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Can’t Litigate? Let’s Arbitrate

  • Hong Kong
  • International arbitration

14-04-2020

Hong Kong Courts are closed as a result of the COVID-19 pandemic and the backlog of litigation continues to grow. Does arbitration have the answers?

The COVID-19 pandemic has led to the closure of the Hong Kong courts. They closed after the Chinese New Year and briefly reopened in March1 only to close again following a significant rise in confirmed COVID-19 cases in Hong Kong.

On 8 April 2020, the Hong Kong Judiciary extended the period of general adjournment of court proceedings (“GAP”) to 3 May 2020.2 During this time, only “urgent and essential business” will be handled by the courts, including the filing of claims where the limitation period could expire during the GAP.3

Our experience confirms the impact of the GAP, particularly in delaying court proceedings and filings. In addition, the COVID-19 situation is transmuting rapidly, as the government increases efforts to contain the pandemic. This makes it difficult to predict the ‘new normal’ with certainty, including ‘when’ and ‘how’ the courts will resume normal operations.

Hong Kong Judiciary's Responses

Businesses, government departments, the Judiciary and ordinary people all face the challenge of working in the ‘new normal’.

On 2 April 2020, the Judiciary announced steps to address the backlog of matters while complying with government directives on social distancing and other measures to contain COVID-19. The key message in the announcement was the “incremental” introduction of technology-based solutions. Video conferencing would be authorised for civil cases in the High Court where oral submissions are generally concluded within two hours.4 Electronic lodging of documents with the court, or with a particular judge (such as by use of a ‘no-reply’ email address or e-lodgement platforms) would also be permitted. The Judiciary’s announcement of 8 April 2020 already refers to two cases that have been heard through video conferencing on 6 and 7 April 2020 by the Court of Appeal and the Court of First Instance, respectively.5

In February 2020, Mr. Justice Coleman conducted a directions hearing via teleconference in Cyberworks Audio Video Technology Limited v Mei Ah (HK) Company Limited & Ors. This was the first time such a hearing had occurred in Hong Kong.6

Despite these steps, it remains unclear (i) whether the ad hoc measures announced by the Judiciary are sufficient to address the backlog together with the likely increase in COVID-19-related litigation; and (ii) whether the court’s systems and infrastructure have the necessary capacity and resilience. Another factor to consider is the prioritisation of cases. “[U]rgent and essential” business has not been defined in the GAP. This remains at the discretion of the courts, making it difficult to predict the outcome with any degree of certainty.

Arbitration – A Flexible Alternative to Delayed Litigation in the Wake of COVID-19

In the current crisis, the public court system has become overburdened. This, in turn, is exacerbated by the existing procedural framework, as well as limited access to, or use of, technology-led solutions. Arbitration represents a viable alternative for parties to advance their disputes – whether they have yet to be commenced or are already underway.

Arbitration is a tried and tested method of resolving business disputes typically agreed to by parties in contracts.7 As a creature of agreement, parties are able to tailor the dispute resolution process in many ways to suit their needs and the nature of their commercial and legal relationships.

Arbitration is similar to litigation as it involves the adjudication and administration of a dispute by an independent and neutral third-party, in this case an arbitrator (or tribunal of arbitrators). The arbitrator considers the parties’ submissions and then issues a binding determination, which is generally final.

The differences between arbitration and litigation become apparent at the moment when the parties decide to commence arbitral proceedings. From that point onwards, the dispute moves to a private forum. In Hong Kong, arbitrations under the Hong Kong Arbitration Ordinance (“HKAO”) have the further benefit of remaining confidential.

Unlike litigation, parties to an arbitration can decide how and where they wish to conduct the proceedings. For example, they can agree procedural issues such as timelines, the exchange of written submissions, the taking of evidence and the venue (or venues) for hearings. If the parties are unable to agree on these points, the arbitrator will determine the procedure. This flexibility gives the parties greater control and autonomy over their dispute.

Below is an overview of how arbitration can help parties avoid the impediments currently facing Hong Kong courts due to the present pandemic:

  1. Expedited procedures: parties may apply under some institutional arbitration rules adopted in their contracts for the application of expedited procedures based on particular grounds.8 Typically, these procedures provide for a limited exchange of submissions, the resolution of the issues on a documents-only basis and the rendering of a decision (or award) within a fixed timeframe (e.g., six months from the constitution of the tribunal). These procedures have been used with considerable frequency.9

  2. Urgent interim relief: a party can seek the appointment of an emergency arbitrator (“EA”) in circumstances in which it cannot await the constitution of an arbitral tribunal to grant interim relief to preserve assets or evidence or to maintain the status quo.10 Institutional rules generally provide for the appointment of an EA at short notice (24 hours in the case of HKIAC11). The EA is also required to make an order or decision within a fixed period (14 days under the 2018 HKIAC Rules).12

  3. Flexible hearing procedures and technology support: arbitration hearings are not subject to the constraints currently experienced with the GAP. They can usually be scheduled according to the needs and availabilities of the arbitral tribunal and the parties, including on weekends and after business hours. Generally, they are also flexible in terms of the prescribed venue and/or mode, which means that hearings can be held at any convenient location or remotely via video conferencing on various electronic platforms that are commonplace in many commercial and law firm settings.

