International Arbitration: A Comparative Analysis of the Rules of the ICC, HKIAC, and SIAC

Paula P. Plaza

Vol. 43 Associate Editor

As global supply and demand chains expand, so do flashpoints for conflict in international business transactions.[1] One way to solve disagreements is through arbitration, which is a private form of dispute resolution decided by an impartial tribunal. By selecting this method, parties hope to wield greater power in naming the decision-makers, controlling the procedure, reducing time and expense, and increasing confidentiality.[2] Awards issued by private tribunals are recognized and enforced through an international treaty – the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention).[3] Arbitration is grounded on consent, and arbitration clauses can be included in any business contract.[4] Companies have a plethora of options in selecting the institution that will administer their arbitration in case a conflict arises,[5] but they must exercise care. Ultimately, the selection of an institution impacts the process and outcome of an arbitration, e.g., administrative and arbitrator fees can range in millions of dollars, relative reputation of an institution can undermine the enforcement of an award, and certain panels of arbitrators may be less knowledgeable in a technical field. [6] To provide guidance in crafting effective arbitration clauses and wading through the dynamic world of alternative dispute resolution, this post examines key features of top global institutions. As the COVID-19 pandemic continues to rock the global economy, there will be a sustained and increased use of virtual hearings and document exchanges (and concomitant challenges).[7] I introduce and distinguish the arbitral institutions’ rules, explore practitioners’ concerns with the use of technology, and suggest three ways the institutions can adopt the best approaches from each other. Preferred Arbitral Institutions The International Chamber of Commerce (ICC) is the most preferred institution by a significant margin (57%), followed by Singapore International Arbitration Center (SIAC) (49%), Hong Kong International Arbitration Center (HKIAC) (44%), and the London Court of International Arbitration (LCIA) (39%).[8] These statistics are based on a 2021 survey conducted by the Queen Mary University of London School of International Arbitration and White & Case LLP with 1,218 respondents and 198 interviews (“Survey”),[9] who were asked to name up to 5 of their preferred institutions.[10] The China International Economic and Trade Arbitration Commission, International Centre for Settlement of Investment Disputes, and Arbitration Institute of the Stockholm Chamber of Commerce are also well-respected.[11] In the Survey, the main drivers for choice of institution are general reputation and previous experience with the institution.[12] Overview of the Rules The rules of the ICC, SIAC, and HKIAC[13] are suitable for arbitrations conducted in various seats and under different governing laws. The rules are similar because they allow parties to choose the seat of arbitration[14] and venue[15] of hearings, permit a challenge of the arbitrators,[16] and allow parties to appoint an arbitrator not accredited or included in the database of the institution. Since the COVID-19 pandemic, all institutions have issued their own guidelines on remote arbitration and online hearings.[17] The rules are different as to the degree of administration, fee structure for arbitrators and timing for advancement of costs, and choice of arbitrators. These factors will determine the best choice for an arbitral institution based on the contract and the circumstances of each case. Similarities The parties may choose the seat of arbitration and the venue of the hearings. The “seat” determines the governing procedural law of the arbitration, judicial interference and support (to compel discovery measures, facilitate appearances of witnesses, etc.) and the enforceability of the award (grounds to challenge and set aside the award).