section 724 of the Companies Ordinance, Cap. 622 and petitions for winding up a company on just and equitable grounds under section 177(1)(f) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, Cap. 32, where there is no allegation of insolvency concerning the subject company and no allegation that the affairs of the company would require full investigation in the public interest.

Where the petitions are purely disputes between shareholders, not involving the interest of the general body of creditors of the subject company or affecting the public’s interest, the court wishes to encourage those shareholders to consider the use of mediation as a possible additional means of resolving their disputes in a cost-effective and more expeditious manner.

For details, please go to the Judiciary’s website.

d. The Lands Tribunal -Building Management Cases

Since 1 January 2008, the Lands Tribunal had introduced a pilot scheme to streamline the processing of building management cases. The aims of the Pilot Scheme are to streamline the processing of building management cases and to encourage parties involved in or considering civil legal action to attempt to resolve their differences by mediation, so that such cases can be disposed of in an efficient and expeditious manner.

A Building Management Mediation Co-ordinator's Office (BMMCO) has been set up in the Lands Tribunal [Address: Room 206-208, Lands Tribunal Building, 38 Gascoigne Road, Kowloon] since January 2008 to facilitate concerned parties seeking mediation on matters concerning building management. BMMCO mainly holds information sessions on mediation and help the litigants seek mediation to resolve their disputes in a more cost effective, timely and satisfactory manner.

The Tribunal has adopted the measures in the Pilot Scheme, with some modifications, as standard practice. A Practice Direction was issued by the Tribunal after the Pilot Scheme ended on 30 June 2009.

For details, please go to the Judiciary’s website.

e. Compulsory Sale Cases

A Practice Direction has also been issued to cover all Compulsory Sale Cases under the Lands (Compulsory Sale for Redevelopment) Ordinance, Cap. 545 ("the Compulsory Sale Ordinance"). This Practice Direction came into effect on 15 February 2011.

Parties to Compulsory Sales Cases can approach the BMMCO for information on mediation.

For details, please go to the Judiciary’s website.

f. Practice Direction 15.10: Family Mediation

Practice Direction 15.10 (“PD 15.10”), titled “Family Mediation”, establishes the procedural framework for mediation in matrimonial and family proceedings. The current Practice Direction came into effect on May 2, 2012. 

Purpose and scope 

The primary objective of PD 15.10 is to assist the court in its duty to facilitate the settlement of disputes and encourage parties to use mediation where appropriate. 

It applies to “Matrimonial Proceedings” and “Family Proceedings” as defined in Practice Direction 15.12. 

It does not automatically apply to certain proceedings unless directed by the court, including those under the Adoption Ordinance (Cap. 290), Legitimacy Ordinance (Cap. 184), Maintenance Orders (Reciprocal Enforcement) Ordinance (Cap. 188), Marriage Ordinance (Cap. 181), Marriage Reform Ordinance (Cap. 178), and Parent and Child Ordinance (Cap. 429). 

Key procedures 

PD 15.10 prescribes a specific referral process that begins at the earliest stages of litigation: 

Solicitors must advise clients on the availability of family mediation and provide a standard information leaflet issued by the Judiciary. 

When filing a petition or originating summons, the solicitor must file a “Petitioner’s/Applicant’s Certificate as to Family Mediation” (Appendix 1) signed by both the solicitor and the party. 

If a desire to mediate is indicated, the Family Court Registry refers the case to the Mediation Co-ordinator, who communicates with the parties to seek consent for the commencement of the process. 

The Registry staff are responsible for providing the information leaflet and certificate directly to unrepresented litigants. 

At any stage during litigation, parties may separately or jointly file an “Application for Family Mediation” (Appendix 5) with the Co-ordinator to attend an information session. 

Court directions and stays 

While an application for mediation does not lead to an automatic stay of legal proceedings, the court has the discretion to grant one. 

If parties agree to mediate but cannot agree on the arrangements, they may apply to the court for directions to resolve points of difference. 

The court may stay proceedings for mediation for a period it thinks fit, while remaining mindful of avoiding unnecessary delay to milestone dates and fixed trial dates. 

Costs and sanctions 

Similar to the general civil mediation framework, PD 15.10 provides that the court may make an adverse costs order against a party who unreasonably fails to engage in mediation. A party can avoid these sanctions if they show they have: 

1. Engaged in mediation to a minimum level of participation agreed to by the parties or directed by the court (for example, at least one substantive mediation session of a duration determined by the mediator). 
2. Provided a reasonable explanation for not engaging in mediation. 

Confidentiality and privilege 

The Practice Direction emphasizes that the court cannot compel the disclosure of materials protected by legal professional privilege or without prejudice privilege. Communications made during the mediation process are specifically protected as privileged and generally inadmissible in court, a principle also reflected in section 9 of the Mediation Ordinance (Cap. 620). 

g. Practice Direction 6.1: Construction and Arbitration List

Parties in construction cases are encouraged to attempt mediation as a possible cost-effective means of resolving disputes.

Like PD 31, when a party was engaged in mediation up to the minimum level of expected participation agreed by the parties or as determined by the court, and has reasonable explanation for non-participation, he should not suffer any adverse court order. （Practice Direction 6.1）

For details, please go to the Judiciary’s website.

IV. Related Websites

• Hong Kong International Arbitration Centre
• Hong Kong Judiciary
• Department of Justice
• Legal Aid Department
• Hong Kong Bar Association
• The Law Society of Hong Kong
• Joint Mediation Helpline Office Limited

1. What is Alternative Dispute Resolution (ADR)?

Given that the cost of litigation is normally high, the Hong Kong judicial system has provided some other means of dispute resolution in the form of ADR that seek to minimize the costs of dispute resolution by avoiding expensive court costs.

Alternative Dispute Resolution is a dispute resolution process whereby the disagreeing parties can come to an agreement short of litigation. The idea is that using ADR can minimize the time and costs involved in litigation. The most common forms of ADR are arbitration and mediation.

Arbitration

Arbitration is a legal process which results in the arbitrator(s), instead of a court judge, issuing an award to the aggrieved party. Arbitration awards are final and binding on the parties involved and the parties can only challenge these awards in very exceptional circumstances. An arbitration award has a status similar to a court judgment and is enforceable in a similar manner. Arbitration awards made in Hong Kong are enforceable through the courts of most of the world's trading nations.

Arbitration is a binding form of dispute resolution, equivalent to litigation in the courts, and is entirely distinct from the various forms of non-binding dispute resolution such as negotiation, mediation, or non-binding determinations by experts.

For an arbitration to take place, the disputing parties must agree to take their dispute to arbitration. In practice, this agreement has often been made before any dispute arises as companies will often include arbitration clauses in their various business contracts. By signing a contract with an arbitration clause in it, the parties are agreeing that any dispute arising from the contract will not be heard by a court, but will instead be heard by a private individual or a panel of several private individuals. If the parties have agreed to arbitration, they will generally have to proceed with an arbitration rather than litigation since courts will normally force the parties to honour their agreement to arbitrate.

You may also refer to Hong Kong Legal System.

Mediation

Mediation involves the appointment of a third party to help disputing parties reach a settlement. The mediator is not given any power to impose (or force) a settlement. The mediator will encourage the parties to reach an agreement during mediation so that the parties will not have one imposed upon them by an arbitrator or a judge.

In contrast to an arbitrator, a mediator will attempt to bring the parties to a mutually accepted settlement. A party is not legally required to accept the terms of a settlement proposed in a mediation. A mediation settlement takes effect as an agreement, rather than as an immediately enforceable award.

You may also refer to Hong Kong Legal System.

2. What Form of ADR should be adopted?

The parties should first refer to the terms in their contracts (i.e. the contract(s) that are providing the subject matter of their disputes).

In most commercial contracts (e.g. construction, insurance), there will normally be an arbitration clause stating that when there are disputes arising from the contract, the parties should refer to arbitration before instituting legal proceedings. The parties are therefore bound by their contracts to go for arbitration before commencing any civil action in Court. [see: Introduction - Arbitration]

Although mediation is the ADR recommended by the Judiciary, the parties are free to choose either arbitration or mediation to resolve their dispute.

No party shall be compelled to go to mediation as it is purely voluntary.

If the parties chose to go for arbitration, the award made by the arbitrator(s) would be final and binding on the parties.

On the contrary, a mediator would not impose a settlement. It is entirely for the parties to decide whether to settle and if so on what terms. A settlement after mediation is an agreement rather than an enforceable award.

3. Where do I find Arbitrators or Mediators?

There are a number of organizations in Hong Kong which provide lists of arbitrators and mediators. The major providers are: the Hong Kong Bar Association, the Law Society of Hong Kong and the Hong Kong International Arbitration Centre (“HKIAC”).

The parties have to agree to appoint the same arbitrator or mediator before the arbitration or mediation can commence.

In ad hoc proceedings, the HKIAC is authorized to carry out two important functions in relation to an arbitration:

• HKIAC may appoint arbitrators or umpires where the parties have failed to agree or have not designated an appointing authority or the designated appointing authority fails to carry out its function.
• HKIAC may determine whether a tribunal of one or three arbitrators should consider a dispute under the international (UNCITRAL Model Law) regime. (Where an arbitration falls within the domestic regime, unless the parties have agreed otherwise there shall be only one arbitrator).

Mediation, however, is a voluntary process and no party can be forced to go to mediation and no party can be forced to appoint a particular mediator.

4. Do I need legal representations in Arbitration or Mediation?

Just like any Civil Proceedings in Hong Kong, a party can represent himself or herself in Arbitration or Mediation if they cannot afford, or do not wish to have, legal representation.

However, a party may have professional legal representation if they want to and can afford it. Generally speaking, legal representation is recommended and is likely to be helpful if the case involves points of law that the party does not fully understand, or is complicated.

The Judiciary’s Mediation Information Office provides useful information on mediation. For details, please go to https://mediation.judiciary.hk/en/.

The Joint Mediation Helpline Office Ltd. (“the JMHO”), a non-profit-making organization jointly founded by the Hong Kong Mediation Council, the Hong Kong Bar Association, the Law Society of Hong Kong, the Chartered Institute of Arbitrators (East Asia Branch), the Hong Kong Institute of Arbitrators, the Hong Kong Institute of Architects, the Hong Kong Institute of Surveyors and the Hong Kong Mediation Centre, also provides useful information to the general public. (http://www.jointmediationhelpline.org.hk)

B. Comparison between arbitration and litigation

While both processes result in a binding decision, they differ in several important ways: 

(i) Voluntariness 

Litigation is a state-imposed system. Parties do not need to agree to be subject to the jurisdiction of courts. Arbitration is entirely voluntary and relies on a valid arbitration agreement. Arbitral tribunals derive their jurisdiction solely from the parties’ agreement to settle disputes privately. 

(ii) Selection of the decision-maker 

In litigation, a generalist judge is assigned by the state. In arbitration, parties can select experts with subject-matter expertise (such as engineers for construction disputes or specialists for shipping). 

(iii) Procedure 

Court procedures are often inflexible and bound by strict rules of evidence and conduct. Arbitration is more flexible and informal, allowing the tribunal to tailor the process to the specific needs of the dispute to ensure a speedier and more cost-effective outcome. 

(iv) Confidentiality and privacy 

Litigation is a public process, and judgments are generally published. Arbitration is a private and confidential process, which is often a decisive factor for businesses wishing to protect trade secrets or reputation. 

(v) Finality and appeals  

Litigation involves a multi-tiered court system with broad rights of appeal. Arbitration aims for one-stop-shop resolution with very narrow grounds for a court to set aside an award. Arbitral awards are generally not subject to appeal on the merits. 

(vi) International enforcement 

Enforcing national court judgments across borders is often much more difficult, as there is no equivalent global convention for the universal enforcement of court judgments. Arbitral awards are often easier to enforce internationally due to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, a treaty ratified by over 170 countries that requires member states to recognize and enforce foreign arbitral awards with very limited grounds for refusal. 

(vii) Costs 

Judges and court facilities are public expenses, whereas parties in arbitration must pay the arbitrator’s fees and the costs of hiring a hearing venue. 

D. Arbitration Ordinance (Cap. 609) 

The principal legislation governing arbitration in Hong Kong is the Arbitration Ordinance (Cap. 609). It applies primarily based on the seat of the arbitration, the timing of the proceedings, and the form of the arbitration agreement. 

Objects and guiding principles 

Section 3 of the Arbitration Ordinance sets out the main objectives and guiding principles of Hong Kong’s arbitration law. The purpose of the Ordinance is to help parties resolve their disputes by arbitration in a way that is fair, speedy and cost-effective, and without unnecessary expense. 

A key principle is party autonomy. This means that the parties are generally free to agree on how their arbitration should be conducted, including the procedure to be followed and the manner in which their dispute is to be resolved. However, this freedom is subject to necessary safeguards, particularly where matters of public interest are involved. 

Another important principle is minimal court intervention. The court should not interfere in an arbitration unless the Arbitration Ordinance expressly allows it to do so. This reflects Hong Kong’s pro-arbitration approach. In practice, the court’s role is mainly to support the arbitration process, rather than to supervise or control it. 

UNCITRAL Model Law Framework 

A defining feature of the Arbitration Ordinance is its substantial verbatim reproduction of the UNCITRAL Model Law (1985 version with 2006 amendments) directly within its sections, which has the force of law in Hong Kong. This drafting style ensures overall familiarity for international practitioners and cements Hong Kong’s status as a Model Law jurisdiction.  

The Ordinance specifically incorporates 2006 amendments, such as Article 2A of UNCITRAL Model Law (international origin/uniformity) and Article 7 of UNCITRAL Model Law (modern writing requirements for agreements). While it replicates the Model Law, it also adapts it to the local landscape by substituting certain articles (such as Article 6 of UNCITRAL Model Law regarding the competent authority) with Hong Kong-specific provisions. 

The shift to a unitary regime 

The most salient feature of the current Arbitration Ordinance (Cap. 609) is the establishment of a unitary regime. Under the old Arbitration Ordinance (Cap. 341), Hong Kong maintained a dual system that drew a sharp distinction between “domestic” and “international” arbitrations, with different rules applying to each. The current Ordinance abolished this bifurcated approach. Now, a single set of rules applies to all arbitrations seated in Hong Kong, regardless of whether they involve local or international parties. 

Geographic application (the seat) 

The Arbitration Ordinance applies to an arbitration under an arbitration agreement, whether or not that agreement was entered into in Hong Kong, provided the seat of arbitration is in Hong Kong. While the seat must be Hong Kong for the full Ordinance to apply, the arbitral tribunal remains free to hold physical meetings or hearings at any other location for convenience. 

If the seat of arbitration is outside Hong Kong, only specific provisions of the Arbitration Ordinance apply to support the process, including: 

• Section 20: Stay of court proceedings in favour of arbitration. 
• Section 21: Confirming the compatibility of an arbitration agreement with a request to a court for an interim measure. 
• Part 3A: Enforcement of emergency relief. 
• Section 45: Granting of interim measures by the court in relation to foreign proceedings. 
• Sections 60 and 61: Special powers of the court and enforcement of tribunal orders. 
• Part 10: Recognition and enforcement of awards (including Convention, Mainland, and Macao awards). 
• Part 11A (specific sections): Only sections 103A, 103B, 103C, 103D, 103G, and 103H regarding Intellectual Property Rights (IPR) apply extra-territorially. 

Temporal application (commencement date) 

The current Arbitration Ordinance came into effect on 1 June 2011. 

Proceedings commenced on or after 1 June 2011 are governed by the current Ordinance (Cap. 609), even if the arbitration agreement was made before that date. 

Proceedings commenced before 1 June 2011 generally continue to be governed by the repealed Arbitration Ordinance (Cap. 341) as if the current Arbitration Ordinance (Cap. 609) had not been enacted. 

Form of the agreement 

The Arbitration Ordinance applies exclusively to arbitrations based on written agreements. While oral arbitration agreements are valid at common law, they are rare and are not subject to the Arbitration Ordinance. The powers conferred on arbitrators and the court by the Arbitration Ordinance do not apply to them. 

For more information, please refer to “Written agreement requirement”. 

Provisions under Schedule 2 (opt-in and automatic) 

The Schedule 2 provisions of the Arbitration Ordinance are a set of optional clauses that preserve certain features of the previous domestic arbitration regime (under the repealed Cap. 341) within Hong Kong’s current unitary regime of arbitration. While the Ordinance is primarily based on the UNCITRAL Model Law, Schedule 2 allows for greater court intervention and oversight than the standard Model Law provisions. 

Schedule 2 comprises 7 sections, often grouped into 5 distinct sets of procedural mechanisms: 

1. Sole arbitrator: If the parties fail to agree on the number of arbitrators, the dispute is automatically submitted to a sole arbitrator. This contrasts with the default under the unitary regime (section 23), where the HKIAC decides if there should be one or three arbitrators. 

2. Consolidation of arbitrations: The Court of First Instance (“CFI”) is empowered to order the consolidation of two or more arbitral proceedings, or order them to be heard concurrently or sequentially. This is permissible if a common question of law or fact arises, or if the claims arise from the same transaction or series of transactions. 

3. Preliminary question of law: With the consent of all parties or the arbitral tribunal, a party may apply to the CFI to determine a preliminary question of law arising during the proceedings. The court will only entertain this if the determination might produce substantial savings in costs. 

4. Challenge for serious irregularity: A party may challenge an award in court on the grounds of serious irregularity affecting the tribunal, the proceedings, or the award. This involves a “closed list” of irregularities (such as failure to comply with section 46 duties or exceeding powers) that have caused or will cause substantial injustice. 

5. Appeal on question of law: This provides a limited right to appeal to the CFI on a question of law arising out of an award. Unless all parties agree, the appellant must obtain leave from the court, which is granted only if the tribunal's decision was obviously wrong or the question is of general importance and open to serious doubt. 

Schedule 2 provisions apply in the following scenarios: 

1. Express opt-in: If the parties expressly state in their agreement that specific Schedule 2 provisions apply. 

2. Transitional automatic opt-in: The agreement was entered into before 1 June 2011, or within the six-year transitional period ending 31 May 2017, and provided that the arbitration is a “domestic arbitration”. 

3. Statutory arbitrations: These are deemed to have expressly provided that Schedule 2 applies. 

4. Construction sub-contracts: If Schedule 2 applies to a main construction contract under the transitional rules, it is deemed to apply automatically to related sub-contracts containing a written arbitration agreement. However, this is subject to an “international exception”: Schedule 2 will not automatically apply if the subcontractor is a non-local entity or if a substantial part of the work is performed outside Hong Kong. 

Funding and fee structures 

The provisions regarding third-party funding (Part 10A) and Outcome Related Fee Structures (Part 10B) also apply to arbitrations seated outside Hong Kong, but only in relation to costs and expenses for services provided within Hong Kong. 

1. Nature and definition 

The arbitration agreement is the fundamental contract by which parties agree to resolve their disputes through a private arbitral tribunal rather than a court. Under section 19 of the Arbitration Ordinance (Cap. 609), which adopts the UNCITRAL Model Law, it is defined as an agreement to submit to arbitration all or certain disputes which have arisen or may arise between parties in respect of a defined legal relationship, whether contractual or not.  

These agreements typically manifest in two forms: 

(i) Arbitration clauses 

These are the most common type, typically included as one or more provisions within a larger commercial contract. They provide for the submission of future disputes that may arise from the defined legal relationship. 

(ii) Submission agreements 

These are post-dispute agreements entered into after a specific controversy has already arisen. Because it is often difficult for parties to cooperate on procedural matters once they are in active conflict, submission agreements are used much less frequently than pre-dispute clauses. They are often stand-alone documents detailing the specific dispute being referred to the arbitral tribunal. 

2. Requirements for validity 

1. Consent to arbitrate 

For an arbitration agreement to be valid and enforceable in Hong Kong, its terms must be certain and demonstrate a clear intent to arbitrate. The parties must clearly and unequivocally agree to submit their disputes to arbitration, thereby waiving their right to bring claims before Hong Kong courts. 

A valid agreement must contain an element of compulsion, typically using mandatory language such as “shall” rather than merely providing an option to litigate. An agreement that merely offers an "option" to choose between arbitration and litigation is generally not considered a valid arbitration agreement. 

Parties may sometimes include a provision known as a Scott v Avery clause, which adds a layer of compulsion to the arbitration process. This type of clause stipulates that the obtaining of an arbitral award is a condition precedent to any right of action in a court of law. Consequently, a party cannot successfully sue in court until he has first completed the arbitration and received a final award. These clauses do not fully oust the court’s jurisdiction but serve as a substantive defence that effectively postpones court access until the private resolution process is finished. 

2. Identification of the parties 

It is essential that the parties bound by the agreement are properly identified. An arbitrator has no authority to decide a dispute between parties other than those to the arbitration agreement. 

3. Identification of the disputes (scope) 

The agreement must define the “defined legal relationship” and the specific categories of disputes or claims that will be subject to arbitration. This is often achieved through broad "connecting phrases” such as disputes "relating to" or “arising in connection with” the contract. 

While the courts lean in favour of giving effect to these clauses (a “pro-arbitration” approach), they will refuse to enforce an agreement if it is found to be null and void, inoperative, or incapable of being performed. Additionally, the subject matter of the dispute must be arbitrable. For instance, matters involving criminal charges, certain family law issues, or specific state-reserved functions like taxation cannot be referred to arbitration under Hong Kong law. 

