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Presentation Material for Efficiency Unit Contract Management issues subject to Arbitration

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Should commercial disputes be a hindrance to your company's success. ... Informality. Secrecy. Economy. Speed. Finality. 9. Strengths of Arbitration. A. General Issues ... – PowerPoint PPT presentation

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Title: Presentation Material for Efficiency Unit Contract Management issues subject to Arbitration


1
Presentation Material for Efficiency
UnitContract Management issues subject to
Arbitration
  • Christopher To
  • Hong Kong International Arbitration Centre
  • www.hkiac.org
  • Christopher_at_hkiac.org
  • 30 June 2005
  • 2.15 to 2.45 pm

2
Introduction
Business Disputes
  • Should commercial disputes be a hindrance to your
    companys success.
  • How should you prepare for the worst.
  • What advice and guidance is available.
  • How can you proactively manage your disputes that
    could substantially save you in unnecessary costs
    and time.
  • Understanding the various dispute resolution
    mechanisms that are available in market place can
    assist you in managing your potential disputes in
    an effective and efficient manner while at the
    same time minimizing your exposure to potential
    risks.

3
Introduction
Business Disputes
  • Definition of a Dispute
  • The New Shorter Oxford English Dictionary 1993
    defines it as
  • A logical argument or
  • An oral or written discussion of a subject in
    which arguments for and against are put forward
    and examined or
  • An instance of disputing or arguing against
    something or someone, argument, a controversy or
  • A heated contention, a disagreement in which
    opposing views are strongly held or
  • The act of disputing or arguing against
    something or someone controversy, debate or
  • A fight, a struggle

4
Introduction
Business Disputes
  • Examples of International Business Disputes
  • Contracts on sale of goods (including
    commodities)
  • Distributorship, agency and intermediary
    contracts
  • Construction, engineering and infrastructure
    contracts
  • Intellectual property contracts
  • Registration of domain names
  • Joint Venture agreements
  • Maritime contracts ( such as bills of lading,
    charter parties)
  • Dealings with a pre shipment inspection agency
  • Dealings with customs authorities
  • Documentary Credit arrangements
  • Employment Contracts
  • Where a State or a State owned entity is involved

5
What is Conflict Resolution?
  • Dont get confused with indecision,
    disagreement, stress or other common experiences
    that may cause, or be caused by conflict.
  • By definition, conflict only occurs between
    parties who need each other and who cannot simply
    leave the relationship with no negative
    consequences.

6
What is Conflict Resolution?
  • Six parts of Conflict structure-
  • Interdependency
  • How much do the parties need each other to act
    cooperatively? If interdependency is high, then
    the costs of not resolving it are also likely to
    be high.
  • Number of interested parties
  • How many distinct parties have an interest in how
    the conflict is resolved? As the number and size
    of parties increase, there are more people to
    please and the difficulty of resolving the
    conflict increases.
  • Constituent representation
  • Do the parties represent the interests of other
    people who are not personally and directly
    involved in the process of resolving the
    conflict? Reaching an agreement that is
    acceptable to everyone who is affected by how the
    issue is resolved, especially those who are not
    personally involved, is more difficult.
  • Negotiator authority
  • If the negotiator authority is high, then
    resolution is easier, otherwise the process will
    take longer and will be more difficult.
  • Critical urgency
  • Is it absolutely necessary that a solution be
    found in the very near future? The greater the
    critical urgency, the less likely a consensual
    solution.
  • Communication channels
  • Same-time-same-place dialogue nearly always
    produces far better solutions than lesser
    communication channels.

7
What if there is a Conflict?
  • Being in Conflict is no fun. Its stressful,
    unpleasant, distracting, intrusive and annoying.
    Whats more

8
What if there is a Conflict?
  • Costs Money down the Drain
  • Wasted Time
  • Bad Decisions
  • Lost Employees
  • Unnecessary Restructuring
  • Sabotage, Theft and Damage
  • Lowered Job Motivation
  • Lost Work Time
  • Health Costs

9
How to resolve any Conflict?
  • Five Conflict Strategies-
  • Integrating
  • Compromising
  • Competing
  • Smoothing
  • Avoiding

10
Introduction
Ways to Resolve Disputes
  • Violence
  • Avoidance
  • Negotiation
  • Mediation
  • Adjudication
  • Arbitration
  • Litigation

11
(No Transcript)
12
A. General Issues
1. What is Arbitration?
  • Flexible, Inexpensive, Confidential, Fair and
    Final
  • Features distinguishing a reference to
    arbitration from other dispute resolution
    techniques
  • the presence of a dispute or difference between
    parties which has been formulated in some way or
    another
  • the dispute of difference has been remitted by
    the parties to a person to resolve in such a
    manner that he is called upon to exercise a
    judicial function
  • where appropriate, the parties must have been
    provide with the opportunity to present evidence
    and / or submissions in support of their
    respective claims in dispute
  • the parties have agreed to accept the decision.
  • Arbitrators are appointed by or on behalf of the
    parties in disputes and has to decide a dispute
    that has already arisen. Inquisitorial powers are
    not normally given to an arbitrator.
  • Arbitration is conducted in accordance with the
    terms of the parties arbitration agreement,
    usually found in the provisions of a commercial
    contract between the parties.

13
A. General Issues
1. What is Arbitration- Essential Features of
Arbitration
  • Consensual arbitration agreement
  • Party autonomy e.g Choice of tribunal, manner
    of case presentation, procedure and powers of the
    tribunal
  • Jurisdiction of the tribunal is fixed primarily
    by the terms of the arbitration agreement and the
    submission to arbitration
  • Final and legally binding process
  • Limited scope for intervention by the courts

14
A. General Issues
2. How is the Arbitration started?
  • Disputes governed by arbitration agreements
    trigger the arbitration process.
  • Arbitration agreements come in two forms
  • where parties to a contract include a clause in
    which they agree to resolve any dispute which may
    arise under the contract by arbitration. This is
    known as an arbitration clause. Many Hong Kong
    trades and industries have applicable standard
    forms of contract with standard arbitration
    clauses, although parties can tailor clauses to
    suit their circumstances.
  • where parties are already in dispute but their
    contract does not contain an arbitration clause,
    they may enter into a separate agreement to refer
    the matter to arbitration. This is known as a
    submission agreement.
  • Occasionally disputes are referred to arbitration
    by a court order or the operation of a statute.

