Arbitration of Chinese Contracts in Hong Kong

Arbitration is a private process where disputing parties agree that one or several individuals can make a decision about the dispute after receiving evidence and hearing arguments. It is the process of bringing a business dispute before a disinterested third-party for resolution. The third party, an arbitrator, hears the evidence brought by both sides and makes a decision.

Arbitration is on the rise in China

With the massive growth of Chinas economy over the last few decades, arbitration is on the rise in China. Arbitration owes its popularity among the foreign investors doing business in China primarily because it holds four distinct advantages over other dispute redressal mechanisms. Arbitration owes its popularity among the foreign investors doing business in China primarily because it holds four distinct advantages over other dispute redressal mechanisms. Parties are free to adapt the clause to their particular circumstances.

Arbitration outside China, especially in Hong Kong is a viable option

Arbitration outside China may be deemed more reliable than litigation or arbitration within China. Under the Convention for the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958) to which China is a member, arbitral awards reached in most countries can be recognized and enforced in China. Arbitration is usually considered to be neutral and can alleviate the parties’ concerns about the impartiality of local Chinese courts. On 18 October 2018, the Hong Kong International Arbitration Centre (“HKIAC”) announced that the new version of its Administered Arbitration Rules (the “2018 Rules”) have been adopted by the council of HKIAC. The Arbitration Ordinance (Cap 609), which came into force in June 2011, applies to arbitration in Hong Kong. The ordinance is largely based on the UNCITRAL Model Law on International Commercial Arbitration.

Any arbitration proceeding is based on a written agreement of the parties. They submit a given dispute to arbitration instead of the state courts, this becomes the “arbitration agreement”. Arbitration agreements can be found in the majority of commercial contracts, particularly in contracts relating to international transactions. In the arbitration process organized by permanent institutions, the process is more bound to the rules of the said institution. The institution provides arbitral services and normally appoints the arbitrators.

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