Office-Information No.: 51 (EN)
International Arbitration and Commercial Mediation
in Germany, Hong Kong, Singapore,
Thailand, and Vietnam
(July 2015, 71 pages, Reading time approx.: 63 minutes)
Alternative Dispute Resolution (ADR) methods are becoming an increasingly popular way of resolving conflicts. ADR consists of, mediation, conciliation, adjudication, arbitration and combinations thereof.
The common characteristic of all ADR methods is that they are an alternative to litigation at governmental courts. Whereas governmental court procedures are static and designed to provide a standard procedure for all types of cases, ADR allows the parties to choose flexible and individually tailored proceedings which meet their specific needs. Furthermore, ADR provides the parties with the opportunity to retain some control over the outcome of the process and achieve a mutually amicable solution.
Beyond these common key characteristics, there are in fact many differences between the different ADR methods. These differences range from objectives to enforceability. This brochure focuses on the ADR methods of international arbitration and commercial mediation. The former has been the common choice for settling disputes in cross-border contracts for a long time; the latter has rapidly grown in popularity in recent years. This brochure shall provide an insight into the procedures, practical and legal aspects and recent developments of international arbitration and commercial mediation, with particular emphasis on the conditions, legal situation, infrastructure and latest developments in these areas in Germany, Hong Kong, Singapore, Thailand and Vietnam.
- Alternative Dispute Resolution
The most common methods of ADR are arbitration, mediation, conciliation and adjudication. Conciliation and mediation are often collectively referred to as mediation; although there are actually significant differences between these two methods, which will be outlined below.
Mediation involves an independent, impartial third party helping the disputing parties to settle their conflict. The parties, not the mediator, decide the terms of the settlement. The role of the mediator is to revive communication between the parties and reveal the real cause of the dispute and true wishes of the parties via a structured mediation process. The mediator does not make own suggestions as to how the dispute should be resolved.
Conciliation differs from mediation in that the main goal is to conciliate the parties of the dispute by seeking concessions and seeking to reach a compromise. The conciliator, a third impartial person, is often an expert in the disputed subject matter. This expertise allows the conciliator to provide technical assistance, proactively explore and suggest potential solutions and to negotiate a settlement. The parties are generally free to accept or reject the conciliator’s suggested resolution, unless explicitly agreed otherwise.
Arbitration is a form of out-of-court dispute resolution, where the parties refer the dispute to one (an arbitrator) or more persons (an arbitral tribunal), by whose decision they agree to be bound. Arbitration proceedings are conducted in a similar fashion to court proceedings in that each party may have an advocate to speak on their behalf and the arbitrator’s decision is final and binding much like a court decision. However, the key difference is that the parties to arbitration have much greater freedom in terms of choosing the rules of proceeding, the arbitrators, applicable law etc. Moreover, in most jurisdictions arbitration proceedings are confidential whereas court proceedings are a matter of public record. As noted above, arbitral awards are legally binding and usually not subject to appeal. Finally, arbitral awards can be registered with a court and are then enforceable in the same way as a court judgment.
Adjudication involves an independent third party considering the claims of both sides and making a decision. The adjudicator is usually an expert in the subject matter of the dispute. Adjudicators are not bound by the rules of litigation or arbitration. Adjudication is often used in construction disputes and is intended to be quicker and more cost effective than litigation or arbitration. The decisions are often temporary and non-binding . They can be revised. However, experience regarding the FIDIC standard forms of contracts has shown that the adjudicator’s decision may have a factual binding effect with regards to a subsequent arbitration. In addition to the above, there are also a number of hybrid ADR methods and other more specialised methods designed to meet the specific needs of a dispute or industry (e.g. early neutral evaluation or expert determination).
- International Arbitration
The international business community is increasingly using arbitration to resolve commercial disputes which arise in the global marketplace. Supportive laws are in place in many countries that provide a favourable climate for the enforcement of an arbitral agreement. Further, international commercial arbitration awards are recognized by national courts in most parts of the world. Even those countries which do not currently recognize such awards mostly realise that this will need to change in future. In contrast, the enforcement of foreign court orders can be complicated and is subject to certain approval procedures in most foreign jurisdictions. While several bilateral and multilateral treaties exist to support inter-country enforceability, the requisite procedures are still usually very time and cost consuming. This is one of the main reasons for the success of international arbitration in cross-border disputes.
- Definition of Arbitration
Arbitration is a legal process which results in an award being issued by either a single arbitrator or an arbitration panel. Arbitral awards are final and binding on the parties and can only be challenged in very exceptional circumstances. An arbitral award can be enforced in a similar way to a court order. Under the New York Convention (see below 3.8) an arbitral award which is issued in one member country can be enforced in any other member country. Arbitrations can be divided into two types: institutional arbitrations and ad hoc arbitrations. In ad hoc arbitrations proceedings the parties determine all aspects of the arbitration such as the number of arbitrators, manner of their appointment, procedure for conducting the arbitration etc. In institutional arbitrations, the arbitration is organised and administered by a professional arbitration institution.
- The Arbitration Agreement
For an arbitration to take place, the parties must first agree to resolve their dispute via arbitration. In practice, this agreement is often made before the dispute arises in either the form of an arbitration clause within a wider contract or a separate agreement. By signing an arbitration clause the parties are agreeing that their dispute will not be lodged with a court but will be arbitrated instead. Although a written arbitration agreement is usually not required it is still advisable to have a written document to serve as evidence of the existence of such agreement should a dispute arise.
- Terms of the Arbitration Agreement
An arbitration clause should contain the following essential components:
- The parties’ agreement to arbitrate any dispute arising from the applicable contract/transaction;
- The identity of the chosen arbitration institution or the procedure for appointing an ad hoc tribunal;
- Applicable procedural rules;
- Applicable law;
- Place of arbitration (“seat of arbitration”);
- Place of hearing (which can be different from place of arbitration);
- Number of arbitrators;
- Language of arbitration;
- Substantive law;
- Enforceability of the award; and
- Cost provisions.
- Model Clauses
Almost all arbitration institutions provide model clauses on their websites (often in different languages). In this regard please see the recommended arbitration clauses under item 10 (Annex) of this brochure.
- Advantages of Arbitration
There are several advantages of arbitration. The primary advantage of international arbitration compared to court litigation is the international enforceability of the decision. Thus, the parties to international contracts can decide to resolve their disputes in a third neutral country knowing that the eventual award can be easily enforced in any country that is a signatory to the New York Convention.
Another major advantage is that it is more flexible than court litigation and the parties are free to arrange the arbitral process according to their specific needs. The autonomy of the parties includes the choice of arbitration institution, the rules of procedure and taking of evidence, the substantive law, the place of the hearings and the language.
The advantage of autonomy is a key advantage which is the parties’ freedom to choose the arbitrators, in particular their qualifications, nationality and other characteristics. This makes arbitration especially useful in complex, technical commercial disputes, as the arbitrators can be experts in the topic in dispute, which a judge seldom is.
Furthermore, arbitration is usually much quicker than litigation, especially since the awards are binding and not open to appeal as litigation is. Arbitration is private and confidential. Therefore, publicity and the disclosure of trade secrets or potentially embarrassing information can be avoided.
Arbitration is sometimes (but not always) less expensive. However, costs of arbitration depend on different factors, e.g., institution fees, arbitrator’s fees, venue, travel costs, etc. The ICC Arbitration Court is considered to be particularly expensive.
- Institutional Arbitration and ad hoc Arbitration
As mentioned above, arbitrations can be divided into institutional arbitrations, which are administered by an arbitration institution and self-administered ad hoc arbitrations.
- “Arbitration Courts”
Although the institutions are sometimes called “arbitration courts”, they are not courts in the traditional sense. The task of the institution is to administer and oversee the arbitration process and ensure the application of the rules. Normally the arbitration institution will also appoint the arbitrators. Most institutions provide their own standard arbitration rules, which the parties can choose to apply to their arbitration proceedings.
- International Arbitration Institutions
Amongst the internationally most significant arbitration institutions are:
- the ICC-International Court of Arbitration of the ICC located in Paris and an office for the Asia Pacific region located in Hong Kong:
- the International Centre for Dispute Resolution (ICDR) of the American Arbitration Association (AAA) located in New York City:
- the London Court of International Arbitration (LCIA) located in London:
- the Arbitration Institute of the Stockholm Chamber of Commerce (SCC) located in Stockholm:
Examples for arbitration institutions in other countries are:
- the Deutsche Institution für SchiedsgerichtsbarkeitV. (DIS), i.e., the German Institution of Arbitration in Cologne:
- the Chinese European Arbitration Institution (CEAC) of the Chinese European Legal Association (CELA) located in Hamburg:
- the Hong Kong International Arbitration Centre (HKIAC):
- the Thai Arbitration Institute (TAI) of the Alternative Dispute Resolution Office of the Judiciary in Bangkok
- the Vietnam International Arbitration Centre (VIAC) at the Vietnam Chamber of Commerce and Industry:
- the China International Economic and Trade Arbitration Commission (CIETAC):
- the Singapore International Arbitration Centre (SIAC):
Specialist ADR bodies also exist, such as the World Intellectual Property Organisation (WIPO), which has an arbitration and mediation centre and a panel of international neutral individuals who specialise in intellectual property and technology related disputes (www.wipo.int).
- International Investment Arbitration Institution
Arbitration of overseas investment disputes is one of the fastest growing areas of international ADR. The last few decades have seen the promulgation of numerous Bilateral Investment Treaties (BITs) and Multilateral Investment Treaties (MITs), which are designed to encourage investment in signatory countries by offering protection to investors from other signatory states. One of the significant features of some BITs is that they provide investors with the ability to resolve disputes with the host states by way of mediation or arbitration before the International Centre for the Settlement of Investment Disputes (ICSID). The ICSID, an institution of the World Bank Group based in Washington, D.C., is an autonomous international institution which was established under the 1966 Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention or the “Washington Convention”). The primary purpose of ICSID is to provide facilities for the conciliation and arbitration of international investment disputes. ICSID also provides procedural rules for the conduct of conciliation, mediation and arbitration proceedings under the auspices of ICSID. There are currently 159 signatory States to the ICSID Convention. Of these, 150 States have ratified, accepted or approved the Convention and have become ICSID Contracting States. Most ICSID arbitrations proceedings are conducted at the headquarters in Washington, D.C. However, since 2005, the Frankfurt International Arbitration Center (FIAC) in Frankfurt am Main, Germany (which is a cooperation between DIS and the Frankfurt Chamber of Industry and Commerce) has been generally recognised as a key venue for the conduct of ICSID arbitrations under the ICSID Convention. More details can be found at: http://icsid.worldbank.org or at http://www.fiac-arbitration.de.
- Source of Law in International Arbitration
Regarding the sources of law in arbitration a distinction must be made between:
- Rules governing the proceeding (lex arbitri);
- Choice of substantive law, applicable to the merits of the case; and
- Law applicable to the recognition and enforcement of foreign arbitral awards.
- Sources of procedural rules
Binding international rules on arbitration procedures do not exist. It is up to the parties to choose the rules under which they wish their arbitration to be conducted.
