THE AUTHORS:
Jenny Zhang is an associate at Ashurst.
Katrine Tvede is an associate at Ashurst
Background
On 11 September 2023, the Tashkent International Arbitration Centre (“TIAC”) and the Hong Kong International Arbitration Centre (“HKIAC”) launched the Cross-Institutional Rules of Arbitration (the “Rules”). The Rules contain a so-called “cross-institutional decision-making mechanism for administered arbitration“—a novel feature that allows TIAC and HKIAC to jointly administer the Rules and arbitrations taking place under them.
According to HKIAC’s press release, the Rules are intended to “combine the benefits of TIAC (with cost-effective and regional expertise on the CIS region) and HKIAC (with extensive experience in international arbitrations and highly-quality decision on procedural matters).”
Against this background, the Rules appear to serve two agendas. First, they appear as a cross-institutional initiative aimed at handling disputes likely to arise out of the increased trade and investment flows between the CIS region and China, which the 2013 Chinese Belt and Road Initiative seeks to create. The Rules allow the resolution of CIS-Chinese disputes, perhaps particularly as these involve Chinese investment into the CIS region, to be handled cost-effectively in the CIS but with the institutional support and expertise necessary to ensure that enforceable awards are rendered from a well-established institution with almost 40 years of experience. Second, the Rules appear to be an attempt to strengthen Uzbekistan further as an arbitration hub in the CIS region, following the launch of TIAC, the introduction of judicial reforms, and the adoption of a new Model Law-based arbitration act.
Central Features of the Rules
Scope of Application of the Rules
The Rules apply only “where the Parties have agreed to refer their existing or future disputes for arbitration in accordance with the Rules through an arbitration agreement […] that provides for the Rules to apply” or when an arbitration clause provides for an arbitration to be administered “by TIAC and HKIAC or words to similar effect” (Article 2.1). This formulation leaves some room for ambiguity, but the Rules appear to only apply to disputes taking place under an arbitration clause that specifically refers to the Rules or their cross-institutional administration.
Division of Powers Between TIAC and HKIAC
A closer look at the Rules reveals that they largely adopt the Rules of Arbitration of TIAC published in 2019 (the “TIAC Rules 2019”). Curiously, given the timing of the publication of the Rules, the Rules are not based on the most recent set of TIAC rules (adopted in 2021), which include provisions addressing the treatment of documents and data, the use of experimental evidence, and cybersecurity concerns.
Apart from a few derogations, the Rules simply adapt the TIAC Rules 2019 to the cross-institutional administrative model created through them. Like other institutions, TIAC consists of a Secretariat and a Court of Arbitration. The TIAC Rules 2019 delegate certain, mainly administrative, powers to the TIAC Secretariat and the powers to decide on more substantive questions to the TIAC Court of Arbitration.
The Rules, in comparison, do not contemplate any involvement of the TIAC Court of Arbitration. Instead, the TIAC Court of Arbitration is substituted for HKIAC, and most of the responsibilities that were vested with the TIAC Court of Arbitration in the TIAC Rules 2019 are delegated to HKIAC, such that HKIAC comes to serve as the Court of Arbitration for TIAC-administered arbitrations.
As such, according to Article 1.1 of the Rules, TIAC is to act “as an administering authority assisting HKIAC in procedural decision-making over the disputes covered by [the] Rules.” The role of TIAC, as the “administering authority,” involves:
- registering requests for arbitration (Articles 4.1 and 4.3);
- receiving the answer to the request for arbitration notifications of interim measures applied for and requests for joinder (Articles 5.1, 7.3(e) and Article 22.3);
- receiving arbitrator disclosures and any notice of challenge of any arbitrator (Article 11.1; Schedule 1.4);
- receiving applications for expedited proceedings and emergency arbitration (Article 32.1; Schedule 1.1);
- handling communications with the parties and the tribunal, as well as with any emergency arbitrator (Articles 3.1, 10.4, and 24.7; Schedule 1.10);
- collecting and managing deposits and fees (Articles 6.2 and 26); and
- managing time limits which the parties need to comply with (Articles 3.5, 7.4, 8.3, and 9.3).
In comparison, HKIAC has a decidedly less administrative role. According to the Rules, HKIAC “acts as the appointing and acting authority competent for procedural decision-making over the disputes covered by these Rules” (Article 1.1). HKIAC is vested with the powers to:
- decide on the prima facie existence and validity of an arbitration agreement prior to the constitution of the tribunal (Article 21.1);
- determine the number of arbitrators absent party agreement (Article 9.1);
- appoint arbitrators and emergency arbitrators, and confirm arbitrator nominations (Articles 9.3, 9.4(b)-(d), and 10(2); Schedule 1.4);
- decide on challenges to and remove arbitrators (Article 11.6);
- decide on requests for consolidation and on requests for joinder of additional parties prior to the constitution of the tribunal (Articles 7.1 and 8.1);
- decide on applications for expedited or emergency arbitration (Article 32.2; Schedule 1.3);
- manage the time within which awards have to be drawn up and provide limited scrutiny of the award (Article 24.3); and
- fix the amount of deposits to be paid by the parties (Article 26).
