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New HKIAC model arbitration clauses

22 October 2014
The Hong Kong International Arbitration Centre (HKIAC) has recently published new model clauses stipulating the law of the arbitration agreement.

The new model clauses, which can be found at the HKIAC's website (http://hkiac.org/en/arbitration/model-clauses), are to a large extent the same as the previous model clause, with the addition of an optional provision providing that "the law of this arbitration agreement shall be [Hong Kong] law."

As explained in the remarks to this optional provision, parties are advised to consider including this provision in their arbitration agreements, particularly when the law of the substantive contract is different from the law of the seat. This optional provision was introduced to avoid uncertainty and the unnecessary costs of potential ancillary litigation to decide which law should apply (see HKIAC's Press Release dated 1 August 2014, available at http://hkiac.org/en/news/483).

Although parties will normally agree the seat of the arbitration in their arbitration clause, it is not unusual for parties not to specify expressly the law of the arbitration agreement (eg because they mistakenly assume that the law of the underlying contract will apply automatically).  This type of omission can lead to uncertainty and complications in arbitrations, especially when the law of the substantive contract is not the same as that of the seat of the arbitration as is sometimes the case.   This question has arisen recently in a number of court decisions relating to arbitration claims, where the national courts of Hong Kong, England, India and Singapore have all considered (and disagreed) which law should apply.

The lack of international consistency in dealing with this issue highlights the importance of including choice of law provisions in arbitration agreements and, against that background, the HKIAC's new model clauses are a welcome development for users of arbitration.

Amy Lo

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