Procedural rules can come from:
- The arbitration rules of the various arbitration institutions and organisations;
- The arbitration rules of the governing legal system; or
- The parties can create their own rules.
- UNCITRAL-International Arbitration Rules (2010)
The Arbitration Rules of UNCITRAL are a comprehensive, internationally accepted set of rules which parties can adopt for their arbitration. These rules are essentially designed for non-institutional arbitration. Under these rules neither the UNCITRAL nor any other institution plays any role in the administration of the arbitration. However, many institutional arbitration rules are based on the UNCITRAL-Arbitration Rules.
The UNCITRAL-Arbitration Rules were established in 1976 and revised in 2010. The 2010 amendments recognise 34 years of practical experience. Primarily they were designed to make the arbitration procedures more time and cost effective. Various provisions were added to expedite the arbitration process, such as adding a requirement that the tribunal establish a provisional timetable for the arbitration.
- Institutional Arbitration Rules
All arbitration institutions have their own rules although many are based on either the UNCITRAL or ICC rules. In general, the ICC-based rules usually give stronger powers to the institution.
UNCITRAL-based arbitration rules include:
- HKIAC-Rules of the Hong Kong International Arbitration Center;
- CEAC-Rules of the Chinese European Arbitration Center;
ICC-based rules include:
- DIS-Rules of the German Arbitration Institution (DIS);
- UN-Model Law and National Arbitration Laws
Many countries have their own laws on arbitration most of which are based on the Model Law on International Commercial Arbitration (UN-Model Law or UNCITRAL-Model Law), which was adopted by the UNCITRAL in 1985 and revised in 2006.
The UN-Model Law is designed to assist States to form and reform their national arbitration laws to take into account the particular features and needs of international commercial arbitration. It reflects worldwide consensus on key aspects of international arbitration practice which have been accepted by States in all regions and with various legal or economic systems.
Although the UN-Model Law itself is not binding a great number of States have incorporated it into their arbitration laws with no or little modification. Examples include the German Civil Procedure Code, the Thai Arbitration Act 2002, Vietnam’s 2010 Arbitration Law and Hong Kong’s 2011 Arbitration Ordinance.
- IBA Rules on the Taking of Evidence in International Arbitration (2010)
Institutional arbitration rules generally provide little guidance in regards to document production and the presentation of evidence. This gap is commonly closed by the International Bar Association’s Rules on the Taking of Evidence in International Arbitration (IBA Rules of Evidence or IBA Rules), which have been prepared by an international working group of the IBA.
The IBA Rules of Evidence reflect procedures in use in many different legal systems and accommodate both common law and civil law approaches to taking evidence. As such, they are particularly useful when the parties come from different legal cultures.
The most recent version of the IBA Rules was adopted in 2010. These updated rules reflect current practices and challenges in order to promote efficiency in international arbitration.
The IBA Rules, amongst other things, govern:
- Early consultation and scheduling production;
- Recommendations to identify key issues at an early stage;
- Documentary and electronic evidence, e.g., the obligation to identify specific files, search terms, etc; and
- Good faith.
The parties must expressly adopt the IBA Rules in order for them to be binding.
- Arbitral Proceedings
The formal structure of an arbitration proceeding is similar to a regular civil court proceeding: written pleadings and documents are submitted, a hearing takes place where witnesses and experts give evidence, the arbitrators deliberate and then issue an arbitral award. However, there are differences between an arbitration proceeding and court litigation. An international arbitration proceeding generally combines elements of both civil law and common law, e.g. the role of the arbitrator (or tribunal) is often similar to that of a continental-European judge, whereas the gathering of evidence might be more in the Anglo-American legal tradition. The aforementioned particularly applies when the IBA Rules have been agreed upon.
- Submission of a Request for Arbitration
Arbitration begins when a request for arbitration is submitted by one of the parties involved (usually referred to as the claimant). The other party involved (usually referred to as the respondent) will then be given a chance to answer the request with their own statement of response, including any counterclaims.
- Constituting the Arbitral Tribunal
Arbitration is usually conducted by a sole arbitrator or an arbitral tribunal, generally consisting of no more than three arbitrators. If the parties cannot agree upon the number of arbitrators, then the fall back position depends on the applicable procedural rules. In general, each party names one arbitrator and then the third arbitrator is nominated by the arbitration institution or by the other two nominated arbitrators. Most of the arbitration rules stipulate that the third arbitrator will act as president of the arbitral tribunal and has the casting vote.
- Evidence Finding and Hearing
The arbitrators or arbitral tribunal will collect as much information as they deem necessary from all parties involved in the dispute. Even though the parties are generally free to set their own procedural rules there are still some basic mandatory principles which must always be abided by:
- Equality under the law;
- Right of each party to be heard; and
- Right of each party to be legally represented.
- The Arbitral Award
After the hearings, the arbitrator(s) will set aside time to deliberate and render the award. The duration of this deliberation will depend on the complexity of the case. When there are multiple arbitrators then the award is usually given by a majority decision. If there is no majority and a consensus cannot be obtained then according to most rules the chairman shall make the final decision. The tribunal will also assess the costs of the proceedings, including the fees and expenses of the arbitrators (and experts, if appointed). The administration fee is generally fixed by the institution itself. All costs usually depend on the amount in dispute. Standard legal costs are usually set out in the applicable arbitral rules. The arbitral award is nearly always given in writing and the reasons for the decision are generally stated.
- Recourse Against Award
According to the provisions of the UN-Model Law, an arbitral award can only be set aside for a limited number of reasons, which the party making the application has to prove. A court may also set aside the award if the subject-matter of the dispute is not capable of settlement by arbitration under the law of that State or the award is in conflict with the public order of that State.
- Costs of Arbitration
The costs of arbitration can generally be divided into two categories:
- Procedural costs, consisting of the arbitrator’s/arbitrators’ fees and expenses (i.e. also for travel, accommodation, meals, courier charges and facilities for hearings) and the arbitration institution’s fees for the administration of the arbitration; and
- Party costs, consisting of cost of legal representation and other costs incurred by the parties for the arbitration.
The procedural costs are generally fixed by the arbitration institution based on the sum in dispute. The rules of arbitration usually provide tables which lay out the procedural costs in accordance with the sum of dispute. Therefore, the parties can make themselves familiar with the core procedural costs beforehand. Notwithstanding the previous, some arbitration institutions alternatively allow that the arbitration tribunal’s fees are fixed on an hourly rate if agreed to by the parties.
The assessment of the party costs is usually at the tribunal’s sole discretion. In international arbitration, costs for legal representation are generally based on an hourly fee and other than the procedural costs are not dependent on the sum in dispute. It is worth mentioning in this context that most rules of arbitration limit the recoverable amount for legal representation to a reasonable amount. “Reasonableness” of legal costs is, however, determined on an item by item basis. Further, tribunals will look at whether the costs were proportionate. When looking at the “proportionality” of the costs, tribunals, among other things, will consider
- the amount or value of any money or property involved;
- the particular complexity of the matter; and
- the time spent on the case.
Based on the above, the cost decision usually follows a two-tier procedure: In a first step, the costs are fixed by the arbitration institution (procedural costs) and by the arbitral tribunal (party costs). In a second step, the arbitral tribunal decides about the allocation of the aforementioned costs. Generally speaking, the rule is that the costs follow the event, meaning that the losing party is obliged to pay the procedural costs and to reimburse the successful party’s costs. However, the tribunal may make exceptions from this rule. When making the cost allocation decision the tribunal shall consider the extent to which each party has conducted the arbitration in an expeditious and cost-effective manner. Other points that the tribunal can consider are:
- Whether a party has succeeded on part of its case even if it has not been wholly successful;
- Whether a successful party has failed on issues on which substantial amounts of time were spent; and
- Any offer to settle the case drawn to the arbitrator’s attention.
The parties are also free to reach agreements on the principles to be followed by the tribunal when making the cost allocation decision. However, such agreements should always be viewed in light of the underlying substantive law. Stipulating that one party e.g. will have to bear the cost of the arbitration “in any event” may be contrary to the underlying law and hence held invalid.
Unlike under the procedural codes in civil law jurisdictions, arbitrators in international arbitration have a wide direction when fixing the parties’ costs and allocating the costs of arbitration among the parties. Therefore, only vague predictions can me made in advance as to the recoverability of the costs of arbitration. It should be evaluated on a case by case basis whether the risk of un-recoverability of the costs of arbitration is proportionate to the pursued claim.
- Cost Control Measures
Arbitration can be expensive and time consuming. Therefore, procedures should be performed as efficiently as possible. In this regard, the model clauses provided by arbitral institutions may lead to suboptimal results.
188.8.131.52. Graduated Arbitration Clauses
In general, arbitration procedures may hardly be performed cost efficiently below a dispute value of 200,000 EUR. This is not only because of the previously shown unpredictability regarding the allocation of costs. The main reason is that (state) court procedures below the aforementioned threshold are usually more cost efficient.
With that said, it may be advisable to put arbitration clauses in place that assign disputes below a certain (threshold) dispute value to (ordinary) courts, or leave the option to the parties to have these disputes decided by a state court. This ensures that disputes relating to relatively “low” amounts in dispute may be carried out most cost-efficiently. If the parties opt for such a “graduated” arbitration clause, they should consider how to handle special procedural situations (partial claim, counterclaim, supplementary application, etc.).
184.108.40.206. Minimizing Process Duration and Costs
Further, the behavior of the parties involved (in particular including their lawyers) affect the process duration and cost. The chairing arbitrator’s ability to guide the proceedings is crucial in this context. Therefore, when selecting arbitrators, among other things, it must be ensured that they are experienced and assertive. Additionally, the arbitrator(s) may be requested by the parties to complete the procedure within a certain timeframe. In case this period is exceeded, the fees of the arbitrator(s) shall be automatically reduced. Through this, all parties have an interest in a speedy conclusion of the proceedings.
Finally, care should be taken in choosing the governing arbitration rules by ensuring that these provide for an early structuring of the scope of the dispute and schedule. It may also be useful to agree that at least parts of the process are carried out via video telephony or similar telecommunications in order to save costs.
- International Recognition and Enforcement of Arbitral Awards
The principal instrument governing the enforcement of commercial international arbitration agreements and awards is, as already mentioned, the UN-Convention on the Recognition and Enforcement of Foreign Arbitral Awards (often referred to as the New York Convention). Since its initiation in 1958, the membership has grown steadily to over 150 countries, including most major countries involved in significant international trade and economic transactions, including Germany, Hong Kong, Thailand and Vietnam.
- The New York Convention
The two basic issues stipulated by the New York Convention are the recognition and enforcement of arbitral awards made in the territory of another member state and the referral by a court to arbitration.
The New York Convention does not include provisions on the execution procedure itself. Instead, once a court has recognised the award and declared it enforceable, the enforcement procedures will follow the same rules that apply to the execution of national court orders of the member state where execution is sought.
220.127.116.11. Recognition and Enforcement of Arbitral Awards
The New York Convention places a general obligation on the member states to recognize foreign awards as binding and to enforce them in accordance with their procedural rules. A party seeking to enforce a foreign award needs to supply to the court with:
- the arbitral award; and
- the arbitration agreement.