[18] The “venue” is the physical location where the parties or the tribunal choose to meet as a matter of convenience. This may be different from the seat of arbitration.[19] If a party is concerned about the partiality or qualifications of an arbitrator, he can raise a challenge within a specified period.[20] Parties can appoint arbitrators that are neither accredited nor included in the databases of the institutions. Differences There are main differences as to the degree of administration, fee structure for arbitrators and timing for advances of costs, and choice of arbitrators A. Degree of Administration Parties may prefer either a hands-on approach or a lighter touch in proceedings. The rules vary as to the review of the award by another body, period for rendering awards, and the requirement of the Terms of Reference (TOR). i. The ICC and SIAC Have a Higher Degree of Administration As to review, under both rules, the arbitrators submit their draft awards to the ICC Court and SIAC Registrar for scrutiny.[21] The bodies review the awards and may lay down modifications as to the form and draw the arbitrator’s attention to points of substance[22] (completeness, internal consistency, adherence to the rules and the governing law) before issuance. This additional level of review improves the quality of the awards and catches any oversights. As to time limits for the award, under ICC Rules, the award must be issued six months from the last signature on the TOR, subject to modification.[23] Under SIAC Rules, the award must be submitted to the Registrar for review no later than forty-five days after the proceedings are closed.[24] Only the ICC Rules require the arbitrator to prepare a TOR, which contains a summary of the claims, issues, and procedural rules to guide the proceedings.[25]  ii. The HKIAC Utilizes a Lighter Touch As to review, the HKIAC neither imposes a review of the awards nor time limits for issuing the same. B. Fee Structure for Arbitrators and Timing for Advances of Costs As to the fee structure, some parties prefer the arbitrator’s rate to be dependent on the sum in dispute (ICC[26] and SIAC[27]). Others prefer an hourly rate based on actual time spent. The HKIAC affords the parties more flexibility as they can choose either fee structure.[28] As to advances on costs, the ICC[29] and SIAC[30] require advances for costs at an early stage. C. Choice of Arbitrators As to confirmation of selections, parties have more autonomy under the HKIAC rules. The parties’ selection does not require approval. As to foresight on potential arbitrators, generally, institutions keep their list of arbitrators confidential. In contrast, the SIAC[31] and HKIAC[32] panels of arbitrators are publicly available. The ICC may solicit endorsements from its National Committee, whose members’ names are accessible.[33] Thus, when parties select the HKIAC, SIAC, or the ICC, they have a clearer view of the potential arbitrators. The Boon in the Use of Technology, Perceived Challenges, and Solutions A comparison of the Survey results in 2018[34] and 2021[35] reveals a meteoric rise in the use of virtual hearing rooms. In 2018, 64% of respondents said they have “never” utilized them, while 14% said it was “rare.”[36] Fast forward two years, and 72% of respondents[37] have had occasion to use them – a remarkable sea change. In the 2021 Survey, among the challenges in the use of technology were “the difficulty in controlling witnesses and assessing their credibility,” technical malfunctions, and cybersecurity.[38] The HKIAC Guidelines provide unique solutions, absent in ICC and SIAC checklists and guidance notes.[39]  To better address the technological challenges, the latter two can provide options for institutionally managed videoconferencing,[40] an IT specialist to attend hearings to caddie the tribunal and parties,[41] and an Electronic Presentation of Evidence (“EPE”) Manager for evidence bundles.[42] To address witness credibility issues, the ICC and SIAC can explore options to provide a hearing invigilator to be physically present with a witness to ensure integrity of the proceedings,[43] e.g. to guard against coaching and inappropriate communication with counsels or parties. The suggestions may increase the administrative costs of arbitration, but they will provide greater comfort to the parties, who appear to rely heavily on institutional reputation and past experience.[44]