15
A. General Issues
2. How is the Arbitration started?
  • Disputes hereunder shall be referred to
    arbitration, to be carried out by arbitrators
    named by the International Chamber of Commerce in
    Geneva in accordance with the arbitration
    procedure set forth in the Civil Code of
    Venezuela and in the Civil Code of France, with
    due regard to the law of the place of
    arbitration.

16
A. General Issues
2. How is the Arbitration started The Agreement
  • MAGIC FORMULA
  • Any dispute, controversy, or claim arising out
  • of or in connection with this contract, including
  • any question regarding its existence, validity,
  • or termination shall be finally resolved by
  • arbitration under the Rules of rules/institution
    .
  • The tribunal shall consist of a sole/three
  • arbitrators.
  • The place of arbitration shall be city.

17
A. General Issues
2. How is the Arbitration started The Agreement
  • OTHER USEFUL POINTS
  • Language
  • Expertise and special requirements of
  • arbitrators
  • Discovery
  • Multi party proceedings
  • Costs
  • Confidentiality
  • Med-arb, ADR
  • Sovereign immunity waiver

18
A. General Issues
2. How is the Arbitration started The Agreement
  • INSANE CLAUSES
  • (1) Should either party come to feel that the
    Arbitrator is insane or for reasons it comes to
    know after commencement of the arbitration, it
    may consult with the other party, and should both
    parties agree that the Arbitrator is likely to be
    insane, they shall serve a notice of doubt on the
    Arbitrator. Causes giving rise to a notice of
    doubt must be extreme and not be limited to
    continuous making of senseless remarks,
    absentmindedness and queer conduct such as
    dancing alone in the public without cause, and
    the parties may serve a notice of doubt only once
    during the arbitration.

19
A. General Issues
2. How is the Arbitration started The Agreement
  • INSANE CLAUSES
  • (2) On such notice of doubt being served the
    Arbitrator may not refuse medical examination by
    a psychiatrist specialist at one of the hospitals
    listed in Appendix 1 appended to and made a part
    hereof.
  • (3) If in the opinion of the psychiatrist
    specialist the examination would require more
    than four weeks or if the psychiatrist specialist
    is unable to conclude that the Arbitrator is
    positively insane, then the Arbitrator shall be
    deemed to be not insane. The medical examination
    shall be at the parties cost and shall be
    conducted under the condition that the result
    will be made known only to the Arbitrator and the
    parties.

20
A. General Issues
2. How is the Arbitration started The Agreement
  • INSANE CLAUSES
  • (4) If the Arbitrator is found insane, he shall
    resign in which event he shall not be entitled to
    the fee for the services he will have rendered,
    but each party shall pay to the Arbitrator a get
    well fee of Yen 100,000 and one-half of the
    disbursements covering the amount the Arbitrator
    will have expended in connection with the
    arbitration. If the Arbitrator is found not
    insane as the result of the examination, the
    parties shall jointly provide him with a letter
    of apology and each party shall pay a so-sorry
    fee of Yen 1,000,000 to the Arbitrator which he
    may treat as damages for tax purposes. The
    arbitrator, however, may not count the time spent
    for the medical examination as time spent for
    arbitration.

21
A. General Issues
2. How is the Arbitration started The Agreement
  • INSANE CLAUSES
  • (5) While the provisions of these clauses are
    not intended to permit the parties to take the
    arbitrator to the hospital by dint of force, it
    does not bar the parties from initiating judicial
    proceedings for removal of the arbitrator.
  • Such proceedings may be resorted to only where
    the arbitrator refuses to subject himself to
    medical examination or where the parties are not
    satisfied with the findings of the psychiatrist
    that the arbitrator is not insane. If the parties
    initiate judicial proceedings and fail to remove
    the arbitrator, each party shall pay a
    nuisance-fee of Yen 2,000,000 to the arbitrator.
    During such proceedings, the arbitrator may
    proceed, but the arbitrator may not render an
    award. If rendered, such award may not be
    enforced.

22
A. General Issues
3. Arbitration Procedure
  • Arbitration procedure varies, depending on the
    agreement between the parties and the applicable
    statutes and rules.
  • An arbitration commences with one party serving a
    notice of arbitration on the other. (The notice
    briefly describes the dispute and the questions
    to be put to the arbitrator.)
  • The arbitrator or arbitrators are selected
    according to an agreed procedure.
  • The terms of reference (lay down the framework
    for the rules and procedures under which the
    arbitration is to be conducted) are prepared and
    agreed. It is advisable to take guidance from
    those provided by local bodies such as the HKIAC
    Domestic Rules or applicable specialist bodies.
  • The arbitrators fees are agreed.
  • A detailed timetable and set of ground rules for
    the arbitration (Directions) are agreed, or
    imposed by the arbitrator. If the parties are
    adopting any arbitration rules, they should refer
    to those rules and make the Directions consistent
    with them.
  • A venue is booked and the hearing takes place.
  • The arbitrator prepares and delivers his award
    (usually includes recitals, findings of
    liability, the relief granted, any interest
    component, findings as to costs and reasons.
  • The arbitrator (or arbitrators) must execute the
    award, by signing and dating it.

23
A. General Issues
4. Document-Only Arbitration
  • The arbitrator makes his determination based
    solely on any statements of case and an agreed
    bundle of documents provided to him by the
    parties.
  • It dispenses with directions, discovery, experts
    and the hearing.
  • Written statements of claim are usually
    exchanged, as this is usually the only way for a
    party to put forward its case, since no oral
    evidence will be received.
  • Art. 24 of Model Law on International Commercial
    Arbitration (Model Law) provides that, subject to
    any contrary agreement by the parties, the
    arbitral tribunal shall decide whether the
    proceedings shall be conducted on the basis of
    documents and other materials.
  • In an arbitration governed by the HKIAC Domestic
    Arbitration Rules, Art. 25 allows documents-only
    arbitrations where the parties agree. The HKIAC
    documents-only procedure requires the claimant to
    deliver submissions and documents within 28 days,
    defence and counterclaim submissions within 28
    days afterwards, reply and defence to
    counterclaim within 28 days afterwards, followed
    by the respondents final submissions within 21
    days.