The party against whom enforcement is sought can object to the enforcement by submitting proof of the existence of one of the grounds for refusal of enforcement which are listed in the Convention (see below). The court may at its own discretion i.e. refuse the recognition and enforcement of an award if it would be contrary to the public policy or because the subject matter of the dispute was not capable of settlement by arbitration under the law of that country. Furthermore, if the award is subject to an appeal action in the country in which, or under the law of which it is made, then the foreign court before which recognition of the award is sought may adjourn its decision until the said appeal has been heard.
18.104.22.168. Judicial Review
Recognition and enforcement of an award may only be refused if the party against whom enforcement is being sought is able to prove that:
- A party to the arbitration agreement did not have sufficient capacity;
- The arbitration agreement was not valid under its governing law;
- A party was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings, or was otherwise unable to present its case;
- The award deals with an issue not contemplated by or not falling within the terms of the arbitration agreement, or contains matters beyond the scope of the arbitration agreement. However, if an award deals with multiple issues, the parts of the decision which deal with the issues which were contemplated by the arbitration agreement can be separated from the rest and then enforced;
- The composition of the arbitral tribunal was not in accordance with the arbitration agreement or with the law of the location where the hearing took place (the “lex loci arbitri”);
- The award has not yet become binding upon the parties, or has been set aside or suspended by a competent authority, either in the country where the arbitration took place, or pursuant to the law of the arbitration agreement.
- Primacy of Arbitration
If, despite the existence of a valid arbitration agreement, one party brings the dispute before a court, the New York Convention requires the court to refer the matter to arbitration (unless the arbitration agreement is invalid).
- Selected Member States
Germany, Hong Kong, Thailand and Vietnam have all ratified the New York Convention. Some have made additional declarations or reservations.
- Ratification: 21 December 1959
- Entry into force: 20 March 1960
- Adopted 21 April 1977 (First via the United Kingdom. China, also a signatory to the New York Convention, applied the Convention to Hong Kong since 1 July 1997) with reciprocity reservation
- In addition: reciprocal treatment for awards made in non-contracting States and domestic awards
- Ratification: 12 September 1995
- Entry into force: 11 December 1995 with reciprocity reservation
- In addition: reciprocal treatment for awards made in non-contracting States and
- Restricted to “commercial” relations/disputes
- Signature: 10 June 1958
- Ratification: 30 June 1961
- Entry into force: 28 September 1961 with reciprocity reservation
In countries where mediation is comparatively new and people have little knowledge about the concept, there is often the vague and misleading association of mediation as a kind of non-binding “arbitration light” or preliminary proceeding for arbitration or litigation. In fact, arbitration and mediation are fundamentally different methods of dispute resolution.
First and foremost, mediation is not limited to the solution of legal disputes, although usually legal issues will be involved. Mediation can be used in multiple contexts including private life, business, public administration and politics, from minor disputes to global peace-talks. Examples of mediation sectors include:
- Commercial and business mediation:
Disputes with business partners, associates or competitors, workplace/labour disputes.
- Family mediation:
Matrimonial issues, financial or budget disagreements, divorce, separation, child support, inheritance.
- Mediation in public disputes:
Environmental, land-use, construction disputes, planning of large scale projects in the private or public sector.
As such there is no universal procedure for mediation but there are some fundamental principles and typically, commercial mediations go through at least four main phases (see below).
- Definition of Mediation
Mediation involves the appointment of an independent third party who guides the parties through the problem-solving process and helps them reach a settlement by facilitating their own resolution rather than deciding who should win or lose. The mediator is actively involved but not given any power to impose a settlement. Mediation is based on the assumption that the disputing parties themselves are the best experts for resolving their own dispute.
The mediator acts as a channel for communication between the parties and helps to understand what the parties’ real wishes and interests behind the claimed positions are. Filtering out the emotional elements leads to a deeper understanding and allows the parties to focus on their main objectives and think “outside the box”, thus opening them up to possible settlement options which had not been seen before.
Therefore, mediation enables the parties to find the path from confrontation to cooperation. Mediation is more than simple negotiation, since it shifts the focus from the parties’ respective rights and positions to a mutual agreement and the settlement itself.
Unlike arbitration or court litigation, parties who utilise mediation retain ultimate control over whether to settle the dispute and on what terms.
- Principles of Mediation
The generally recognised principles of mediation are:
- Voluntariness of the parties
In order to work, mediation must be a voluntary process where the parties freely enter into mediation and any resulting resolution. The parties are free to withdraw from mediation at any time.
- No prejudice to the outcome
The parties have to be open regarding the outcome of the mediation; fixed positions inhibit a fertile mediation process.
- Self-determination of the parties
The parties control the issues and the outcome of the mediation. The mediator is not empowered to decide the outcome or impose a solution onto the parties.
- Complete disclosure of facts
It has to be ensured that both parties are comprehensively informed of all the relevant facts and issues in order to provide a basis for a mutual agreement.
- Confidentiality of the parties and the mediator
Knowing that the mediation process is confidential enables the parties to speak freely and explore options without fear that what they communicate during mediation might be used against them if the dispute is not resolved. Both parties and the mediator are obliged to maintain confidentiality regardless of the eventual outcome.
The mediator is a neutral and impartial third party. The mediator does not support, prefer or represent any of the parties at any stage of the process.
- How Mediation Works
Mediation commonly includes the following aspects or stages and although the details may vary, most mediations follow this outline.
- Statement of purpose
At the beginning of a mediation session, the mediator makes sure that introductions are made and then explains the goals, rules and principles of mediation.
- Outlining topics and gathering information
Each side explains in their own words and from their point of view what the causes and the impact of the dispute are.
- Clarification of interests
The respective interests and underlying objectives of the parties are clarified and specifically detailed. The respective subjective evaluations are then converted into more objective values.
- Seeking creative solutions
Brain storming: Identification of options.
- Discussion and analysis of the possible solutions
The details of a possible solution are discussed until an agreement can be reached. This includes a “reality check” where the parties consider which of the potential solutions can be practically implemented.
- Final agreement
Specific tasks and steps are defined and an agreement drafted. In general, there will also be a legal check-up by the parties’ consulting lawyers before the agreement is signed.
It can be useful to schedule a follow-up session in order to support the parties during the implementation of the agreed solution. Furthermore, adjustments can be made if necessary. In addition to the above basic steps, many mediations also include one-to-one-interviews between each party and the mediator, either before or during the mediation process. The decision to mediate can be taken at any stage before or during proceedings, but it is advisable to agree upon mediation in advance when drafting a contract.
- Enforceability of Mediation Agreements
A mediation procedure is concluded by the drafting and signing of a final agreement between the parties which from its legal nature is a private contract. In general, this means that the agreement is not directly enforceable and if one party refuses to comply with their obligations the other party has no recourse except to take the matter to court. However, some legal regimes (e.g. Germany) permit mediation agreements to include a right of provisional enforceability (in certain circumstances) which gives the parties the same enforcement right as a court judgement or arbitral award.
- Advantages of Mediation
Mediation is preferential to most other adversarial resolution processes by virtue of its simplicity, informality, flexibility and cost efficiency.
- Time efficiency
Most mediations are concluded within a few weeks (and can be arranged even more quickly), whereas court litigation can take years (with an uncertain outcome). Moreover, the parties can control the speed of the process by determining the frequency and duration of the mediation sessions.
- Cost efficiency
Compared with litigation and arbitration processes, mediation is a less expensive process for resolving disputes. In fact, the only really significant cost is the mediator’s fee. There are no obligatory court fees or legal representation costs (although representation is common in commercial mediation).
Mediation offers a confidential process. While court hearings are open to the public, whatever happens in mediation remains strictly confidential. In fact, confidentiality in mediation is of such importance that in most cases the mediator cannot be forced to testify in court as to the content or progress of the respective mediation. The only exceptions to such strict confidentiality usually involve criminal acts.
A high percentage of cases referred to mediation settle (75%- 90%) and crucially the result is in favour of both parties. Even if mediation does not result in the settlement of the entire dispute it usually succeeds in whittling down the key issues to be resolved. In addition, the parties also profit from the opportunity to see another perception of the conflict and their needs and motives. Furthermore, mediation helps parties relearn the basics of communication so that they can resolve future disputes on their own.
- Sustainable solutions
Settling disputes and disagreements through the courts is not only costly and time-consuming; it can also destroy profitable business relationships. Mediation can maintain business relationships far more effectively than adversarial processes. This is because there are no winners and losers, the parties do not fight but consent and cooperate to reach a solution which benefits all parties involved.
- Comprehensive Solutions
In contrast to court judgments, in mediation a wide variety of settlement options can be achieved over and above monetary settlements. These “outside the box” settlements can address personal, psychological and emotional issues and are thus usually more satisfying than a standard court judgment.
- The Mediator
Mediators come from many different professional backgrounds. The ideal mediator has formal mediation training and experience. The mediator does not necessarily require experience in the subject matter of the particular dispute nor be an expert on the law involved. Instead competence is demonstrated by the ability to remain neutral and to move parties through impasse-points. Mediation skills apply to all disputes because the goal is to reach a settlement; not to decide on who is right or wrong under the law. The good mediator is likely to work as much with the emotional and relationship aspects of a case as with the “topical” issues of the matter.
- Legal Framework
An international law on mediation does not exist. The extent to which mediation is adopted into a national legal regime very much depends on the legal system. In Anglo-American countries mediation has a longer tradition and is more integrated. However, recently many other countries have started integrating mediation into their legal regimes. This is particular true of European countries, which were required to implement EU-Directive 2008/52/EC concerning the regulation of mediation in certain cross-border disputes into national laws by May 2011. In Germany, i.e., the Law on Mediation – based on the aforementioned directive – came into force on 26 July 2012.
- Mediation in Thailand
- Mediation in Thailand
Mediation and other means of ADR have always been a part of Thai culture and society. The law encourages disputing parties to use mediation wherever it is appropriate to do so. Many organisations in both the public and private sector embrace mediation and other means of ADR wherever possible.
- Mediation in the Thai Legal System
Mediation has a key place in the Thai legal system despite a lack of a comprehensive law on the subject.
Thailand has three different court systems: the Court of Justice, the Constitutional Court and the Administrative Court. The Court of Justice is the court with general jurisdiction over civil and criminal matters, and any other cases not falling under the jurisdiction of the other courts. Currently, mediation is only available in cases under the jurisdiction of the Court of Justice.
Generally speaking, there are two types of court-annexed mediation procedures practiced under the Court of Justice’s jurisdiction according to the Civil Procedure Code:
- “Inside court mediation” where the responsible judge may mediate the case within the regular court proceedings; and
- “Outside court mediation” where the court orders or upon the parties’ request orders that the case is mediated outside the court room (or in a mediation centre). In this case, the court may request for mediator(s) to assisting in mediation the case.
Protection of Confidentiality
To ensure the principle of confidentiality the parties may not invoke facts that arise during mediation, settlement proposals, a party’s willingness or refusal to engage in mediation or to accept a settlement proposal etc. as evidence in court proceedings. Further, a party may not ask the court to issue a subpoena to force another party, the mediator or any other third party to disclose any facts that arise during mediation.
