2.   Paragraph 23 of the HKMAG Terms allows the parties to challenge an award on grounds of serious irregularity and appeal against an award on a question of law by opting in the provisions of section 4, 5, 6 and 7 of Schedule 2 of the Arbitration Ordinance. The challenge and appeal may act as extra measures to maintain the high quality and standard of the

maritime arbitrators and allow the Hong Kong Courts to develop and explain the law. They do not casually open the floodgates and intervene in the finality of the awards as the English experience tells that challenges to awards under sections 68 and 69 of the English Arbitration Act 1996 are rarely successful.42

Parties who would like to retain the option to appeal against  an  award on  a question of law  under the HKMAG Terms should ensure that Hong Kong law, rather  than  English  law,  is chosen as the governing law of their maritime contracts. The reason is that foreign law is a question of fact in the Hong Kong Courts. Any legal issue arising from English law as the substantive law of a contract would only  be  considered  as  an  issue  of  fact rather  than law: see, for example, Reliance Industries Ltd. v. Enron Oil and Gas India Ltd.  and Oil & National  Gas Corporation (2002) 1 Lloyd's Rep 645. In other words, if English law is chosen as the governing law, the parties have in fact opted out of sections 5 and 6 of Schedule 2 of the Arbitration Ordinance.

(i)             Procedures for the Administration of Arbitration under the HKMAG Terms

The HKMAG has also produced Procedures for the Administration of Arbitration under the HKMAG Terms. The Procedures adopt a  very  light  touch  administered  approach  for arbitration to be administered or supervised by the HKMAG. The HKMAG will charge registration and administration fees under  the  Procedures.  The  fees  are  subject to review  by the HKMAG Committee. Currently, no registration fee is charged and the administration fee is fixed at HKD 5,000 only.

The Procedures were developed to enable parties to China-related transactions to take advantage of the benefits of the "Arrangement Concerning Mutual Assistance in Court- ordered Interim Measures in Aid of Arbitral Proceedings by the Courts of the Mainland and of the HKSAR" as the Arrangement only applies to administered arbitrations, excluding ad-hoc arbitrations. The HKMAG is a qualifying arbitral institution under the Arrangement.

Costs

Costs of arbitration have always been a concern to the users. It is not denied that, like other popular arbitration venues, professional arbitration and legal services in Hong Kong come at a price. Having said that, the costs of maritime arbitration here are still  affordable  and  controllable. One of the reasons, perhaps, is that  given  their  shipping  background,  many  service providers here considered themselves as  part  of the industry  and are more willing to    pull together with the users. More importantly, they are  not  providing  one-off  arbitration  service and have to be responsible to various stakeholders including P & I / Defence Clubs and insurers.

Another reason is that maritime arbitrations are usually conducted informally and flexibly. Most of the disputes are resolved on a documents-only basis. This means that there is only limited exchange of written submissions before the arbitral tribunal proceeds to its award. The arbitration process can be expedited and costs will be saved. Although a party can ask for an oral hearing as of right under the Arbitration Ordinance, in reality, this rarely happens if it is not necessary as there will be an adverse costs consequence even if it is successful in the arbitration. With the use of the HKMAG Terms, an arbitral tribunal can decide whether the case is to be dealt with on documents alone.

Complaints about the high costs of Hong Kong maritime arbitration are not unheard of. While each case has  to be viewed  on  its  own  facts, the use of institutional arbitration rules43  which  are not designed for maritime arbitrations and the  arbitrator's  lack  of  knowledge  and  experience in maritime business may have  contributed  to  this  unfavourable  impression.  The use of the HKMAG Terms and Small Claims Procedure in Hong Kong maritime arbitrations ensures the resolution of maritime disputes in an efficient and affordable manner.

Recommended arbitration clauses

To sum up, with a good legal system and a good  number  of  the  right  people  domiciled  in Hong Kong providing legal and arbitration services for the shipping industry, Hong Kong is a good venue to resolve maritime disputes, particularly disputes involving parties in the Asia- Pacific region.

Arbitration is a consensual process based on the parties’ agreement. ln order to benefit from the use of the Hong Kong maritime arbitration services, the parties need to include in their contracts an arbitration clause requiring them to arbitrate their disputes in Hong Kong. Usually, a simple arbitration clause such as the one below will suffice for this purpose.