24
A. General Issues
5. Small Claims Arbitration
  • Introduced by the HKIAC primarily for low value
    shipping disputes, small quality or quantity
    claims arising from commodities trading.
  • The procedure is only available where the parties
    agree to it, either by a contractual term or by
    agreement after the dispute has arisen.
  • There is only limited power to extend time for
    service of pleadings and late pleadings are
    inadmissible.
  • There is no discovery, although the arbitrator
    may order the production of a relevant document.
  • There is usually no hearing and no right of
    appeal to court.
  • The fees payable by a claimant to an arbitrator
    are limited to a fixed HK15,000.
  • If there is a counterclaim which exceeds the
    amount of the claim, the respondent must pay the
    additional fee of HK7,500.
  • HKIAC charges HK1,500 to appoint an arbitrator.
  • The arbitration has power to direct which party
    must bear the ultimate responsibility for the
    small claims fee, tribunals expenses and the
    legal costs of the successful party.
  • The arbitrator may assess the recoverable costs
    on a commercial basis, but not exceeding HK30,000.

25
A. General Issues
6. Statute Governing Arbitrations in Hong Kong
  • Arbitration in Hong Kong is governed by the
    Arbitration Ordinance (Cap. 341) of the Laws of
    Hong Kong SAR.
  • The Arbitration Ordinance provides two regimes
    for arbitration
  • Domestic arbitration agreement regime
  • International arbitration agreement regime
  • The domestic regime is based on the English
    Arbitration Acts 1950, 1975 and 1979 with
    additional clauses influenced by Singapores
    International Arbitration Act and the English
    Arbitration Act 1996.
  • The international regime incorporates the Model
    Law.
  • Parties can opt in to either regime.
  • Arbitration Ordinance is designed to support
    arbitration as a fair, speedy and cost-effective
    means to resolve disputes.
  • It gives the parties maximum scope for autonomy
    during arbitration.
  • The role of the courts is confined to occasions
    where it is obvious that either the arbitral
    process needs assistance or that there has been,
    or is likely to be, an obvious denial of justice.

26
A. General Issues
7. Rules Applicable to Arbitrations in Hong Kong
  • In addition to the Arbitration Ordinance, the
    parties may agree to adopt a particular set of
    rules in the event of an arbitration.
  • The HKIAC commends the use of the HKIAC Domestic
    Arbitration Rules which took effect from 1 April
    1993 for domestic arbitrations.
  • The HKIAC commends the use of the UNCITRAL
    (United Nations Commission on International Trade
    Law) Arbitration Rules promulgated by UNCITRAL in
    1976 for international arbitrations.

27
A. General Issues
8. Arbitration Institutions in Hong Kong
  • The Hong Kong International Arbitration Centre
    (HKIAC)
  • The Hong Kong Institute of Arbitrators and
  • The East-Asia Branch of the Chartered Institute
    of Arbitrators

28
A. General Issues
9. Strengths of Arbitration
  • Freedom to choose the arbitrator
  • Informality
  • Secrecy
  • Economy
  • Speed
  • Finality

29
A. General Issues
10. Weaknesses of Arbitration
  • The tendency to treat the arbitration as a court
    hearing
  • Costs of the arbitrator and court facilities
  • Unavailability of legal aid
  • Incompetent arbitrators
  • Arbitrator unavailability
  • Lack of legal expertise
  • Lack of control over proceedings

30
B. Role of the Court in Arbitration
1. General
  • The Arbitration Ordinance expressly restricts the
    courts role by providing that it should
    interfere in the arbitration of a dispute only as
    expressly provided by this Ordinance.
  • By virtue of the provisions in the UNCITRAL Model
    Law, the courts role in international
    arbitrations is very limited.
  • Broadly speaking, the court has a role in the
    following activities
  • enforcing an arbitration agreement
  • supporting the conduct of arbitration
    proceedings
  • appeals and
  • enforcing an award

31
B. Role of the Court in Arbitration
2. Enforcing an Arbitration Agreement
  • The court has to stay any action commenced in
    defiance of an arbitration agreement, unless it
    is satisfied that the agreement is null and void,
    inoperative or incapable of being performed.
  • An agreement is a valid arbitration agreement
    notwithstanding the fact that it confers upon the
    claimant the option of commencing action by
    litigation or arbitration or it gives only one of
    the parties the right to refer any dispute to
    arbitration.
  • The courts approach is to lean in favour of
    making the parties who have agreed to settle
    their disputes by arbitration stick to that
    method of dispute resolution rather than
    resorting to litigation when it suits them to do
    so.

32
B. Role of the Court in Arbitration
3. Support for the Conduct of Arbitration
Proceedings
  • The court has powers to enable it to support
    arbitral proceedings.
  • Granting an extension of contractual time to
    commence arbitration proceedings (or some other
    dispute resolution procedure that must be
    exhausted before the commencement of arbitration
    proceedings)
  • Dismissing a partys claim and prohibiting it
    from commencing further arbitration proceedings
    in respect of the claim if the court is satisfied
    that the party or its adviser has unreasonably
    delayed bringing the claim
  • Granting interim relief (such as making an order
    directing an amount in dispute to be secured or
    granting an interim injunction or any other
    interim measure)
  • Determining a preliminary point of law in a
    domestic arbitration
  • Consolidating domestic arbitrations and
  • Removing arbitrators for failure to use all
    reasonable dispatch or for misconduct in a
    domestic arbitration.
  • The court has residual jurisdiction to dismiss a
    partys claim if the party or its adviser has
    unreasonably delayed bringing the claim and, at
    relevant time, there is no arbitral tribunal in
    existence.
  • In a domestic arbitration, the court has the
    power to determine any question of law arising in
    the course of a reference, where the application
    is made with the consent of all the parties or
    with the consent of the arbitrator concerned.
  • The courts role is one of support. It is not to
    be abused by parties for the purpose of
    frustrating or delaying the arbitral process.
    Thus, the court will discourage applications by
    awarding costs on an indemnity basis.