- Thai Mediation Centre
The Thai Mediation Centre (TMC) was established by the Office of the Judiciary of Thailand in 2000 to promote mediation in Thailand, strengthen awareness of amicable conflict resolution through mediation, develop and enhance mediators’ professional skills, and accredit mediators. By working closely with the Court of Justice, the TMC has developed a system to divert cases into mediation and has built the legal infrastructure to accommodate such a system via the creation of mediation rules and regulations.
There are currently over 2,000 accredited mediators in Thailand. These trained mediators come from various backgrounds, including former judges, legal professionals, accountants, bankers, retired civil servants, business owners and recognised persons in the national as well as international community.
More than 100,000 cases per year are mediated in TMC-sponsored mediation programs. The rate of success in these cases ranges from 80-85%.
- Arbitration in Thailand
- The Thai Arbitration Act
In April 2002, the Arbitration Act B.E. 2545 (2002) was put into force. The 2002 Act, replacing the Arbitration Act B.E. 2530 (1987), largely reflects the UN-Model Law and is designed to place the Thai arbitration system on an international footing. The key difference between the Arbitration Act and the UN-Model Law is that arbitrators in Thailand are not allowed to make any interim measures. Instead, applications for provisional measures to protect the interests of the party before or during the arbitration proceedings must be filed with the competent Thai court.
- Thai Arbitration Agreements
The Arbitration Act states that an arbitration agreement is valid regardless of its legal nature. The principles regarding Thai arbitration agreements are as follows:
- Definition: The arbitration agreement is a contract or a part of a contract (arbitration clause) where the parties agree to settle their dispute by way of arbitration;
- Generally: The agreement has to be evidenced in writing. The arbitration agreement will not be invalid by any party’s death or incapacity afterwards. In case the claims or liabilities on which it rules has been assigned to a third person, the third person is bound by it as well;
- Disputes susceptible of arbitration: Disputes regarding an agreement made between a government agency and a private entity may also be agreed to be settled by way of arbitration. However, in 2004 the Thai government decided that arbitration clauses in government administrative contracts (loosely defined as concession contracts relating to public utilities) are prohibited unless prior Cabinet approval has been obtained. This was followed in 2009 by a resolution from the Thai Cabinet to forbid arbitration clauses in any contract between the Government and a Thai or foreign entity;
- Interim measures by court: A party to arbitration may ask for a court order for interim measures (e.g. pre-award attachment) in order to protect its rights before or during the conducts of arbitral proceedings (Section 16 Arbitration Act 2002);
- Evidence of arbitration agreement: The arbitration agreement has to be signed by the parties, with some exceptions such as in case of facsimile and electronic data interchange with electronic signatures (Section 11 of the Act). However, normally parties agree on arbitration already in the main contract.
- Written form of arbitration agreement: The Act widens and clarifies the definition of written form by providing that the reference in a contract to a document (e.g. general conditions) containing an arbitration clause constitutes an arbitration agreement provided that the contract is in writing and the reference is such as to make that clause part of the contract (Section 11 of the Act);
- Validity of arbitration agreement: The Act also adds that the validity of an arbitration agreement will not be ineffective merely by termination of a juristic person who is a party (e.g. dissolution of a limited company).
- Arbitration agreement and substantive claim before court: The period of time for a party to request to the (state) court a dismissal in case an action is brought by another party in a matter which is subject to an arbitration agreement, is shortened to not later than submitting the first statement on the substance of the dispute.
- Choice of Arbitrators
The parties are free to determine the number of arbitrators. Failing such determination, the number of arbitrators shall be one. In case the parties specify an even number, the arbitrators have to appoint one more arbitrator to be the chairman of the arbitral tribunal.
The law provides in principle that an arbitrator has to be neutral and liberal, in order to change perception that an arbitrator should decide in favour of that party which has chosen this arbitrator.
Interesting to note is that a provision regarding civil and criminal liabilities of arbitrators is added. An arbitrator has to pay compensation for his functioning as arbitrator in case he intentionally or gross negligently causes damage to any party. In case he takes a bribe in functioning in his duty, he will be subject to imprisonment up to ten years or liable for a fine up to THB 100,000, or both.
- Place and language of arbitration
The parties are free to agree on the place of arbitration and the language or languages to be used in the arbitral proceeding. Failing such agreement, the place of arbitration and/or the language to be used shall be determined by the arbitral tribunal having regard to the circumstances of the case, including the convenience of the parties.
- Arbitral proceedings
22.214.171.124. Jurisdiction of arbitral award
The Arbitration Act provides competence to the arbitral tribunal to rule on its own jurisdiction and stipulate the autonomy of the arbitration clause. That is, an arbitration clause shall be treated as an agreement, independent of the other terms of the contract, and a decision by the arbitral tribunal stating the contract is null and void shall not entail by itself the invalidity of the arbitration clause. A plea that the arbitral tribunal does not have jurisdiction may be submitted to the court. However, it is in the discretion of the arbitral tribunal to continue the proceedings and to make an award while the matter is pending in the court in order to avoid dilatory tactics.
126.96.36.199. Fundamental Procedural Rights of a Party
Unless the parties have validly agreed that no oral hearings for the presentation of evidence or for oral argument should be held, the arbitral tribunal has to carry out such hearings at an appropriate stage of the proceedings. Another fundamental right of the parties is the right of being heard and being able to present their case in relation to evidence by an expert appointed by the arbitral tribunal. The right to being able to present their case relates to evidence and obliges the expert, after having delivered a written or oral report, to participate in a hearing where the parties may put questions to the expert and present expert witnesses in order to testify on the points at issue, if such a hearing is requested by a party or deemed necessary by the arbitral tribunal. The right of being heard provides that all statements, documents and other information supplied to the arbitral tribunal by one party must be communicated to the other party, and that any expert report or evidentiary document on which the arbitral tribunal may rely in making its decision must be communicated to the parties. In order to enable the parties to be present at any hearing and at any meeting of the arbitral tribunal for inspection purposes, they will be given sufficient notice in advance.
188.8.131.52. Determination of Rules of Procedure
The law guarantees the parties’ freedom to agree on the procedure to be followed by the arbitral tribunal in conducting the proceedings. However, the arbitration proceedings are subject to a few mandatory provisions on procedure. Failing agreement by the parties, the arbitral tribunal is empowered to conduct the arbitration in such a manner as it considers appropriate. Therefore, the arbitral tribunal is empowered to determine the admissibility, relevance and weight of any evidence. It should be noted that the tribunal is allowed to apply legal principles on evidence of the Thai Civil and Procedure Code on the case.
Autonomy of the parties to determine the rules of procedure is of special importance since it allows the parties to select or tailor the rules according to their specific wishes and needs. The supplementary discretion of the arbitral tribunal is equally important in that it allows the tribunal to tailor the conduct of the proceedings to the specific features of the case.
184.108.40.206. Default of a Party
Only if due notice was given, the arbitral proceedings may be continued in case of absence of a party. This applies, in particular, to the failure of a party to appear at a hearing or to produce documentary evidence without showing sufficient cause for the failure. The arbitral tribunal may also continue the proceedings where the respondent fails to communicate his statement of defense, while there is no need for continuing the proceedings if the claimant fails to submit his statement of claim.
Provisions which empower the arbitral tribunal to carry out its task even if one of the parties does not participate are of considerable practical importance since, as experience shows, it is not uncommon that one of the parties has little interest in co-operating and in expediting matters. Such provisions therefore give arbitration its necessary effectiveness, within the limits of fundamental requirements of procedural justice.
220.127.116.11. Termination of Arbitral Proceedings
The arbitral proceedings are terminated by the final award or by an order of the arbitral tribunal in the following cases:
- When the claimant withdraws his claim, unless the respondent objects thereto and the arbitral tribunal recognises a legitimate interest on its part in obtaining a final settlement of the dispute;
- When the parties agree on the termination of the proceedings;
- When the arbitral tribunal finds that the continuation of the proceedings has for any other reason become unnecessary or impossible.
- Arbitral Award
18.104.22.168. Making of Arbitral Award
The arbitral tribunal will decide the dispute in accordance with such substantive law as agreed by the parties. Generally, according to the Thai Arbitration Act, in case the parties have not agreed on the choice of law, the tribunal has to decide the case according to Thai law. In case of commercial disputes, trade practices will be taken into consideration by the arbitral tribunal in making the award. The award then will be made by the arbitral tribunal with the majority of the votes, unless otherwise agreed.
22.214.171.124. Recourse Against Arbitral Award (Sec. 40 Arbitration Act)
The party not satisfied with the award can only refuse to comply with the award and oppose the award before the court when a petition by the other party for enforcement thereof is filed. The opposing party may make an application for recourse against the award to the court or the court may make it without such application. An arbitral award may be set aside by the court only if:
(a) the party making the application provides the evidence that:
- a party to the arbitration agreement was under some incapacity; or the said agreement is not valid under the law to which the parties have subjected it, or failing any indication thereon, under the laws of Thailand; or
- the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present its case; or
- the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside; or
- The composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this law.
(b) The court decides that:
- the subject-matter of the dispute is not capable of settlement by arbitration under the laws of Thailand; or
- The award is in conflict with the public order.
If the recourse is justified, the court may revoke the arbitration tribunal’s decision.
- Fees, Expenses and Remunerations
In case not otherwise agreed, fees and expenses occurred during the arbitration process, along with remunerations of arbitrators but excluding legal fees and expenses, will be according to the arbitral award. If not specified in the award, any party may ask the court to rule on it as the court deems appropriate. Parties to an arbitral proceeding administered by TAI pay no institutional fee. The parties are responsible only for arbitrators’ remuneration and other actual expenses in conducting arbitral proceedings, such as expenses for delivering documents, production of recording testimony etc.
- Enforcement of International Arbitral Awards in Thailand
Thailand has acceded to the New York Convention without reservation.
126.96.36.199. Recognition and enforcement
The voluntary compliance of the parties with the arbitral award is the objective of arbitration. While the law in principle does not allow private parties to enforce their award by themselves, the enforcement can be done by the power of the governing law or statute.
Although one of the most important advantages for the parties to settle their dispute in arbitration is the international recognition of arbitral awards, it is important to note that according to the Thai Arbitration Act, if the award was made in a foreign country, the Court having the jurisdiction may pass its judgment enforcing the award only when such award is subject to a Treaty, Convention, or International Agreement to which Thailand is a member, and it shall be enforceable so long as Thailand agrees to be bound by them only (Sec. 41(2) “the Arbitration Act B.E. 2545”).
Under the Arbitration Act, Section 9, parties can file an application to execute an arbitral award in one of the following Courts:
- The Central International Trade and Intellectual Property Court;
- The Court having the jurisdiction over arbitration;
- The Court having the jurisdiction where either party is domiciled; or
- The Court having the jurisdiction over the dispute duly forwarded to the arbitrator.
According to Section 42 of the Act, to enforce an arbitral award the winning party has to submit an application to the court having jurisdiction within three years from the date that it may be enforceable under the award. The following documents should be attached to the application:
- Original of the arbitral award or a duly certified copy;
- Original arbitration contract or its certified copy; and
- Thai translation of the arbitral award and arbitration contract.