    Arbitral institutions such as HKIAC and the Singapore International Arbitration Centre (“SIAC”) have partnered with technology specialists to offer reliable integrated virtual hearing systems for parties’ use, IP-based and cloud-based video conferencing and audio conferencing, together with e-platforms for bundling documents and services and facilities for the electronic presentation of evidence.13 The Korean Commercial Arbitration Board has developed the “Seoul Protocol” with guidelines for the conduct of arbitration hearings by video conference.14

Practical Guidance – Switching from Litigation to Arbitration ‘Mid-Dispute’

Generally, any referral of a dispute to arbitration must be mutually agreed by all parties. In most matters, a ‘pre-dispute’ arbitration agreement to submit future disputes is incorporated in the underlying contract in the form of an “arbitration clause”. That said, parties can refer litigation to arbitration after a dispute has arisen or even ‘mid-dispute’ where all parties enter into a standalone agreement, known as a “submission agreement”.

The HKAO requires submission agreements to be ‘in writing’15, but there is no prescribed format or requirements on the content. In practice, submission agreements generally include:

  • the parties’ express agreement to arbitration;
  • the institution administering the arbitration and the agreed procedural rules;
  • a brief description of the contract or document under which the dispute, controversy, difference or claim has arisen or may arise;
  • the seat of the arbitration; and
  • the governing law of the submission agreement, the number of arbitrators and the language for conducting the arbitration proceedings.

Arbitral institutions have model submission agreements on their websites.16

In light of the unprecedented disruption to court proceedings by COVID-19, arbitration presents itself as a viable alternative as it is less encumbered by social distancing measures and court closures. Parties may look to it for resolving matters that have yet to be submitted or are currently not progressing in litigation.


1 See our e-briefing entitled “Courts Returning to Business – Hong Kong” on 3 March 2020.

Announcement by Judiciary on 8 April 2020, available at https://www.info.gov.hk/gia/general/202004/08/P2020040800665.htm (“Announcement by Judiciary”).

3 The Judiciary, “Urgent and Essential Hearings/Matters to be Handled by the Courts for the Weeks of March 30 and April 13”, available at https://www.judiciary.hk/doc/en/court_services_facilities/gap_urgent_hearing_20200330_20200413.pdf and “Urgent and Essential Hearings/Matters to be Handled by the Courts for the Weeks of April 14 to May 3”, available at https://www.judiciary.hk/doc/en/court_services_facilities/gap_urgent_hearing_20200414_20200503.pdf.

4 The Judiciary, Guidance Note for Remoting Hearings for Civil Business in the High Court (Phase 1: Video-Conferencing Facilities), available at: https://www.judiciary.hk/doc/en/court_services_facilities/guidance_note_for_remote_hearings_phase1_20200402.pdf.

5 See supra note 2, Announcement by Judiciary, paragraph 2.

6 Cyberworks Audio Video Technology Limited v Mei Ah (HK) Company Limited & Ors [2020] HKCFI 347. The full judgment is available at https://www.hklii.hk/cgi-bin/sinodisp/eng/hk/cases/hkcfi/2020/347.html?stem=0&synonyms=0&query=title(cyberworks)%2520OR%2520ncotherjcitationtitles(cyberworks)%2520&nocontext=1.

7 In Hong Kong, certain disputes cannot be resolved by arbitration (i.e., they are not ‘arbitrable’), including, for example, those involving criminal matters or domestic relation issues.

8 Article 42.1 of the 2018 version of the Administered Arbitration Rules of the Hong Kong International Arbitration Centre (“HKIAC”) provides that a party may apply for an arbitration to be conducted on an expedited basis if (a) the amount in dispute does not exceed the threshold prescribed by HKIAC on its website (which is currently HK$25 million); (b) the parties so agree; or (c) in cases of exceptional urgency.

According to HKIAC, 79 applications for expedited procedure were submitted to the institution from 2015 to 2019, of which 55 were granted and 24 did not proceed under the procedure. For detailed statistics, see HKIAC’s website at https://www.hkiac.org/about-us/statistics.

10 Article 23 of the 2018 HKIAC Administered Arbitration Rules (“2018 HKIAC Rules”).

11 Schedule 4, Emergency Arbitrators Procedures of the 2018 HKIAC Rules, Paragraph 4.

12 Schedule 4, Emergency Arbitrators Procedures of the 2018 HKIAC Rules, Paragraph 12.

13 For further details, see HKIAC’s website at https://www.hkiac.org/content/virtual-hearings. SIAC has also encouraged parties to use the Maxwell Chambers Virtual ADR Services for virtual hearings: see SIAC’s announcement at https://www.siac.org.sg/images/stories/press_release/2020/%5bANNOUNCEMENT%5d COVID-19 Information for SIAC Users.pdf and Maxwell Chambers’ offering at https://www.maxwellchambers.com/2020/02/18/maxwell-chambers-offers-virtual-adr-hearing-solutions/.

14 Issued on 18 March 2020, the Seoul Protocol sets out the best practices in conducting arbitration hearings through video conferencing, available at http://www.kcabinternational.or.kr/user/Board/comm_notice_view.do?BBS_NO=548&BD_NO=169&CURRENT_MENU_CODE=MENU0025&TOP_MENU_CODE=MENU0024.

15 Section 19 of the HKAO: the term ‘in writing’ is broadly defined to include arbitration agreement whose content is recorded in any form even if the arbitration agreement itself has been concluded orally, by conduct or by other means (including electronic communications).

16 See, e.g., HKIAC’s model clause available at: https://www.hkiac.org/arbitration/model-clauses#Arbitration under the HKIAC Administered Arbitration Rules.