33
B. Role of the Court in Arbitration
4. Appeals
  • Under the UNCITRAL Model Law, recourse to a court
    against an arbitral award may only be made on
    procedural ground which are set out in Art. 34.
  • In domestic arbitration, there is a limited right
    of appeal against the award to the court on any
    question of law. This limited right of appeal may
    also be excluded by agreement.
  • On determining such an appeal, the court may
    order
  • Confirm, vary or set aside the award or
  • Remit the award together with the courts opinion
    on the question of law to the reconsideration of
    the arbitrator.

34
B. Role of the Court in Arbitration
5. Enforcing an Award
  • The court has the power to enforce an award,
    order or direction made by an arbitral tribunal
    in the same way as a judgment, order or direction
    of the court of the same effect, regardless of
    whether the same is made in or outside Hong Kong.
  • Award governed by the New York Convention may be
    enforced in the same manner as an arbitrators
    award enforceable by virtue of s.2GG of the
    Arbitration Ordinance.
  • The court generally takes a narrow approach in
    construing the meaning of public policy under
    the New York Convention. It looks at the
    fundamental conceptions of morality and justice
    of Hong Kong when it comes to a matter of public
    policy.

35
C. Arbitration Proceedings
1. Procedural Meetings
  • Arbitration merges the adversarial system and
    inquisitorial system.
  • Abstracts the best of both systems
  • The principle that arbitral tribunals cannot
    enter into the arena remains applicable under
    both the adversarial and inquisitorial systems.
  • s. 26B(6) and (9) of the Arbitration Ordinance
    allows the arbitral tribunal in Hong Kong to
    inquire into the facts and law to the extent it
    see fit.

36
C. Arbitration Proceedings
2. Separation of Procedural and Substantive
Matters
  • The general practice in Hong Kong is for the
    procedural matters and the substantive matters to
    be dealt with separately.
  • In dealing with procedural matters, preliminary
    meetings or procedural meetings can be convened
    to deal with various interlocutory applications
    in addition to the use of submissions in writing.
  • Rulings of the arbitrator in procedural matters
    are not subject to challenge or review by the
    courts.
  • It limits court intervention while retaining the
    courts supervisory jurisdiction.
  • However, there are advantages to avoid clear
    separation of the procedural and substantive
    matters when the issues are narrow or the amount
    in dispute is relatively small.

37
C. Arbitration Proceedings
3. Arbitration Rules
  • Arbitration in Hong Kong are generally ad hoc
    arbitrations or non-institutional arbitrations.
  • Non-institutional arbitrations can tailor make
    procedures for each arbitration based on the
    fundamental procedural guidelines laid down by
    the lex arbitri.
  • Commonly used Arbitration rules
  • HKIAC Domestic Arbitration Rules
  • UNCITRAL Model Rules and
  • HKIAC Short Form Arbitration Rules.
  • The above give the arbitral tribunal power to
    vary the procedures.
  • Administered arbitrations in Hong Kong include
    ICC arbitrations and arbitration administered by
    HKIAC.
  • The adoption of arbitration rules is not
    essential.
  • The procedural law of arbitration in Hong Kong is
    governed by the Arbitration Ordinance and the
    common law, where the tribunal is given the
    powers and duties to manage the arbitration
    proceedings.
  • Rigidity of procedures is one of the
    disadvantages of institutional arbitration.

38
C. Arbitration Proceedings
4. Fundamental Guidelines
  • There are certain fundamental guidelines that
    have to be adopted for all procedural and
    interlocutory matters
  • The rules of natural justice must be observed at
    all times
  • Notice must be given for any meetings or
    hearings and
  • Rulings and decisions of the arbitral tribunal
    must be sent to both parties.
  • Failure to observe the above principles may
    result in the arbitrator being removed, the award
    being set aside or not enforced.

39
C. Arbitration Proceedings
5. Preliminary Meetings
(a) Necessity, Purpose and Timing of
Preliminary Meetings
  • The main purpose of a preliminary meeting is for
    the arbitral tribunal to lay down procedures and
    set a time frame for complying with the same.
  • This is the first meeting between the arbitrator
    and the parties and the representatives.
  • In international arbitrations involving parties
    from different jurisdictions, preliminary
    meetings should be avoided.
  • Where the issues are straightforward and simple,
    the arbitral tribunal can actually lay down
    procedures right up to the main hearing at the
    first preliminary meeting.
  • For longer arbitrations, more than one
    preliminary meeting would be necessary.

40
C. Arbitration Proceedings
5. Preliminary Meetings
(b) Agenda of Preliminary Meetings
  • A typical agenda of the first preliminary meeting
    could include the following
  • Confirmation of a written arbitration agreement
  • confirmation of the appointment of an arbitrator
    and terms of appointment
  • Check whether or not there is any challenge on
    jurisdiction
  • Decide whether any arbitration rules should be
    adopted
  • Confirmation of time-table for exchange of
    pleadings / statement of case
  • Decide whether documents to be relied on should
    be appended to the pleadings / statement of case
  • How discovery of documents is to be dealt with
  • Mode of service of documents / pleadings /
    statement of case
  • Whether oral evidence will be required
  • If there is no oral evidence, whether
    documents-only arbitration should be adopted and
  • If there is oral evidence, whether directions
    leading to the main hearing can be dealt with.
  • If the parties are able to dealt with further
    directions leading to the main hearing, the
    typical matters to be dealt with would include
  • Exchange of factual witnesses statements
  • Number of expert witnesses (if any) and areas of
    expertise / issues to be dealt with
  • Exchange of experts reports and meetings of
    experts
  • Venue, duration and dates of oral hearing
  • Preparation of hearing bundles
  • Exchange of opening submissions

41
C. Arbitration Proceedings
5. Preliminary Meetings
(b) Agenda of Preliminary Meetings (i)
Appointment of arbitral tribunal
  • The appointment should have been formalised when
    the preliminary meeting is called.
  • The terms of appointment may have been passed to
    the parties.
  • Any matters that may be seen to give rise to
    actual or potential conflict of interest should
    have been raised at the time when the nomination
    process took place and before the acceptance of
    appointment.
  • The duty to disclose is a continuous one.
  • The arbitral tribunal should be satisfied that it
    has been properly constituted under the
    arbitration agreement.