188.8.131.52. Judicial Review
According to Section 43 of the Arbitration Act, an application to enforce an arbitral award may be rejected by the Court having jurisdiction upon the supplying of proof by the party whom the award shall be imposed on in the following reasons:
- A party under the arbitration contract was under some incapacity under the law applicable to the said party.
- The arbitration contract is not valid under the law of the country to which the parties have subjected it, or under the country where the award was made in case there is no such agreement.
- The party against whom the award shall be enforced was not given proper notice of the appointment of the arbitral tribunal or the arbitral proceedings, or the said person was unable to present his/her case in the arbitration proceedings by other reasons.
- The award deals with a dispute not falling within the terms of the arbitration contract, or contains decisions on matters beyond the scope of the agreement on submission of dispute to arbitral tribunal. However, if it can be separated, the court may withdraw only that part.
- The composition of the arbitral tribunal or the arbitration procedure was not in accordance with the agreement of the parties, or was not in accordance with the law of the country the award was made in case the parties have not made an agreement.
- The award has not yet become binding or has been withdrawn or suspended by a court having the jurisdiction or under the law of the country the award was made, except in the case it is during the period of asking the court to withdraw or suspend the award, when the court may postpone the proceedings of the application for the enforcement as it deems fit, and if the party applying for the court to enforce the award makes a request, the Court may order the party whom the award shall be imposed on to furnish a suitable security.
In addition, according to Section 44 of the Arbitration Act, the court having jurisdiction may refuse an application if the Court is of the opinion that an award deals with a dispute that cannot be settled by arbitration under the law, or if the enforcement under the said award would be against the peace and order or the good morals of the public.
However, Section 45 prohibits parties to appeal to the higher court against the order or judgement of the court having the jurisdiction, except:
- The recognition or the enforcement of the said award would be against the peace and order or the good morals of the public.
- The said order or judgment is against the provisions of the law governing the peace and order of the public.
- The said order or judgment does not correspond to the award of the arbitral tribunal.
- The judge or the justice hearing the case has made a counter-opinion in the judgment.
- It is an order relating to the temporary measure to protect the benefits of the party.
184.108.40.206. Appointing an Executing Officer
The purpose of appointing an executing officer is to proceed with the court decision. Because the successful party cannot legally enforce the court decision by itself, the enforcement has to follow as laid in the Civil Procedure Code. Sec. 271 states in this regard that the party who wins the case is entitled to ask the Court to execute the court decision or court order within ten years after the date of the decision or order.
Although the Civil Procedure Code (CPC) does not mention an appointment of an executing officer, Sec. 275 CPC provides that the creditor according to the judgment may submit an application by motion to the Court for a writ of execution. The regulation provides further that the Court shall notify such writ to the executing officer. In practice, such application shall include a wording asking the Court to appoint an executing officer to seize the defendant’s property in the case of money debt.
After submitting an application, if the motion is granted, the Court officer will issue a writ appointing an executing officer. This writ will be sent to the Execution Department in Bangkok or the Court Sheriff or the Deputy Court Sheriff in other provinces.
The executing officer will ask the winning party to deposit money for expenses and then set the seizure date. However, it is also necessary to submit to the executing officer a request form and a property list.
To seize property, the winning party or lawyer thereof has to accompany the executing officer to the defendant’s residence, land, or other real estate listed (Sec. 279 CPC). The executing officer then will record the seizure and announce the property seized. If the property is movable property, the executing officer may ask the plaintiff or its representative to transport such property to the Execution Department in order to sell by compulsory auction afterwards. If the property is land or other real estate, the executing officer will post a notice there stating that the property is under attachment. The lawyer then has to follow up with the executing officer regarding when the auction date is. On the auction date the lawyer will lead the auction. If the lawyer sees that the price would be too low, he may ask the executing officer to postpone the auction. After the property has been sold, the officer will deduct expenses and executing fees and then give the money to the lawyer.
220.127.116.11. Attachment of Claims against Third Parties
In some cases the defendant does not have property to be seized, but has money that will be subsequently received from other persons, i.e. salary or claims against third parties. The executing officer may ask the court to attach, which is to prohibit the defendant to dispose of such claims and order third parties to not make payment or submit property to the defendant but to the court instead.
In order to attach money or property of the defendant, the winning party or lawyer thereof has to submit a petition to the executing officer stating where to attach the defendant’s money or whom the defendant would receive money from. According to the Sec. 310(3) and 311 CPC, it can be inferred that the executing officer may submit an application by motion to the Court in order to attach such claims. However, in practice there are some cases that the executing officer issues an attachment order by himself.
- Arbitration Institutions in Thailand
Thai Arbitration Institute (TAI) of the ADR Office
Office of the Judiciary
Criminal Court Building 5th-6th Floor
Tel: +66 2 541 229-8/9
Fax: +66 2 512 8432
Office of the Arbitration Tribunal Board of Trade Thailand
150/2 Rajbopit Road
Tel: +66 2 622 1860-76 0/465-467/518
Fax: +66 2 226 4525
In addition to these two bodies, other organizations such as the Securities and Exchange Commission and the Department of Intellectual Property also operate industry-specific arbitration schemes. The Insurance Department of the Thai Ministry of Commerce also has its own arbitration rules and arbitration body.
- Hong Kong
The first step in turning Hong Kong into an important arbitration and mediation centre in Asia was made in 1985, when the Hong Kong International Arbitration Centre (HKIAC) was established. Now, HKIAC is one of the leading Asian arbitration centres. HKIAC is a non-profit making company limited by guarantee. HKIAC’s success can be attributed to the fact that Hong Kong has one of the most progressive legal regimes for arbitration in the world, a well-equipped and professionally administered international arbitration centre, a vibrant arbitration community with knowledgeable and experienced arbitrators, and a prime location at the crossroads of trade and commerce in the Asia-Pacific region. By being part of China, but with a separate and distinct legal system under the concept of ‘one country, two systems’, Hong Kong continues to exude immense arbitration appeal within Asia.
Major legal reforms in the recent years concerning arbitration and mediation became effective to ensure that Hong Kong’s ADR framework continues to meet the judicial and practical needs of national and international participants.
In 2010 Hong Kong enacted a new Arbitration Ordinance which unifies the domestic and international arbitration regimes on the basis of the UN-Model Law. Furthermore, in 2011 a new Practice Direction (LTPD: CS No.1/2011) on Mediation for all cases under the Land Ordinance (Cap.545) came into effect.
- Mediation in Hong Kong
Hong Kong’s 2009 Civil Justice Reform (CJR) brought a renewed focus to mediation proceedings. The key legal provisions are as follows:
- Procedures to encourage mediation: One of the main features of the CJR is the imposition of a duty onto the Court to use their case management powers to encourage the parties to use ADR and mediation, if appropriate.
- Cost consequences for failing to engage in mediation: In order to encourage the use of mediation a party who “unreasonably” refuses or fails to mediate may now face an adverse cost order even if the said party is successful at trial.
The court will not find a party to have acted unreasonably if the party has engaged in mediation to the minimum level of participation agreed by the parties or as directed by the court, or if a party has a reasonable explanation for not engaging in mediation. The fact that there are active unprejudiced settlement negotiations between the parties or the parties are actively engaged in some other form of ADR may provide the required reasonable explanation.
On 22 June 2012, the Mediation Ordinance was enacted in Hong Kong to provide a basic statutory framework for the conduct of mediations. The Department of Justice is also working on establishing the Hong Kong Mediation Accreditation Association Limited (HKMAAL) which may become the sole accreditation body for mediators and the default appointing body where parties cannot agree on the appointment of a mediator.
- Arbitration in Hong Kong
- Arbitration Ordinance 2010
Legal provisions about arbitration in Hong Kong are provided in the Hong Kong Arbitration Ordinance 2010. Prior to the reform in 2010, the international regime was governed by the UNCITRAL-Model Law, while the domestic regime was mostly based on the English Arbitration Acts 1950, 1975 and 1979 with some improvements including provisions based on Singapore’s International Arbitration Act and the English Arbitration Act 1996. The Arbitration Ordinance 2010 was passed in order to simplify arbitration law in Hong Kong and make it more user friendly by following the UN-Model Law:
- Based on UN-Model Law
The new legislation largely adopts the structure of the UN-Model Law as its framework but contains some provisions which are unique to Hong Kong.
- Unified Regime
The new Arbitration Ordinance eliminates the distinction between domestic and international arbitration. Previously, the UN-Model Law was applicable only to international arbitration whilst domestic arbitration was governed by the old Arbitration Ordinance which was largely based on the United Kingdom arbitration legislation.
- Opt-in provisions
The new Arbitration Ordinance allows parties to opt into a series of provisions, which substantially constitute the former domestic arbitration regime, including its provisions for judicial decisions on preliminary questions of law, as well as post-award judicial review. It is possible to opt into the former procedures in any arbitration, domestic or international. Further for a period of six years, any arbitration agreement that says it is “domestic” will be subject to the former provisions. If there is no opting in then Hong Kong arbitrations, international or domestic, will be subject to the UN-Model Law under the new Arbitration Ordinance.
The new Ordinance contains provisions which allow an arbitrator to act as a mediator after the arbitral proceedings have commenced provided that the parties have consented in writing. The arbitral proceedings would then be stayed to facilitate the said mediation. The express reference to mediation in the new Ordinance reflects Hong Kong’s acceptance of mediation as a preferred alternative mode of dispute resolution under the CJR.
- Enforcement of Awards
The enforcement arrangements for New York Convention awards and China Mainland awards remain in place. For non-Mainland and non-Convention awards the new Ordinance applies the same evidence and grounds for refusal provisions as those which apply to Convention awards.
- Hong Kong Arbitration Agreements
Under the provisions of Hong Kong an “arbitration agreement” is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. This agreement can be concluded either in the form of an arbitration clause within a contract or in the form of a separate agreement. In both cases it should be in writing, i.e. contained in a document signed by the parties or in an exchange of letters, telexes, telegrams or other means of telecommunication which provide a record of the agreement.
- Choice of Arbitrators
In general, the parties are free to agree on an arbitrator or arbitrators. If they are not able to come to a compromise, the HKIAC can make an appointment upon a party’s application. When making an appointment the applicant and HKIAC must follow the arbitration rules. These rules require the applicant to apply on a prescribed form of HKIAC. Neither the rules nor the legal statute provide any mandatory requirements or qualifications for persons seeking appointment as arbitrators. Moreover, the appointed tribunal is not bound by the rules of evidence and can receive any evidence that it considers relevant to the proceedings.
- Language of Arbitration
The arbitration procedure is conducted in English, unless the parties agree otherwise. Subject to an agreement by the parties, HKIAC, if it deems appropriate in the circumstances, will make a preliminary determination of the language or languages to be used in the proceedings to the extent necessary to carry out its function as appointing authority. The tribunal shall, promptly after its appointment, determine the language or languages to be used in the proceedings. This determination shall apply to the statement of claim, the statement of defence, and any further written statements and, if oral hearings take place, to the language or languages to be used in such hearings.
- Arbitral Proceedings
The parties are also free to agree on the procedural rules. HKIAC sets its standard international and domestic arbitration rules, but the parties may choose ICC, UNCITRAL or another organisation’s arbitration rules as well.