[1]See DENNIS CAMPBELL AND SUSAN MEEK, THE ARBITRATION PROCESS: THE COMPARATIVE YEARBOOK OF INTERNATIONAL BUSINESS 10–12 (2001). [2]GEORGE BERMANN, WILLIAM DODGE & DONALD EARL CHILDRESS III, TRANSNATIONAL LITIGATION IN A NUTSHELL 387 (2003). [3]Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 3. [4]See BERMANN, supra note 2, at 395. [5]Parties can also select ad hoc arbitrations which do not take place within the institutional framework of any given institution, which is beyond the scope of this post. [6]See PAUL FRIEDLAND, ARBITRATION CLAUSES FOR INTERNATIONAL CONTRACTS 43–47 (2007). [7]White & Case LLP and Queen Mary University of London, 2021 International Arbitration Survey: Adapting arbitration to a changing world 23, https://www.whitecase.com/publications/insight/2021-international-arbitration-survey (last visited Oct. 9, 2021) [hereinafter Survey]. [8]Id. at 9. [9]Id. [10]Id. at 11. [11]Id. at 10. [12] Id. [13]See Blog Post (Plaza) Table Draft 1 [14]Singapore Arbitration Center Rules art. 21(1), Aug. 1, 2016 [hereinafter SIAC]; International Chamber of Commerce Rules art. 18, Jan. 1, 2021 [hereinafter ICC]; Hong Kong International Arbitration Center Administered Arbitration Rules art. 14.1, Nov. 1, 2018 [hereinafter HKIAC]. [15] SIAC, supra note 6, art. 24.2; ICC, supra note 6, art. 18; HKIAC, supra note 6, art. 14.1. [16]SIAC, supra note 6, art. 14; ICC, supra note 6, art. 14; HKIAC, supra note 6, art. 11. [17]ICC, Guidance Note on Possible Measures Aimed at Mitigating the Effects of the COVID-19 Pandemic, https://iccwbo.org/publication/icc-guidance-note-on-possible-measures-aimed-at-mitigating-the-effects-of-the-covid-19-pandemic (last visited Oct. 6, 2021) [hereinafter ICC Guidance]; SIAC Secretariat, SIAC Guide Taking Your Arbitration Remote, https://www.siac.org.sg/images/stories/documents/siac_guides/SIAC%20Guides%20-%20Taking%20Your%20Arbitration%20Remote%20(August%202020).pdf, (last visited Oct. 6, 2021) [hereinafter SIAC Guidance]; HKIAC Secretariat, HKIAC Guidelines for Virtual Hearings, https://www.hkiac.org/sites/default/files/ck_filebrowser/HKIAC%20Guidelines%20for%20Virtual%20Hearings_3.pdf, (last visited Oct. 9, 2021) [hereinafter HKIAC Guidance]. [18]GARY BORN, INTERNATIONAL COMMERCIAL ARBITRATION 36 (2012). [19]Survey, supra note 7, at 6 (explaining that the most preferred seats of arbitration are London, Singapore, Hong Kong, Paris, Geneva, and New York). [20]SIAC, supra note 6, art. 14; ICC, supra note 6, art. 14; HKIAC, supra note 6, art. 11. [21]ICC, supra note 6, art. 34; SIAC, supra note 6, art. 32(3). [22]Id. [23]ICC, supra note 6, art. 31(1). [24]ICC, supra note 6, arts. 24, 31; SIAC supra note 6, art. 32(3). [25] ICC, supra note 6, art. 23. [26]Id. art. 38. [27]SIAC, supra note 6, art. 34(1). [28]HKIAC, supra note 6, art. 10.1. [29]ICC, supra note 6, art. 37; SIAC, supra note 6, art. 34. [30]SIAC, supra note 6, art. 34(2). [31]SIAC, SIAC Panel, https://www.siac.org.sg/our-arbitrators/siac-panel (last visited Oct. 9, 2021). [32]HKIAC, HKIAC Arbitrators, https://www.hkiac.org/arbitration/arbitrators#HKIAC’s%20Panel%20and%20List%20of%20Arbitrators (last visited Oct. 11, 2021). [33]ICC, National Committees, https://iccwbo.org/about-us/global-network/regional-offices/#1483448997017-6a7b56b0-90af (lastvisited Oct. 11, 2021). [34]Survey, supra note 7, at 32. [35]Id. at 21. [36]Id. [37]Id. [38]Id. at 24. [39]ICC Guidance, supra note 17, at 6 (ICC provides a comparison of third-party options but does not endorse or make anyrepresentation for any third-party vendors); SIAC Guidance, supra note 17, at 6 (SIAC provides a choice of self-managed or limited institutionally managed platform for the virtual hearing). [40]HKIAC Guidance, supra note 17, at 1. [41]Id. at 2. [42]Id. at 3. [43]Id. [44]Survey, supra note 7, at 6.