42
C. Arbitration Proceedings
5. Preliminary Meetings
(b) Agenda of Preliminary Meetings (ii)
Written arbitration agreement and jurisdiction
  • The arbitral tribunal should always ensure that
    at least prima facie it has jurisdiction to deal
    with the dispute referred to it.
  • A copy of the arbitration agreement should be
    given to the arbitrator before or at least
    immediately after the appointment.
  • The notice of arbitration should be placed before
    the arbitrator at an early stage.
  • The notice of arbitration provides a framework on
    which to check which dispute can be raised in the
    subsequent pleadings or statement of case.
  • As the arbitration progress, the parties may
    continue to give the arbitral tribunal
    jurisdiction to deal with issues which were not
    previously before it.

43
C. Arbitration Proceedings
5. Preliminary Meetings
(b) Agenda of Preliminary Meetings (iii)
Timetable for exchange of pleadings
  • In simple international sale of goods disputes,
    parties have frequently set out their contentions
    with substantiating evidence in correspondence
    before the action.
  • The duration of preparation will depend on the
    type of pleadings to be adopted as well as
    whether documents relied upon are to be appended
    to such pleadings or whether discovery is to take
    place after the exchange of pleadings.
  • Even if a set of rules has been adopted and a
    timetable for exchange of pleadings been laid
    down, the tribunal always has a discretion to
    re-evaluate the time frame if appropriate.

44
C. Arbitration Proceedings
5. Preliminary Meetings
(b) Agenda of Preliminary Meetings (iv)
Mode of discovery
  • Discovery is the process by which documents are
    disclosed.
  • The mode of discovery in Arbitration is more
    limited that that of court-style discovery.
  • The common practice is that documents to be
    relied upon by a party are appended to the
    pleadings / statement of case.
  • Arbitral tribunals are vested with the power to
    order specific discovery of documents.
  • Limited discovery starts with disclosure of
    documents substantiating the claim or defence and
    is supplemented by specific discovery of
    documents which have not been voluntarily
    disclosed.
  • However, there are instances where court-style
    discovery may be more suitable, for instance, in
    insurance arbitrations.
  • After discovery, it may be necessary to deal with
    potential issues on the authenticity of the
    documents disclosed.

45
C. Arbitration Proceedings
5. Preliminary Meetings
(c) Preliminary Issues (i) Documents-only
or oral hearings
  • At the early preliminary meetings, it is not
    possible to determine whether an oral hearing is
    necessary.
  • Even when a documents-only arbitration is to be
    adopted, the parties and arbitrator still tend to
    reserve their right to call for a short oral
    hearing to deal with matters which need
    clarification or elaboration.
  • If it is definite that an oral hearing is
    required, another procedural meeting may be
    convened.
  • In international arbitrations involving
    experienced and often busy counsel and
    arbitrators, hearing dates tend to be fixed well
    in advance.
  • Parties should be prepared to advise the tribunal
    as to the likely number of witnesses to be
    called.

46
C. Arbitration Proceedings
5. Preliminary Meetings
(c) Preliminary Issues (ii) Collection of
real evidence
  • In certain cases, there may be the need for site
    visits or surveys / records to be conducted in
    the presence of the arbitrator.
  • In conducting these visits, it is important that
    the purpose be clearly identified and the
    evidence sought to be viewed be listed.
  • If the site visit or inspection is to familiarise
    the arbitrator with the layout of the site
    generally so that the evidence can be more easily
    understood, the statements made by the parties
    should be confined to that.
  • Photographs are useful source of real evidence.
  • Collection of samples should be conducted in the
    presence of both parties.

47
C. Arbitration Proceedings
5. Preliminary Meetings
(c) Preliminary Issues (iii) Exclusion
agreement (for domestic arbitrations)
  • An exclusion agreement would only be considered
    for domestic arbitrations under s.23B which allow
    parties to agree to exclude the courts right to
    grant leave to appeal.

48
C. Arbitration Proceedings
5. Preliminary Meetings
(c) Preliminary Issues (iv) Communication
with arbitrator
  • Any communication with the arbitrator must be
    copied to the other side to ensure impartiality
    and independence of the arbitrator.
  • Where communication electronically is permitted,
    these should be digitally signed and encrypted to
    ensure reliability, confidentiality and accuracy.

49
C. Arbitration Proceedings
6. Order for Directions
  • The decisions and directions made by the arbitral
    tribunal in these procedural meetings must be
    recorded in writing.
  • They must be clear so that parties know what to
    follow and more importantly, the court can
    enforce it if necessary.
  • The directions should set out the acts to be
    carried out and the time frame by which they
    should be completed.
  • It is not necessary to give any reasons for the
    directions or orders but where appropriate, the
    arbitral tribunal should indicate briefly why it
    has come to the views it did.
  • The arbitrators fee note should be itemised so
    that costs incurred by him in relation to each
    application can be identified. If costs need to
    be reserved they must be dealt with before the
    final award.

50
C. Arbitration Proceedings
7. Identification of Issues
(a) General
  • A difficult issue is when and how the issues in
    contention should be identified.
  • Parties need time to fully appreciate the
    relevant facts, law and other features of their
    own case and that of their opponent.
  • It is common for arbitration agreements to
    specify the procedural rules to be adopted for
    the arbitration.
  • In the absence of any agreement, the tribunal is
    empowered to conduct the reference in such manner
    as it considers appropriate.

51
C. Arbitration Proceedings
7. Identification of Issues
(b) Court-style Pleadings
  • Issues in court proceedings are usually
    identified by means of pleadings.
  • For court proceedings, parties are required to
    plead material facts upon which they rely and the
    causes of action arising thereon.
  • Pleadings in court proceedings commence with the
    plaintiffs statement of claim.
  • In response, the defendant has to file a defence
    wherein the defendant either admits, denies or
    does not admit to any of the claims in the
    statement of claim.
  • The defendant may also raise a counterclaim
    against the plaintiff.
  • The plaintiff will then have the right to serve a
    reply to the defence and a defence to
    counterclaim.

52
C. Arbitration Proceedings
7. Identification of Issues
(c) Modified Pleadings
  • Some institutional arbitration rules expressly
    allow or require the parties to plead points of
    law as well as evidence.
  • The UNICTRAL Arbitration Rules provide that the
    Claimant may annex to his statement of claim all
    documents he deems relevant or may add a
    reference to the document or other evidence he
    will submit.
  • The Domestic Arbitration Rules of the HKIAC
    provide that the statement of claim shall set
    out a full description in narrative form of the
    nature and circumstances of the dispute and
    specify all factual matters, and if necessary
    for the proper understanding of the claim, a
    summary and contentions of law relied upon and
    the relief claimed.