18.104.22.168. Jurisdiction of arbitral award
The arbitral clause rules on its own jurisdiction. An arbitration clause shall be treated as an agreement independent of the other terms of the contract.
22.214.171.124. Fundamental procedural rights of a party
Each party has the right to be represented by a counsel of its choice and to oral hearings, unless the parties stipulate otherwise.
126.96.36.199. Determination of the procedure
The parties are free to agree on the procedure to be applied by the arbitration tribunal.
188.8.131.52. Default of a party
If, within the period of time fixed by the arbitral tribunal, the claimant or the respondent has failed to communicate his/her claim respectively his/her statement of defence without showing sufficient cause for such failure, the arbitral tribunal shall order that proceedings continue. If one of the parties, duly notified under these rules, fails to appear at a hearing without showing sufficient cause for such failure, the arbitral tribunal may proceed with the arbitration. If one of the parties, duly invited to produce documentary evidence, fails to do so within the established period of time, without showing sufficient cause for such failure, the arbitral tribunal may make the award on the evidence before it.
184.108.40.206. Termination of arbitral proceedings
The arbitral procedure is terminated when the tribunal makes an award.
- Arbitral Award
220.127.116.11. Making of arbitral award
An arbitral award under the law of Hong Kong shall be in writing, dated and signed. The tribunal shall also name reasons for the conclusion. Any award or other decision of the arbitral tribunal shall be made by a majority of the arbitrators. In the case of questions of procedure, when there is no majority or when the arbitral tribunal so authorizes, the presiding arbitrator may decide on his own, subject to revision, if any, by the arbitral tribunal.
18.104.22.168. Recourse against arbitral award
A domestic arbitral award may be set aside by the court if:
- There is some defect or error patent on the face of the arbitral award;
- The arbitrator has admittedly made a mistake;
- Material evidence has been discovered after the arbitral award was made, and that evidence could not, with reasonable diligence, have been discovered before the arbitral award was made;
- The arbitrator has misconduct himself or the proceedings;
- There has been corruption on the part of the arbitrator;
- Without misconduct, some mishap or misunderstanding has caused an aspect of the dispute that has been the subject of the reference not to be considered and adjudicated upon as fully as the parties were entitled to expect, such that it would be unfair to allow the arbitral award to take effect without further consideration by the arbitrator
- The arbitrator has exceeded his/her jurisdiction or has failed to deal with all the questions submitted to him/her.
An arbitral award under the New York Convention and an arbitral award from China will not be enforced if the person against whom it is invoked can prove that:
- A party to the arbitration agreement was under some incapacity;
- The arbitration agreement was not valid under the law;
- A party was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present its case;
- The arbitral award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration or contains decisions on matters beyond the scope of the submission to arbitration;
- The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties or, failing such agreement, with the law;
- The arbitral award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, it was made;
- The arbitral award is in respect of a matter which is not capable of settlement by arbitration;
- It would be contrary to public policy to enforce the arbitral award.
An arbitral award obtained in China will not be enforced if an application has already been made in China to enforce such award.
- Fees, Expenses and Remunerations
Apart from the HKIAC’s administrative fees, arbitrator fees shall not be set by the HKIAC. The fees for arbitrators appointed by the HKIAC are generally calculated by reference to work done by them in connection with the arbitration and are generally charged at hourly/daily rates. However, there is even the possibility to calculate by valorem, by reference of the overall amounts in dispute, or by fixed fee, where the fixed fee is assessed at the beginning of the proceedings, without any direct impact to time spent, amounts in dispute or complexity. If the parties wish, the HKIAC will consult with the arbitral tribunal to establish the rates applicable to a particular case.
The HKIAC arbitration rules reflect the arbitration rules of several different institutions around the world. Key features include the use of plain language and substantial party autonomy in order to address the needs of individual cases. HKIAC also provides rules for mediation and conciliation as well as various supporting administrative services for all kinds of conflict settlement. The HKIAC has also launched the HKIAC Electronic Transaction Arbitration Rules as a third-party arbitration framework for use and adoption by online merchants to handle consumer disputes online.
- Enforcement of International Arbitral Awards in Hong Kong
22.214.171.124. New York Convention
Hong Kong adopted the New York Convention on 21 April 1977 by virtue of the United Kingdom having acceded on Hong Kong’s behalf. China is also a signatory to the New York Convention and applied the Convention to Hong Kong after 1 July 1997. Further in accordance with the Arbitration Ordinance, the Hong Kong courts are now required to enforce domestic awards and awards made in non-Convention countries as if they were Convention awards.
126.96.36.199. Enforcement in Mainland China
When sovereignty over Hong Kong returned to China on 1 July 1997, Hong Kong awards were redefined as domestic awards for the purpose of enforcement within China, and vice versa. Special regulations apply for enforcements of awards in Hong Kong and China. The New York Convention does not apply in this case. Under the principles of international law the application requires two different contracting countries. This requirement is no longer met after the change of sovereignty on 1 July 1997.
Thus under the 1999 Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and the Hong Kong S.A.R., Hong Kong courts are required to enforce “Mainland awards” on almost identical terms as Convention awards, and vice versa.
There are only limited grounds for refusing to enforce an award in Hong Kong, which mirror the grounds for refusal found in the New York Convention. The most controversial of these is that an award will not be enforced if this would be contrary to the public policy or interests of China (rather than the interests of Hong Kong).
There is, however, one major limitation to enforcement under Hong Kong law which is not found in the New York Convention. This limitation is that an applicant is not entitled to file enforcement applications in both Hong Kong and Mainland China at the same time.
- Arbitration Institutions in Hong Kong
Hong Kong International Arbitration Centre (HKIAC)
38th Floor Two Exchange Square
8 Connaught Place
Hong Kong SAR
Tel.: +852 2525-2381
Fax: + 852 2524-2171
Email: [email protected]
Secretariat of the ICC International Court of Arbitration – Asia Office
Suite 2, 12/F, Fairmont House
8 Cotton Tree Drive
Hong Kong SAR
Tel.: +852 3607 5600
Fax: + 852 2523 1619
In 1987 Vietnam embarked on a process of comprehensive economic and political renewal, which has resulted in important social, economic and legal changes in the regulation and support of domestic and international commercial activity. As part of this development on 1 January 2011 a new Law on Commercial Arbitration became effective replacing the 2003 Ordinance on Commercial Arbitration which created a favourable legal framework for the expansion of Vietnam’s arbitration service market.
- Mediation in Vietnam
Culturally, Vietnam is not a litigious society. A large number of disputes are resolved outside of court. Vietnamese law also highly emphasises the role of mediation. Mediation is a mandatory part of certain litigation procedures such as civil litigation, labour, marriage and family litigation. The State encourages the use of mediation to resolve civil and family disputes and violations of the law which do not amount to criminal offences. At the local level, groups of non-professional mediators have been set up to carry out this mediation mandate. However, there are currently no relevant legal regulations regarding international commercial mediation.
- Arbitration in Vietnam
As noted above, the new Law on Commercial Arbitration came into force in 2011 with the express purpose of modernising and improving Vietnam’s arbitration framework. The most significant changes brought about by this new law are:
188.8.131.52. Extension of the jurisdiction of arbitration
The old Ordinance on Commercial Arbitration was restricted to the resolution of disputes arising from commercial activities, meaning the performance of one or more commercial acts by a business organisation or individual. In a significant deviation from the UN-Model Law joint ventures and other forms of industrial or business co-operations were not explicitly included in the definition of “commercial”. In the new Law on Arbitration the jurisdiction of arbitration includes:
- Disputes arising from commercial activities; and
- Disputes in which at least one party conducts commercial activities.
In addition, arbitration can be used to settle disputes which do not arise from commercial activities but for which other current legal documents exist, permitting the concerned parties to choose arbitration as a mode of dispute settlement. For instance:
- 208 of the Maritime Code of Vietnam permits the use of arbitration in relation to default determination and compensation for damages in accidents;
- 2 of the Law on Investment permits the use of arbitration for investment related disputes; and
- 131 of the Law on Securities permits the use of arbitration for securities related disputes.
184.108.40.206. Foreign arbitrators
One major change brought about by the Law on Arbitration is the recognition of foreign arbitrators. The Law on Arbitration abolishes the citizenship criteria which existed under the old Ordinance thus allowing foreigners to act as arbitrators in Vietnam.
220.127.116.11. Applicable law
According to the Law on Arbitration, Vietnamese law shall be applied to settle a dispute if such dispute concerns solely Vietnamese parties. Foreign law(s) shall be applied if such dispute has a foreign “element” and is selected by the concerned parties. However, the said foreign law will only be applied to the extent that it does not conflict with principles of Vietnamese law. If the parties do not and will not decide upon the applicable law, then the arbitration panel shall decide instead.
18.104.22.168. Other significant changes under the Law on Arbitration
- Arbitral tribunals will now have the power to grant interim relief (i.e. orders designed to preserve evidence or assets, or otherwise maintain the status quo pending the final award);
- A foreign language may be used as the language of the arbitration if the dispute involves a foreign element;
- Foreign arbitration organisations are now entitled to establish a branch or representative office in Vietnam; and
- Procedural rules have been introduced to clarify the relationship between arbitration and the court. Specifically the new law defines the powers and competences of the provincial courts with respect to arbitration, i.e. the appointment of arbitrators.
- Enforcement of International Arbitral Awards in Vietnam
Vietnam has been a member of the New York Convention since 1995. This means that, at least in principle, awards rendered in other New York Convention countries should be enforceable in Vietnam. However, in reality the execution of foreign arbitral awards has had a troublesome track record. One reason for this was the narrow definition of “commercial activities” under the old arbitration Ordinance. The New York Convention only guarantees national recognition of foreign arbitral awards on issues considered to be of a commercial nature under the national law. Thus, the Ordinance’s narrow definition of “commercial” significantly limited the Convention’s applicability. It is hoped that the new expanded definition of the “commercial activities” will improve the conditions for effective enforcement of foreign arbitral awards. Recognition and enforcement of foreign awards in Vietnam has also been problematic due to the provision that allows the Vietnamese courts to refuse to enforce an award if it is “contrary to the basic principles of Vietnamese law”. The courts have repeatedly used this to justify reviewing the full merits of an award. As a result those wishing to enforce an arbitral award in Vietnam often have their whole case re-heard by a local court which is a very time and cost consuming process.
- Arbitration Institutions in Vietnam
Vietnam has established two arbitration institutions to settle economic disputes, namely the Vietnam International Arbitration Centre (VIAC) and the Economic Arbitration Centre (EAC). VIAC’s jurisdiction extends to both international and domestic commercial disputes. EAC is responsible for domestic disputes only. VIAC has its own Arbitration Rules which are published (in English and Vietnamese) on its website.
Vietnam International Arbitration Center (VIAC)
At the Vietnam Chamber of Commerce and Industry
Dao Duy Anh Street, Dong Da District
Tel.: +84 4 357 440 01
Email: [email protected]
- Mediation in Germany
In Germany mediation is a comparatively new method of ADR.