3. Written agreement requirement

Section 19 of the Arbitration Ordinance (Cap. 609) mandates that all arbitration agreements subject to its provisions must be in writing. Hong Kong has adopted a modern, broad interpretation of “writing” that accounts for technological developments. An arbitration agreement is treated as being in writing if its content is recorded in any form, even if the agreement itself was concluded orally, by conduct or by other means. 

An agreement satisfies this requirement if: 

1. its content is recorded in any form, including electronic communications like emails even if the underlying contract was concluded orally or by conduct; 
2. it is contained in an exchange of statements of claim and defence where one party alleges the existence of the agreement and the other does not deny it; or 
3. it is incorporated by reference, such as when a contract refers to a separate document (like standard industry terms) that contains an arbitration clause. 

Incorporation by reference 

Arbitration clauses do not always have to be written out in full within the primary contract document to be effective. Hong Kong law allows parties to incorporate an arbitration agreement by reference to another document that contains the clause, such as standard industry terms, general conditions of contract, or a separate signed agreement. For this incorporation to be valid, the reference in the main contract must be clear enough to demonstrate an intent to make the arbitration clause part of the contract. This mechanism is widely used in the construction and shipping sectors, where parties frequently adopt standardized forms. 

4. Consent, capacity and authority

At the heart of the arbitral process is the consent of the parties, as an arbitrator has no authority to decide disputes between parties who have not agreed to the process. 

Capacity refers to the legal ability of a natural or legal person to enter into such a contract under the relevant substantive law. For individuals, capacity is generally determined by the law of their domicile or residence, while for corporations, it is governed by their constitution and the law of their place of incorporation. An award may be set aside if a party can prove he lacked the legal capacity to conclude the arbitration agreement at the time it was made.  

Similarly, issues regarding whether a representative was properly authorized to sign on behalf of a company are treated as jurisdictional questions to be determined by the tribunal. 

5. Separability doctrine

Hong Kong law recognizes the doctrine of separability, which treats an arbitration clause as an independent agreement distinct from the other terms of the substantive contract. This principle, enshrined in section 34 of the Arbitration Ordinance (Cap. 609), ensures that the validity or existence of the arbitration agreement is not automatically affected if the main contract is found to be invalid or terminated.  

Because the clause is a separate obligation, an arbitral tribunal retains the jurisdiction to rule on the validity of the underlying contract and any claims arising from it, even if the contract was void from the start. This doctrine is closely allied with the principle of competence-competence, which empowers the arbitral tribunal to rule on its own jurisdiction. 

The separability doctrine ensures that an arbitration clause survives the termination, expiration, or rescission of the main contract. Even if a contract is repudiated and that repudiation is accepted, the arbitration clause remains in effect to resolve disputes arising from the relationship, including claims for damages.  

To terminate the arbitration agreement itself, the parties must generally reach a separate express agreement to that effect, independent of the termination of the main contract. 

6. Effect of death, bankruptcy and winding up

Death of a party 

Under section 22 of the Arbitration Ordinance (Cap. 609), the death of a party does not normally discharge an arbitration agreement. Unless the parties agreed otherwise, the arbitration agreement may still be enforced: 

• by the deceased party’s personal representatives; or 
• against the deceased party’s personal representatives. 

The personal representative may step into the position of the deceased party for claims that survive death. In this sense, the personal representative becomes a “derivative party” and may be required to continue or commence arbitration on behalf of the estate. 

However, section 22 does not keep alive a claim that the law says has already ended because of death. If the underlying legal right or obligation is extinguished by death (e.g. certain personal services), the arbitration agreement relating to that right will also cease to operate for that dispute. 

Bankruptcy of a party 

Bankruptcy does not automatically terminate an arbitration agreement. The effect depends on the role of the trustee in bankruptcy and whether the relevant contract is adopted. 

If the trustee in bankruptcy adopts the contract containing the arbitration agreement, the trustee will generally be bound by that arbitration agreement. 

If the trustee does not adopt the contract, the court may still order that the dispute be referred to arbitration, depending on the circumstances. 

Winding up and insolvency of companies 

An arbitration agreement is binding on liquidators as successors by operation of law. 

A winding up petition does not automatically override an arbitration. A winding up petition is not treated simply as an ordinary private claim between two parties. It is a class remedy for the benefit of all creditors. For this reason, the mandatory stay provision under section 20 of the Arbitration Ordinance does not apply in the same straightforward way as it would to ordinary court proceedings. 

However, the court generally respect the parties’ agreement to arbitrate. The modern approach is that, where the debt or dispute relied upon in support of a winding-up petition falls within an arbitration agreement, the court will usually give effect to that agreement and require the parties to resolve the dispute by arbitration, unless there are strong reasons not to do so. 

Strong reasons may include: 

• the alleged dispute being plainly insubstantial, frivolous, or an abuse of process; 
• a creditor community being at risk; or 
• insolvency affecting third parties. 

Court control over arbitration during winding-up 

Arbitration may, in principle, continue after a winding-up petition has been presented. However, the court has statutory control over proceedings against the company at different stages of the winding-up process. 

Under section 181(b) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32), once a winding up petition has been presented, the Court of First Instance may restrain or stay proceedings, including arbitration proceedings, against the company. 

Once a winding-up order is made or a provisional liquidator is appointed, section 186 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, provides that no arbitration may be commenced or continued against the company except with the leave of the court. 

The overall position is therefore that arbitration agreements remain relevant and are generally respected in insolvency situations, including by liquidators. But the court retains ultimate control where a winding-up petition has been presented, and especially after a winding-up order or the appointment of a provisional liquidator, because the process then concerns not only the company and the petitioning creditor, but the interests of creditors as a whole. 

F. Drafting effective arbitration agreements

1. Importance of clear drafting 

The arbitration agreement is a fundamental contract that serves as an empowering provision, allowing parties to agree on a suitable procedure and scope for resolving disputes while their relationship is still collaborative. Because this agreement forms the basis of the arbitral tribunal’s jurisdiction and sets the rules for any future proceedings, clear and precise drafting is pivotal to the success of the process. Poorly drafted provisions, often referred to as "pathological arbitration clauses”, frequently lead to expensive and confused jurisdictional battles in court. Common drafting errors include a lack of mandatory language (such as using “may” instead of “shall”), naming non-existent appointing bodies or procedural rules, and creating ambiguity regarding the number of arbitrators. 

While Hong Kong courts adopt a “pro-arbitration” approach and try to give effect to these clauses whenever possible, parties are strongly advised to use model clauses provided by major institutions to ensure a valid and binding agreement. A failure to draft properly may still lead to expensive jurisdictional challenges. In extreme cases, the arbitration agreement may be so uncertain or unworkable that the court will decline to enforce it and will assume jurisdiction over the dispute. 

An effective arbitration agreement should deal with the following matters, either expressly in the clause itself or by incorporating arbitral rules that address them: 

• the scope of disputes referred to arbitration; 
• any pre-arbitration negotiation, mediation or adjudication steps; 
• the seat of arbitration; 
• governing law and choice of law; 
• whether the arbitration will be institutional or ad hoc; 
• if institutional, which institution and which institutional rules will apply; 
• if ad hoc, whether the UNCITRAL Arbitration Rules will apply or whether bespoke procedures will be drafted; 
• the number of arbitrators and the method of appointment; 
• the language of the arbitration; 
• the procedure the tribunal will adopt in deciding the dispute; 
• confidentiality arrangements; 
• interim measures and emergency relief; 
• joinder, consolidation and multiparty issues; 
• costs; 
• legal representation; and  

• any time limits for the award. 

   

2. Scope of arbitration agreements 

General principles 

The scope of an arbitration agreement defines which specific disputes the parties have agreed to submit to the tribunal. Hong Kong courts apply a “one-stop shop” presumption, assuming that rational businesspeople intend all disputes arising from their relationship to be decided by the same tribunal unless they clearly exclude certain matters.  

Broad and narrow drafting 

Broad language, such as disputes “arising out of”, “in connection with” or “relating to” a contract, is generally construed to cover a wide range of issues, including claims in tort, misrepresentation, and rectification, if they are closely connected to the underlying contract. 

In contrast, the phrase “arising under” may be interpreted more strictly, potentially excluding non-contractual claims. Consequently, parties should avoid narrow or uncertain wording unless they deliberately intend to bifurcate their dispute resolution. 

Disputes outside the arbitration agreement 

If a dispute is found to be outside the ambit of the agreement, the court will refuse to stay legal proceedings in favour of arbitration. For more information, please refer to “Stay of court proceedings in favour of arbitration”. 

Ultimately, the scope is a matter of contractual construction, giving the chosen words their natural meaning in the context of the overall relationship. For this reason, parties should avoid narrow or uncertain wording unless they deliberately intend to exclude particular categories of dispute from arbitration. 

Limits on scope: arbitrability 

Regardless of how broadly a clause is drafted, the scope of arbitration is limited by the doctrine of arbitrability. Non-arbitrable matters are categories of disputes that, for reasons of public policy or specific statutory reservation, cannot be resolved through private arbitration and must instead be determined by state courts or specific tribunals. While parties generally enjoy wide freedom to agree on how to resolve their disputes, this autonomy is subject to safeguards necessary in the public interest. 

Non-arbitrable matters under Hong Kong law 

Under Hong Kong law, certain matters are reserved for the courts and cannot be submitted to arbitration: 

(i) Criminal liability 

Criminal charges are reserved for the state and cannot be referred to arbitration. However, if an injury amounting to an indictable offence also gives rise to a civil cause of action that can be legitimately compromised, that specific civil claim may still be arbitrated. 

(ii) Matrimonial and family matters 

Disputes concerning the status of a marriage, divorce, and the relations between parents and children (such as custody) are non-arbitrable. An exception exists for the specific terms on which a husband and wife shall separate, as they can validly agree on these matters between themselves. 

(iii) Personal status 

Matters affecting a person’s legal status (e.g., mental capacity) are reserved for the courts. 

(iv) Actions in rem against vessels 

While admiralty claims for debt or damages can often be arbitrated, actions in rem against a vessel are generally non-arbitrable. 

(v) Matters reserved for state agencies 

Disputes involving issues specifically reserved for resolution by government bodies or specialized tribunals are non-arbitrable. These include: 

1. Taxation and revenue matters. 
2. Immigration and nationality issues. 
3. Social welfare entitlements. 
4. Development control. 

(vi) Employees’ compensation claims 

The Court of Final Appeal has held that the Employees’ Compensation Ordinance (Cap. 282) confers exclusive jurisdiction on the District Court for these claims. Consequently, there is no power to stay such proceedings in favour of arbitration. 

(vii) Competition and anti-trust 

These are listed as matters generally not capable of being referred to arbitration. 

a. Legal consequences of non-arbitrability under Hong Kong law  

Where a dispute concerns a subject matter that is not capable of settlement by arbitration, the consequences may arise at every stage of the arbitral process: from an application to stay court proceedings, through the tribunal’s jurisdictional ruling, to setting aside, recognition and enforcement. 

Refusal to stay court proceedings 

The issue may first arise when one party commences court proceedings despite an arbitration agreement, and the other party applies for a stay in favour of arbitration. 

Section 20 of the Arbitration Ordinance (Cap. 609) generally requires the court to refer parties to arbitration where the dispute is the subject of an arbitration agreement. However, that obligation does not apply if the arbitration agreement is “null and void, inoperative or incapable of being performed”. A dispute over a non-arbitrable subject matter renders the agreement null and void in the context of that specific claim. 

If the subject matter of the dispute is non-arbitrable, the court may refuse to stay the proceedings. 

At this gateway stage, the court will often conduct only a prima facie review, particularly where the issue is not clear-cut. If it is arguable that the matter falls within the arbitration agreement and is arbitrable, the court may leave the arbitral tribunal to make the first full determination of jurisdiction. However, if it is clear that the subject matter is not capable of settlement by arbitration, the court need not refer the matter to arbitration. 

The arbitral tribunal’s jurisdiction 

Even where court proceedings are stayed or no court proceedings have been brought, the arbitral tribunal must still consider whether it has jurisdiction to hear the dispute. Under section 34 of the Arbitration Ordinance, an arbitral tribunal may rule on its own jurisdiction. This is the principle of competence-competence. 

The tribunal must consider whether the dispute is capable of settlement by arbitration under the law of the seat, namely Hong Kong law. In appropriate cases, it may also need to consider whether the award would face arbitrability objections under the law of the place where enforcement is likely to be sought. 

That power, however, is not exclusive. The tribunal’s jurisdiction remains subject to supervision by the courts, especially where the issue concerns arbitrability. 

If the tribunal rules as a preliminary question that it has jurisdiction despite an arbitrability objection, a party may request the Court of First Instance (“CFI”) to decide the matter. The CFI determines the issue of the tribunal’s jurisdiction afresh, meaning that it makes its own independent determination and is not bound by the tribunal’s findings. 

This application must be made within the statutory time limit, which is 30 days from receipt of notice of the tribunal’s ruling. The decision of the CFI on such a jurisdictional ruling is final and not subject to appeal. 

If, by contrast, the tribunal concludes that the dispute is non-arbitrable and that it therefore lacks jurisdiction, that ruling is generally not subject to appeal. In such case, the parties must pursue the dispute before the competent court or statutory forum. 

Setting aside an award on grounds of non-arbitrability 

If a tribunal proceeds to determine a dispute that is not arbitrable under Hong Kong law, any resulting award is vulnerable to being set aside. 

Section 81 of the Arbitration Ordinance provides that an award may be set aside if the court finds that the subject matter of the dispute is not capable of settlement by arbitration under the law of Hong Kong. 

Unlike some grounds for setting aside, which depend on proof by the party challenging the award, the court may consider non-arbitrability of its own motion. 

If the award is set aside on this basis, it cannot stand as a binding arbitral determination. The parties are effectively returned to the position that the dispute must be resolved by the court or other body with lawful jurisdiction over the subject matter. 

Refusal of recognition and enforcement 

Non-arbitrability may also arise at the final stage, when a party seeks recognition or enforcement of an award in Hong Kong. The Arbitration Ordinance contains separate enforcement regimes for different categories of awards, but each regime recognises non-arbitrability as a ground on which enforcement may be refused: 

• Section 86(2)(a): Hong Kong awards and non-Convention awards 
• Section 89(3)(a): Convention awards 
• Section 95(3)(a): Mainland awards 
• Section 98D(3)(a): Macao awards 

Severability of awards 

If an award contains decisions on both arbitrable and non-arbitrable matters, the court may enforce the arbitrable parts of the award provided they can be separated from the portions that are not capable of settlement by arbitration. 

3. Staged dispute resolution (multi-tiered clauses)

Definition and industry practice 

Commercial agreements increasingly incorporate “staged” or multi-tiered dispute resolution clauses, which require parties to attempt interim steps such as negotiation, mediation, or adjudication before an arbitration can be commenced.  

These procedures are common in construction and engineering contracts, where a dispute might first be submitted to an engineer or architect, project manager or other professional for a preliminary decision within a fixed time period. 

Drafting requirements and enforceability 

To ensure such clauses are enforceable rather than “pathological”, they must be drafted with certainty and completeness. While mediation and adjudication are widely accepted, clauses requiring “negotiation” or “consultation” are traditionally viewed as unenforceable for uncertainty unless they provide an unequivocal commitment with clear entry and exit mechanisms. 

When drafting such clauses, it is essential to specify whether these interim steps are intended as mandatory conditions precedent to the right to arbitrate and to define clear entry and exit mechanisms for each stage. The clause should state: 

• when the pre-arbitration step begins; 
• who must participate; 
• how long the step lasts; 
• what happens if a party refuses to participate;  
• what objective criteria to determine when the process is exhausted or terminated are; and 
• when a party is entitled to commence arbitration. 

Failure to comply: admissibility vs. jurisdiction 

If a party fails to comply with a mandatory pre-condition, modern Hong Kong jurisprudence clarifies that this is generally a question of the admissibility of the claim for the tribunal to decide, rather than a jurisdictional issue for the court. This is a critical distinction: because it is an admissibility issue, the tribunal’s ruling on whether the pre-conditions were met is generally final and cannot be reviewed or set aside by the court. An exception only exists if the parties expressly and clearly provide that failure to comply with the interim steps will exclude the tribunal’s jurisdiction entirely. 

Procedural consequences 

If a party ignores mandatory pre-conditions and commences litigation (court proceedings), the court will typically grant a stay under section 20 of the Arbitration Ordinance (Cap. 609). This refers the parties back to the agreed resolution process, requiring them to complete the missing interim steps before proceeding. 

If arbitration is commenced prematurely, the arbitral tribunal has the authority to determine the consequences of the non-compliance. This may include staying the arbitral proceedings until the parties complete the required step or, in some cases, finding the claim currently inadmissible without prejudice to it being refiled once the conditions are satisfied. 

4. Governing law and choice of law

A well-drafted arbitration agreement should ideally distinguish between three distinct systems of law that may govern different aspects of the process. While these laws are often the same in practice, they are legally independent: 

1. the substantive law of the contract, which governs the underlying commercial rights and obligations of the parties, such as whether a contract was breached or how damages are assessed; 
2. the proper law of the arbitration agreement, which governs the formation, existence, validity, interpretation, scope and enforceability of the obligation to arbitrate; and 
3. the procedural law of the arbitration, which is determined by the seat of the arbitration, and which governs the internal conduct of the proceedings and the external relationship between the arbitration and the supervisory courts. 

Determining the law of the arbitration agreement 

The proper law of the arbitration agreement governs whether the agreement is valid, whether it has been discharged, and whether its wording is broad enough to encompass a specific dispute.  

The arbitration agreement is legally separate from the main contract. While the governing law of the arbitration agreement often matches the substantive law of the underlying contract, the two can be different. Therefore, even if the main contract is governed by, for example, English law, it does not automatically mean that the arbitration agreement is also governed by English law. 

In Hong Kong, determining the applicable law for an arbitration agreement is a three-stage process: 

1. Seeking an express choice of law; 
2. If none is found, seeking an implied choice of law; and 
3. If there is neither an express nor an implied choice, identifying the system of law with which the agreement has its closest and most real connection. 

In the absence of an express choice for the arbitration clause itself, an express choice of law governing the substantive contract is generally considered a strong indication of the parties’ intention for the arbitration agreement as well. Although the choice of a seat is a critical factor, Hong Kong courts have held that there is no clear presumption that the law of the seat should automatically override the law of the contract. Instead, the court must perform a construction exercise to ascertain the parties’ intent within the specific context of their agreement. While a deliberate choice of a neutral seat like Hong Kong is a significant factor pointing toward Hong Kong law, it is not a settled rule and must be balanced against other indicators of intent, such as the governing law of the main contract. 

If no express or implied choice can be found, the agreement is governed by the law with which it is most closely connected. This will generally be the law of the seat. 

5. Seat of arbitration

The designation of the “seat” or “legal place” of arbitration is one of the most critical elements of the arbitration agreement. The seat serves as the formal legal home of the arbitration and, in the absence of a contrary agreement, determines the procedural law that governs the proceedings, as well as which court has the power to supervise or support the process.  

Choosing Hong Kong as the seat 

Choosing Hong Kong as the seat ensures that the arbitration will be subject to the Arbitration Ordinance (Cap. 609) and that the Court of First Instance of the High Court serves as the primary supervisory court, having jurisdiction to assist with interim measures, enforcement matters and applications to set aside an award. 

A unique advantage of seating an arbitration in Hong Kong is the Interim Measure Arrangement with Mainland China. Parties in Hong Kong-seated arbitrations administered by recognized institutions can seek asset, evidence, or conduct preservation orders directly from Mainland courts by relying on the Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings by the Courts of the Mainland and the Hong Kong Special Administrative Region, a power not available to arbitrations seated elsewhere. 

Seat and governing law 

Parties should expressly agree on the seat of arbitration in the interests of certainty and to avoid expensive jurisdictional disputes after a dispute has arisen. The seat will not usually determine the substantive law governing the underlying contract. For example, a contract may be governed by Hong Kong law even though the arbitration is seated in Singapore, or vice versa. 

The seat is important because it determines matters such as: 

• the extent to which the courts of the seat may intervene in the arbitration; 
• whether there is any right of appeal or challenge to an award; 
• the court that may set aside the award; 
• the procedural law governing the arbitration; and 
• the legal framework supporting recognition and enforcement of the award. 

Factors to consider when selecting a seat 

When choosing the seat, parties should consider, taking local legal advice where necessary, whether: 

• the courts of the seat will enforce the arbitration agreement; 
• the courts will avoid undue interference in the arbitral process; 
• the courts will respect the finality of arbitral awards; 
• the award can be enforced in the seat as if it were a court judgment; and 
• the seat is in a jurisdiction that is party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, so that awards can be enforced internationally in other Convention states. 

Default position if no seat is specified 

Under section 48 of the Arbitration Ordinance, parties are free to agree on the seat of arbitration. If the agreement does not contain an express choice, the court or tribunal will first attempt to discern an implied choice of seat from the surrounding circumstances. An implied intention may be inferred from a reference to a specific venue for hearings, the choice of procedural law, or the grant of jurisdiction to a specific state’s courts. 

If no express or implied choice can be discerned, the arbitral tribunal will determine it. In making this determination, the tribunal must have regard to the circumstances of the case, including the convenience of the parties. Factors considered include geographic proximity, ease of access, political stability, and the existence of a modern commercial arbitration law in the proposed jurisdiction. 