53
C. Arbitration Proceedings
7. Identification of Issues
(d) List of Issues
  • In most arbitrations, all issues are dealt with
    at the same time.
  • However, in some cases it becomes apparent that
    certain issues should be dealt with as
    preliminary issues because they involve points of
    law or discrete facts and a decision thereupon
    will or may dispose of the entire arbitration or
    a significant part of it.
  • For cases involving a large number of issues, it
    may be advisable for the tribunal to divide the
    case into stages.
  • If a formal list of issues needs to be drawn up,
    it is often preferable to do so after discovery
    and exchange of witness statements and expert
    reports.

54
C. Arbitration Proceedings
7. Identification of Issues
(e) Scott Schedule
  • Scott Schedules are named after an Official
    Referee in England of that name.
  • They are commonly used in construction disputes
    where there are many issues or potential issues
    of fact.
  • A Scott Schedule allows the tribunal and the
    parties to focus their attention on the issues in
    dispute and the parties respective positions.
  • It is a valuable tool to the tribunal to ensure
    that all the issues are covered and the parties
    contentions on each issue are conveniently
    summarised in one document.

55
C. Arbitration Proceedings
8. Evidence
(a) Rules of Evidence
  • An arbitral tribunal is not bound by strict rules
    of evidence and can admit any evidence that it
    considers relevant to the proceeding.
  • The tribunal may determine the admissibility,
    relevance, cogency and weight of evidence at its
    discretion.
  • The tribunal does not have the power to compel a
    party to produce in arbitration proceedings any
    document or other material evidence that he could
    not be required to produce in civil proceedings
    before a court.

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C. Arbitration Proceedings
8. Evidence
(b) Excluding Admissible Evidence?
  • The general rule is that a tribunal must have
    regard to all relevant and admissible evidence
    tendered by the parties.
  • However, under certain circumstances, a tribunal
    may have discretion to exclude or limit evidence
    tendered by a party even though it is relevant
    and admissible.
  • In most cases, it would be advisable for the
    tribunal to discuss any proposed exclusion of
    evidence with the parties.
  • In the absence of consent or in case of doubt,
    the tribunal should give the benefit of the doubt
    to the party seeking to adduce the evidence in
    question.

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C. Arbitration Proceedings
8. Evidence
(c) Weight
  • Unless otherwise agreed, the tribunal has
    discretion to determine how much weight should be
    attached to each piece of admissible and relevant
    evidence tendered by the parties.
  • In exercising such discretion, it is advisable
    for the tribunal to have regard to the rules of
    evidence though the Arbitration Ordinance allows
    the tribunal power the determine the weight to be
    given to the evidence adduced.

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C. Arbitration Proceedings
8. Evidence
(d) Hearsay Evidence
  • Sometimes, a party may be unable to call a
    witness to give direct oral evidence.
  • In such situation, the party concerned may rely
    on hearsay evidence.
  • Generally speaking, a tribunal is justified in
    attaching less weight to hearsay evidence.
  • However, where the hearsay statement is contained
    in a contemporaneous document which the tribunal
    has no reason to believe is forged or inaccurate,
    the tribunal may be justified in attaching more
    weight to that document.

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C. Arbitration Proceedings
8. Evidence
(e) Other Evidence to which an Arbitral
Tribunal may attach less weight
  • In general, the tribunal may consider attaching
    less weight to the following categories of
    evidence
  • Subsequent evidence which is inconsistent with
    contemporaneous evidence
  • Evidence of a witness who has not been
    cross-examined
  • Evidence of a witness who is not independent or
    may have an interest in the outcome of the
    arbitration
  • Uncorroborated circumstantial evidence
  • Inconsistent or contradictory evidence and
  • Evidence which is self-serving.

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C. Arbitration Proceedings
8. Evidence
(f) Burden of Proof
  • The general rule is that a party must prove the
    facts upon which it relies in establishing its
    claim or defence.
  • Although there is no express provision in the
    legislation which governs the standard of proof
    required, it is widely accepted that an arbitral
    tribunal should adopt the normal standard of
    proof in civil cases.

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C. Arbitration Proceedings
8. Evidence
(g) Documentary Evidence
  • Authenticity
  • Some arbitrators take the view that to avoid
    unnecessary delay and expense, any dispute as to
    the authenticity of any documentary evidence
    should be resolved before the commencement of the
    hearing.
  • It is submitted that there are often good reasons
    to hear the dispute on authenticity at the same
    time as other relevant issues are being heard so
    that the tribunal will have a better opportunity
    to study the witnesses concerned and to
    understand the relevant circumstances so that it
    may assess the context of the arguments on
    authenticity put forward by the parties.
  • Agreed bundles
  • Most arbitrators in Hong Kong require the parties
    to submit agreed bundles at an appropriate
    time.
  • It may be possible for the parties to extend the
    scope of their agreement to admissibility and
    perhaps relevance.

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C. Arbitration Proceedings
8. Evidence
(h) New Evidence
  • A party may obtain new evidence after proceedings
    have begun.
  • If either party is expecting such evidence, it
    should inform the tribunal at the earliest
    opportunity.
  • The arbitral tribunal has discretion whether or
    not to admit any new evidence tendered.
  • The tribunal should also consider whether the
    party seeking to adduce the evidence is at fault
    for not adducing it earlier.
  • If the evidence sought to be adduced is relevant
    and material, an arbitral tribunal should be slow
    to reject it.
  • If the evidence is material but the tribunal
    fails to admit it, the award may be remitted or
    even set aside on the basis of misconduct.
  • If the new evidence turns out to be unnecessary,
    the party adducing the evidence can always be
    penalised on costs.

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C. Arbitration Proceedings
8. Evidence
(i) Earlier Arbitration Awards
  • In Land Securities Plc v. Westminster City
    Council, Hoffmann J. took the view that an
    arbitration award is merely an opinion by the
    arbitrator based on the evidence put before him
    at the time and does not constitute direct
    evidence of the matters stated in the award.
  • There is no direct authority on whether evidence
    adduced in an arbitration is admissible in a
    separate arbitration.

