15 May, 2018
We often hear legal terms such as “domestic arbitration”, “international arbitration”, “ad-hoc arbitration” and “institutional arbitration” – but what do they really mean? What are the differences between them? This article serves as a simple introduction to this question.
Institutional arbitration
An institutional arbitration is one where a specialised institution is appointed and takes on the role of administering the arbitration process / case management. Each institution has its own set of rules which provides a framework (such as timelines for the filing of documents or procedures for making applications etc) for the arbitration and its own form of administration to assist in the process. Common institutions include the Hong Kong International Arbitration Centre (HKIAC) and the International Chamber of Commerce (ICC)
The obvious advantage of institutional arbitration is the administrative assistance given by the institution. For example, the HKIAC now offers tribunal secretary services to the parties. The availability of established rules also helps move the arbitration forward in a timely manner. The institution will usually charge a percentage of the disputed sum as their fee – which can sometimes be substantial in large disputes.
Ad hoc arbitration
On the flip side of the coin, we have ad hoc arbitration. An ad hoc arbitration is one that is not administered by an institution. Parties will determine between themselves all aspects of the arbitration, such as the appointment of arbitrator, applicable rules and timetable for filing various documents.
Without the administering institution, parties in ad hoc arbitrations are free to agree to use the procedure of their choice. In cases where no procedural rules are agreed, the arbitral tribunal will administer the arbitration in the way it thinks fit.
An ad hoc arbitration can also be turned into an institutional arbitration. If parties feel they require the assistance of a specialised institution to run the case at some point, they may by agreement make such an appointment.
In many jurisdictions, ad hoc arbitration is not common. For example, in Mainland China, the Arbitration Law states that an arbitration agreement must designate an arbitration commission.
Therefore, arbitration agreements providing for domestic ad hoc arbitrations are generally considered invalid in China. However, in recent years, the Supreme People’s Court of China released an “Opinion on Providing Judicial Protection for the Development of the Pilot Free-Trade Zones” which was regarded as allowing ad hoc arbitration in China. Last year, the Management Committee of Hengqin New Zone and Zhuhai Arbitration Commission jointly published the “Ad Hoc Arbitration Rules of (Guandong) Pilot Free Trade Zone Hengqin Area of Zhuhai”. Thus it seems that ad hoc arbitration is making its way into Mainland China, but more time and judicial support will be needed before it can truly become a practical dispute resolution method in China.
Domestic and International Arbitration
Nowadays the terms domestic and international arbitration carry much less legal significance. In the old Arbitration Ordinance (Cap.341), there were separate regimes for the conduct of domestic and international arbitrations in Hong Kong, the latter being governed by the United Nations Commission on International Trade Law Model Laws (Model Law). Under the new Arbitration Ordinance (Cap. 609), however, that distinction has essentially been abolished and there is now a single regime, governed by the Model Law, subject to modifications and supplements.
An example of the modifications and supplements is Schedule 2 of the new Arbitration Ordinance which retains some of the old provisions under the old domestic arbitration regime which parties (now in both domestic and international arbitrations) may opt into.
These days, international and domestic arbitrations are simply used to describe the dispute and the parties, as opposed to carrying different meanings in law.
For further information, please contact:
Andrew Law, Deacons