Parties often determine the seat indirectly by incorporating institutional rules that contain default provisions. These institutional defaults often apply before the tribunal is constituted. For example, if HKIAC Administered Arbitration Rules are adopted, the seat of an arbitration conducted under these rules is Hong Kong unless the arbitral tribunal determines, having regard to the circumstances of the case, that another seat is more appropriate. 

Practical hearing logistics 

It is important to distinguish the legal seat from the physical location of hearings. A tribunal may meet at any geographical location or hold virtual hearings for convenience without changing the legal seat or the applicable procedural law. That said, if hearings are likely to take place in the seat, parties should also consider practical logistics, including travel, visas, rights of audience for legal representatives, hearing facilities, availability of interpreters, and access for parties, counsel, witnesses and experts. 

a. Mismatch of seat and governing laws

In international arbitration, different laws may apply to different parts of the dispute. The contract may be governed by one law, the arbitration agreement by another, and the arbitration procedure by the law of the arbitral seat. If these laws are not aligned, this can create uncertainty and practical difficulties for the parties. 

The “seat” of arbitration is particularly important because it determines the procedural law of the arbitration. It also identifies which court has supervisory jurisdiction over the arbitration. 

Uncertainty over the law governing the arbitration agreement 

A common problem arises where the parties have chosen a governing law for the main contract, but have not expressly stated which law governs the arbitration agreement. 

Under the doctrine of separability, the arbitration agreement is legally separate from the main contract. Therefore, even if the main contract is governed by, for example, English law, it does not automatically mean that the arbitration agreement is also governed by English law. 

Where there is no express choice, a court may have to decide whether the parties made an implied choice. The governing law of the substantive contract is often a strong indication of the parties’ intention. However, if the parties choose a different arbitral seat, that may point in another direction. 

If no implied choice can be identified, the court may apply the law with the closest and most real connection to the arbitration agreement. In many cases, that will be the law of the seat. This creates uncertainty because parties may not know in advance which law will be applied to determine the validity, scope or interpretation of the arbitration clause. 

Mandatory rules of the seat may still apply 

Even if the parties choose a foreign law to govern the contract or the arbitration agreement, the mandatory rules of the seat cannot usually be avoided. 

For example, if the arbitration is seated in Hong Kong, Hong Kong Arbitration Ordinance (Cap. 609) will apply to important procedural matters. Hong Kong courts have statutory powers to intervene in specific functions, including the appointment or removal of arbitrators, reviewing tribunal jurisdiction, granting interim measures (like injunctions), and assisting in taking evidence (such as subpoenas or warrants). 

The award may also be vulnerable if it conflicts with the public policy of the seat. Therefore, even where the parties intended another law to govern their commercial relationship, the law of the seat may still affect the conduct and validity of the arbitration. 

Jurisdictional and award challenges 

A mismatch between the seat, the governing law of the contract and the law of the arbitration agreement may give a party grounds to challenge the tribunal’s jurisdiction or the validity of the award. 

A party may argue that the arbitration agreement is invalid, that the dispute falls outside the scope of the arbitration clause, that the tribunal lacked jurisdiction, or that the wrong law was applied. These objections may be raised at the start of the arbitration, during the proceedings, in set-aside proceedings before the courts of the seat, or at the enforcement stage. 

The courts of the seat usually have the power to set aside an award. If the law of the seat takes a different approach from the law governing the contract or the arbitration agreement, a party may challenge the award on grounds such as invalidity of the arbitration agreement, lack of jurisdiction or procedural irregularity. 

This can also create enforcement difficulties. An award may be set aside or treated as invalid at the seat but still argued to be enforceable elsewhere, depending on the approach of the enforcement court. Conversely, a party resisting enforcement may rely on alleged invalidity of the arbitration agreement or defects in the arbitral procedure. 

These challenges can significantly increase costs, cause delay and undermine the finality of the dispute resolution process. 

Procedural and evidential complications 

Disalignment can also make the arbitration more complicated in practice. 

Some issues may be difficult to classify. For example, limitation periods, estoppel, admissibility of evidence, confidentiality, waiver, or the scope of the tribunal’s powers may be treated differently under different legal systems. One system may regard an issue as procedural and therefore governed by the law of the seat, while another may regard it as substantive and governed by the law of the contract. 

There may also be inconsistent interpretations. The law governing the arbitration agreement may determine whether a particular dispute falls within the arbitration clause. If that law differs from the governing law of the contract, the tribunal or court may have to consider both systems of law. 

Where foreign law is relevant before the courts of the seat, it may need to be proved by expert evidence. This can increase the time and expense of the proceedings. 

Drafting considerations 

To avoid expensive jurisdictional litigation, parties may consider clearly and expressly stating the governing law of the substantive contract, the governing law of the arbitration agreement, and the seat of arbitration.

6. Institutional vs. ad hoc arbitration

When drafting an agreement, parties must decide whether they prefer an “institutional” (or administered) arbitration or an “ad hoc” arbitration.  

Institutional arbitration 

An institutional arbitration is conducted under the existing rules of a specific body, such as the Hong Kong International Arbitration Centre (“HKIAC”), the International Court of Arbitration of the International Chamber of Commerce (“ICC”), the China International Economic and Trade Arbitration Commission (“CIETAC”), or the Singapore International Arbitration Centre (“SIAC”).  

These institutions provide a structured framework by acting as an appointing authority, supervising the conduct of the case and administering funds for tribunal fees. Depending on the institution, additional services may include appointing arbitrators where the parties cannot agree, acting as a clearing house for documents, providing hearing facilities, administering deposits and fees, supervising procedural timetables and, in some cases, scrutinising draft awards. 

Ad hoc arbitration 

In contrast, an ad hoc arbitration is conducted pursuant to rules agreed upon by the parties themselves or laid down by the tribunal, without institutional oversight and administration. While ad hoc arbitration offers maximum flexibility and may avoid certain institutional costs, it requires more cooperation between parties. 

Many parties in ad hoc proceedings adopt the UNCITRAL Arbitration Rules to provide a general procedural structure. Even in ad hoc cases, parties often designate an institution like the HKIAC to act solely as the “Appointing Authority” to break deadlocks without administering the entire case. 

HKIAC as the statutory default authority 

Under the Arbitration Ordinance (Cap. 609), the HKIAC serves as the statutory default authority for all arbitrations seated in Hong Kong, not just ad hoc ones, where the parties’ appointment procedure fails. A critical statutory function of the HKIAC is the power to determine the number of arbitrators (either one or three) and to appoint arbitrators when the parties fail to reach an agreement. 

Special considerations for Mainland China 

The choice between these two forms is particularly significant when dealing with Mainland Chinese entities. Under Articles 27 and 29 of the PRC Arbitration Law, a valid arbitration agreement must designate a specific “arbitration commission”; consequently, onshore ad hoc arbitrations (seated in the Mainland) are generally not recognized in Mainland China.  

However, the enforceability of Hong Kong-seated awards in the Mainland is robust. Pursuant to the Arrangement Concerning Mutual Enforcement of Arbitral Awards (1999) and the Supplemental Arrangement Concerning Mutual Enforcement of Arbitral Awards (2020), the PRC courts will recognize and enforce any Hong Kong award, whether institutional or ad hoc, rendered in accordance with the Arbitration Ordinance. 

While foreign ad hoc awards (including those from Hong Kong) may be enforced in the PRC under reciprocal arrangements, institutional arbitration remains the safer and more standard choice for disputes involving Chinese parties to ensure the agreement’s validity. 

7. Arbitral rules

Importance of the choice of arbitral rules 

The choice of arbitral rules provides the procedural roadmap for the dispute, and while parties enjoy significant party autonomy to select which rules will govern their proceedings, this freedom is not absolute. In Hong Kong, the parties’ freedom to agree on procedures is subject to the mandatory provisions of the Arbitration Ordinance (Cap. 609). Most notably, section 46 mandates that the tribunal act fairly and impartially, treating the parties with equality and giving each a reasonable opportunity to present their case and deal with that of their opponents. Any procedural agreement that contravenes these fundamental requirements of natural justice may result in the resulting award being set aside. 

Incorporation of institutional rules 

Parties often incorporate the rules of a permanent arbitral institution, such as the Hong Kong International Arbitration Centre (“HKIAC”), the International Court of Arbitration of the International Chamber of Commerce (“ICC”), the China International Economic and Trade Arbitration Commission (“CIETAC”), or the Singapore International Arbitration Centre (“SIAC”), by reference in their arbitration agreement, which is a common practice that saves the time and expense of drafting a fully original set of procedures. These tried-and-tested institutional rules clarify the conduct of the arbitration, including the appointment of arbitrators, handling default by a party, seeking emergency relief, the presentation of evidence, and the making of awards. 

All arbitral institutions have different procedural rules, different supervisory powers and different fee structures. Before selecting, parties should check that the chosen rules, supervisory framework and fees meet their commercial needs. 

Compatibility between rules and administering institutions 

It is essential to ensure that the chosen rules are compatible with the designated institution. For example, the ICC Rules explicitly prohibit anybody other than the ICC Court from administering arbitration under its rules. Attempting a “hybrid” approach, such as designating one institution to administer another’s rules, is a complex exercise that can lead to significant jurisdictional problems and may result in the final award being held unenforceable in certain jurisdictions, such as Mainland China. 

Use and amendment of model clauses 

The starting point when drafting an institutional arbitration clause should be the relevant institution’s recommended model clauses. These clauses are generally widely drafted, consistent with the institution’s rules and tested in practice before courts and tribunals. Drafters should specify that the rules “in force when the Notice of Arbitration is submitted” will apply if the parties intend to use the most up-to-date version of the arbitration procedure. 

If the selected institutional rules do not precisely match the parties’ requirements, the parties may amend the model clauses. For example, they may specify 3 arbitrators rather than a sole arbitrator, a particular seat, a particular language, confidentiality obligations or qualifications for arbitrators. Institutional rules are generally subject to the parties’ express agreement to the contrary, unless the rule in question is mandatory. However, parties should be aware that some institutions may be reluctant to depart from their established administrative framework. 

The following is an example of the standard HKIAC Administered Arbitration Rules model clause, amended to include specific requirements for arbitrator qualifications and to clarify the governing law of the arbitration agreement. 

“Any dispute, controversy, difference or claim arising out of or relating to this contract, including the existence, validity, interpretation, performance, breach or termination thereof or any dispute regarding non-contractual obligations arising out of or relating to it shall be referred to and finally resolved by arbitration administered by the Hong Kong International Arbitration Centre (HKIAC) under the HKIAC Administered Arbitration Rules in force when the Notice of Arbitration is submitted. 

The law of this arbitration clause shall be Hong Kong law. 

The seat of arbitration shall be Hong Kong. 

The number of arbitrators shall be three. The presiding arbitrator shall be a legally-qualified practitioner with at least 10 years of experience in the technology and software licensing sector. 

The arbitration proceedings shall be conducted in English.” 

Ad hoc arbitration and the UNCITRAL Rules 

For ad hoc arbitrations, parties frequently adopt the UNCITRAL Arbitration Rules, which are widely recognized and provide a robust procedural structure without requiring an administering institution. It is generally recommended that parties specify the version of the rules they wish to apply (such as the rules in force at the time of commencement) to ensure clarity. 

Appointing authority in ad hoc arbitration 

When providing for ad hoc arbitration, it is prudent to specify an appointing authority to ensure a tribunal can be constituted if the parties cannot agree on appointments. However, in Hong Kong, the failure to specify an authority is not fatal to the agreement. Under the Arbitration Ordinance, the HKIAC serves as the statutory default appointing authority for all arbitrations seated in Hong Kong, ensuring the process does not reach a deadlock. 

Bespoke procedural rules 

While parties may draft their own bespoke procedural rules, this should be approached with extreme caution. Such rules must be detailed and comprehensive, dealing with all foreseeable procedural issues. Bespoke drafting is often time-consuming and expensive, and if not done carefully, it remains a major source of legal uncertainty and potential challenges to the award. 

8. Number and appointment of arbitrators

Parties are free to determine the number of arbitrators they wish to appoint. Most commercial arbitrations are heard by either one or three arbitrators. It is generally advisable to choose an odd number, usually one or three, to avoid the risk of a deadlocked or “hung” tribunal. 

A sole arbitrator is often chosen for its cost-effectiveness and speed. A three-member tribunal allows each party to nominate one arbitrator, with the third usually appointed by agreement, by the two party-nominated arbitrators, or by the institution or by the appointing authority. A three-member tribunal may be appropriate for international, technically complex or high-value disputes. 

It is generally preferable to agree the number of arbitrators and the appointment procedure when drafting the arbitration agreement, because parties may find it difficult to agree once a dispute has arisen. 

Role of the HKIAC as appointing authority 

If the parties fail to agree on the number of arbitrators, the Arbitration Ordinance (Cap. 609) provides two different default mechanisms depending on the regime applicable to the arbitration: 

1. Unitary regime: In most cases, the HKIAC has the statutory power to decide whether there should be either one or three arbitrators. 

2. Schedule 2 provisions: If the parties have expressly opted into Schedule 2 of the Arbitration Ordinance, or if it applies automatically (common in domestic construction disputes), a failure to agree on the number results in the dispute being submitted to a sole arbitrator by default. In this scenario, the HKIAC has no discretion to appoint three arbitrators. 

When the HKIAC is called upon to decide between one or three arbitrators under its statutory power, it must consider several factors, including: 

1. The amount in dispute and the complexity of the claim. 
2. The nationality of the parties and any relevant customs of the trade or profession. 
3. The urgency of the case and the availability of appropriate arbitrators. 

Parties are free to agree on a specific procedure for appointing the tribunal. In the absence of an agreement for a three-member tribunal: 

1. Each party appoints one arbitrator. 
2. The two party-appointed arbitrators then appoint the third (presiding) arbitrator. 
3. If a party fails to appoint their arbitrator within 30 days of a request, or if the two party-appointed arbitrators fail to agree on the third arbitrator within 30 days of their appointment, a party may request the HKIAC to make the necessary appointment. 

The HKIAC serves as the statutory default appointing authority for all arbitrations seated in Hong Kong where the parties’ agreed procedure fails. Decisions made by the HKIAC regarding appointments or the number of arbitrators are final and subject to no appeal and have the same legal effect as if made by the agreement of all parties. The HKIAC follows specific Appointment Rules and consults its Appointment Advisory Board, composed of industry stakeholders, when exercising these powers. 

While the HKIAC is the primary authority, the Court of First Instance retains residual powers to appoint arbitrators in specific circumstances, such as where the court orders the consolidation of two or more arbitral proceedings. 

Qualifications 

Parties can specify required qualifications for arbitrators, such as professional qualifications, industry experience, language proficiency, nationality or legal expertise. However, for international cases, it is common to prohibit a sole or presiding arbitrator from having the same nationality as any party to ensure perceived neutrality. 

The required qualifications must be drafted with precision. Under Hong Kong law, if a tribunal is constituted with an arbitrator who does not possess the specific qualifications agreed upon by the parties, the resulting award may be held void. Therefore, qualification requirements should be clear and not so restrictive that they make it impossible to constitute a tribunal. 

9. Language of arbitration

The arbitration agreement should expressly specify the language or languages to be used in the proceedings. While the parties have total freedom to choose, failing to do so requires the arbitral tribunal to determine the language, which can lead to significant impasses and additional costs if the arbitrators and parties speak different languages. Under section 50 of the Arbitration Ordinance (Cap. 609), if the parties do not agree on the language to be used in the arbitral proceedings, the tribunal has the power to determine the language. The tribunal may also order that any documentary evidence be accompanied by a translation. 

If the parties feel strongly about the language of the arbitration, they should make express provision in the arbitration agreement. If they fail to agree, the tribunal will decide the language of the proceedings.  

When the tribunal is called upon to determine the language, it must look at all relevant factors to ensure a fair and cost-effective process. These include: 

1. Whether the parties utilized a specific language in their business transactions. 
2. The linguistic abilities of the available pool of arbitrators. 
3. The need to minimize the overall costs of translating documents and providing interpreters for oral evidence. 
4. The convenience of the parties, though this factor carries comparatively little weight. 

The specified language applies to all written statements, oral hearings, and any awards or communications issued by the tribunal. However, the tribunal or the parties’ agreement may specify that certain elements of the proceedings are conducted in a different language. 

Specifying a language does not prevent witnesses from testifying in their mother tongue, but the agreement may stipulate that the party relying on such evidence must provide a certified translation into the official language of the arbitration. 

10. Procedural rules, evidence and discovery

One of the primary benefits of arbitration is procedural flexibility, allowing parties to tailor the “rules of the game” to their specific needs and the nature of their dispute. Subject to mandatory safeguards in the public interest, such as the duty to treat parties equally and provide a reasonable opportunity to present a case, the parties are free to agree on how the dispute should be resolved. This includes the ability to agree on “documents-only” proceedings, the use of tribunal-appointed experts, or specific timelines for the exchange of pleadings.  

If the parties do not agree on a procedure, the tribunal has the statutory power to conduct the arbitration in any manner it considers appropriate. This flexibility allows for the avoidance of the rigid formalities and technical rules of evidence found in court litigation. Furthermore, unless the parties agree otherwise, section 56(7) of the Arbitration Ordinance (Cap. 609) grants the tribunal a specific inquisitorial power to decide whether and to what extent it should itself take the initiative in ascertaining the facts and the law relevant to the proceedings. 

While the Arbitration Ordinance provides the tribunal with general powers to direct the discovery of documents and the delivery of interrogatories, parties can tailor these powers in their agreement. While many international practitioners view limitations on discovery as an advantage, it is important to note that in a Hong Kong-seated arbitration, these powers exist by default. Consequently, if parties wish to limit or exclude discovery to control costs, they must expressly agree to do so in their arbitration agreement or through the adoption of specific arbitral rules. 

The tribunal is not bound by the formal rules of evidence used in court and may decide the admissibility, relevance, and weight to be given to any evidence adduced. However, this flexibility is subject to a mandatory safeguard in section 56(9): a person cannot be required to produce any document or evidence in an arbitration that they could not be required to produce in civil court proceedings. This ensures that fundamental protections, such as legal professional privilege, remain absolute and cannot be overridden by the tribunal’s procedural discretion. 

11. Interim measures 

An effective arbitration agreement operates within a statutory framework that already grants the tribunal broad default authority to order interim measures of protection, such as maintaining the status quo, preserving assets, or preventing harm to the arbitral process. Under section 35 of the Arbitration Ordinance (Cap. 609), this authority exists automatically unless the parties expressly agree otherwise. While the tribunal has the power to modify or terminate these measures and can require the requesting party to provide security, these powers are inherent to the statutory regime. 

Furthermore, it is a settled principle of Hong Kong law that requesting interim measures from a court is not incompatible with an agreement to arbitrate. Section 21 confirms this compatibility regardless of whether the request is made before or during arbitral proceedings, meaning parties do not need to “enhance” their agreement with specific clauses to preserve this right. 

Parties must also distinguish between formal interim measures and “preliminary orders”. A tribunal may grant a preliminary order on an ex parte basis (without notice to the other side) to prevent the frustration of a requested interim measure. While such an order is binding on the parties, the Arbitration Ordinance explicitly states that it is not subject to enforcement by a court and does not constitute an award. Only after the tribunal has heard the other party and potentially converted the order into a formal interim measure can court enforcement be sought. 

Finally, for urgent protection before a main tribunal is constituted, the Arbitration Ordinance empowers the Court of First Instance to enforce relief granted by emergency arbitrators. It is important to note that enforcement is not automatic; both emergency relief and tribunal-ordered interim measures require the leave of the Court before they can be enforced in the same manner as a court judgment or order. 

12. Confidentiality and court proceedings 

Confidentiality is a primary reason parties select arbitration, and the Hong Kong framework provides one of the few express statutory duties of confidentiality in the world. This protection operates on two distinct levels: the confidentiality of the arbitration itself and the privacy of related court proceedings. 

Under section 18 of the Arbitration Ordinance (Cap. 609), unless the parties agree otherwise, no party may disclose any information relating to the arbitral proceedings or the award to third parties. As this is a default position, parties enjoy the autonomy to strengthen these protections or, conversely, to agree on specific protocols for disclosure. This duty is subject to specific statutory exceptions, including disclosures made: 

• To protect or pursue a legal right or interest; 
• To enforce or challenge an award in legal proceedings; 
• To any government body, court, or tribunal when obliged by law; 
• To professional advisers of the parties; or 
• To third-party funders or lawyers for the purpose of funding or fee arrangements. 

Although section 18 provides a statutory default prohibiting disclosure, drafting an express clause is considered “far better” for several reasons: 

• Tailoring for listed companies: Many organizations, such as public-listed companies, have statutory disclosure obligations that may conflict with absolute confidentiality. An express clause can define specific protocols for such disclosures to avoid breaching the arbitration agreement. 
• Certainty and scope: An express provision clarifies that the existence of the arbitration itself is confidential, a point that is explicitly stated in some institutional rules (such as HKIAC 2024 Administered Arbitration Rules Art. 45) but is only arguably implied under section 18. 
• Strengthening default rules: Parties may choose to strengthen default protections or agree on specific protocols for handling sensitive trade secrets or corporate strategies. 

