International Arbitration: Regional Perspectives, Asia

On 7 July 2021 we hosted the second event in our webinar series on International Arbitration, Regional Perspectives and focused on arbitration in Asia.

Our Head of International Arbitration, Johanne Cox, and partner, Jonathon Crook, were joined by:

• Joseph Chung – Deacons, Hong Kong
• Thio Shen Yi, SC – TSMP Law, Singapore
• Kohei Murakawa – Atsumi & Sakai, Tokyo
• Denning Jin – Han Kun Law, Beijing

Hong Kong Overview – Joseph Chung

• Hong Kong is a common law jurisdiction and arbitration friendly. The current Arbitration Ordinance is based upon the UNCITRAL model law.
• The Hong Kong government has promoted arbitration, in part to relieve pressure on the Court systems, and the Courts take a hands-off approach to arbitration.
• Challenges to arbitration awards are generally limited to procedural grounds unless the parties opt-in to allow challenges on questions of law.
• Hong Kong via China is a  party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Enforcing awards in Hong Kong is not difficult and the Courts are pro-enforcement.
• Since 1997 the New York Convention does not apply between Hong Kong and China. There is a mutual enforcement regime between the two making enforcement of Hong Kong arbitral awards in mainland China easier (Arrangement concerning Mutual Enforcement of Arbitral Awards between the Mainland and the HKSAR).
• English and Cantonese are both official languages in Hong Kong. Around 80% of arbitrations are conducted in English. Typically, submissions will be in English, but where appropriate, witness evidence may be in Cantonese.
• Third party funding is available in Hong Kong following amendments to the Arbitration Ordinance in 2019 as part of a drive to encourage parties to use ADR.
• The number of arbitrations administered in Hong Kong is growing, with the majority of arbitrations having an international element.

Singapore Overview – Thio Shen Yi

• Singapore is also an arbitration friendly common law jurisdiction.
• The Singapore arbitration law is based on the UNCITRAL model law.
• Singapore law promotes party autonomy and seeks to ensure minimal intervention into arbitration disputes, with courts restricted from interfering with the merits of an arbitral decision.
• The Courts will be generous in the interpretation of arbitration of a clause if it can be read in a sensible way to uphold an agreement to arbitrate.
• There is no right of appeal under the International Arbitration Act, but for domestic arbitration there are limited grounds of appeal on issues of law.
• Arbitral awards can be set aside on limited grounds – these broadly reflect the grounds in the UNCITRAL model law with the addition that awards can be set aside for fraud and corruption or a breach of the rules of natural justice in making the award. If appropriate, the dispute can be remitted back to the arbitral tribunal.
• The Courts will seek to prevent parties circumventing arbitration clauses where appropriate and will often grant stays to litigation pending the outcome of an arbitration and anti-suit injunctions are readily available.
• Arbitral tribunals have the right to grant interim remedies and have similar powers to the Courts, including the right to grant injunctions. Although the Courts can be faster when emergency relief is sought.
• There are a number of arbitral institutions operating in Singapore, notably: the Singapore International Arbitration Centre, the International Chamber of Commerce, the Singapore Chamber of Maritime Arbitration, the Permanent Court of Arbitration Singapore Office, and the Arbitration and Mediation Centre of the World Intellectual Property Organization.
• There is an experienced bench of international judges with backgrounds from various civil and common law jurisdictions who sit on the Singapore International Commercial Court.

Tokyo Overview – Kohei Murakawa

• Since 2003 Japan’s Arbitration Act has been based on the UNCITRAL Model Law.
• Japan is an arbitration friendly jurisdiction.
• Japanese courts will respect arbitral awards – an important Tokyo High Court decision in 2018 held that even where the fact finding and legal judgment of an arbitral award appeared to be erroneous in the eyes of the domestic court, the domestic court of the seat of arbitration could not interfere with and annul the award on grounds of mere errors in the fact finding and legal judgment.
• The Japan Commercial Arbitration Association (JCAA) handles a relatively large number of domestic and international cases, with, for period from 2016 to 2020, 48% of the arbitrators in JCAA-administered international arbitration were not Japanese nationals.
• JCAA Arbitrations tend to lead to relatively quick resolutions, with the average arbitration over the last 10 years taking 12.8 months to go from constitution date of arbitral tribunal to rendering final award.
• The Japanese government is supportive of arbitration and is working towards further improvement of the foundation of international arbitration in Japan, including supporting the development of the Japan International Dispute Resolution Centre (JIDRC) venues in Tokyo and Osaka which provide affordable venues with exclusive and advanced facilities for hearings to international arbitration and mediation.
• Japanese companies commonly incorporate arbitration clauses into their agreements – with 84.1% of respondents to a JIDRC report in March 2019 stating that they had stipulated arbitration in their agreements in relation to international transactions or overseas expansion.
• Banking and finance are key industry sectors in Tokyo and the Tokyo Metropolitan Government is seeking to promote Tokyo as a seat and hearing venue for international arbitration regarding financial transactions.
• Third party funding is likely to be available in Japan, but there is some uncertainty. If run incorrectly there is a risk of breaching Japanese Attorney Act.

Snapshot of discussion

Asian Arbitral Institutions

There is a strong geographical element to which arbitral institution is chosen. There are an increasing number of arbitrations coming out of India and many of these end up at the Singapore International Arbitration Centre. Hong Kong’s links with mainland China mean that many disputes that have a link to the mainland are seated in Hong Kong.

Themes for the future

Ensuring impartiality and disclosure of conflicts of interests will likely be a significant issue over the next 5 years. More sophistication is required in the systems dealing with these issues, particularly as in smaller jurisdictions an arbitrator may be acting as counsel against one of the parties’ representatives or as co-counsel with them on other disputes.

Cost of Arbitration

There is sometimes a perception that arbitration costs more than litigation, however, the costs of arbitration are not necessarily greater than litigation and the leaner procedure of arbitration can lead to savings. Additionally, in Singapore, the winning party is likely to recover substantially more of its costs in an arbitration; costs recovery in litigation is typically 20 – 40% of the costs incurred, whereas in arbitration recovery is generally between 90% - 100%.