“Arbitration in Hong Kong. English law to apply”

This kind of arbitration clause is commonly found in charterparties / fixture notes and sale of goods contracts agreed by Asian parties. Its simplicity, however, will likely  lead  to  delay,  hinder the smooth process of the arbitration  and  even bring  an  unwanted  satellite  litigation. The clause itself does not specify the number of arbitrators and  does  not  provide  an  appointment mechanism. Sometimes, parties want to remedy the defects by relying on the arbitration clause of a standard form or a pro-forma contract which forms part of their

agreement by way of incorporation. Unfortunately, they may not be able to be construed harmoniously. It is therefore common to see parties making applications to the HKIAC for the exercise of its statutory authority as  described above  to  determine  the number  of  arbitrators and to appoint an arbitrator if the circumstances so warrant it. Such applications will inevitably incur extra costs and delay.

Difficulties can also arise in the construction of a poorly drafted arbitration clause such as "Arbitration to be held in Hong Kong. English law to be applied". As mentioned above, this  clause was subject to scrutiny by the English High Court in Shagang South Asia (Hong Kong) Trading Co. Ltd. v. Daewoo Logistics (The Nikolaos A) [2015] EWHC 194 (Comm).

In many cases, the purposes of commencing arbitration are to protect a statutory time limit or a contractual time bar, to exert pressure on the contractual partner for  an overdue payment,  to resolve an ongoing dispute before jacking up the loss or to pursue a clear-cut claim for expeditious recovery. A sloppily drafted arbitration clause may not help further these purposes.

The HKMAG has produced the following standard arbitration clauses for use in all maritime contracts. They are drafted with the specific aims of tackling the known problems and ensuring that maritime arbitration proceedings are conducted in an orderly and efficient fashion. There are two recommended arbitration clauses. One is the ad-hoc arbitration clause which has long and short forms. The other is the administered arbitration clause which is recommended to be used by parties to China-related transactions who want  to  have the means to obtain interim measures in aid of a Hong Kong seated arbitration in China. Both clauses provide for the use of the HKMAG Terms.

(A) HKMAG Arbitration Clause

Long form

This Contract shall be governed by and construed in accordance with Hong Kong* / English* law and any dispute arising out of or in connection with this Contract shall be referred to arbitration in Hong Kong in accordance with the Arbitration Ordinance Cap. 609 or any statutory re-enactment or modification thereof save to the extent necessary to give effect to the provisions of this clause.

(*) Delete as appropriate. If no deletion is made, Hong Kong law shall apply.

The arbitration shall be conducted in accordance with the HKMAG Terms current at the time when the arbitration proceedings are commenced. The reference shall be to three arbitrators.

Nothing herein shall prevent the parties agreeing in writing to vary these provisions to provide for the appointment of a sole arbitrator and, if necessary, for the President of the HKMAG to appoint the sole arbitrator if the parties cannot agree on the appointment.

In cases where neither the claim nor any counterclaim exceeds the sum of USD 100,000 (or such sum  as the parties may agree) the arbitration shall be conducted in accordance with the HKMAG Small Claims Procedure current at the time when the arbitration proceedings are commenced.

Short Form

(a)             Arbitration in Hong Kong in accordance with the HKMAG Terms and HKMAG Small Claims Procedure, Hong Kong law to apply.

OR

(b)            Arbitration in Hong Kong in accordance with the HKMAG Terms and HKMAG Small Claims Procedure, English law to apply.

32http://www.doj.gov.hk/eng/topical/pdf/mainlandmutual2e.pdf 33http://hsfnotes.com/arbitration/2017/01/05/first-cietac-hk-award-enforced-in-mainland-china/ 34http://www.doj.gov.hk/eng/mainland/pdf/macaoe.pdf 35https://law.moj.gov.tw/ENG/LawClass/LawAll.aspx?pcode=I0020001                                              36See Article 49 of the Taiwan Arbitration Act 37http://www.hklii.org/eng/hk/cases/hkcfi/2015/1787.html

38http://www.arbitration.qmul.ac.uk/docs/123290.pdf

39Article 47 of the Arbitration Ordinance.

40In case of three arbitrators, section 24 (3)(a) of the Arbitration Ordinance provides that a party will have 30 days of receipt of a request from the other party to appoint its arbitrator and the two arbitrators will have another 30 days of their appointment to agree on the third arbitrator.

41https://www.bailii.org/ew/cases/EWHC/Comm/2014/4202.html

42https://www.bailii.org/ew/cases/EWCA/Civ/2018/2494.html

43The keynote address entitled "Cost and Delay in International Arbitration" delivered by the late Sir Anthony Colman to the London Branch of the Chartered Institute of Arbitrators provides some food for thought on this subject: https://www.londonarbitrators.org/sites/londonarbitrators.org/files/Sir%20Anthony%20Colman%27s%20speech..pdf