To safeguard the private nature of the process, section 16 provides a statutory presumption that court proceedings relating to arbitration are not heard in open court. A matter will only be heard in open court if a party applies for it and the court is satisfied there are good reasons to depart from the default. 

Under section 17, the court retains control over the information published about these “closed” proceedings. While the court generally prohibits publication if a party objects, section 17(4) creates a mandatory exception for judgments of major legal interest. In such cases, the court will permit the judgment to be published in law reports and professional publications, provided that identifying details are concealed to respect the parties’ legitimate interest in their privacy. 

13. Multiparty arbitrations: Joinder and consolidation

Why multiparty arbitration matters 

Modern commercial transactions often involve multiple parties, multiple contracts, and interrelated obligations. Where disputes arise, the same facts, legal issues, or liabilities may affect several parties at once. 

If the arbitration agreement does not properly address multiparty or multi-contract disputes, the parties may be forced to pursue separate arbitrations. This can lead to: 

• duplicated proceedings; 
• inconsistent factual or legal findings; 
• increased time and cost; and 
• difficulty in bringing all potentially liable parties before the same tribunal. 

For this reason, where multiparty or multi-contract disputes are foreseeable, the arbitration agreement should expressly deal with joinder, consolidation, concurrent proceedings, and related mechanisms. 

The position under the Arbitration Ordinance 

The Arbitration Ordinance (Cap. 609) itself does not contain detailed provisions on joinder of additional parties. 

Provisions for consolidation and concurrent proceedings are primarily contained in Schedule 2 which applies only if parties expressly opt-in or if they fall under automatic “domestic” or construction subcontracting triggers. Under such circumstances, the Court of First Instance has a statutory power to order the consolidation of two or more arbitral proceedings that have already commenced. 

Institutional mechanisms for multiparty disputes 

Modern institutional rules, such as the HKIAC Administered Arbitration Rules, provide comprehensive frameworks for managing multiparty disputes through joinder, consolidation, concurrent proceedings, and single arbitrations under multiple contracts. 

(i) Joinder 

Joinder allows the tribunal to add a third party to an existing arbitration. This may be possible where the third party is bound by a valid arbitration agreement under the applicable rules, or where all parties consent. Joinder is particularly useful where a third party may share liability or where the dispute cannot be fully resolved without that party’s participation. 

(ii) Consolidation 

Consolidation empowers the tribunal to merge separate pending arbitrations into a single arbitration. This may be possible even without unanimous consent, provided that the applicable rules allow it and the relevant requirements are satisfied. These requirements commonly include that: 

• the arbitration agreements are compatible; 
• the disputes arise out of the same transaction or a series of related transactions; and 
• common questions of fact or law are involved. 

(iii) Concurrent proceedings 

Concurrent proceedings refer to the practice of hearing two or more separate arbitral references at the same time or in a coordinated sequence. 

Concurrent proceedings are often a practical alternative to consolidation, especially when a party is a claimant in one proceeding and a respondent in another, making formal merger procedurally complex or impossible. 

(iv) Single arbitration under multiple contracts 

A party may commence one arbitration covering disputes arising under several related contracts, provided that the underlying arbitration agreements are compatible. 

Drafting considerations 

When dealing with related contracts, parties must ensure that their arbitration clauses are fully compatible regarding the institution, the procedural rules, the seat, and, crucially, the arbitrator appointment procedure.  

Inconsistent appointment mechanisms are a common trap that can render clauses incompatible and prevent the use of joinder or consolidation mechanisms, even where common questions of fact or law exist.  

To ensure maximum efficiency, parties should consider entering into a standalone multiparty arbitration agreement or adopting identical clauses across all related contracts. 

14. Legal representation 

A “user-friendly” feature of Hong Kong arbitration is the “open house” policy on legal representation. Under section 63 of the Arbitration Ordinance (Cap. 609), parties are free to choose their representatives, who do not need to be legally qualified or resident in Hong Kong. There is no requirement for overseas lawyers to be admitted in Hong Kong to conduct arbitral proceedings, and the costs for such representatives remain recoverable. However, this policy does not apply to arbitration-related court proceedings, where traditional rights of audience for solicitors and barristers are maintained. 

15. Costs  

Arbitral tribunals possess broad statutory discretion regarding the award of costs, which includes the fees and expenses of the tribunal and the parties’ own legal and technical costs. This discretion must be exercised judicially and in accordance with the tribunal’s duty to act fairly and impartially. While the general rule is that “costs follow the event” (the loser pays), the tribunal may depart from this rule based on the parties’ conduct or written offers of settlement, such as Calderbank offers. 

Parties should exercise caution when drafting cost-allocation clauses. Under sections 74(8) and 74(9) of the Arbitration Ordinance (Cap. 609), a provision in an arbitration agreement requiring parties to pay their own costs is void if made before a dispute arises. Such “each bear their own costs” arrangements are only legally enforceable if agreed upon after the dispute has arisen. 

Tribunals are empowered under section 79 to award simple or compound interest at such rates as they consider appropriate. This power extends beyond the principal sum awarded to include money paid after the arbitration commenced but before the award was rendered, as well as interest on the costs of the proceedings. Unless the award provides otherwise, interest on the awarded sum and costs accrues automatically at the judgment rate from the date of the award until payment. 

16. Time limits for making arbitral awards 

Under section 72(1) of the Arbitration Ordinance (Cap. 609), an arbitral tribunal generally has the power to make an award at any time, unless the parties have agreed otherwise. However, parties may choose to include a provision requiring the award to be rendered within a specified period. 

However, if such a time limit is included, it should be realistic and should allow extensions by agreement, by the institution or by the court where appropriate. Relying solely on the agreement of the parties for extensions is discouraged, as securing such cooperation is often impossible once the relationship has soured. 

To prevent the process from failing due to unforeseen delays, section 72(2) empowers the court to extend the time limit for making an award. This is a discretionary power that can be exercised whether the original time limit has expired or not. The court generally takes a supportive role, enlarging time limits to facilitate the finality of the process rather than allowing it to be derailed by procedural technicalities. 

Any order extending the time for making an award is final and not subject to appeal under section 72(3). 

Clear timeframes can help manage expectations and encourage efficiency, but overly rigid deadlines may create unnecessary procedural disputes. 

G. Stay of court proceedings in favour of arbitration 

In Hong Kong, the stay of court proceedings in favor of arbitration is primarily governed by section 20 of the Arbitration Ordinance (Cap. 609), which gives effect to Article 8 of the UNCITRAL Model Law. The Hong Kong courts maintain a strong policy against intervening in arbitrations and generally lean in favor of enforcing the parties’ agreement to arbitrate, alongside a discretionary regime for specific categories like employment disputes. 

Mandatory stay 

Under section 20(1), if an action is brought before a court in a matter that is the subject of an arbitration agreement, the court must refer the parties to arbitration if a party so requests. Once a valid arbitration agreement is found to exist and the necessary conditions are met, the court has no residual discretion to refuse the stay. 

To determine whether a mandatory stay should be granted, the court typically applies a four-question test: 

1. Is there an arbitration agreement between the parties? 
2. Is the agreement null and void, inoperative, or incapable of being performed? 
3. Is there in reality a dispute or difference between the parties? 
4. Is the dispute within the ambit (scope) of the arbitration agreement? 

A mandatory stay should be granted where the answer to questions 1, 3 and 4 is yes, and the answer to question 2 is no. 

Threshold and standard of proof 

The party seeking the stay (usually the defendant) only needs to demonstrate a prima facie case that an arbitration agreement exists and covers the dispute. If the scope is unclear or fact-sensitive, the court will stay the proceedings and refer the matter to the tribunal to determine its own jurisdiction under the principle of competence-competence. Only where it is “clear beyond doubt” that the dispute is outside the ambit of the agreement will the court refuse a mandatory stay. Furthermore, even if a mandatory stay is unavailable, the court may still exercise its inherent jurisdiction to grant a discretionary stay. 

A dispute is considered to exist unless the defendant has made an unequivocal admission of both liability and quantum. The court will not investigate the merits of the defence; that is a matter for the arbitral tribunal. 

Mandatory refusal grounds 

Refusal to stay court proceedings is mandatory if any of the following are established: 

(i) Null and void 

This ground refers to an arbitration agreement that, as a matter of law, never existed or was invalid from the outset. In other words, the agreement is treated as having no legal effect from the beginning, either because a valid arbitration agreement was never properly formed or because the agreement was affected by a fundamental legal defect. 

This may arise where the parties never reached a definite agreement, for example because essential elements such as offer and acceptance were absent. It may also arise where the agreement is invalid due to factors such as misrepresentation, duress, unconscionable conduct, or mistake. 

This ground may also apply where the arbitration agreement fails to comply with mandatory formal requirements, such as the requirement for writing under section 19 of the Arbitration Ordinance. Similarly, the agreement may be invalid if one of the parties lacked legal capacity to enter into it. 

Finally, an arbitration agreement may be invalid if the dispute concerns matters that cannot be resolved by arbitration under Hong Kong law. Examples may include criminal prosecutions or certain family law proceedings. Likewise, the agreement may be invalid if giving effect to it would be contrary to public policy. For further information, please refer to “Scope of arbitration agreements”. 

(ii) Inoperative 

The agreement was validly formed but has ceased to have legal effect regarding the relevant dispute. This includes cases where the parties have expressly or impliedly terminated the agreement, a party has waived its right to arbitrate, or the specific matter does not fall within the terms of the arbitration agreement. For further information, please refer to “Scope of arbitration agreements”. 

(iii) Incapable of being performed 

The arbitration cannot effectively be set in motion, for example, because the arbitral institution named in the clause has ceased to exist, the terms are too vague, or there are inconsistent provisions that negate the intention to arbitrate. However, a reference to a non-existent arbitral institution or defunct rules does not necessarily make the agreement incapable of performance. If a clear intention to arbitrate exists, the court will uphold the clause as workable, and the HKIAC can fulfill the default appointment of an arbitrator to ensure performance. 

Notably, the failure to comply with pre-arbitration procedures, or the existence of a limitation defence to the commencement of arbitration, does not make an arbitration agreement “inoperative” or “incapable of being performed”. These are matters for the arbitral tribunal to determine, and the court should stay the proceedings in favour of arbitration rather than resolve them itself. 

(iv) Timing default 

An application for a stay must be made no later than the submission of the first statement on the substance of the dispute. Certain protective steps, such as filing an acknowledgment of service, will not normally prevent a party from applying for a stay. By contrast, steps that show a commitment to litigation, such as filing a defence, a counterclaim, or an affidavit opposing summary judgment, will typically amount to a waiver of the right to arbitrate. However, a stay remains validly requested if it is filed at the same time as the defence. 

(v) Non-existence of a “dispute” 

If there is no reality of a dispute or difference, such as a clear and unequivocal admission of both liability and quantum, the court may refuse the stay and order summary judgment. 

Discretionary stays and special categories 

(i) Inherent jurisdiction 

If a party has already submitted pleadings and cannot rely on section 20, the court may still exercise its inherent jurisdiction under the High Court Ordinance to grant a discretionary stay to avoid a multiplicity of proceedings or to uphold the spirit of the agreement. 

(ii) Labour Tribunal claims 

Under section 20(2), if a claim falls within the jurisdiction of the Labour Tribunal, the court has discretion rather than a mandate to stay proceedings. The court must be satisfied there is “no sufficient reason” to refuse the stay and that the applicant was “ready and willing” to arbitrate. 

(iii) Admiralty proceedings 

The court must stay the action but has the power to order that any property arrested (such as a ship) be retained as security for the satisfaction of the eventual arbitral award. 

(iv) Winding-up petitions 

A winding-up petition is not considered an “action” between parties but a class remedy, so the mandatory stay under section 20 does not automatically apply. The court generally stays or dismisses a petition in favor of arbitration if the underlying debt is subject to an arbitration clause, unless there are "strong reasons" or "wholly exceptional circumstances" to the contrary, such as the dispute being frivolous or an abuse of process. 

(v) Consumer agreements 

Under the Control of Exemption Clauses Ordinance (Cap. 71), arbitration agreements generally cannot be enforced against a consumer unless they consent in writing after the dispute has arisen or they initiate the arbitration themselves. 

Parallel proceedings 

Arbitration proceedings may be commenced or continued while the stay application is pending, and an arbitral award may even be issued before the court has determined the stay application. This prevents a recalcitrant party from using court litigation solely as a delaying tactic. 

Costs 

As to costs, where a stay is granted, the defendant will usually be awarded the costs of both the court action and the stay application. If a party raises an unmeritorious challenge to an arbitration agreement, the court may order indemnity costs against that party. 

Appeals 

A decision of the court to refer the parties to arbitration is not subject to appeal. 

A refusal by the court to refer parties to arbitration may be appealed, but only with the leave of that court. 

H. Stages of arbitration 

The typical stages of an arbitration follow a chronological order, moving from the initial agreement to the final resolution and potential enforcement of an award. While procedures vary based on party agreement and chosen rules, the process generally includes the following phases: 

1. Commencement of arbitration 

The process officially begins when one party (the claimant) serves a Notice of Arbitration or a request for arbitration on the other party (the respondent). Under Hong Kong law, the arbitration is deemed to have commenced on the date the respondent receives this written request. This notice typically defines the matters referred to arbitration and is critical for meeting contractual or statutory time limits. 

2. Appointment of the arbitral tribunal 

Following the initial notice, the next major step is constituting the arbitral tribunal. Unlike permanent courts, tribunals are established case-by-case. The parties usually decide the number of arbitrators (typically one or three) and the method for their selection. If they cannot agree, default procedures involving an appointing authority such as the Hong Kong International Arbitration Centre may be triggered. 

3. Procedural meeting 

Early in the reference, the tribunal often convenes a preliminary or procedural meeting with the parties. The purposes are to confirm the tribunal’s jurisdiction and terms of appointment, establish terms of reference to lay down the procedural framework, and issue an Order for Directions, which sets a detailed timetable for the various stages of the case, such as pleadings and discovery. 

4. Pleadings and statements of case 

Parties set out their respective positions through the exchange of written pleadings or statements of case, including Statement of Claim (the claimant states the facts supporting the claim, the points at issue, and the relief sought), Statement of Defence and Counterclaim (the respondent replies to these particulars and may assert its own claims) and Reply (the claimant may provide a further response to the defence or counterclaim). 

5. Discovery and evidence 

The tribunal has broad discretion over the reception of evidence and is not bound by strict court rules. Parties may be ordered to exchange relevant documents and provide written witness statements or expert reports. 

6. The hearing 

Unless the parties agree to a “documents-only” procedure, an oral hearing is held for the presentation of evidence and arguments. Hearings generally follow a court-like structure: opening statements, examination and cross-examination of witnesses and experts, and closing submissions (which are often provided in writing). 

7. The award 

Once submissions are complete, the tribunal closes proceedings. The tribunal then deliberates and prepares a final award to determine all issues in the dispute, including liability, remedies, and costs. The award must be in writing, signed by the arbitrator(s), dated, and delivered to the parties, which must state the reasons for the decision. In some cases, the tribunal may issue interim or partial awards to decide specific issues (like jurisdiction or liability) before the final conclusion of the case. 

8. Enforcement or challenge 

Once the final award is published, the tribunal is generally functus officio, meaning its authority ends. The winning party may apply to the court to enforce the award as a judgment. The losing party has a limited time (typically 3 months) to apply to the court to set aside the award on very narrow procedural or jurisdictional grounds. 

1. Statutory and contractual limitation periods 

Statutory limitation periods 

Under section 14(1) of the Arbitration Ordinance (Cap. 609), the Limitation Ordinance (Cap. 347) and any other Ordinance relating to the limitation of actions apply to arbitrations just as they apply to court proceedings. This means that a party who wishes to bring a claim in arbitration must still commence the arbitration within the applicable statutory limitation period. Arbitration does not suspend or avoid the ordinary rules on limitation. 

In general, time starts to run when the cause of action accrues. For simple contract or tort claims, the limitation period is generally six years from the date the cause of action accrued. Where the claim is based on a contract executed under seal, the limitation period is generally 12 years. 

Some contracts contain what is known as a Scott v Avery clause. Such a clause may provide that no court action can be brought until an arbitral award has first been obtained. However, section 14(3) of the Arbitration Ordinance (Cap. 609) prevents such a clause from postponing the running of time for limitation purposes. The cause of action is treated as having accrued when it would have accrued if the clause had not existed. 

Contractual time limits 

Apart from statutory limitation periods, parties may agree on their own contractual time limits. These are often called contractual time bars. For example, a contract may require a party to give a notice of arbitration, appoint an arbitrator, or take another step to commence arbitration within a specified period. Such contractual time limits may be shorter than the statutory limitation period. 

If a party fails to comply with a contractual time bar, the usual consequence is that the claim or remedy may be procedurally barred under the contract. However, this does not usually mean that the arbitration agreement itself becomes inoperative or incapable of being performed. In other words, the existence of a time-bar defence does not normally deprive the arbitral tribunal of jurisdiction. 

For that reason, if court proceedings are brought despite an arbitration agreement, the court will usually still grant a stay of the court proceedings in favour of arbitration. It will then be for the arbitral tribunal to decide whether the contractual time bar applies and what effect it has on the claim. 

Statutory power to extend contractual time limits 

Section 58 of the Arbitration Ordinance provides an important safeguard where a contractual time limit would otherwise prevent a claim from being brought in arbitration. It allows the arbitral tribunal to extend the time for taking a step to commence arbitration or any mandatory pre-arbitration procedure. If the tribunal has not yet been constituted, the court may exercise that power. 

However, an extension under section 58 is only available in limited circumstances. The tribunal or court must be satisfied either that the relevant circumstances were outside the reasonable contemplation of the parties when they made the arbitration agreement and that it would be just to extend time, or that the conduct of one party makes it unjust to hold the other party strictly to the contractual time limit. 

It is important to distinguish contractual time bars from statutory limitation periods. Section 58 can only extend time limits agreed by the parties in their contract. It cannot extend or override a statutory limitation period under the Limitation Ordinance. If the statutory limitation period has expired, section 58 will not revive the claim. 

2. Commencement of arbitration

Commencement and the notice of arbitration 

An arbitration is formally initiated when one party serves a written notice on the other party or parties expressing an intention to refer a specific dispute to arbitration. Under section 49(1) of the Arbitration Ordinance (Cap. 609), unless the parties have agreed otherwise, the proceedings are deemed to have legally commenced on the date this request is received by the respondent. This timing is critical for the application of statutory limitation periods, as the service of a timely notice protects a claimant from arguments that their claim is time-barred. If the arbitration agreement includes specific formalities, preliminary procedures, or timeframes for the notice, these conditions precedent must be strictly followed to ensure the tribunal has jurisdiction and that any subsequent award is valid and enforceable. 

The request for arbitration 

The document initiating the process may be called a “Notice of Arbitration”, “Request for Arbitration”, or “Application for Arbitration”. The specific nomenclature used has no legal significance; rather, the validity of the document depends on its substance and effect. At a minimum, the request must leave the recipient in no doubt of the sender’s intention to resort to arbitration and must indicate that an action in response is required, such as the appointment of an arbitrator. In institutional arbitration, such as those administered by the Hong Kong International Arbitration Centre (“HKIAC”), the process is typically started by filing a formal request using specific forms that require the claimant to certify that all details are true and accurate. 

Institutional requirements 

In institutional arbitration, the process may be governed by the specific set of rules promulgated by the arbitral institution appointed to administer the proceedings. These rules are typically incorporated by reference into the parties’ arbitration agreement. Because arbitration is a contractual process, these institutional schemes override non-mandatory default procedural provisions of the Arbitration Ordinance unless the parties have specifically agreed to modify them. 

For example, the claimant may be required to communicate a Notice of Arbitration to both the chosen institution and the respondent, and an arbitration may be deemed to commence on the date on which the chosen institution receives a copy of the Notice of Arbitration. 

Mandatory content of the request 

To allow the respondent to prepare an informed response, the notice must provide sufficient particulars of the dispute. Under common practice and institutional rules like those of the HKIAC, a valid request should include: 

1. The names and contact details of all parties and their representatives. 
2. A copy of the arbitration agreement being invoked and the contract out of which the dispute arises. 
3. A description of the dispute, including the circumstances in which it arose and the approximate amount at issue. 
4. The relief or remedy being sought by the claimant. 
5. A proposal for the number of arbitrators and the method of their appointment if not already agreed. 

Respondent’s response and counterclaims 

Following the receipt of the notice, the respondent is typically given an opportunity to provide a summary of its defences and any counterclaims it wishes to assert. While some procedural rules treat the respondent’s answer as optional, providing this information early helps the appointing authority or the tribunal understand the full scope of the case before the first hearing. A counterclaim is legally defined as a claim made by the respondent and is treated with the same weight as the claimant’s initial case. The arbitral tribunal has jurisdiction to decide on a counterclaim, or a claim relied on for the purpose of a set-off, provided the subject matter falls within the ambit of the same arbitration agreement. 

Defining the issues to be decided 

The notice of arbitration serves as the framework for the proceedings, as it delineates the scope of the reference and the specific issues the tribunal is empowered to decide. It is essential to draft the notice with sufficient width because it is generally not possible to raise new issues later in the proceedings if they were not encompassed by the original notice. Any claim found to be outside the ambit of the original notice would technically require a separate arbitration, though such matters could potentially be consolidated later. Once the tribunal is constituted, the parties and the arbitrator will often agree on a “list of issues” or “terms of reference” to further refine the factual and legal points that require a binding determination. 