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C. Arbitration Proceedings
8. Evidence
(j) Inquisitorial or Adversarial Approach
  • An arbitral tribunal may decide whether and to
    what extent it should take the initiative in
    ascertaining the facts and the law relevant to
    the proceedings.
  • However, such power is subject to any agreement
    by the parties to the contrary.
  • Under inquisitorial procedure, the tribunal may
    undertake an independent inquiry into the facts
    by gathering evidence itself, examining
    witnesses, appointing expert witnesses, relying
    on its own expertise etc.
  • Under normal adversarial procedure, the parties
    are responsible for gathering and presenting the
    relevant evidence and arguments in support of
    their respective positions and the tribunal is
    supposed to act as umpire.

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C. Arbitration Proceedings
8. Evidence
(k) Receiving Evidence in the Absence of a
Party
  • A party would be unable to present its case if it
    was not present at the hearing or otherwise where
    arguments or evidence was being tendered by the
    other party.
  • The general rule is that a tribunal should not
    receive evidence from one party in the absence of
    the other party or parties.
  • The above rule is subject to any contrary
    agreement of the parties.
  • In any event, if the respondent were to be absent
    at the hearing, this did not mean that the
    arbitrator was obliged to accept the claim
    without question. Nor did it mean that he was
    under an obligation to protect the party who was
    not present. His function was to hold the scales
    of justice as evenly as he could and to act
    fairly and judicially in the conduct of the
    hearing.

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C. Arbitration Proceedings
9. Oral Evidence
(a) Examination of Witness (i) Evidence
given by affidavit and examining witnesses on
oath
  • An arbitral tribunal has the discretion to direct
    evidence to be given by affidavit.
  • An arbitrator has the discretion whether or not
    to examine a witness on oath or affirmation
    subject to any agreement by the parties to the
    contrary.
  • The manner of administering oaths and taking
    affirmations should be in accordance with the
    Oaths and Declarations Ordinance. (Cap. 11)

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C. Arbitration Proceedings
9. Oral Evidence
(a) Examination of Witness (ii)
Attendance of witness
  • An arbitral tribunal does not have the power to
    compel a witness to attend a hearing if he
    refuses to do so, although adverse inferences
    could be drawn against a party if it could have
    procured the attendance of such a witness.
  • In order to compel a witness to attend before the
    tribunal to give evidence, a party may make
    application to the High Court for an appropriate
    order.

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C. Arbitration Proceedings
9. Oral Evidence
(a) Examination of Witness (iii) Evidence
of factual witnesses
  • A witness as to fact should only give evidence on
    factual matters.
  • Opinion evidence from such witness should not be
    admitted as evidence.
  • An arbitral tribunal may issue directions
    requiring each party to give advance notice to
    the arbitral tribunal and to the other party of
    any witness it intends to present and to supply
    certain particulars about the witness including
    the language in which the witnesses will testify.
  • A tribunal may direct the presence of a witness
    during a hearing to be limited to the time when
    the witness is testifying.

69
C. Arbitration Proceedings
9. Oral Evidence
(a) Examination of Witness (iv) Expert
evidence
  • An expert who is qualified to give evidence may
    give opinion evidence on a relevant issue in the
    dispute.
  • In evaluating expert evidence, a tribunal should
    consider the following
  • the tribunal should assess the level of
    objectivity and independence of the expert to the
    extent this is possible.
  • whether the experts opinion is based on facts or
    other matters verified by him personally or by
    his assistant or others.
  • whilst it is natural for an arbitrator to be
    impressed by the eminence or experience of an
    expert in his field, the tribunal should satisfy
    itself that the expert has carried out adequate
    preparatory work or research and his conclusions
    are based on logical reasoning and that there are
    no inconsistencies.

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C. Arbitration Proceedings
9. Oral Evidence
(a) Examination of Witness (v) Procedure
in adducing expert evidence
  • Normally the tribunal will give specific
    directions on expert evidence.
  • The directions should limit the number of experts
    and specify clearly the area of expertise
    required.
  • It is usual to require experts to exchange
    written reports at such time before the hearing
    as would enable the parties to adequately study
    the reports and prepare to question the experts.
  • The direction may also require the parties
    experts to meet after the expert reports have
    been exchanged and to set out points of agreement
    and disagreement.
  • It is often advisable that meetings between the
    experts be held on a without prejudice basis.

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C. Arbitration Proceedings
9. Oral Evidence
(a) Examination of Witness (vi)
Arbitrator relying on his own knowledge
  • Arbitrators are often chosen because of their
    technical expertise.
  • An arbitration is different from an expert
    determination.
  • The position under common law appears to be as
    follows
  • Whether or not an arbitral tribunal is entitled
    to rely on its own expertise in coming to a
    decision and the extent to which it can do so
    depends on what parties had expressly or
    impliedly agreed. Party may agreed that the
    arbitrator should make a decision based solely on
    his expertise and investigation.
  • In circumstances where an arbitrator is expected
    to rely on his own knowledge, a distinction
    should be made between general knowledge and
    special knowledge.
  • If the arbitrator has formed an opinion of his
    own which is not in accordance with the expert
    evidence adduced, he should inform the parties
    and allow them to comment on his view.

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C. Arbitration Proceedings
9. Oral Evidence
(a) Examination of Witness (vii)
Tribunal-appointed expert
  • For domestic arbitrations, there is no express
    provision in the Arbitration Ordinance allowing a
    tribunal to appoint its own expert.
  • For international arbitration, the Model Law
    expressly provides that a tribunal may appoint
    experts to report on a specific issue of the
    dispute.
  • Normally a tribunal would consider its own expert
    in the following circumstances
  • where the parties have agreed to this for cost or
    other reasons.
  • where the nature of the dispute is such that the
    tribunal considers it advisable to appoint an
    expert to assist the tribunal to understand and
    analyse the expert evidence submitted by the
    parties.
  • A tribunal is entitled to seek input from its
    appointed expert as long as it bears in mind that
    it has the responsibility to make decisions on
    the arbitration and such responsibility should
    not be delegated to the expert.

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C. Arbitration Proceedings
9. Oral Evidence
(a) Examination of Witness (viii) Terms
of reference
  • It is advisable in most cases for terms of
    reference of the tribunals appointed expert to
    be drawn up.
  • The purpose of this is to define the scope of the
    experts advice for the parties benefit as well
    as that of the tribunal and the expert.