- Mediation Act
On 21 July 2012, the Mediation Act (Mediationsgesetz) was passed. This law reflects Germany’s obligations to implement the EU Directive 2008/52/EC on mediation in cross-border civil and commercial matters. The Mediation Act implements most of the key provisions of the directive and in some cases exceeds its requirements, e.g. by extending its applicability to domestic as well as cross-border disputes, and the enforceability of settlement agreements resulting from mediation.
The main objectives of the new law are:
- to promote and strengthen amicable, out of court dispute settlement in Germany; and
- to ensure confidentiality in mediation.
The new law contains:
- regulations on 3 types of mediations: out of court mediation, mediation during court proceedings and mediation conducted by the Courts;
- Basic duties which all mediators must fulfill, e.g.:
- To inform the parties if any fact arises which may affect his/her neutrality;
- Mediators must prove their knowledge and education upon the parties’ request; and
- Provide for their own continuing training and education.
However, the law does not specify what, if any, sanctions will apply for violations of these duties.
- The mediator has a duty of confidentiality and accordingly he/she has the right to refuse to give evidence at court regarding the contents of the mediation.
- Mediation agreements can be declared enforceable in a cost efficient and easy way by the courts, even if they contain some provisions which are invalid under German law.
- Mediation Institutions in Germany
German Institution of Arbitration (DIS)
The German Institution of Arbitration in addition to the DIS-Arbitration Rules offers numerous ADR procedural rules. New Mediation Rules have been available since 2010.
Bundesverband Mediation e. V. (BM)
Tel.: +49 561 73 96-413
Fax: +49 561 73 96-412
Email: [email protected]
Centrale für Mediation GmbH & Co. KG (CfM)
Anwalt-Suchservice Verlag Dr. Otto Schmidt GmbH
Tel.: +49 221 93738-821
Fax: +49 221 93738-926
Email: [email protected]
Deutsche Gesellschaft für Mediation (DGM)
Tel.: +49 233 19 87 4860
Fax: +49 233 19 87 395
Email: [email protected]
Working Group Mediation of the German Bar Association
[Arbeitsgemeinschaft Mediation im Deutschen Anwaltsverein]
Tel.: +49 (0) 30 726152- 128
Fax: +49 (0) 30 726152 198
Email: [email protected]
Hamburg Mediation Center for Economic Disputes
[Hamburger Mediationsstelle für Wirtschaftskonflikte]
Founded in 2000 by the Hamburg Chamber of Commerce and the Hamburg Chamber of Lawyers
Hamburg Chamber of Commerce
Dr. Sven Eisenmenger
Tel.: +49 40 36138-343
Fax: +49 40 36138-533
Email: [email protected]
Hamburg Chamber of Lawyers
Bleichenbrücke 9, 20354 Hamburg
Tel.: +49 40 35 74 41-0
Fax: +49 40 35 74 41-41
Email: [email protected]
- Arbitration in Germany
- Legal Framework
The German legal framework on arbitration is stated in the Civil Procedure Code. This Code was implemented in 1879 and was the oldest applicable law in Europe until its reform in 1997. The new law includes both the UN-Model Law and several additional regulations.
For example, the UN-Model Law only applies to commercial disputes whereas the German law applies to any monetary claim except for claims related to a private lease. Any arbitration agreement involving a consumer has to be made separately from any other agreement in order to be valid.
- Enforcement of Arbitral Awards in Germany
Germany is a member of the New York Convention and the law expressively refers to the Convention. Therefore, its rules apply according to German law.
- Arbitration Institutions in Germany
22.214.171.124. The German Institution of Arbitration
The Deutsche Institution für Schiedsgerichtsbarkeit e.V. (DIS), i.e. the German Institution of Arbitration is a registered association that promotes arbitration and serves as the support headquarters for arbitration tasks in Germany. The current DIS Arbitration Rules have been in force since 1998 and may be applied in national or international disputes. The rules are non-sector specific and can be used for all branches of trade for the purpose of dispute settlement.
In 2008, the DISSupplementary Rules for Expedited Proceedings (DIS-SREP) were released which limit the period of time between the initiation of proceedings (by lodging the statement of claim at the DIS central office) and the arbitration ruling itself to 6 months (sole arbitrator) or 9 months (arbitration tribunal).
Furthermore in 2009, DIS issued the Supplementary Rules for Corporate Law Disputes (DIS-SRCoLD). These rules are designed specifically for the determination of disputes relating to resolutions of limited liability companies (GmbH). They may also be used for various other types of disputes if the parties so wish.
 The Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”) provides the cross-country enforceability of arbitral awards.
 The UNCITRAL Model Law is no longer available for download.
The Frankfurt International Arbitration Center (“FIAC”) is a co-operation between DIS and the Frankfurt Chamber of Industry and Commerce and is located on the site of the Frankfurt Chamber of Industry and Commerce.
Frankfurt International Arbitration Center
von DIS und IHK Frankfurt
Industrie- und Handelskammer Frankfurt am Main
Email: [email protected]
The Chinese European Arbitration Centre (CEAC) was officially established by the Hamburg Bar Association, the Hamburg Chamber of Commerce and by leading lawyers and law firms from around the globe.
CEAC offers institutional arbitration services which are tailor-made to the needs of trading with China. However, it is also open to participants from areas other than Europe and China.
Chinese European Arbitration Centre GmbH (CEAC)
Tel: +49 40 79 69 10-14
Fax: +49 40 79 69 10-15
Email: [email protected]
The German Maritime Arbitration Association (GMAA) offers the worldwide maritime industry an out-of-court procedure for settling shipping disputes.
Tel.: +49 40 5 700 700
Fax: +49 40 5 700 70 200
Email: [email protected]
The growth of Singapore’s reputation in ADR has been increased by the establishment of the Singapore International Arbitration Centre (SIAC) in July 1991.
Mediation has a long tradition in Singapore. In 1997, the Singapore Mediation Centre (SMC) was established. In 1998, the Community Mediation Centres Act came into force, establishing Community Mediation Centre for the settlement of family and neighbourhood related disputes. More recently, in 2014, the Singapore International Mediation Centre (SIMC) was established to give a platform to resolve cross-border commercial disputes.
The conduct of arbitration is mainly regulated by two separate legal acts, the Arbitration Act (AA) and the International Arbitration Act (IAA). The last enactment incorporates the UNICITRAL-Model Law on commercial arbitration and applies to all international arbitration agreements and non-international arbitrations where parties have a written agreement for Part II of the IAA and the Model Law to apply. Under the IAA, an arbitration is international if:
- At least one of the parties has its place of business in any state other than Singapore, at the time the arbitration agreement was concluded; or
- The agreed place of arbitration is situated outside the state in which the parties have their place of business; or
- Any place where a substantial part of the obligation of the commercial relationship is to be performed or the place to which the subject matter of the dispute is most closely connected is situated outside the state in which the parties have their place of business; or
- The parties have expressly agreed that the subject matter of the arbitration agreement relates to more than one country.
In other cases the AA applies to all arbitration procedures. The distinction between the low legal regimes lies in the degree of court intervention in the arbitral process and respect for party autonomy. Under the IAA, influence of the court is limited and restricted only to instances expressly provided by law. There are also limited instances of recourse against the arbitral award. Under the AA, a party may appeal an award on a question of law arising out of the award by agreement of the parties or by leave of court. Under this regime it is also allowed for each party to apply to the court to determine any question of law. For that reason it has to be distinguished between both the IAA and AA in the following considerations.
Under both regimes there is no distinction between a submission, in the case of an already existing dispute, and a pre-dispute arbitration clause within an agreement. In both statutes an “arbitration agreement” is defined as an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them whether contractual or not. It is possible to stipulate an arbitration agreement in the form of an arbitration clause in a contract or in the form of a separate agreement. The arbitration agreement must be in writing contained in a document signed by the parties or in an exchange of letters, telefacsimile or other means of communication which provide a record of the agreement. Furthermore, it is also provided by law that an arbitration agreement is deemed constituted in the following situations:
- Where a party asserts the existence of an arbitration agreement in a pleading, statement of case or any other document in circumstances in which the assertion calls for a reply but is not denied, an effective arbitration agreement is deemed to exist.
- A reference in a bill of lading to a charter party or some other document containing an arbitration clause constitutes an arbitration agreement if the reference in such is to make that clause part of the bill of lading.
There are no specific wording or form provisions to give effect to the agreement. It is necessary but also sufficient that the will to solve a dispute in the way of arbitration must be clear and unequivocal.
The parties may stipulate in their agreement the person of the arbitrator or the way how an arbitrator or the arbitrators ought to be appointed. Apart from that, there are no special qualifications required of any arbitrator, neither in terms of nationality nor professional qualifications. It is not even prescribed that an arbitrator should be a lawyer, although many of the arbitrators in Singapore are lawyers. The arbitrators’ appointment may be challenged only if circumstances exist which give rise to justifiable doubts as to his/her impartiality or independence or he/she may not possess the qualifications agreed upon by the parties. This objection can especially occur in the case of personal, business or professional relationship between the appointed arbitrator and one of the parties. If the arbitration agreement does not provide otherwise, a single arbitrator is presumed, but the parties are free to appoint more arbitrators. Common are either one arbitrator or a three-person tribunal.
If the arbitration should be conducted under the rules of the SIAC, arbitrators are appointed by SIAC only. This new rule, effective since 1 July 2007, provides that even if the parties have agreed that an arbitrator is to be appointed by one or more of the parties or by a third person or entity, this agreement is merely an agreement to nominate an arbitrator. The new rule provides that an arbitrator shall not be deemed appointed until confirmed by the Chairman of SIAC. The underlying principle of the new rule is to ensure that a prospective arbitrator’s independence from the parties and impartiality is established before his or her appointment. This regulation is very similar to the ICC Rules.
Under the IAA, the decision of the Chairman of the SIAC according to the appointment of arbitrators is not subject to any appeal. By contrast, under the AA, it is possible to challenge the decision in case of:
- justifiable doubt as to independence and impartiality; and
- lack of qualifications agreed upon by the parties.
The place or seat of arbitration determines the governing procedural law of the arbitration and the enforceability of the award. The place of arbitration has to be distinguished from the place of hearing, which refers to the physical location where the hearing is held. The location of hearing can differ from the place or seat of arbitration. Under the SIAC rules, it is possible that the place of hearing lies in another country. In such case, the SIAC can provide institutional support throughout the arbitration remotely from the secretariat in Singapore. The secretariat can also act as a central depository of all original documents if the parties so require.
Unless the parties have agreed otherwise, the Tribunal shall determine the language to be used in the proceedings.
Arbitration in Singapore may be conducted under ad hoc rules or under the rules of any arbitration institution. The parties are generally free to choose the procedure of arbitration. If there is no agreement between the parties as to the procedure, the tribunal conducts the arbitration in a manner that it considers appropriate.
126.96.36.199. Arbitral Proceedings under SIAC
The arbitral proceedings of the SIAC are conducted in accordance with the arbitration rules of that organization. If one of the parties (the claimant) intends to conduct the arbitration, it shall serve on the other party (the respondent) and concurrently file with the registrar of SIAC a notice of arbitration. The notice of arbitration shall include the following:
- Demand that the dispute be referred to arbitration;
- Names and addresses of the parties;
- Reference to the arbitration agreement;
- Reference to the contract out of which the dispute arises;
- Brief statement describing the nature and circumstances of the dispute and specifying the relief claimed; and
- Statements on any matters which the parties have previously agreed as to the conduct of the arbitration or with respect to which the claimant wishes to make a proposal.