3. Arbitral tribunals and arbitrators 

Under the Arbitration Ordinance (Cap. 609), Hong Kong arbitration law is based largely on the UNCITRAL Model Law. The Arbitration Ordinance gives arbitral tribunals broad powers to conduct proceedings in a fair, efficient and flexible manner. At the same time, the law seeks to minimise unnecessary court intervention, so that arbitration can remain a private and effective method of dispute resolution. 

General duties of the arbitral tribunal 

Arbitrators in Hong Kong are subject to important statutory duties. Section 46 of the Arbitration Ordinance provides that the parties must be treated with equality. This duty applies to all stages of the proceedings, including interlocutory applications and the final hearing. Each party must also be given a reasonable opportunity to present its case and to respond to the other party’s case. 

The requirement of a “reasonable opportunity” is significant. It does not mean that a party is entitled to take every possible procedural step, regardless of cost or delay. The tribunal may control the proceedings and prevent unreasonable conduct, such as calling excessive witnesses, making repetitive submissions, or using procedures that are disproportionate to the dispute. 

Arbitrators must also act independently, fairly and impartially. This applies to all arbitrators, including an arbitrator appointed by one party. Independence is generally assessed by reference to objective circumstances, such as the arbitrator’s relationships with the parties, their lawyers, or the subject matter of the dispute. Impartiality concerns whether the arbitrator approaches the dispute with an open mind and without bias. 

In addition, the tribunal must adopt procedures suitable for the particular case. The aim is to avoid unnecessary delay or expense while ensuring that the parties have a proper opportunity to be heard. 

Duty of disclosure 

Under section 25, a person approached for a possible appointment as an arbitrator is under a mandatory duty to disclose any circumstances likely to give rise to justifiable doubts as to their impartiality or independence. This is a continuing obligation that persists from the moment of initial contact through the final conclusion of the arbitral proceedings. The purpose of disclosure is to allow the parties to consider whether they object to the appointment or continued involvement of the arbitrator. 

The legal threshold for “justifiable doubts” in Hong Kong is an objective one: whether a fair-minded and informed observer, having considered the relevant facts, would conclude there is a real possibility that the tribunal is biased. While failure to disclose a relevant circumstance does not, by itself, prove partiality, it is a factor that the objective observer may take into account when assessing whether there was intentional concealment. 

Jurisdiction of the arbitral tribunal 

The Arbitration Ordinance recognises the principle of competence-competence. This means that an arbitral tribunal has power to rule on its own jurisdiction. The tribunal may decide: 

• whether a valid arbitration agreement exists; 
• whether the tribunal has been properly constituted;  
• whether the matters in dispute fall within the scope of the arbitration agreement; and 
• whether the tribunal is exceeding its authority. 

A jurisdictional objection must generally be raised no later than the statement of defence. An objection that the tribunal is exceeding its authority must be raised as soon as the relevant issue arises. 

If a tribunal rules as a preliminary question that it has jurisdiction, a party may request the Court of First Instance to decide the matter within 30 days. The Court performs a de novo review, meaning it considers the issue anew and is not bound by the tribunal’s findings. The court’s decision is not subject to appeal. 

Powers relating to procedural management and evidence 

An arbitrator is not merely a passive decision-maker. The tribunal has an active case management role and is expected to take charge of the proceedings. Unless the parties have agreed otherwise, the tribunal has wide powers to decide how the arbitration should be conducted. 

For example, the tribunal may decide what evidence is admissible, relevant or important, and how much weight should be given to it. It may also decide whether there should be an oral hearing or whether the case can be dealt with on a documents-only basis. In appropriate cases, the tribunal may adopt a more inquisitorial approach by taking the initiative to identify relevant facts or legal issues. However, the tribunal cannot compel a person to produce evidence that would be privileged in a court of law. 

Under section 56, unless excluded by the parties, the tribunal has broad powers to: 

• Require a claimant to give security for costs of the arbitration; 
• Direct discovery of documents or the delivery of interrogatories; 
• Direct evidence to be given by affidavit; 
• Direct the inspection, preservation, or sale of “relevant property” involved in the dispute. 

If a party fails to comply with a procedural order without sufficient cause, the tribunal may issue a peremptory order. Such orders are intended to ensure that the arbitration proceeds efficiently and that a party cannot obstruct or delay the process by ignoring directions. 

Personal duty to decide and decision-making 

Arbitrators have a personal and non-delegable duty to resolve the dispute. While they may appoint experts or assessors to advise on technical matters or costs, the tribunal must not delegate the ultimate power of decision to them. In tribunals with multiple members, any decision must be made by a majority of all members, though the parties may authorize a presiding arbitrator to decide procedural questions. Once a final award is made, the tribunal is functus officio and generally lacks the power to revisit its decision, except for correcting clerical errors or making an additional award for omitted claims. 

Procedure for challenging an arbitrator 

The parties are free to agree on the procedure for challenging an arbitrator. In many cases, the applicable institutional rules, such as arbitration rules of an arbitral institution, will set out the procedure. 

If there is no agreed procedure, section 26 applies. A party wishing to challenge an arbitrator must send a written statement of the reasons for the challenge to the tribunal within 15 days after becoming aware of the constitution of the tribunal or the relevant grounds for challenge. 

Unless the challenged arbitrator withdraws, or the other party agrees to the challenge, the tribunal (including the challenged member) will decide on the challenge. If the challenge is rejected, the challenging party may apply to the Court of First Instance for a decision within 30 days. The decision of the Court of First Instance is final and is not subject to appeal. 

While such a court application is pending, the tribunal may continue the arbitration and may even make an award. This prevents parties from using challenges merely as a tactic to delay the arbitration. However, to protect the parties, section 26(2) empowers the court to refuse the enforcement of any such award, and section 26(5) allows the court to set aside the award if it ultimately upholds the challenge. 

Termination of an arbitrator’s mandate 

An arbitrator’s mandate may terminate in several situations. It may end if the arbitrator becomes legally or physically unable to perform his functions, or if the arbitrator fails to act without undue delay. The mandate also terminates on the death of the arbitrator, because the authority of an arbitrator is personal. If a controversy exists regarding these grounds, any party may apply to the Court of First Instance for a final decision. 

However, under section 29, the death of the person who appointed the arbitrator does not revoke the arbitrator’s authority. The arbitrator may continue to act unless there is some other reason why the mandate has ended. 

An arbitrator may also withdraw or resign from office, including where a challenge has been made. The parties may also agree to terminate the arbitrator’s mandate. In the ordinary course, the mandate ends when the tribunal has completed its function by making a final award and becomes functus officio. 

Where an arbitrator’s mandate terminates, a substitute arbitrator is usually appointed according to the same rules that applied to the original appointment. 

Immunity of arbitrators and appointing authorities 

To safeguard the integrity and finality of the process, section 104 provides that an arbitral tribunal is not liable in law for acts or omissions in the performance of its functions unless it is proved the act was done dishonestly. This protection is mandatory, cannot be waived by agreement, and extends to the tribunal’s employees and agents. 

Similar immunity is granted under section 105 to appointing authorities (such as the HKIAC) and other bodies performing administrative functions in connection with the arbitration. They are only liable if their acts or omissions are proven to be dishonest. In Hong Kong, “dishonesty” is used as the statutory standard rather than “bad faith” to connote a lack of probity or a deceptive intent for personal gain, providing a high threshold that protects arbitrators even in cases of negligence. This immunity remains in effect even if an arbitrator resigns before the completion of the proceedings. 

I. Arbitral awards 

In Hong Kong, arbitral awards are primarily governed by Part 8 of the Arbitration Ordinance (Cap. 609). This part gives effect to Articles 28 to 33 of the UNCITRAL Model Law. An arbitral award is the tribunal’s formal and binding decision on matters submitted to arbitration. While the Arbitration Ordinance does not explicitly define “award”, it recognizes several types based on their function and timing. 

1. Types of remedies 

Arbitral tribunals in Hong Kong possess extensive authority to grant remedies, primarily founded on section 70 of the Arbitration Ordinance (Cap. 609). This mandatory provision allows an arbitral tribunal, when deciding a dispute, to grant any remedy or relief that the Court of First Instance could have ordered if the same dispute had been brought before the court. While parties generally cannot limit this broad power, they may do so in the specific context of intellectual property rights disputes. 

(i) Monetary awards and damages 

The most common remedy in arbitration is an award of money. A tribunal may order one party to pay a sum of money to another party, either as a debt or as damages for breach of contract or another legal wrong. 

Damages are usually assessed according to the principle of putting the injured party, so far as money can do so, in the position it would have been in if the breach had not occurred. 

A tribunal may also award money in an appropriate currency. In many cases, the currency used will be the currency in which the relevant contractual obligation or loss was expressed. 

(ii) Specific performance 

A tribunal may order specific performance, which means requiring a party to carry out a particular obligation rather than merely paying damages. For example, a tribunal may order a party to deliver goods or perform a contractual act. 

However, there is an important limitation. Unless the parties expressly agree otherwise, a tribunal cannot order specific performance of a contract relating to land or an interest in land. 

Such orders should specify clear time frames for compliance and may include alternative monetary relief if performance is not achieved. 

(iii) Injunctions 

An arbitral tribunal may grant perpetual injunctions (mandatory or prohibitory) to require or restrain specific actions, provided they only bind the parties to the arbitration. 

However, unlike a court, an arbitral tribunal does not have contempt powers. If a party fails to comply with an injunctive order made by a tribunal, the other party may need to seek assistance from the court to enforce the order or the resulting award. 

(iv) Declaratory relief 

A tribunal may grant declaratory relief. This means that the tribunal may make an award declaring the parties’ legal rights and obligations. For example, a tribunal may declare the proper interpretation of a contract clause, whether a party has breached an agreement, or whether a party is entitled to rely on a particular contractual right. 

(v) Indemnity 

A tribunal may order one party to indemnify another. An indemnity generally requires one party to reimburse the other for a loss, liability, cost or expense that has been incurred. 

This type of relief may arise where the contract contains an indemnity clause, or where the applicable law otherwise supports such a remedy. 

(vi) Rectification 

A tribunal may also order rectification of a contractual document. Rectification is an equitable remedy used to correct a written document so that it accurately reflects the parties’ true agreement. 

This remedy may be available, for example, where both parties made a mutual mistake and the written contract does not properly record what they had actually agreed. The tribunal may then order the document to be corrected to reflect the parties’ true intention. 

(vii) Costs and interest 

The Arbitration Ordinance gives arbitral tribunals wide powers in relation to costs and interest. 

The costs of arbitration may include the costs of the award, such as the tribunal’s fees and expenses, and the costs of the reference, such as legal fees, expert fees, witness expenses and other costs incurred in presenting the case. 

A tribunal has broad discretion to decide who should pay the costs and how they should be paid. Many tribunals apply the general principle that “costs follow the event”, meaning that the unsuccessful party pays the successful party’s costs. However, the tribunal may depart from that approach where the circumstances justify it. Relevant factors may include the parties’ conduct in the arbitration and any written settlement offers, such as Calderbank offers. 

There are restrictions on agreements about costs. Under sections 74(8) and 74(9), a pre-dispute agreement requiring each party to bear its own costs is generally void as a matter of public policy. Such an agreement is only valid if it is made after the dispute has arisen. In addition, under section 57, unless otherwise agreed by the parties, a tribunal may, on its own initiative or by application, cap the amount of recoverable costs in advance to promote proportionality and prevent a wealthier party from using costs as an intimidatory tactic. 

The tribunal must normally assess and settle the amount of costs itself, unless the parties agree that costs should be taxed by the court. If taxed by the court, costs are assessed on a “party and party” basis under the Rules of the High Court (Cap. 4A). 

The tribunal also has extensive power under section 79 to award interest. It may award simple or compound interest at such rates as it considers appropriate. Interest may be awarded on money claimed but paid before the award, on the amount awarded, and on costs. 

Unless the award provides otherwise, post-award interest is automatically payable at the judgment rate (fixed by the Chief Justice) from the date of the award. 

Under section 69(3), the tribunal may review an award of costs within 30 days of the award date if it was unaware of material information, such as a settlement offer, when the award was made. 

2. Types of arbitral awards

(i) Final awards 

A final award is the determination that disposes of all remaining matters in controversy between the parties. It typically addresses substantive issues, relief ordered, and the assessment of costs. Once a final award is published, the tribunal is generally functus officio, meaning its mandate is exhausted and it has no power to revisit the decision. This is subject to limited statutory exceptions for corrections, interpretations, or the issuance of additional awards. 

(ii) Interim or partial awards 

A tribunal may make an interim or partial award to determine some, but not all, of the matters in controversy. For example, a tribunal may decide on liability first, reserving the determination of quantum (damages) for a later stage. Despite the nomenclature, a partial award is final and binding regarding the specific matters it decides and cannot be revised by the tribunal merely because it has changed its mind. 

(iii) Consent awards (awards on agreed terms) 

If parties settle their dispute during the arbitration, they may request the tribunal to record the settlement as an award on agreed terms, commonly known as a consent award. The tribunal may refuse this request if the settlement appears to involve fraud or illegal acts like money laundering. Once made, a consent award has the same status and effect as an award on the merits. Additionally, under section 66(2) of the Arbitration Ordinance (Cap. 609), a written settlement agreement signed by the parties is treated as an arbitral award for enforcement purposes in Hong Kong. 

(iv) Additional awards 

Under section 69, a party may request an additional award to deal with claims that were presented during the proceedings but omitted from the original award. If the tribunal finds the request justified, it must generally make the additional award within 60 days. 

(v) Awards on interim measures 

A tribunal may issue a decision on an application for an interim measure (such as an injunction or asset preservation order) in the form of an award. This is specifically intended to facilitate enforcement in jurisdictions that only recognize “awards” rather than “orders”.  

It is crucial to distinguish between an “award” and an “interlocutory order” or “procedural direction”. Rulings on procedural matters (e.g., discovery of documents) are generally not awards. These orders are not subject to the exclusive setting-aside recourse under section 81 and are subject to a more restrictive enforcement regime under section 61.  

3. Form and content of arbitral awards 

The formal requirements for an arbitral award are set out in section 67 of the Arbitration Ordinance (Cap. 609). These requirements are mandatory and should be carefully observed. 

An award must be in writing. It must also be signed by the arbitrator. If there is more than one arbitrator, the award must be signed by a majority of the tribunal members, provided that the reason for any omitted signature is stated. 

The award must give reasons for the tribunal’s decision unless the parties have agreed that reasons are not required, or unless the award is an award on agreed terms. Under Hong Kong law, reasons do not need to be as elaborate as a court judgment. It is sufficient if they enable the parties to understand “how and why” a conclusion was reached on material findings. 

The award must also state its date and the seat of arbitration. The award is deemed to have been made at the seat stated in it. 

After the award is made, a signed copy must be delivered to each party. However, this delivery obligation is strictly subject to section 77, which entitles the tribunal to refuse to deliver the award until its fees and expenses have been paid in full. 

In practice, publication of the award occurs when the tribunal informs the parties that the award is ready for collection. 

4. Finality and binding effect  

The purpose of arbitration is to produce a final and binding determination of the parties’ dispute. An award made under a valid arbitration agreement is binding on the parties and on persons claiming through them. It may also give rise to res judicata, meaning that the same matters cannot generally be re-litigated in later proceedings. 

Once the tribunal has decided an issue and made an award, it is generally functus officio in relation to that issue. This means that the tribunal’s authority over that matter has come to an end. It cannot reopen or revise its decision except in the limited circumstances allowed by the Arbitration Ordinance (Cap. 609), such as correction, interpretation, or the making of an additional award. 

There is no general right of appeal on the merits of an arbitral award. The court will not review the case simply because one party says the tribunal made a wrong decision. The principal recourse against an award is an application to set it aside under section 81. The grounds for setting aside are limited and mainly concern matters such as jurisdiction, procedural fairness, the validity of the arbitration agreement, and public policy. 

An award will generally remain final and binding even if the tribunal has made an error of fact or law. The court does not have jurisdiction to set aside an award merely because there is an error on the face of the award.

5. Correction, interpretation and additional awards 

Section 69 of the Arbitration Ordinance (Cap. 609) allows limited post-award steps to be taken. These powers are not intended to allow the tribunal to reopen the merits of the dispute. 

A party may request the tribunal to correct an award within 30 days of receiving it. If justified, the tribunal must make the correction within 30 days of receiving the request. On its own initiative, the tribunal may correct such errors within 30 days of the date of the award. The correction power is limited to errors in computation, clerical or typographical mistakes, and similar accidental errors. It does not allow the tribunal to correct errors of judgment or to reconsider its reasoning. 

If the parties have agreed that interpretation is available, a party may request the tribunal to interpret a specific point or part of the award. Such a request must usually be made within 30 days of receipt of the award. The tribunal must provide this interpretation within 30 days of receiving the request. Any interpretation given by the tribunal forms part of the award. 

A party may also request an additional award where claims presented in the arbitration were omitted from the original award. The request must generally be made within 30 days of receipt of the award. If the tribunal considers the request justified, it must make the additional award within 60 days of the request. 

The tribunal has the power to extend the time limits for these actions if necessary. It may also make any consequential changes to the award necessitated by a correction or interpretation. 

A party making any of these requests must give notice to the other party. Any correction, interpretation or additional award must comply with the same formal requirements that apply to the original award, including the requirements as to writing, signature, reasons, date and place. 

J. Setting aside arbitral awards 

In Hong Kong, an application for setting aside an arbitral award is the exclusive judicial recourse against an award made in an arbitration seated in Hong Kong. This process is governed by section 81 of the Arbitration Ordinance (Cap. 609). This is not an appeal on the merits. The court will not set aside an award merely because the tribunal may have made an error of fact or law. 

Under the standard section 81 regime, the grounds for setting aside are limited. Additional grounds may be available only where Schedule 2 applies, including serious irregularity or appeal on a question of law. 

The Court of First Instance has power to set aside only awards that are seated in Hong Kong. Where an award is made outside Hong Kong, the Hong Kong court cannot set it aside. It may only refuse enforcement if a valid ground for refusal is established. 

Grounds for setting aside under section 81 

The grounds for setting aside a Hong Kong arbitral award are substantially the same as the grounds for refusing enforcement. The Court of First Instance can only set aside an award based on 6 exhaustive and largely technical grounds. The burden of proof lies with the party making the application. 

(i) Incapacity or invalidity 

A party to the arbitration agreement was under some legal incapacity (such as being a minor or a bankrupt entity), or the agreement itself is invalid under its governing law. If no governing law was specified, the law of the seat (Hong Kong) applies. 

(ii) Procedural unfairness (lack of notice/inability to present case) 

A party was not given proper notice of the arbitrator’s appointment or the proceedings, or was otherwise unable to present their case. To succeed, the breach of natural justice must be serious or egregious, reaching a level that undermines due process. This ground is frequently invoked to address serious breaches of due process, such as a party being imprisoned and unable to participate. 

(iii) Excess of jurisdiction 

The award deals with a dispute not contemplated by or falling within the terms of the submission to arbitration. If the decisions on matters submitted can be separated from those not submitted, the court may set aside only the part of the award that exceeds jurisdiction. 

(iv) Irregular composition or procedure 

The composition of the tribunal or the arbitral procedure was not in accordance with the parties’ agreement or the mandatory provisions of the Arbitration Ordinance. 

(v) Non-arbitrability 

The court finds that the subject matter of the dispute is not capable of settlement by arbitration under Hong Kong law. For example, disputes involving criminal liability or personal status (such as divorce) are generally not arbitrable. However, Intellectual Property Rights disputes are specifically clarified as arbitrable by Part 11A of the Arbitration Ordinance. For more information, please refer to “Legal consequences of non-arbitrability under Hong Kong law”. 

(vi) Conflict with public policy 

The award is in conflict with the public policy of Hong Kong. This ground is construed narrowly and applied only where the award or the manner it was arrived at violates Hong Kong’s “most basic notions of morality and justice”. It includes cases where an award was procured by fraud, corruption, or perjury. 

Additional grounds in Schedule 2 

Parties can expressly “opt-in” to additional grounds for challenge under Schedule 2, which were traditionally used in domestic arbitrations. These include: 

(i) Serious irregularity 

Under section 4 of Schedule 2, a party may challenge an award for “serious irregularity” affecting the tribunal, proceedings, or award. This is an exhaustive list of 9 categories, such as bias, failing to deal with an issue, or exceeding powers. Unlike section 81, the applicant must prove that the irregularity has caused or will cause substantial injustice. 

(ii) Appeal on a question of law 

A limited right to appeal an award to the court on a point of law, provided the court grants leave. Leave is generally granted only if the tribunal’s decision was “obviously wrong” or the question is one of general importance and the decision is open to serious doubt. 

The court’s residual discretion 

The court is not obliged to set aside an award even if a ground is established. It has residual discretion to refuse to do so. For instance, if the procedural error had no material impact on the result and the tribunal would have reached the same conclusion regardless, the court may allow the award to stand. Conversely, some breaches may be so egregious (such as extreme bias) that they warrant setting aside regardless of the ultimate result. 

Procedural requirements and time limits 

A party seeking to set aside an award must act promptly. Applications must be made by originating summons to the judge in charge of the Construction and Arbitration List in the Court of First Instance.  

