The choice of seat in international commercial arbitration has become the core variable affecting procedural rights. As the focus of international arbitration is shifting from Europe and the US to Asia, and new seats of arbitration are emerging in the Middle East, Chinese enterprises should build a dynamic framework for choosing the seat of arbitration. The chosen seat must match the industry characteristics to better protect enterprises’ interests.
Comparison of procedural rules
Partner
AnJie Broad Law Firm
Tel: +86 136 6505 1133
Email: anshouzhi@anjielaw.com
The procedural rules for mainstream seats of arbitration can be compared under multiple dimensions. First, as for efficiency of interim measures, the Hong Kong Arbitration Ordinance (HKAO) provides that an emergency arbitrator’s order has the same enforcement power as a court order. The Singapore International Arbitration Centre’s (SIAC) emergency arbitrator procedure requires the chairman to appoint an emergency arbitrator within 24 hours of receiving an application, and mandates the arbitrator to issue an interim order within 14 days.
Regarding evidence disclosure, the common law system permits extensive document disclosure, including “adverse evidence”, which may pose procedural challenges for companies weak in evidence management and organisation. The civil law system, on the other hand, tends to allow the arbitral tribunal to limit the scope of evidence submission, making it more suitable for companies with less robust evidence management systems.
To mitigate risks associated with extensive disclosure of evidence in a common law system, companies may deploy an electronic filing system on signing the contract and consider the seat of arbitration comprehensively.
Regarding a challenge to or replacement of an arbitrator, challenges under Singapore law are grounded on “justifiable doubts” but have a low success rate. The London Court of International Arbitration (LCIA) has sole discretion in such matters and tends to prioritise the stability of the tribunal.
In arbitration involving government entities, attention should be given to potential association between arbitrators and the host country. To ensure neutrality of nationality, the “exclusion of arbitrator based on nationality” can be considered in dispute resolution clauses.
Regarding the judicial review and scope of intervention in arbitral awards, section 81 of the HKAO stipulates that courts may set aside awards for serious procedural violations (e.g. the tribunal exceeding its powers), thereby setting a high threshold of judicial intervention and interference. By contrast, courts in some Middle Eastern jurisdictions such as Saudi Arabia retain the authority to review substantive issues in arbitration.
Business needs and seat characteristics
Energy and infrastructure enterprises often face risks associated with asset transfers and sovereign immunity in the host country. The core demand for an arbitration seat is the quick asset freezing ability and enforceability against sovereign barriers. London is a preferred seat, as it can cover domestic and foreign assets of respondents through the “worldwide freezing orders” of UK courts.
Tech firms prioritise preventing technology leakage and efficiently resolving technical fact disputes. Singapore provides dual assurances. First, the SIAC rules ensure confidentiality by prohibiting the disclosure of trial or award information without the parties’ consent, which especially meets the needs to protect trade secrets concerning industries such as integrated circuits and biomedicine businesses. Second, the “early dismissal procedure” introduced by the SIAC in 2020 allows quick dismissal of patent infringement defences (e.g. prior art invalidity claims) that obviously lack legal grounds, shortening the resolution cycle.
The resolution of financial disputes is centred on global enforceability of rulings, particularly the ability to penetrate offshore structures and circumvent sanctions. Hong Kong offers unique advantages.
The Hong Kong International Arbitration Centre’s (HKIAC) arbitral awards are enforceable in 172 countries under the New York Convention without re-hearing the substance of disputes. Its awards are directly enforceable under the mutual legal assistance agreements between Hong Kong and offshore jurisdictions such as the Cayman Islands and the British Virgin Islands. Also, Hong Kong courts are well known for supporting arbitration, with typically short enforcement cycles.
In recent years, China’s mainstream arbitral bodies have developed rapidly, offering diverse rules and services including arbitration rules for investment, intellectual property and maritime issues, which achieved remarkable results in aspects such as professionalisation and international capacity building.
Certain regional legal districts such as Fujian’s Maritime Silk Road Central Legal District are also stepping up to be preferred seats for resolving international commercial and maritime disputes. Companies with strong bargaining power may choose these arbitral bodies and legal districts as the seat of arbitration.
Design of arbitration clauses
In business negotiation, the dispute resolution clause of a contract is vital to putting the enterprise in an advantageous position. Therefore, enterprises should value the design of “defensive clauses” and offensive strategy.
Enterprises may consider including a clause for dynamic seat of arbitration in the contract for a more proactive stance in arbitration. Mixing procedural rules is another effective approach to design the arbitration clauses.
For example, the contract may designate Singapore as the seat of arbitration, while confirming the applicability of the IBA [International Bar Association] Rules on the Taking of Evidence. This arrangement reduces the risk of an evidence ambush in a common law system, makes evidence collection and presentation a fairer and more orderly process, and aligns better with both parties’ expectations of justice in arbitration.
The bottom-line list for negotiation is also an integral part of clause design. Non-negotiable points may include excluding courts with excessive judicial interference, as such judicial interference may impact arbitration results significantly and weaken its independence and efficiency.
Also, clauses should clarify emergency arbitrators’ authority, helping enterprises safeguard their interests when disputes arise. Incorporating an optional “expedited procedure” can further enhance arbitration efficiency, catering to the needs of parties for streamlining dispute resolution.
An Shouzhi is a partner at AnJie Broad Law Firm. He can be contacted by phone at +86 136 6505 1133 and by mail at anshouzhi@anjielaw.com.
Huang Wenqi, graduate student at the School of Law, Xiamen University, also contributed to this article.