The respondent may within 14 days of the receipt of the notice of arbitration send to the claimant and concurrently file with the registrar a response. The response shall contain:
- Confirmation or denial of all or parts of the claims;
- Brief statement of the nature and circumstances of the counterclaim;
- Comments in response to statements contained in the Notice of Arbitration.
Under the SIAC rules, after the arbitrator(s) has/have been appointed, the parties shall complete the submission of their written statements and documents. After oral hearings, unless the parties agreed on documents-only arbitration, the tribunal makes an award. But before the award is issued, it must be submitted in draft form to the registrar in respect of the necessary formalities. The registrar may draw the tribunal’s attention to points of substance. The scrutiny step is intended to ensure that all formalities necessary for enforcement were met.
188.8.131.52. Jurisdiction of arbitral award
Both the IAA and AA provide competence for the tribunal to rule on its own jurisdiction. Arbitrators in Singapore are also not bound by judicial rules of evidence. The Evidence Act expressly excludes its own application to arbitral proceedings.
Each party has the right to be represented by lawyers of its choice as counsels who have expertise in international arbitration. Under the old provisions, foreign lawyers were prohibited from acting in arbitrations in Singapore subject to two exceptions set out in provisions of the Legal Profession Act. In 2004, the amendment of the Act replaced these provisions with new ones. Under the new law, the market has been opened to foreign lawyers. They may act in any arbitration proceeding in Singapore, regardless of whether they are governed by Singapore or a foreign law. This includes the giving of advice, preparation of documents and providing any other assistance with respect to the arbitration proceedings.
Unless the parties have stipulated otherwise, they have the right of oral hearings.
Generally, the law provides the parties’ freedom to agree on the procedure to be followed by the arbitral tribunal in conducting the proceedings.
Notwithstanding the above mentioned, principle orders or directions made by the tribunal, both under the AA and the IAA, are enforceable by leave of the High Court, in the same manner as if they were made by the court.
If any party fails to appear at an oral hearing without showing sufficient cause, the tribunal may proceed and make an award on the evidence before it.
The arbitral proceedings are terminated when the tribunal makes the final award.
An award is defined in the IAA and the AA as “a decision of the arbitral tribunal on the substance of the dispute and includes any interim, interlocutory or partial award.” An “interim” award refers to an award that is not the final award in the arbitration. The term “interim award” relates to the applicable law, time-bar defenses, joinder of parties and arbitral jurisdiction. “Partial” awards mean awards in which only part of the claims submitted was subject to the procedure. “Interlocutory” awards are interim awards that deal with issues such as liability leaving quantum to be decided.
There is no time-limit for making an award either under the IAA or the AA. Under the Rules of the SIAC, the tribunal shall issue its award within 45 days from the closing of the hearing. An award should be in writing and must be signed by the arbitrator(s). Under the IAA, only a majority of arbitrators shall sign the award. The award must give reasons unless the parties agree otherwise or the award is an award on agreed terms. The award must state the date and place of arbitration.
An issued award is binding on the parties. Both the IAA and the AA arbitrators are permitted to make corrections in case of “any errors in computation, any clerical or typographical errors or other errors of similar nature.” Furthermore, the parties can also apply to the tribunal for interpretation of particular elements of the award. The correction or interpretation must be made by the tribunal within thirty days of the receipt of the request.
There is no legal impediment against an appeal process from one arbitral tribunal to an appellate arbitral tribunal in the event the parties so agree.
Appeals to a court against awards on the merits are permissible only on arbitrations under the AA. The right of appeal can be excluded by agreement. An appeal may be brought only if all the parties consent or with leave of the High Court and must be made within twenty eight days after the award has been made. Before granting leave to appeal, the court must be satisfied that:
- The determination of the question will substantially affect the rights of one or more of the parties;
- The question is one which the arbitral tribunal was asked to determine on the basis of findings of fact in the award;
- The decision of the arbitral tribunal on the question is obviously wrong or the question is one of general public importance and the decision of the arbitral tribunal is at least open to serious doubt and despite the agreement of the parties to resolve the matter by arbitration, it is just and proper in all the circumstances for the court to determine the question.
In addition, before an appeal can be made, the applicant must first exhaust all available arbitral processes of appeal or review and any available recourse under the AA. Apart from the mentioned possibility to set aside an award on appeal, it is also possible to set it aside if:
- The court is satisfied that:
- A party to the arbitration agreement was under some incapacity;
- The arbitration agreement is not valid under the law to which the parties have subjected it, or failing any indication thereon, under the laws of Singapore;
- The party making the application was not given proper notice of the appointment of an arbitrator or the arbitration proceedings or was otherwise unable to present its case;
- The award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration, except that, if the decision on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside;
- The composition of the arbitral tribunal or the arbitral procedure is not in accordance with the agreement of the parties, unless such agreement is contrary to any provisions of this Act from which the parties cannot derogate, or, in the absence of such agreement, is contrary to the provisions of this Act;
- The making of the award was induced/affected by fraud/corruption;
- A breach of the rules of natural justice occurred in connection with the making of the award by which the rights of any party have been prejudiced; or
- If the court finds that:
- The subject matter of the dispute is not capable of settlement by arbitration under this Act; or
- The award is contrary to public policy.
Under the IAA, the only recourse against an award made is to set it aside and the grounds to set aside are similar to the grounds to set aside an award under the AA.
Under both regimes the application to set aside an award must be made by originating motion within three months from the date of receipt of the award by the applicant.
The fees, expenses and remunerations of an appointed arbitrator depend on a particular agreement with him or her.
In contrast to that, the fees, expenses and remunerations of the SIAC are set. Where a case is conducted according to the SIAC rules, or where it has been submitted or referred to SIAC for arbitration, parties pay a (non-refundable) case filing fee and an administration fee. The administration fee is pegged to the amount of the claim or counterclaim according to a scale. The case filing fee is applicable to all cases administrated by the SIAC. Its amount is dependent on whether the parties are from Singapore or Overseas.
In cases that fall outside SIAC’s arbitration rules, where SIAC is asked to appoint an arbitrator, SIAC charges an appointment fee. It is a flat fee, not dependent of the amount of the claim.
Awards made in Singapore, either in respect of a domestic or international arbitration are binding and enforceable. In order to enforce an arbitration award made in Singapore by way of execution proceedings, the following steps must be taken:
- An ex parte application must be made to the High Court for leave to enforce the award;
- The order must be served on the opposing party, who has 14 days to make an application to set aside the order of court;
- If an application to set aside the order is made by the debtor, the award shall not be enforced until the application is heard and finally disposed of.
In respect of enforcement of foreign arbitral awards in Singapore it is to mention that Singapore acceded to the New York Convention of 1958. Hence, Singapore recognises awards made in any other contracting country.
In order to enforce a foreign award made in any of the Convention countries, the following steps must be taken:
- An application must be made to the High Court for leave within six years after the award was made;
- An affidavit must be filed to exhibit the arbitration agreement and the duly authenticated original award or a copy thereof. If the award is not in English, a certified translation of it in English must be provided as well. Additionally, the affidavit must state the name and usual or last known place of abode or business of the applicant and the person against whom enforcement is sought;
- The court hearing the application will grant leave on an ex parte basis only in urgent cases, in which event the order must be served on the debtor forthwith.
The AA does not expressly regulate reasons for refusal to enforce awards. It is assumed that the grounds should not be wider than those that relate to the setting aside of the award.
Singapore International Arbitration Centre (SIAC)
32 Maxwell Road #02-01
Tel.: +65 6221 8833
Fax: +65 6224 1882
Email: [email protected]
“All disputes arising out of or in connection with the present contract shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules.”
Further, the ICC suggests that the parties should consider choosing the number of arbitrators, stipulate the place and language of the arbitration and the law applicable to the merits. It should also be added that if the parties wish to exclude any recourse to the so-called emergency arbitrator provisions, they have to expressively opt out on this procedure by adding the following clause:
“The Emergency Arbitrator Provisions shall not apply.”
In essence, the emergency arbitrator provisions allow parties that need urgent interim measures (emergency measures) that cannot await the constitution of an arbitral tribunal to make an application to the Secretariat of the ICC International Court of Arbitration.
“Any dispute, controversy or claim arising out of or relating to this contract, or the breach, termination or invalidity thereof, shall be settled by arbitration in accordance with the UNCITRAL Arbitration Rules.”
Optional sollten die Parteien erwägen, folgende Klauseln aufzunehmen:
“(a) The appointing authority shall be … [name of institution or person];
(b) The number of arbitrators shall be … [one or three];
(c) The place of arbitration shall be … [town and country];
(d) The language to be used in the arbitral proceedings shall be ….”
“All disputes arising in connection with this contract or its validity shall be finally settled in accordance with the Arbitration Rules of the German Institution of Arbitration e.V. (DIS) without recourse to the ordinary courts of law.”
The following points – particularly in the case of a foreign element – should be considered:
“The place of arbitration is …
The number of arbitrators is …
The language of the arbitral proceedings is …
The applicable substantive law is …”
“Any dispute, controversy, difference or claim arising out of or relating to this contract, including the existence, validity, interpretation, performance, breach or termination thereof or any dispute regarding non-contractual obligations arising out of or relating to it shall be referred to and finally resolved by arbitration administered by the Hong Kong International Arbitration Centre (HKIAC) under the HKIAC Administered Arbitration Rules in force when the Notice of Arbitration is submitted.
The law of this arbitration clause shall be … (Hong Kong law).
The seat of arbitration shall be … (Hong Kong).
The number of arbitrators shall be … (one or three). The arbitration proceedings shall be conducted in … (insert language).“
“Any dispute arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration in Singapore in accordance with the Arbitration Rules of the Singapore International Arbitration Centre (“SIAC Rules”) for the time being in force, which rules are deemed to be incorporated by reference in this clause.
The Tribunal shall consist of … arbitrator(s) to be appointed by the Chairman of the SIAC.
The language of the arbitration shall be ….”
“Any dispute, controversy or claim arising out of or relating to this contract or the breach, termination or invalidity thereof, shall be settled by arbitration in accordance with the Arbitration Rules of the Thai Arbitration Institute, Office of the Judiciary applicable at the time of submission of the dispute to arbitration and the conduct of the arbitration thereof shall be under the auspices of the Thai Arbitration Institute.”
We hope that this information brochure can be of any help to you. Please do not hesitate to
contact us in case you have further questions.
LORENZ & PARTNERS Co., Ltd.
27th Floor Bangkok City Tower
179 South Sathorn Road, Bangkok 10120, Thailand
Tel.: +66 (0) 2-287 1882
E-Mail: [email protected]
Although Lorenz & Partners always pays greatest attention on updating the information provided in this newsletter we cannot take responsibility for the topicality, completeness or quality of the information provided. None of the information contained in this newsletter is meant to replace a personal consultation. Liability claims regarding damage caused by the use or disuse of any information provided, including any kind of information which is in-complete or incorrect, will therefore be rejected, if not generated deliberately or grossly negligent.