The application to set aside an award based on the ground set out in section 81 must be brought within 3 months of the date the applicant received the award. 

Challenges for serious irregularity or appeals on questions of law under Schedule 2 must be made and served within 30 days after the award is delivered. 

Suspension and remission 

In applications under section 81, in addition to directly setting aside the award, the court may suspend the setting-aside proceedings to allow the arbitral tribunal to resume the arbitration in appropriate cases. This enables the tribunal to take steps to remove or cure the grounds relied upon for setting aside the award. This mechanism is often used where the tribunal has failed to deal with a specific issue or has failed to give sufficient reasons, allowing it to correct the defect without requiring the parties to undergo a full rehearing. 

In applications under Schedule 2, remission of the award to the tribunal is a primary remedy. The court must remit an award for reconsideration unless it is satisfied that doing so would be inappropriate (e.g. if the tribunal is biased or the parties have lost confidence in them). Remission revives the tribunal’s jurisdiction only for the matters remitted. 

If the award is remitted, the tribunal must make a fresh award in respect of the matters remitted within 3 months of the date of the order for remission, or within a longer or shorter period that the court may direct. 

Consequences, limitation periods and costs  

If an award is set aside, it is deprived of all legal effect, as if it had never been made. The dispute must then be resolved again by arbitration (usually before the same tribunal) unless the arbitration agreement is terminated. 

To protect parties from being time-barred after a failed arbitration, section 14(4) mandates that the period between the commencement of the original arbitration and the court’s order to set aside the award must be excluded when computing the time prescribed by a limitation enactment for any subsequent proceedings. 

To discourage unmeritorious challenges, Hong Kong courts maintain a strong policy of awarding indemnity costs against unsuccessful applicants in setting-aside proceedings. 

Appeals 

Any decision by the Court of First Instance under section 81 may only be appealed with leave from that court. If the Court of First Instance refuses leave, that decision is generally final. 

K. Enforcement of arbitral awards 

General enforcement of awards in Hong Kong 

Hong Kong has consolidated its position as a leading global arbitration hub by adopting a unitary regime that applies the same standards to both domestic and international arbitrations. Part 10 of the Arbitration Ordinance (Cap. 609) categorizes awards into four distinct regimes based on their origin: 

• Division 1: Arbitral awards made in or outside Hong Kong that are neither Convention nor Mainland/Macao awards (“Hong Kong awards and non-Convention awards”). 
• Division 2: Convention awards made in states (other than China) that are party to the New York Convention (“Convention awards”). 
• Division 3: Mainland awards made in accordance with the PRC Arbitration Law (“Mainland awards”). 
• Division 4: Macao awards made in accordance with Macao’s arbitration law (“Macao awards”). 

An award in any of these categories is enforceable in the same manner as a judgment of the court with the same effect, but only with the leave of the Court of First Instance. 

General methods of enforcement in Hong Kong 

There are two main methods of enforcing an arbitral award in Hong Kong. The first is summary enforcement under section 84 of the Arbitration Ordinance. This is a streamlined procedure in which a party applies ex parte (without notice) to the Court of First Instance and specifically to the judge in charge of the Construction and Arbitration List for leave to enter judgment in terms of the award. The court will not review the substantive merits or correctness of the award, even if it is alleged to be wrong or irrational. The summary enforcement mechanism is intended to be faster and less costly than commencing a full trial.  

The second method is an action on the award. Under this approach, a party brings a separate common law action based on the implied promise in every arbitration agreement that the parties will comply with and perform the award. This method may be used where summary enforcement is unavailable or unsuitable.  

An application for leave to enforce an award must satisfy procedural requirements under Order 73, rule 10 of the Rules of the High Court (Cap. 4A) and section 85 (Hong Kong awards and non-Convention awards), section 88 (Convention awards), section 94 (Mainland awards), or section 98C (Macao awards) of the Arbitration Ordinance. It must be supported by an affidavit exhibiting the duly authenticated original award (or a certified copy) together with the original arbitration agreement. Where the relevant documents are not in one of Hong Kong’s official languages, namely English or Chinese, certified translations must also be provided. 

Enforcement of Convention awards in Hong Kong 

Hong Kong applies the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958, commonly known as the New York Convention, following the Government of China’s extension of the Convention’s territorial application to Hong Kong. The Convention requires contracting states to recognize and enforce foreign arbitral awards made in the territory of other contracting states. 

China’s accession to the New York Convention is subject to two important reservations, which also apply in Hong Kong. The first is the reciprocity principle, under which Hong Kong applies the Convention only to awards made in the territory of another contracting state. The second is the commercial reservation, which means that enforcement is generally available only for arbitral awards arising from legal relationships that are considered “commercial” under Hong Kong law. 

Convention awards are awards made in a state or territory, other than China, that is a party to the New York Convention. Their enforcement is governed by Part 10, Division 2 of the Arbitration Ordinance.  

Convention awards are directly enforceable in Hong Kong with the leave of the Court of First Instance. Under section 87, they may be enforced either by a common law action on the award or through a summary enforcement procedure in the same manner as a court judgment. Once a Convention award is enforceable, it is treated as binding for all purposes and may be relied upon by way of defence, set-off, or otherwise in any legal proceedings in Hong Kong. 

Hong Kong courts maintain a strong presumption in favour of enforcing Convention awards. This approach is intended to discourage unmeritorious or technical objections to enforcement. The only grounds on which the courts will refuse leave to enforce a Convention award are those set out in section 89. 

If an application to set aside or suspend the award is pending before a competent authority in the country of origin, the Hong Kong court has the discretion to adjourn its decision on enforcement. In such circumstances, the court may also require the party resisting enforcement to provide security for the sum awarded. 

Enforcement of Hong Kong awards and non-Convention awards in Hong Kong 

The enforcement of arbitral awards that are not covered by the New York Convention, or specific arrangements with Mainland China and Macao, is governed by Division 1 of Part 10 of the Arbitration Ordinance. This division applies to awards made in Hong Kong as well as awards from non-Convention jurisdictions, such as Taiwan. 

Under section 84, these awards are enforceable in the same manner as a judgment of the court with the same effect, but only with the leave of the Court of First Instance. Once leave is granted, the court will enter judgment in terms of the award. 

Enforcement of Mainland awards in Hong Kong 

The New York Convention does not apply to the enforcement of arbitral awards between Hong Kong and Mainland China because both are part of the same country. Instead, enforcement between the two jurisdictions is governed by the Arrangement Concerning Mutual Enforcement of Arbitral Awards (1999), as amended by the Supplemental Arrangement Concerning Mutual Enforcement of Arbitral Awards (2020), which is implemented in Part 10, Division 3 of the Arbitration Ordinance. 

Important changes were introduced by the Arbitration (Amendment) Ordinance 2021. The scope of enforceable Mainland awards was expanded by redefining them as any award made in the Mainland (defined as any part of China other than Hong Kong, Macao, and Taiwan) in accordance with the PRC Arbitration Law. This removed the previous restriction that enforcement was available only for awards made by a specific list of “recognised Mainland arbitral authorities”, though it continues to exclude Mainland awards made in ad hoc arbitration. 

The 2021 amendments also introduced parallel enforcement. Parties may now file simultaneous enforcement applications in both Hong Kong and the Mainland. However, the total amount recovered through enforcement in both jurisdictions cannot exceed the amount awarded by the arbitral tribunal. 

When dealing with applications to resist enforcement of Mainland awards, Hong Kong courts adopt a “pro-enforcement” stance and give due weight to decisions of the relevant Mainland supervisory courts regarding the validity or procedural integrity of the arbitration. 

Suspension of enforcement 

Once an order for leave to enforce is served on the debtor, the award cannot be executed for 14 days (or a period fixed by the court). If the debtor applies to set aside the leave within this timeframe, enforcement is stayed until the application is finally disposed of. 

Refusal of enforcement 

The grounds for refusing enforcement are limited and exhaustive for Convention awards, Mainland awards, and Macao awards. Enforcement of these awards is generally refused only if the party resisting enforcement furnishes proof of a recognized ground. However, the court may also refuse enforcement of its own motion if it finds that the subject matter is not arbitrable under Hong Kong law or that enforcement would be contrary to public policy. 

The court may refuse to enforce an arbitration award in certain circumstances. This can happen if one of the parties did not have the legal capacity to enter into the arbitration agreement under the law applicable to that party. It can also happen if the arbitration agreement itself was not valid under the law chosen by the parties. If the parties did not choose a law, the court may look at the law of the place where the arbitration award was made. 

The court may also refuse enforcement if the arbitration process was unfair. For example, this could include situations where a party was not properly notified about the appointment of the arbitrator or about the arbitration proceedings. It could also include cases where a party was not given a fair opportunity to present its case. In general, the court may refuse enforcement where there was a serious problem with the arbitration agreement or with the fairness of the arbitration process. 

Another ground for refusal is excess of jurisdiction. This arises where the award deals with a dispute that was not contemplated by, or did not fall within, the terms of the parties’ submission to arbitration. The court may also refuse enforcement where the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the parties’ agreement. In addition, refusal may be justified where the award has not yet become binding, or has been set aside or suspended by a competent authority in the country or region where it was made. 

The court may also refuse enforcement if it finds that the subject matter of the dispute is not arbitrable under Hong Kong law, or if enforcement would be contrary to public policy. The public policy ground is interpreted narrowly and is applied only where enforcement would violate Hong Kong’s most basic notions of morality and justice, such as where an award was procured by fraud, bribery, or corruption. 

For Convention awards, Mainland awards, and Macao awards, even if a statutory ground for refusal is established, the court retains a residual discretion to order enforcement. The court will generally exercise this discretion unless the resisting party can demonstrate a real risk of injustice, in particular, that the proper presentation of its case was prejudiced and that the outcome of the arbitration could or might have been different had the violation not occurred. 

For Hong Kong awards and non-Convention awards, the court also retains a residual discretion to refuse enforcement for any other reason it considers just. Conversely, the court has a residual discretion to order enforcement even if a statutory ground for refusal is proved, particularly if the infraction had no impact on the result. 

Severability of awards 

If an award contains decisions on both arbitrated and unrelated matters, the court may enforce the arbitrable parts provided they can be separated from the portions that were not submitted to arbitration or are otherwise objectionable. 

Enforcement of Hong Kong arbitral awards in other jurisdictions 

The primary mechanism for enforcing Hong Kong arbitral awards internationally is the New York Convention. 

Following the resumption of sovereignty in 1997, the Government of China extended the territorial application of the New York Convention to Hong Kong. Consequently, awards made in Hong Kong are enforceable in all other contracting states to the Convention, which numbered 172 as of May 2026. 

Contracting states are obliged to recognize Hong Kong awards as binding and enforce them in accordance with their own rules of procedure. Enforcement is subject to the procedural rules of the enforcing jurisdiction and may be refused only on the limited and exclusive grounds set out in Article V of the New York Convention. The burden of proving such grounds rests on the party resisting enforcement. Even if a ground for refusal is established, the enforcing court often retains residual discretion to grant leave to enforce if the irregularity did not affect the outcome or if enforcement is otherwise just. 

For the purposes of international enforcement, an award is deemed to have been made at the seat of arbitration. If the seat is Hong Kong, the award is treated as a Hong Kong award for enforcement purposes, even if hearings, consultations, or deliberations between the arbitrators took place in other geographical locations. 

B. Key features of mediation 

1. Facilitative and non-adjudicative process 

Mediation is a facilitative and non-adjudicative process. In Hong Kong, the main form of mediation is facilitative mediation. This means that the mediator helps the parties discuss their concerns, identify the real issues in dispute, and explore possible ways to settle the matter. The mediator does not focus only on strict legal rights, but may also help the parties consider their underlying interests, practical needs and future relationship. 

A mediator is not a judge or an arbitrator. The mediator has no power to decide who is right or wrong, impose a solution, or force the parties to settle. Mediation is therefore a form of assisted negotiation. The mediator manages the process and encourages constructive communication, but the parties remain responsible for deciding whether to settle and what the settlement terms should be. 

2. Voluntary nature of mediation 

Mediation is voluntary. The parties decide whether to take part in mediation, what matters they wish to discuss, and whether they are willing to accept any proposed settlement. If an agreement is reached, it is the parties’ own agreement. A party may withdraw from mediation at any stage. The mediator may also end the mediation if it is no longer appropriate or useful to continue. 

This allows the parties to reach practical and creative solutions that may not be available from a court. For example, a mediated settlement may include apologies, future business arrangements, payment schedules, or other terms designed to preserve relationships. 

3. Role of the mediator 

The mediator must be impartial. This means that the mediator must treat all parties fairly and must not favour one side over another. The mediator should also be neutral and independent. If there is any actual or possible conflict of interest, the mediator should disclose it before or during the mediation. 

The mediator’s role is to act as a neutral facilitator. The mediator may help the parties communicate more effectively, clarify the issues, consider their options and move towards settlement. However, the mediator does not give a binding decision and should not act as a legal adviser to any party. Parties should obtain independent legal advice where necessary. 

4. Flexible but structured procedure 

Mediation is less formal than court proceedings, but it usually follows an organised process. A typical mediation may begin with the mediator’s opening remarks, followed by opening statements from the parties. The mediator may then help the parties identify the issues, explore areas of agreement and disagreement, and consider possible settlement options. 

The mediation may involve joint meetings with all parties present and private meetings between the mediator and each party. These private meetings are often called caucuses. They allow a party to speak confidentially with the mediator about its concerns, priorities and possible settlement position. 

The procedure remains flexible. The parties and the mediator may agree on the timetable, venue, format and method of communication. Mediation may take place in person, online, or by a mixture of different methods. If a settlement is reached, the terms are usually recorded in a written mediated settlement agreement. 

5. Confidentiality and without prejudice protection 

Confidentiality is an important feature of mediation. It encourages parties to speak openly and explore settlement options without fear that what they say will later be used against them. Under the Mediation Ordinance, a “mediation communication” generally includes anything said or done, any document prepared, or any information provided for the purpose of, or in the course of, mediation. Such communications are generally confidential and are not admissible as evidence in judicial, arbitral, administrative or disciplinary proceedings, unless an exception applies or permission is given. 

Mediation is also protected by the common law “without prejudice” rule. This means that statements, admissions, concessions or settlement offers made during mediation generally cannot be used against a party if the mediation fails and the case later goes to trial. This protection allows parties to negotiate more openly without prejudicing their legal position. 

However, the agreement to mediate and the mediated settlement agreement are not treated as “mediation communications” under the Mediation Ordinance. They do not have statutory confidentiality under that definition. They may be produced where necessary, for example, to prove that the parties agreed to mediate or to enforce the terms of a settlement.

D. Legal framework

The legal framework for mediation in Hong Kong is primarily established through the Mediation Ordinance (Cap. 620) and various Practice Directions issued by the Judiciary. This framework was designed to provide a predictable environment for alternative dispute resolution, with the twin objects of promoting the resolution of disputes and protecting the confidential nature of the process. 

Under the Mediation Ordinance, mediation is defined as a structured process where one or more impartial individuals assist parties in identifying issues, exploring options, communicating with one another and reaching agreements regarding the resolution of the dispute. The framework generally applies to any facilitative mediation conducted under a written agreement, whether it is a private contractual matter or adjunct to court proceedings. 

A cornerstone of this regime is confidentiality. To encourage open dialogue, mediation communications are generally inadmissible in evidence and must not be disclosed. There are limited statutory exceptions, such as for seeking legal advice or preventing harm to a child, though some disclosures require formal leave from the court. 

The Civil Justice Reform further integrates mediation into the litigation process. Notably, Practice Direction 31 requires litigants to indicate their willingness to mediate via “Mediation Certificates”. Parties who unreasonably fail to engage in mediation may face adverse costs orders. While the Ordinance does not mandate mediator qualifications, the Hong Kong Mediation Accreditation Association Limited serves as the premier body for unifying professional standards.  

Complementary legislation, such as the Apology Ordinance (Cap. 631), further facilitates settlement by protecting apologies from being used as admissions of fault. 

1. Mediation Ordinance (Cap. 620) 

Mediation in Hong Kong is mainly governed by the Mediation Ordinance (Cap. 620). The Ordinance is supplemented by the Judiciary’s Practice Directions and by professional and institutional support from bodies such as the Hong Kong Mediation Accreditation Association Limited (HKMAAL). 

The Mediation Ordinance came into operation on 1 January 2013. It is the main statutory foundation for mediation in Hong Kong and gives mediation a clearer legal status. 

a. Core objective and definition 

Under section 3 of the Mediation Ordinance (Cap. 620), its purpose is to promote, encourage and facilitate the resolution of disputes by mediation. It also provides statutory protection for the confidentiality of mediation communications. This is important because parties are more likely to speak frankly during mediation if they know that what they say will not normally be used against them later in court or other proceedings. 

Under section 4, mediation is defined as a structured process comprising one or more sessions in which one or more impartial individuals assist the parties to do any or all of the following: 

1. identify the issues in dispute; 
2. explore and generate options for resolving the dispute; 
3. communicate with one another; and 
4. reach an agreement regarding the resolution of the whole or part of the dispute. 

While the Ordinance does not explicitly prohibit other models, it is designed to support the facilitative model of mediation, which is the dominant standard for training and accreditation in Hong Kong. 

b. Scope of application

The Mediation Ordinance (Cap. 620) applies to mediation conducted under a written agreement to mediate. It applies where the mediation is conducted wholly or partly in Hong Kong. It also applies where the parties have agreed that Hong Kong law should apply to the mediation. 

The Ordinance also applies to the Government. This means that, where the Ordinance applies, public authorities are generally subject to the same mediation framework and confidentiality rules as private parties. 

The Ordinance does not apply to every process that may involve settlement discussions or conciliation. Schedule 1 excludes certain statutory procedures from the application of the Ordinance, such as conciliation under the Labour Tribunal Ordinance (Cap. 25https://www.hklii.hk/en/legis/ord/609), the Sex Discrimination Ordinance (Cap. 480https://www.hklii.hk/en/legis/ord/609), and mediation conducted within the specific “Med-Arb” or “Arb-Med” frameworks governed by the Arbitration Ordinance (Cap. 609https://www.hklii.hk/en/legis/ord/609). 

These exclusions are intended to avoid overlap or conflict with specialised statutory schemes. Those processes are governed by their own statutory rules. 

c. Key statutory definitions

The Mediation Ordinance (Cap. 620) introduces and defines important mediation-related concepts, including: 

1. Mediation communication: anything said or done, any document prepared, or any information provided for the purpose of, or in the course of, mediation. This broad definition helps protect discussions, statements, proposals, information and documents generated for mediation. However, the Ordinance expressly excludes both the agreement to mediate and the mediated settlement agreement from the definition of mediation communication. 

2. Agreement to mediate: a written agreement by two or more persons to submit a dispute to mediation. An agreement to mediate must be in writing in order to fall within the Ordinance. 

3. Mediated settlement agreement: an agreement reached by the parties as a result of mediation, resolving the whole or part of a dispute. Although written settlement agreements are standard practice, the Ordinance does not strictly require a mediated settlement agreement to be in writing for it to be binding. A mediated settlement may therefore be enforceable under general common law principles where the necessary legal requirements for a binding agreement are satisfied. 

    

d. Assistance during mediation

Section 7 of the Mediation Ordinance (Cap. 620) supports the process's flexibility by allowing parties to receive assistance from persons who are not Hong Kong lawyers. It provides that such assistance does not constitute a breach of sections 44, 45, or 47 of the Legal Practitioners Ordinance (Cap. 159), which generally penalize unqualified persons for acting as solicitors or barristers. 

This means parties may be assisted by non-lawyer advisers, technical experts, foreign lawyers, or even supporters such as social workers and friends. This is particularly useful in community and peer mediation, as well as complex commercial or cross-border disputes where specialised non-legal expertise is required. 

e. Confidentiality and use of mediation communications

Confidentiality is one of the central features of mediation. Sections 8, 9 and 10 of the Mediation Ordinance (Cap. 620) provide the main statutory protection for mediation communications. 

As a general rule, mediation communications must not be disclosed under section 8(1). The term “mediation communications” is broadly defined to include the following for the purpose of or in the course of mediation: 

1. anything said or done; 
2. any document prepared; or 
3. any information provided.  

Crucially, this definition excludes the agreement to mediate and the mediated settlement agreement itself, as these are typically considered contractual documents that may need to be produced to prove their own terms. 

This protection allows parties to negotiate more openly and to explore possible settlement options without fear that their words or proposals will automatically become evidence in later proceedings. 

However, this protection is not absolute. Section 8(2) permits disclosure without leave of the court in seven specific circumstances: 

1. When consent is obtained from each party, the mediator, and (if applicable) the third-party source of the communication. 
2. When the information is already lawfully in the public domain. 
3. When the communication contains information that is otherwise subject to discovery in civil proceedings. 
4. When necessary to prevent or minimize injury to a person or serious harm to the well-being of a child. 
5. When disclosure is for research, evaluation, or educational purposes, provided no participant’s identity is revealed. 
6. For the purpose of seeking legal advice. 
7. When made in accordance with a requirement imposed by law. 

Under section 8(3), where a party wishes to disclose mediation communications to a third party, for example to enforce or challenge a mediated settlement agreement or to establish or dispute an allegation of professional misconduct against a mediator or other professional participant, that party will usually need to obtain the leave of the court or tribunal.  

