HKIAC: rules revisions promote diversity and sustainability

The Hong Kong International Arbitration Centre (HKIAC) has published revisions to its Administered Arbitration Rules (the 2024 Rules), which came into force on 1 June 2024. While the structure and content of the rules have not been overhauled, the changes include some eye-catching provisions on diversity and sustainability issues which have been at the forefront of discussions among parties and practitioners in recent years.

Key changes include (among others):

• Promoting the designation and appointment of diverse arbitrators (2024 Rules, Art 9A).
• Ensuring the environmental impact of proceedings is considered by arbitral tribunals (2024 Rules, Art 13.1).
• Empowering arbitrators to take into account adverse environmental impact when determining reasonable costs and apportioning arbitration costs (2024 Rules, Art 34.4(f)).
• Updates to reflect more widespread use of electronic communication, which accelerated due to the COVID-19 pandemic, and the need to better protect information security in arbitrations (2024 Rules, Art 45A).
• Granting the tribunal additional express powers over case management, including determining preliminary issues and bifurcating proceedings (2024 Rules, Art 13.6).
• Measures to avoid conflicts of interest arising out of changes to party representatives (2024 Rules, Art 13.9).
• An express HKIAC power to preserve the efficiency or integrity of proceedings, including, in exceptional circumstances, through the removal of arbitrators where it considers they are prevented from or have failed to fulfil their functions (2024 Rules, Art 13.10).
• Enabling the HKIAC to adjust arbitrator fees and expenses (2024 Rules, Schedule 2, para 5.1).

In this article, we discuss the changes related to:

• Tribunal diversity
• Sustainability and environmental impact
• Tribunal case management powers, and
• Information security

 

Arbitrator diversity

As discussed here: Diversity in institutional arbitration: what does the data say and what next? | DLA Piper, promoting increased diversity among arbitrators is a key focus for stakeholders in the international arbitration community. Arbitral institutions have made particular progress in recent years to increase the (binary) gender diversity of arbitrator appointments when they are required to make appointments on behalf of the parties or co-arbitrators. HKIAC has been a signatory to the ERA Pledge for Equal Representation in Arbitration since 2016, and has since experienced a remarkable increase in appointment of female arbitrators by HKIAC from 22% in 2021, 27% in 2022, to 35% in 2023.

To further promote this positive development, under the new Article 9A, the HKIAC is obliged (the word “shall” is used) to take into account considerations of diversity, alongside all other relevant considerations, when exercising its authority to appoint arbitrators (2024 Rules, Art 9A.2). This is a welcome move, even if it reflects existing HKIAC tribunal appointment practice.

In addition, parties and co-arbitrators are “encouraged” to take into account considerations of diversity when designating arbitrators (2024 Rules, Art 9A.1). A softer approach has been taken in this regard given the practical and legal difficulties of mandating the consideration of arbitrator diversity by parties and co-arbitrators. It is, nonetheless, a welcome move to include such encouragement expressly in the body of the rules, which may result in parties and co-arbitrators giving more, or indeed any, thought to diversity when it comes to arbitrator designations.

It is noted that the word “diversity” and the phrase “considerations of diversity” are not defined. We assume diversity is to be interpreted broadly but take the view that the provision of additional guidance would be welcome. For example, the 1 January 2022 Note to ICC National Committees and Groups on the Proposal of Arbitrators¹ encourages the consideration of diversity “broadly defined, including but not limited to racial, ethnic, cultural, generational, and gender diversity.” The HKIAC may wish to adopt a similar formulation in, for example, any guidance or practice notes issues on this provision.

 

Environmental impact

Limited revisions are proposed with respect to the environmental impact of HKIAC arbitrations:

• When adopting suitable procedures for the conduct of the arbitration, the arbitral tribunal shall have regard to “environmental impact” (2024 Rules, Art 13.1).
• When deciding on whether costs of the arbitration are reasonable and apportioning the costs of the arbitration, the tribunal shall take into account “any adverse environmental impact arising out of the parties conduct” as part of the circumstances of the case (2024 Rules, Art 34.4(f)). Note: The revisions include more guidance on costs apportionment more generally compared to the 2018 HKIAC Administered Arbitration Rules.

While laudable in aim, we look forward to further clarification on the scope, effect and meaning of these amendments. For example:

• With regard to adopting suitable procedures for the arbitration, what is the expectation for arbitrators in this regard? What would be a consequence of a tribunal’s failure to adopt procedures to reduce environmental impact? And what action can an arbitral tribunal take in the face of party opposition to measures aimed at reducing environmental impact?
• With regard to determining reasonable costs and costs apportionment, what may amount to “any adverse environmental impact arising out of the parties conduct”? It would be useful for specific examples and guidance to be provided.

 

Enhanced case management powers

Additional, express discretionary case management powers are granted to arbitral tribunals, subject to consultation with the parties (2024 Rules, Art 13.6). Tribunals may:

• Determine preliminary issues that the tribunal considers could dispose of all or part of the case. Comment: Examples of such issues may include limitation and jurisdiction.
• Bifurcate the proceedings. Comment: It is reasonably common for tribunals to determine the parties’ dispute in two phases, for example, a jurisdiction and liability phase followed by a quantum/damages phase. The 2024 Rules make express that such a power is available to tribunals.
• Conduct the arbitration in sequential phases. Comment: This power goes beyond bifurcation and contemplates perhaps multiple phases dealing with different issues.
• Decide the stage of the arbitration at which any issue(s) shall be determined.
• Otherwise adopt procedures to decide the case efficiently.

Providing additional clarity to parties, counsel and arbitrators on potentially available case management techniques is welcome as it provides additional flexibility and may enhance the efficiency of proceedings. These techniques compliment the existing early determination procedure in Article 43, which is unamended.

 

Information security

Reflecting growing international arbitral practice², revisions are proposed with the aim of protecting information security (2024 Rules, Art 45A). Specifically:

• The parties may agree on any reasonable measures to protect information shared, stored or processed in relation to the arbitration;
• The tribunal may, after considering the views of the parties, give directions to the parties to project the security of any information shared, stored or processed during the arbitration, taking into account the circumstances of the case; and
• The tribunal may, after taking into account the views of the parties, make a decision, order or award in respect of breaches of any agreed or directed information security measures.

The level of understanding of best practice regarding information security and data protection varies between parties, counsel and arbitrators. Enhancing protections for such matters within HKIAC arbitrations is welcome, but further, detailed guidance is required in order to make these provisions effective and efficient (for example, steps on how confidentiality hub can be set up during arbitration proceedings). We understand such guidance may be forthcoming from the HKIAC.

 

Concluding remarks

The HKIAC’s amendments to its Administered Arbitration Rules are targeted and meaningful, and should offer the institution a strong platform for the continued development and success of its party-focused services.

The 2024 Rules were launched while Hong Kong played host to the ICCA Congress, which was organised around the theme “International Arbitration: A Human Endeavour”. The ICCA 2024 Congress in Hong Kong was attended by a record-breaking 1,400+ delegates from over 70 jurisdictions around the globe. Making it the most well-attended ICCA Congress ever. Fittingly, some of the most notable changes included in the 2024 Rules seek to humanise the operation of the rules and arbitration more broadly, which is to be welcomed.

If you would like to discuss the rules revision project or any other arbitration-related matters, please contact the authors of this article or your usual DLA Piper contact(s).

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¹Note to ICC to National Committees and Groups on the proposal of arbitrators
²For example, 2020 LCIA Arbitration Rules, Art 30A and the ICC Note to Parties and Arbitral Tribunals on the Conduct of Arbitration under the ICC Rules of Arbitration para [199].