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C. Arbitration Proceedings
9. Oral Evidence
(b) Real Evidence (i) Inspection
  • The tribunal has the power to carry out an
    inspection of the physical evidence under the
    Arbitration Ordinance provided the property
    belongs to or is possessed by a party to the
    proceedings and the property is subject to the
    proceedings or any question relating to the
    property arising in the proceedings.
  • A tribunal does not have the power to inspect
    property belonging to a third party.
  • It is usually advisable for the tribunal to carry
    out the inspection in the presence of all the
    parties to the arbitration.

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C. Arbitration Proceedings
9. Oral Evidence
(b) Real Evidence (ii) Preservation of
evidence
  • Both the court and the tribunal may
  • direct the preservation, custody or detention of
    the relevant property
  • direct samples to be taken from or experiments to
    be conducted on the property and
  • grant interim injunctions or direct other interim
    measures to be taken.
  • When the court and the tribunal have parallel
    jurisdiction to grant the appropriate relief,
    parties should apply to the arbitral tribunal for
    such relief unless the order sought involves a
    third party or the tribunal is otherwise unable
    to grant the relief sought.

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C. Arbitration Proceedings
10. Hearing
(a) Estimation of Duration of Hearing
Chess-clock approach
  • Sometimes called the guillotine system.
  • In a chess competition, the maximum time each
    competitor could use is limited to half the time
    that has been allotted for the whole of the
    competition.
  • The same can be applied to oral hearings.
  • There should be a time keeper from each side.
  • Under the current Arbitration Ordinance, if a
    party requests for the adoption of a chess-clock
    system approach and it is objected to by the
    other side, the arbitral tribunal must decide
    whether or not it is the appropriate procedure to
    follow.

77
C. Arbitration Proceedings
10. Hearing
(b) Venue for Hearing
  • The most common adopted venue is the Hong Kong
    International Arbitration Centre.
  • The oral hearing can be held at a place outside
    Hong Kong.
  • Video conferencing is an option.
  • The venue should be neutral, convenient and with
    all the necessary supporting facilities.

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C. Arbitration Proceedings
10. Hearing
(c) Directions for Main Hearing
  • Such directions would normally be considered
    after the close of pleadings.
  • Even if at the first preliminary meeting they
    have been dealt with, it is not uncommon for
    these directions to be reviewed to ensure that
    they remain realistic and workable.

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C. Arbitration Proceedings
10. Hearing
(d) Factual Witness Statements
  • The use of witness statements to stand as
    evidence-in-chief is the norm in arbitrations and
    in court.
  • Statements of factual witnesses should generally
    be exchanged simultaneously.

80
C. Arbitration Proceedings
10. Hearing
(e) Expert Witnesses
  • Leave has to be obtained from the tribunal before
    expert opinion evidence can be tendered.
  • The order granting leave should specify the
    number of experts to be called and preferably the
    discipline of the experts and their names if
    possible.
  • In inquisitorial jurisdictions, party-appointed
    experts are not preferred. If assistance from
    experts is required, the tribunal would appoint
    its own experts.
  • Expert witnesses must confine themselves to
    rendering opinion. Fact finding remains the role
    and duty of the arbitral tribunal and cannot be
    delegated.

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C. Arbitration Proceedings
10. Hearing
(e) Expert Witnesses (i) List of
agreed facts
  • This usually takes the form of a chronology.
  • The list would include dates of contracts,
    specific events that happened, letter exchanged,
    date of delivery of goods, date of commencement
    of work etc.

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C. Arbitration Proceedings
10. Hearing
(e) Expert Witnesses (ii) List of
issues
  • The list is useful for the arbitrator when he
    gets to writing the award and also to understand
    the evidence.
  • The list of issues should be agreed.
  • Where the matters cannot be agreed, it is up to
    the arbitrator to decide what the issues are by
    reference to the pleadings.

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C. Arbitration Proceedings
10. Hearing
(e) Expert Witnesses (iii) Hearing
bundle
  • The approach to append documents to the
    statements of case in arbitrations and then to
    build on it by specific discovery applications or
    further voluntary production of documents, is to
    start with a core bundle and then expand that
    into a hearing bundle.
  • If documents are to be scanned and transmitted
    electronically, security measures to ensure that
    the contents cannot be deliberately or
    inadvertently tempered with must be in place.
  • Digital signatures and encryption are necessary
    security measures.

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C. Arbitration Proceedings
10. Hearing
(e) Expert Witnesses (iv) Form and
exchange of submissions
  • Invariably, written submissions are adopted.
  • As for closing submissions, this is again
    commonly dealt with by a written closing.
  • It is not advisable to agree to extend the time
    for the exchange of the written closing.
  • Where there is a claim and a counterclaim, the
    closing submissions should still be exchanged
    with the claimant having the last word.
  • Where this is contested, then the closing
    submissions could be exchanged simultaneously
    followed by a simultaneous exchange of reply.

85
C. Arbitration Proceedings
10. Hearing
(f) Interpretation
  • It is for the party whose witness requires
    interpretation to arrange for the interpreter.

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C. Arbitration Proceedings
10. Hearing
(g) Translation
  • Translation of documents should have been dealt
    with at the time of the preparation of the
    hearing bundle.
  • It is best if the translation is agreed on.

87
C. Arbitration Proceedings
10. Hearing
(h) Transcript
  • The arbitrator has a duty to keep full notes
    whether or not the use of a transcript is
    necessary.

88
C. Arbitration Proceedings
11. Pre-Hearing Review
  • Some arbitrators adopt the practice of having a
    pre-hearing review to ensure that there are no
    last minutes applications that may jeopardise the
    conduct of the hearing.

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C. Arbitration Proceedings
12. Order of Proceedings
  • The order the proceedings generally follow is
    that of court but given the flexibility of
    arbitration, different orders dealing with
    factual and expert witnesses have been developed.
  • The usual order
  • claimants opening
  • claimants evidence
  • respondents opening
  • respondents evidence
  • respondents closing
  • claimants closing

90
C. Arbitration Proceedings
13. Costs
(a) What Costs are Recoverable?
  • The tribunals fees and expenses will include any
    expenses pro
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