Furthermore, section 9 stipulates that a mediation communication is generally inadmissible as evidence in any judicial, arbitral, administrative, or disciplinary proceedings, unless leave is granted. 

When deciding whether to grant leave for either disclosure or admission under section 10, the court must consider whether disclosure is in the public interest, the interests of the administration of justice, and whether the information has already been disclosed under other exceptions. Case law highlights that the “interests of the administration of justice” involve a balancing exercise. For example, the need for a fair trial or the protection of a child may outweigh the general duty of confidentiality. This requirement provides an additional safeguard and ensures that mediation confidentiality is not lightly overridden. 

2. Civil Justice Reform and Relevant Practice Directions 

On 2 April 2009, the Judiciary implemented the Civil Justice Reform with a view to encouraging and facilitating the settlement of disputes by means other than litigation in court. Mediation is the recommended alternative dispute resolution process. The CJR introduced changes to the Rules of the High Court (Cap. 4A) and the Rules of the District Court (Cap. 336H), and various Practice Directions have been issued to reflect and support these changes. 

In particular, the Judiciary encourages parties to consider mediation seriously. Under the relevant Practice Directions, including Practice Direction 31, the court may take into account a party’s unreasonable failure to engage in mediation when dealing with costs. This reflects the broader policy of promoting a “Mediate First” culture in Hong Kong and strengthening Hong Kong’s position as an international dispute resolution centre. 

h. Practice Direction 31.1: Case Settlement Initiatives in Civil Cases in the District Court

The Case Settlement Conference (CSC) and Mediator-assisted Case Settlement Conference (MCSC) are a specific court-based mechanism introduced by the Hong Kong Judiciary to integrate mediation into formal court proceedings. They are governed by Practice Direction 31.1, “Case Settlement Initiatives in Civil Cases in the District Court” (“PD 31.1”), which took effect on 2 January 2025 and provides procedural guidelines for both CSCs and MCSCs. 

PD 31.1 forms part of a broader suite of judicial tools designed to facilitate settlement and reduce the time and costs of litigation. 

Scope of PD 31.1 

PD 31.1 applies to all civil cases before the District Court, except for: 

1. personal injury claims; 
2. employees’ compensation claims; 
3. false detention claims against the Government; and 
4. equal opportunities cases. 

The Case Settlement Conference 

A CSC is a court hearing designed to facilitate settlement by allowing parties to have a face-to-face dialogue about their case. 

It is generally heard by a master with experience in mediation. While they do not act as “mediators” in the formal sense, they use mediation techniques to foster constructive dialogue and help parties explore settlement options. No mediator is present in CSCs. 

CSCs are held in chambers (not open to the public) and conducted on a strictly “without prejudice” basis. Anything said or admitted during the conference cannot be used as evidence in later court proceedings if the case does not settle. 

The Mediator-assisted Case Settlement Conference 

An MCSC is an enhanced version of the settlement conference that integrates the parties’ appointed mediator into the court process. It is designed to combine the benefits of mediation with the support and authority of the court, with the aim of improving the prospects of settlement. 

An MCSC is not intended to be a standalone event. Rather, it functions as a continuation of the mediation process. As a general rule, it should only be convened after the parties have already attended at least one mediation session with their appointed mediator. The MCSC may be fixed with the consent of the parties, or through a party-driven consent summons submitted at an appropriate stage of the proceedings, such as during a Case Management Conference. 

Before an MCSC is set down, a mediator’s note must be lodged. This is a critical prerequisite. The note should identify the common grounds that have been agreed upon, the issues that remain in dispute, and the latest settlement proposals and concerns of each party in relation to those disputed issues. This enables the court to understand the current state of the negotiations and the obstacles to settlement. 

At the MCSC, communications take place between the parties and the court in the presence of the appointed mediator. The mediator attends to work with both the judge and the parties. Since the mediator would usually already have a fair understanding of the parties’ concerns, interests, settlement positions and the history of the mediation, the mediator is able to assist the court in advancing the settlement discussions. 

For this purpose, the court may liaise and discuss matters with the appointed mediator in the absence of the parties, both before and during the MCSC. During the conference, the judge may also adjourn the hearing to allow the parties to use court-provided accommodation to continue their private mediation session. The parties may then be given liberty to reappear before the judge on the same day if further assistance from the court is required. 

The MCSC draws on the combined strengths of the mediator and the court. The mediator contributes facilitative skills, familiarity with the parties’ concerns and knowledge of the mediation history. The judge contributes judicial authority, procedural oversight and the ability to help the parties focus on the practical risks, costs and benefits of continuing with litigation. 

This combined approach is intended to improve the chances of settlement where an earlier mediation has not succeeded. Although the court is involved, the process remains non-adjudicative, confidential and without prejudice. 

Role of the court 

At the heart of PD 31.1 is the court’s facilitation of settlement discussions, rather than adjudication. 

During these sessions, the master or judge will not: 

• adjudicate on the merits of the case; 
• determine contested case management issues; or 
• deal with interlocutory applications, unless such applications are taken out for settlement purposes. 

Instead, the court will address the parties directly, foster constructive dialogue, encourage negotiations, and help the parties explore realistic settlement options. 

CSCs and MCSCs are held in chambers and are not open to the public. 

Attendance requirements 

Under PD 31.1, personal attendance at both CSCs and MCSCs is mandatory for the following persons to ensure meaningful, direct, and face-to-face settlement discussions: 

1. Natural persons: Each individual party must attend personally. 
2. Corporate parties: An authorized representative must attend who is familiar with the substance of the litigation and has authority to settle the case. If the corporation is acting in person, this representative should be the director authorized under Order 5A of the Rules of the District Court (Cap. 336H). 
3. Legal representatives: The Court expects the handling solicitor (or a representative with adequate knowledge of the case) to attend. Their role at these conferences is not to act as advocates in litigation but to support and advise their clients within a collaborative mindset. 
4. Mediators (MCSC only): In an MCSC, the appointed mediator must also attend. 

Confidentiality and statutory protection 

Because MCSCs are designed for non-adjudicative purposes, they fall under the broad definition of “mediation” in the Mediation Ordinance (Cap 620). Consequently, they receive the full protections of the Ordinance. 

Under the Ordinance, the following fall within the statutory definition of “mediation communications”: 

1. Communications between the parties and the Court prior to the MCSC. 
2. Communications between the mediator and the judicial officer prior to the MCSC. 
3. Communications between the parties and the Court in the presence of the mediator during the MCSC. 

All communications between the court and the appointed mediator, including the mandatory mediator’s note, are strictly confidential and without prejudice in nature. This ensures that if the MCSC does not result in a settlement, these discussions cannot be referred to in later proceedings. 

Discussions between the judge and the mediator are treated as internal and should not be disclosed to the parties without the consent of the judge. At the same time, the court is expected to respect the mediator’s discretion as to what information obtained from a party may properly be shared with the Judge, since the mediator remains bound by duties of confidentiality to the parties. 

Role of legal representatives 

Legal representatives play a crucial but non-advocacy role in CSCs and MCSCs. Their primary responsibility is not to argue the case as they would at trial, but to assist their clients in engaging meaningfully in the settlement process. They should help clients understand the issues, evaluate risks, consider settlement options, and engage meaningfully with the Court-assisted process. 

Costs 

As a general rule, each party’s costs of and incidental to a CSC or MCSC are treated as the party’s costs in the cause, meaning they are recoverable by whoever eventually wins the trial. 

However, this is without prejudice to the court’s general power to make costs orders having regard to all the circumstances, including a party’s conduct at the CSC or MCSC. Failure to comply with preparation directions, failure to attend properly, or unreasonable behaviour during the process may result in costs sanctions. 

E. Mediation agreements

A mediation agreement (also known as an agreement to mediate) is a foundational legal document that formally initiates the mediation process and establishes the ground rules under which it will be conducted. In Hong Kong, this agreement is regulated by both statutory law, specifically the Mediation Ordinance (Cap. 620) and various Practice Directions. The agreement provides the framework for how the parties will engage in mediation, how the mediator will be appointed, and what legal protections will apply during the process. 

Statutory definition and requirements 

Under section 2(1) of the Mediation Ordinance, an agreement to mediate is defined as an agreement in writing by two or more persons to submit a dispute between them to mediation.  

This statutory framework specifically applies to facilitative mediation, where a neutral third party assists the parties without adjudicating any aspect of the dispute. 

The agreement may take various forms. It may appear as a mediation clause within a broader substantive contract, designed to apply to future disputes, or it may be a separate agreement entered into after a specific dispute has already arisen. 

The Ordinance makes clear that an agreement to mediate may be entered into either before or after a dispute arises. It remains valid even if no specific mediator has been appointed at the time the agreement is made. 

To be recognized under the Mediation Ordinance, the agreement must be in writing. This requirement is satisfied if the agreement is recorded in electronic form, including emails, provided the information is accessible for future reference. 

Although the agreement must be in writing, the Mediation Ordinance does not strictly require it to be signed in order to be legally valid. In practice, however, signatures are commonly used and may be required under institutional mediation rules or by the parties’ own agreed procedure. 

Typical contents of the agreement 

A well-drafted agreement to mediate usually deals with the practical mechanics of the mediation and the legal protections available to the participants. It typically confirms the role and impartiality of the mediator, making clear that the mediator acts as a neutral facilitator and does not impose a binding decision or provide legal advice to the parties. 

Confidentiality is another central feature. The agreement commonly requires all participants to keep the mediation process, discussions, documents, and related communications confidential, subject only to limited legal exceptions. It also usually states that communications made during the mediation are “without prejudice”, meaning that offers, concessions, and information exchanged in the mediation generally cannot be relied upon as evidence in later litigation or arbitration. 

The agreement often addresses fees and costs by specifying how the mediator’s fees, venue charges, and other mediation expenses are to be shared. In many cases, these costs are divided equally between the parties, while each party remains responsible for its own legal and professional expenses. 

The agreement may also require those attending the mediation to have proper authority to settle the dispute, so that any agreement reached can be final and effective. 

The agreement typically requires the mediator to disclose any prior dealings with the parties or any personal interest in the dispute. The parties, in turn, agree to cooperate in good faith with the mediator and with each other throughout the process in order to conduct the mediation efficiently. 

Termination provisions are also common. These clauses usually allow any party, or the mediator, to withdraw from the mediation at any time, often without having to give reasons.  

In addition, many mediation agreements contain mediator immunity provisions, which seek to protect the mediator from liability arising out of the mediator’s professional conduct during the mediation, except in cases such as fraud or dishonesty. The agreement usually also includes a provision stating that the parties will not call the mediator as a witness or require the mediator to produce notes or records in any future legal proceedings. 

The “Mediation Minute” in court-adjunct mediation 

In civil proceedings before the High Court and District Court, Practice Direction 31 provides a specific procedure for court-adjunct mediation. Where parties propose different mediation arrangements in their Mediation Notice and Mediation Response, they are expected to attempt to resolve those differences. 

If the parties reach agreement on the procedural arrangements for the mediation, that consensus is recorded in a document known as a Mediation Minute. Once signed by the parties or their solicitors, the Mediation Minute serves as the formal record of their agreement to proceed with mediation and must be filed with the court within 3 days of its signing. It records the agreed procedural mechanics, such as the mediation timetable, choice of mediator, and allocation of costs. 

Validity and enforceability 

The enforceability of agreements to mediate has been the subject of significant legal discussion in Hong Kong. As a general principle, a mediation clause or agreement must be sufficiently certain and complete before it will be enforceable.  

A vague promise to negotiate, or a mere “agreement to agree”, is typically not legally enforceable. The clause must commit parties to a defined process rather than leaving the details to be settled by future agreement. 

An effective clause should address the triggering mechanism (how and when the process is initiated), the scope of disputes covered, and a defined procedure for selecting the mediator and conducting the sessions. Incorporating recognized mediation rules (such as HKIAC Mediation Rules) often provides the necessary certainty, as these rules establish the procedures, timeframe, and appointment mechanisms. 

An agreement to mediate may be drafted as a condition precedent to litigation or arbitration. In such a case, the parties agree that they must first attempt mediation before commencing court or arbitral proceedings. However, an agreement cannot permanently prevent a party from exercising the right to sue, because that would unlawfully oust the jurisdiction of the court. 

The decision in Hyundai Engineering & Construction Co Ltd v Vigour Ltd (2005) illustrates this principle. In that case, the Court of Appeal held that the relevant agreement was unenforceable because it lacked sufficient certainty and attempted to restrain the parties permanently from exercising their right to bring legal proceedings. 

Relationship with confidentiality and discovery 

A particularly important point under the Mediation Ordinance is that the agreement to mediate itself is expressly excluded from the definition of a “mediation communication.” As a result, the agreement does not enjoy the same statutory confidentiality protection as communications made during the mediation process. 

This means that the agreement may be produced in court to prove its terms. For example, a party may rely on it to show that there was a contractual obligation to mediate, to establish the agreed procedure for appointing a mediator, or to demonstrate how mediation costs were to be apportioned. If one party attempts to avoid the consequences of the agreement, the other party may rely on the document as a protective measure or as the basis for seeking a stay of proceedings until the agreed mediation process has been followed. 

F. Role of mediators

The mediator brings the parties together, whether in joint meetings or, where appropriate, separate private sessions, in a private and confidential setting. Each party will have the opportunity of putting forward his point of view and listening to what the other party has to say. 

Unlike an arbitrator, the mediator does not impose a decision on the parties. He does not provide legal advice and will not take sides. He will not determine who is right and who is wrong in the dispute, but merely helps to facilitate settlement.  

Under section 4(1) of the Mediation Ordinance (Cap. 620), the mediator assists the parties in four primary ways: 

1. Identifying issues: Helping parties clarify what is actually in dispute, which is often clouded by emotion. 
2. Exploring and generating options: Encouraging creative solutions beyond a simple “yes or no” and assisting parties to move past stalemates. 
3. Communicating: Establishing rapport, providing ground rules, and acting as an intermediary (shuttle diplomacy) to restore trust. 
4. Reaching agreement: Supporting parties as they formulate precise settlement terms to be encapsulated in a mediated settlement agreement. 

The mediator helps the parties explore the strengths and weaknesses of their cases, identify possible solutions, and help them resolve the matter between themselves. The mediator must not perform any adjudicative function. 

Conduct and ethics 

Generally speaking, mediators are required by their ethical and professional codes of practice to observe confidentiality in respect of all matters disclosed in the mediation sessions. Mediators in Hong Kong are also encouraged to adopt the Hong Kong Mediation Code, which provides a common ethical framework for mediation practice. The Code sets out standards of professional conduct, including impartiality, neutrality, independence, confidentiality and the mandatory disclosure of conflicts of interest. 

Section 4(1) of the Mediation Ordinance focuses specifically on the mediator’s duty to be impartial, requiring a mediator to show no bias or psychological predisposition toward a party. Institutional codes and professional standards may go further by expecting mediators to have no personal or professional ties to the parties or to the subject matter of the dispute, unless such matters have been fully disclosed and accepted by the parties. 

When the parties agree to take part in mediation, they will usually be required by the mediator to sign a Mediation Agreement, i.e. an agreement to mediate, which states that all negotiations undertaken pursuant to the mediation are to be privileged and conducted on a without prejudice basis. Without prejudice means that nothing discussed can be used as evidence in any future legal proceedings. Although the Hong Kong Mediation Code is not itself legislation, it is frequently incorporated into the agreement to mediate. This contractual adoption helps ensure that the mediator and the participants understand the ethical boundaries of the process, including the mediator’s obligation to remain impartial and not to decide the dispute for the parties. 

Mediation is considered to be a private and confidential process on two levels. Firstly, the mediation process must be kept confidential at all times in that no third party is allowed to be privy to the proceedings. Secondly, where a party discloses matters to the mediator in a private session, the mediator should not disclose those matters to the other party without permission. 

Accreditation of mediators 

The Hong Kong Mediation Accreditation Association Limited (“HKMAAL”) was established in August 2012 and officially commenced operations on 2 April 2013. It is the main non-statutory mediation accreditation body in Hong Kong. HKMAAL was founded by the Hong Kong Bar Association, the Law Society of Hong Kong, the Hong Kong International Arbitration Centre and the Hong Kong Mediation Centre. Supported by both the Government and the Judiciary, HKMAAL plays an important role in maintaining professional standards and quality assurance for mediators in Hong Kong. 

However, the Mediation Ordinance does not require a mediator to be accredited before acting as a mediator. This reflects a deliberate legislative choice to preserve party autonomy, allowing parties to choose a mediator whom they consider most suitable for their particular dispute, having regard to matters such as professional experience, technical knowledge, industry expertise, language ability or other relevant qualities. 

G. Stay of court proceedings in favour of mediation 

In Hong Kong, the court may stay, adjourn, or otherwise manage court proceedings to provide parties with an opportunity to mediate. A “stay” means that the legal proceedings are put on hold, either until a specified date or until a specified event occurs, such as the completion or termination of mediation. However, a stay for mediation is not automatic and remains entirely a matter for the court’s discretion. 

The Mediation Ordinance (Cap. 620) does not grant the Court a specific power to stay proceedings. Instead, the Court’s authority is derived from its inherent jurisdiction and its statutory case management powers under Order 1B, rule 1(2)(e) of the Rules of the High Court (Cap. 4A) or the Rules of the District Court (Cap. 336H). Practice Direction 31 (“PD 31”) further integrates these powers into the civil justice system to ensure settlement is facilitated as part of active case management. 

The court’s discretion 

The court will consider whether a stay for mediation serves a useful and practical purpose. The court will not normally grant a stay merely because the word “mediation” is mentioned. 

In deciding whether to grant a stay, the court applies a “practical benefit” test, considering matters such as: 

• whether mediation has a real prospect of assisting settlement; 
• whether the stay may save costs; 
• whether the application is made at an early or late stage; 
• whether important procedural deadlines have already been fixed; 
• whether a trial date has already been set; 
• whether the stay would cause unfair delay or prejudice; and 
• whether the parties have already had a proper opportunity to mediate. 

A stay is more likely to be granted at an early stage of proceedings, for example before discovery, exchange of witness statements or preparation for trial. At that stage, mediation may save significant legal costs and court time. 

On the other hand, if the case is already ready for trial, the court may be reluctant to grant a stay if it would serve little practical benefit or would disrupt the trial timetable. 

Case management and milestone dates 

Under the Civil Justice Reform, the court has a duty to manage cases actively and to further the underlying objectives of civil procedure. These objectives include dealing with cases justly, cost-effectively and expeditiously. 

The court may encourage parties to use alternative dispute resolution, including mediation, where appropriate. It may also make directions to facilitate mediation. 

However, the court will also be concerned to preserve the litigation timetable. In particular, the court will try to avoid unnecessary disruption to milestone dates, including dates fixed for: 

• a Case Management Conference; 
• a Pre-Trial Review; and 
• the trial, or the period during which the trial is to take place. 

The court is especially reluctant to adjourn a fixed trial date simply because the parties wish to attempt mediation at the last minute. If trial is imminent, the court may require the parties to mediate while continuing to prepare for trial, instead of staying the proceedings altogether. 

A trial date will normally be postponed only for good reason, and late applications for adjournment may be viewed critically. 

Application for a stay for mediation 

Parties seeking a stay should generally apply by way of a case management summons under Order 25 of the Rules of the High Court or Rules of the District Court, ideally following the service of a Mediation Response. The application should be supported by an affidavit exhibiting the Mediation Certificate, Notice, Response, and Minute, alongside an estimate of the expected duration of the proposed mediation. 

In appropriate cases, the court may also raise mediation of its own motion and make suitable case management directions. PD 31 supports the use of mediation and provides a procedural framework for parties to indicate whether they are willing to mediate. 

In practice, the court may order: 

• a short stay of proceedings for mediation; 
• an extension of procedural deadlines; 
• a direction that mediation be attempted by a certain date; 
• a further case management hearing after mediation; or 
• mediation to take place in parallel with ongoing preparation for trial. 

The order may specify that the stay lasts until a particular date, or until the mediation has been concluded or terminated. 

Enforcement of contractual mediation clauses 

Sometimes, a contract contains a dispute resolution clause requiring the parties to attempt mediation before starting court proceedings. This is often called a multi-tiered dispute resolution clause. 

For example, the contract may require the parties to: 

1. negotiate first; 
2. then attempt mediation; and 
3. only then commence litigation or arbitration. 

If such a clause is sufficiently clear and certain, the court will generally give effect to it. The court may stay proceedings commenced in breach of the clause so that the agreed mediation step can take place. 

The reason is that commercial parties are generally expected to honour the dispute resolution procedure they have agreed in their contract. 

However, the clause must be sufficiently certain to be enforceable. A vague clause which merely says that parties should “try to resolve disputes amicably” may not be enough. The court will look at the wording of the clause, including whether it clearly identifies a mandatory process and when that process has been completed or exhausted. 

Where there is a valid contractual requirement to mediate before litigation, the party who started proceedings without complying with it may have to explain why the proceedings should not be stayed. 

H. Stages of a mediation session

Mediation in Hong Kong is a flexible and voluntary process. The mediator does not decide who is right or wrong and does not impose a result on the parties. Instead, the mediator helps the parties communicate, identify the real issues in dispute, explore possible solutions and, if possible, reach their own settlement. 

Although every mediation may be conducted differently, a typical mediation will usually move through the following stages. 

1. Meet and greet

At the start of the mediation day, the mediator will usually welcome the parties and show them to their separate private rooms. These private rooms are often called “caucus rooms”. 

If the mediation agreement has not already been signed, the parties will usually sign it at this stage. The mediation agreement normally sets out matters such as confidentiality, the mediator’s role, the fees, and the parties’ agreement to take part in the process. 

The mediator may also discuss practical arrangements for the day, including timing, breaks, the use of joint and private meetings, and who will attend each session. 

The mediator may ask the persons attending to confirm their names and roles. This is important because all parties should be comfortable with the people present at the mediation, including legal representatives, company representatives, insurers, experts, interpreters or other advisers. 

The mediator may also check whether the parties or their representatives have authority to settle the dispute. This may be straightforward where the parties are individuals, as they usually have authority to settle their own disputes. However, where a party is a company, organisation or insurer, the mediator may ask whether the attending representative has been properly authorised to represent that party and to agree settlement terms. 

Where the amount of the claim is in issue, the mediator may check whether the representative has a financial limit on settlement authority and whether further approval from a board of directors, senior management, insurer or other decision-maker is required. If a representative does not have full authority to settle, the mediation may still continue if the parties agree to proceed on the basis that approval will need to be obtained before any settlement becomes final. 

2. Initial joint meeting and the mediator’s opening statement 

The parties will usually then meet together with the mediator in a joint meeting. 

After the parties are seated in the mediation room, the mediator will usually begin by making an opening statement. The purpose of the mediator’s opening statement is to help the parties understand the mediation process, what will happen during the day, and their own role in the process. It also gives the parties an opportunity to ask questions about how the mediation will operate. 

At this meeting, the mediator will usually make an opening statement to explain the mediation process and help the parties understand what will happen during the day. The mediator’s opening statement will normally cover the following matters:  

1. introducing himself and welcoming the parties; 
2. asking all persons attending to state their names and roles, so that everyone is clear who is present and in what capacity; 
3. confirming, where appropriate, that the parties or their representatives have authority to settle the dispute, or that any necessary decision-maker is available; 
4. explaining the purpose of mediation, including that it is a voluntary and confidential process designed to help the parties communicate, explore settlement options and, if possible, reach their own agreement; 
5. explaining the mediator’s role as a neutral and impartial facilitator, and making clear that the mediator will not decide the dispute or impose a result; 
6. confirming that the mediator is independent and impartial; 
7. disclosing any connection or possible conflict of interest with any party, if such a matter exists, and asking whether the parties consent to the mediation continuing; 
8. explaining that mediation is conducted on a “without prejudice” basis, subject to exceptions provided by law; 
9. explaining the ground rules for communication, including respectful listening, allowing each party to speak, and avoiding interruptions; 
10. explaining the expected structure of the mediation day, including: 

• the mediator’s opening statement; 
• the parties’ opening statements; 
• setting the agenda; 
• discussing the issues on the agenda; 
• private or individual sessions; 
• any further or final joint sessions; and 
• recording any settlement in writing; 

11. explaining the use of private meetings, including that information disclosed in a private meeting will not be passed to the other side by the mediator unless permission is given; 
12. checking the parties’ availability and whether they are willing to continue beyond any preset finishing time if useful; 
13. asking whether the parties are committed to participating actively and constructively in the mediation; and 

14. inviting the parties to ask questions about the process before proceeding. 

     

3. The parties’ opening statements 

Each party is then usually invited to make an opening statement. This allows the parties to explain their views of the dispute and what outcome they hope to achieve. 

The parties are usually given equal time to speak. The order of speaking may be agreed by the parties. Commonly, the party who initiated the claim or dispute will speak first, but this is not a fixed rule. 

Because the mediator and the parties may already have received position papers, statements of issues and supporting documents before the mediation, the opening statement does not usually need to describe the entire case in detail. It may be more useful for each party to highlight the major points, explain what matters most to them, and identify any new information that may not previously have been understood by the mediator or the other party. 

The mediator may summarise what each party has said. This helps to confirm understanding and may reduce tension.  

If the mediator is unclear about anything said in an opening statement, the mediator may ask clarifying questions. Before moving to the next stage, the mediator may reframe or summarise the parties’ statements to ensure that the issues have been properly understood and that the parties are satisfied that the correct matters will be discussed. 

The mediator may also help the parties identify: 

• any areas of common ground; 
• the main issues in dispute; 
• matters which must be resolved before settlement is possible; and 
• the order in which issues should be discussed. 

At this stage, the mediator may encourage the parties to move away from blaming each other and to approach the dispute as a common problem to be solved. The mediator may also encourage the parties to focus not only on their legal positions, but also on their underlying interests and practical needs. 

4. Problem definition, agenda setting and exploration of issues

After the opening stage, the mediator will help the parties define the real issues in dispute. 

These issues may be legal, factual, financial, commercial, personal or practical. For example, one party may say that it wants compensation, but the underlying concern may also involve cash flow, reputation, an apology, future business relations or certainty. 

After the mediator and the parties have made their respective opening statements, and after any questions relating to those statements have been addressed, the mediator will usually help the parties set an agenda of issues to be discussed. 

The mediator may use a visual aid, such as a whiteboard, flip chart or shared screen, so that all parties can see the proposed issues and agree what should be discussed. This can help make the process transparent and organised. 

The mediator may help the parties distinguish between: 

• issues which are essential to settlement; 
• issues which are less important; 
• misunderstandings which can be clarified; and 
• practical obstacles which may prevent agreement. 

The mediator may also explain the difference between “positions” and “interests”. A position is what a party says it wants, such as “I want HK$1 million” or “I deny liability”. An interest is the reason behind that position, such as cash-flow pressure, commercial reputation, certainty, avoiding litigation risk, preserving a business relationship or obtaining an apology. 

Although parties may have provided a list of issues before the mediation, those issues are often framed by reference to legal or bargaining positions. The mediator may therefore reframe the issues in more neutral and mutual language, focusing on the interests that need to be addressed if settlement is to be possible. 

For example, instead of framing an issue as “Party A’s failure to pay”, the mediator may reframe it as “payment arrangements and timing”. Instead of “Party B’s defective work”, the issue may be reframed as “quality of work and remedial steps”. Neutral wording can reduce blame and encourage problem-solving. 

As part of this process, the mediator may help the parties identify areas of common ground. This can be important because settlement often develops from points on which the parties already agree, even if those points appear limited at first. The mediator may pay close attention to concessions or acknowledgements made by the parties and may use them as a basis for further discussion. 

Common ground may include, for example: 

• an agreement that the parties wish to preserve an existing business, employment, family or personal relationship; 
• a shared wish to avoid court or arbitration because of cost, delay, uncertainty or confidentiality concerns; 
• a shared wish to resolve the dispute as early as possible; 
• agreement that certain facts are not disputed; 
• agreement that some payment or performance is due, even if the amount or terms remain disputed; 
• agreement that future communication needs to improve; or 
• agreement that the dispute should be resolved confidentially. 

If the parties are unwilling to acknowledge common ground at an early stage, the mediator may help by identifying obvious points of agreement in a neutral way. For example, the mediator may observe that both parties have chosen to attend mediation, which usually indicates that they are at least willing to explore settlement. 

Once the issues have been identified and, where appropriate, reframed, the mediator may ask the parties whether they agree with the wording of the issues and the order in which they should be discussed. 

During the discussion, the mediator may tick off or mark issues that have been dealt with. This can help the parties see the progress being made and focus on the remaining matters. 

This stage is important because settlement is more likely if the parties understand what actually needs to be resolved, what interests lie behind their stated positions, and where common ground may already exist. 

5. Private meetings with the mediator

The mediator will often meet each party separately in private meetings, commonly called caucuses. 

The purpose of private sessions is to explore the issues, the parties’ underlying interests, and possible options for settlement in greater depth. Parties may sometimes feel uncomfortable expressing their real concerns, priorities or possible concessions in front of the other side because they may fear that this will be seen as a sign of weakness. A private session allows a party to speak more freely with the mediator. 

In a private meeting, the mediator may help a party: 

• explore the reasons behind its position; 
• identify its broader interests and needs; 
• consider what the other side’s interests and needs may be; 
• decide which issues are most important and which are secondary; 
• consider the strengths and weaknesses of its case; 
• assess the risks, costs and uncertainty of litigation or arbitration; 
• discuss the gap between the parties’ positions; 
• consider possible settlement options; and 
• formulate proposals which may be put to the other side. 

The mediator may encourage the parties to generate options for settlement. These options may go beyond what a court could order. For example, a settlement may include: 

• payment by instalments; 
• revised contract terms; 
• future business arrangements; 
• repair or replacement of goods; 
• an apology or expression of regret; 
• confidentiality undertakings; 
• return of documents or property; 
• withdrawal of complaints; 
• costs arrangements; or 
• agreed steps to prevent similar disputes arising again. 

Information given to the mediator in a private meeting should not be disclosed to the other side unless the party gives express permission. This confidentiality is important because it allows the parties to speak openly with the mediator and to explore possible ideas without necessarily committing themselves to a formal offer. 

Even if the mediator is not given permission to disclose particular information, that information may still assist the mediator in understanding the dispute, identifying possible settlement options, and helping the parties move towards resolution. However, subject to any applicable legal obligations or statutory exceptions, the mediator must not reveal the information to the other party without consent. 

Where permission is given, the mediator should clarify exactly what may be disclosed, to whom, and whether the source of the information may be identified. The mediator should also choose an appropriate time and manner to disclose the information. It may not always be appropriate to disclose the information immediately in the other party’s private session, because the other party may have different concerns or may not yet be ready to consider that information constructively. When disclosing information with permission, the mediator should make clear that consent to disclose has been given, so that the receiving party understands that confidentiality has been waived for that information. 

In Hong Kong, mediation communications are generally protected by confidentiality under the Mediation Ordinance (Cap. 620), subject to statutory exceptions. This statutory confidentiality is separate from, and may be supplemented by, the ground rules agreed for private caucuses, under which the mediator will usually not disclose information from one party’s private session to the other party without permission. 

These private meetings are commonly used for “reality testing”. This means that the mediator may ask questions to help a party assess whether its assumptions are realistic, what may happen if the dispute continues, and whether a proposed settlement is better than the risks of going to trial or arbitration. 

A private session may also be used to explore each party’s BATNA, meaning the “best alternative to a negotiated agreement”. In simple terms, this means what a party can realistically do if no settlement is reached at mediation. For example, a party’s BATNA may be to continue litigation, proceed to arbitration, negotiate directly later, look for another commercial solution, or take no further action. 

The mediator may also help a party consider its WATNA, meaning the “worst alternative to a negotiated agreement”. This involves considering what could happen if the dispute does not settle and matters go badly, such as losing at trial, paying the other side’s costs, suffering delay, damaging a commercial relationship, or facing enforcement difficulties. 

If a proposed settlement option is better than a party’s realistic BATNA, settlement may become more attractive. Conversely, if a proposed settlement appears worse than the party’s BATNA, the party may decide that it is better to walk away from the mediation. By helping the parties examine their BATNA, WATNA, risks, costs and practical consequences, the mediator can assist them to evaluate settlement options more realistically. 

When settlement options are suggested, the mediator may help the parties test whether each option is viable. This may include considering: 

• whether the option is practical; 
• whether it can be implemented easily; 
• whether the parties have the resources to perform it; 
• whether it addresses the parties’ underlying interests; 
• whether the timetable is realistic; 
• whether the terms are sufficiently clear; 
• what will happen if there is default; and 
• whether the proposal may create further disputes in the future. 

Reality testing is important because a settlement should not only resolve the present dispute in principle, but should also be workable in practice. 

There is no fixed limit on the number of private sessions that may be held during a mediation. The mediator may move between the parties several times if this helps the negotiation. However, the underlying principle is that each party should be given a fair opportunity to speak privately with the mediator. This does not always mean that each party must receive exactly the same amount of time, but the mediator should manage the process in a way that is fair and balanced. 

6. Further joint meetings and final joint session

As the negotiation progresses, the mediator may bring the parties back together for further joint meetings. 

Further joint meetings may be used to: 

• summarise progress; 
• narrow the remaining issues; 
• allow the parties to negotiate face-to-face; 
• communicate important messages, such as an apology or expression of regret; 
• confirm the terms of agreement; 
• identify practical obstacles to settlement; 
• discuss payment timing and default provisions; 
• decide how court or arbitration proceedings will be disposed of; 
• deal with legal costs; and 
• discuss how the parties can avoid similar problems in future. 

If the parties have an ongoing business or personal relationship, this stage may be particularly useful. The parties may agree practical arrangements to improve communication and prevent further disputes. 

A final joint session may be held when the parties appear close to settlement or when it would be useful to bring them together to clarify the remaining issues. The purpose of the final joint session is usually to assist the parties to finalise negotiations and, if possible, reach an agreed resolution. 

At this stage, the mediator may help the parties: 

• clarify the offers being made; 
• confirm what has already been agreed; 
• identify any remaining uncertainties; 
• check whether the proposed terms are practical; 
• ensure that the parties understand the consequences of the proposed agreement; and 
• confirm whether any further approval is required from a board of directors, senior management, insurer or other decision-maker. 

The mediator’s role is not to impose a settlement, but to assist the parties in finalising their own agreement. 

Sometimes, the parties may be able to agree on some issues but not all issues. In that situation, the mediator may help the parties identify which matters have been resolved and which remain unresolved. Even a partial settlement may be useful because it can narrow the dispute and reduce the time, cost and risk of later proceedings. 

For issues that remain unsettled, the mediator may help the parties reality test their alternatives to settlement. This may include considering the likely cost, delay, uncertainty and practical consequences of continuing with litigation, arbitration or another dispute resolution process. 

7. Mediated settlement agreement

When the parties have reached a resolution, it is strongly recommended that the settlement be recorded in writing and signed by the parties. The written agreement acts as a clear record of the settlement terms and assists future implementation. 

Although the Mediation Ordinance (Cap. 620) does not strictly require the agreement to be in writing to be binding as a contract, practitioners generally advise a written document to avoid evidential barriers during enforcement. Most institutional rules and the Hong Kong Mediation Code explicitly provide that a settlement is not binding until reduced to writing and signed by all parties.  

In some contexts, mediated settlement agreements must be in writing. For example, Practice Direction 6.1 imposes a stricter regime on cases assigned to the Construction and Arbitration List of the High Court. For matters on that list, no settlement reached in mediation is binding until it is reduced to writing and signed by both parties. 

This document is commonly called a mediated settlement agreement. It should set out exactly what each party has agreed to do. Depending on the case, it may include: 

• the amount of any payment; 
• the time and method of payment; 
• whether payment will be made by instalments; 
• what happens if a party defaults; 
• confidentiality terms; 
• release of claims; 
• costs arrangements; 
• discontinuance or stay of court proceedings; 
• disposal of arbitration proceedings; 
• tax or regulatory matters, if relevant; and 
• any future obligations between the parties. 

In practice, and often under the mediation agreement itself, settlement discussions are not treated as binding unless and until the settlement terms are put into writing and signed by the parties. This avoids later disagreement about whether a final settlement was actually reached. 

Once signed, a mediated settlement agreement will generally be legally binding as a contract, provided the normal requirements for a valid contract are satisfied, including certainty of terms and an intention to create legal relations. 

The mediator may help the parties record the agreement, but the mediator is not usually a party to it. The mediator may witness the signatures, but this is not always legally required. 

If the parties are legally represented, it is often beneficial for the lawyers to draft or review the settlement agreement. Lawyers may help ensure that the terms are clear, certain, enforceable and consistent with any existing court or arbitration proceedings. 

Parties who are legally represented may bring a draft mediated settlement agreement or precedent to the mediation. This can make it easier to prepare a clear and enforceable agreement before the mediation ends. 

When settlement terms are being drafted, care should be taken to ensure that they are: 

• clear and unambiguous; 
• sufficiently certain to be enforceable; 
• practical and capable of performance; 
• complete, so that important matters are not left unresolved; 
• consistent with any necessary approvals; and 
• appropriate for disposing of any related court, arbitration or complaint proceedings. 

If a party representative does not have full settlement authority, the written agreement should clearly state whether the settlement is subject to approval by a board of directors, senior management, insurer or other decision-maker, and when that approval must be obtained. 

8. Termination of mediation

A mediation may end in several ways. It may end because: 

• the parties sign a mediated settlement agreement; 
• one or more parties withdraw from the mediation; 
• the mediator decides that continuing the mediation is unlikely to be useful; 
• the mediation agreement provides for termination; or 
• no settlement is reached. 

If no settlement is reached, the parties may usually continue with litigation, arbitration or another dispute resolution process, subject to any court orders, arbitration rules, contractual obligations or applicable legal requirements. 

The mediator should respect the parties’ decision if they decide to terminate the mediation or if they decide not to settle. Mediation is voluntary, and the parties cannot be forced to reach agreement. 

Where settlement is not reached, the mediator may still help the parties identify what has been achieved during the mediation. For example, the parties may have clarified the real issues, exchanged important information, narrowed the dispute, identified areas of common ground, or resolved some but not all issues. This can help ensure that the parties do not leave the mediation with a sense of failure. 

I. Post-mediation procedures 

1. Where a full settlement is reached 

If mediation results in a full settlement, the parties should record the settlement in a written mediated settlement agreement. The agreement should clearly resolve all issues in dispute. Once signed, the agreement will generally be binding as a contract, provided the usual requirements for a valid contract are satisfied. 

If court proceedings are already on foot, settlement at mediation does not automatically end the court action. The parties must also take formal steps to deal with those proceedings.  

(i) Consent summons and orders 

The final agreement is often incorporated into a consent summons filed with the court, which then hands down a Consent Order or Consent Judgment in similar terms. This process transforms the private contractual settlement into an official court order, providing a high level of legal enforceability. If a party fails to comply with the terms, the other side can apply to the court for enforcement without having to initiate a completely new action for breach of contract. 

(ii) Tomlin orders 

The parties may use a Tomlin Order to stay proceedings on agreed terms, except for the purpose of carrying those terms into effect. The complex details remain in a separate, confidential schedule, while the order itself allows for expedited enforcement without starting a new action. 

(iii) Discontinuance 

The parties may jointly file a Notice of Discontinuance to withdraw all claims and counterclaims without the leave of the court. 

(iv) Duty to inform 

Under PD 31, the plaintiff has a specific duty to promptly inform the court if a settlement is reached, especially if proceedings were stayed. This allows the court to vacate trial dates and reallocate resources. 

If the dispute was in arbitration, the settlement can be recorded as a Consent Award (award on agreed terms), which is enforceable in the same manner as a court judgment. 

Post-mediation tasks may include fulfilling conditional aspects of the agreement (e.g., transferring shares) or attending follow-up meetings to review how the arrangements are working in practice, which is common in ongoing workplace or parenting relationships. 

Unless the parties agree otherwise, the mediator’s role ends once the mediation has concluded and any agreed post-mediation involvement by the mediator has been completed. 

2. Where a partial settlement is reached 

Mediation may resolve all or only part of the dispute. 

If only part of the dispute is settled, the parties should clearly record which issues have been resolved and which issues remain outstanding.  

For issues that remain unresolved, the legal proceedings remain on foot. The court retains jurisdiction to make directions for the further conduct of the trial regarding these outstanding matters. The court may then give further directions for the unresolved issues to proceed. 

For example, the court may: 

• recommend further mediation; 
• give directions for the remaining issues; 
• adjust the timetable; 
• deal with costs of the settled issues; or 
• list the remaining dispute for trial. 

A partial settlement can still be highly beneficial as it may resolve simple issues (like the exchange of documents), thereby shortening future court proceedings and saving time and costs. 

3. Where no settlement is reached 

Parties proceed with their original action in court or before an arbitral tribunal. 

The costs incurred during a failed mediation may be recoverable as costs incidental to the legal proceedings, provided the mediation was sufficiently connected to the litigation. 

While the substance of mediation remains confidential, the mediator may be required to report certain procedural facts to the court, such as whether the parties attended the mediation, the duration of the sessions, and that the process concluded without an agreement. 

Information shared during a failed mediation generally cannot be used as evidence in subsequent trials due to “without prejudice” basis. However, there are limited exceptions, such as where evidence is needed to prove if a settlement was actually reached or if there was unambiguous impropriety. 

The court may penalize a party with an adverse costs order if it finds they unreasonably failed to engage in mediation. 

J. Judiciary Mediation Offices

The Judiciary has set up the Integrated Mediation Office and Building Management Mediation Co-ordinator’s Office to help the public understand the nature of mediation and to assist them in seeking mediation services from professional bodies. 

Integrated Mediation Office 

Address: Room 113, 1/F, Wanchai Tower, 12 Harbour Road, Wanchai, Hong Kong 

Telephone: 2180 8066 

Fax: 2180 8052 

Email: mediation@judiciary.hk 

Integrated Mediation Office (West Kowloon) 

Address: 2 Ying Wa Street, Sham Shui Po, Kowloon 

Telephone: 2388 3070 

Fax: 2388 3073 

Email: mediation@judiciary.hk 

Building Management Mediation Co-ordinator’s Office 

Address: Room 206 – 208, 2/F, Lands Tribunal Building, 38 Gascoigne Road, Kowloon 

Telephone: 2170 3858 

Fax: 2782 5780 

Email: mediation@judiciary.hk