The general division of responsibility between TIAC as the administering authority and HKIAC as the acting authority is borne out throughout the Rules. There is, however, one outlier in Schedule 1.10, which grants TIAC the authority to review draft decisions, orders, or awards from an emergency arbitrator—albeit under the supervision of HKIAC. Less commonly, the Rules delineate a hierarchical relationship. An example can be found in Article 31.2, which empowers HKIAC to require the TIAC Secretariat to provide reasons for any decision made under the Rules.
While in most instances HKIAC’s and TIAC’s responsibilities are separate, the Rules do contemplate limited areas where the TIAC Secretariat and HKIAC have overlapping powers or are required to coordinate on a certain matter. For example, under Article 1.1, both TIAC and HKIAC may publish guidelines to “supplement, regulate or implement these Rules,” and the Rules in several places refer to actions to be undertaken or decisions to be made in accordance with the “TIAC-HKIAC Guidelines“. However, the Rules do not articulate the scope of subject matters in respect to which TIAC and/or HKIAC are empowered to issue, interpret, and apply the guidelines. The lack of clear direction (which may be intentional) as to how the two institutions will jointly exercise the power to issue supplemental rules, and how any conflicts in the decisions made by the two institutions would be resolved, may create ambiguity and uncertainty. In other instances, it is the TIAC Secretariat to receive communications, but HKIAC to decide upon them (see Schedule 1.1, Schedule 1.3, Article 10.3). To ensure that the purpose behind the Rules of providing efficient and cost-effective services is not undermined, the two institutions will therefore have to ensure swift communication, efficient coordination, and consistent action.
Limited Exceptions to the General Substitution of TIAC Court of Arbitration With HKIAC
There are certain places in which the Rules do not substitute the TIAC Court of Arbitration for HKIAC, but instead delegate the powers that were vested with the TIAC Court of Arbitration, in the TIAC Rules 2019, to arbitral tribunals sitting under the Rules or to the TIAC Secretariat.
This is, for example, the case with regard to the discretion to suspend proceedings upon receipt of a notice of challenge against an arbitrator.
Under the Rules, the discretion to suspend proceedings pending a decision on the challenge rests with the arbitral tribunal, and the discretion to decide on the challenge rests with HKIAC (Article 11.4). Under the TIAC Rules 2019, however, both the power to suspend (or, indeed, decide not to suspend) as well as the power to decide on the challenge are exercised by the TIAC Court of Arbitration (TIAC Rules 2019, Article 11.4).
It is unclear why this derogation was made, but it certainly seems that when suspension of proceedings is discretionary while a challenge is pending (rather than, as under other rules, automatic), the discretion is better vested with the entity which is to ultimately decide on the challenge for the simple reason that this entity can carry out a prima facie assessment of whether there are legitimate grounds behind the challenge before suspending proceedings. A discretionary scheme of suspension can, in this way, promote the effective administration of the proceedings by ensuring that meritless challenges do not cause unnecessary delays while pending. However, by splitting the capacity to suspend and the capacity to decide on a challenge, this construct is undermined.
Hong Kong as the Default Seat
In a derogation from the TIAC Rules 2019, the Rules designate Hong Kong as the default seat absent express agreement by the parties. This means that absent parties’ derogation, the arbitration-friendly Hong Kong courts will be called upon to supervise and support arbitration proceedings under the Rules. It also means that, as a result of the recent mutual assistance arrangement between Mainland China and Hong Kong, parties can apply to national courts in Mainland China for interim measures. This will significantly increase the ability of CIS-based parties (and other non-Chinese parties) to secure assets from counterparties with assets in China.
A Cost-Effective Option
Apart from a small filing fee, TIAC currently adopts a “zero admin fee policy” and instead maintains its operations through fees generated through other activities such as events and training programs. Use of cross-institutional services offered under the Rules is therefore only subject to an HKD 8,000 administrative fee for HKIAC‘s services (further fees may apply if HKIAC is asked to appoint an emergency arbitrator or decide on a challenge of an arbitrator). This feature renders the use of the Rules unusually cost-effective, especially considering the access they provide to the acting and appointing services of a well-known institution such as HKIAC.
Practical Implications
The Rules present a novel cross-institutional model which, unsurprisingly, contains some room for ambiguity that potentially risks resulting in costly disputes over wording and interpretation. Similarly, the novel inter-institutional bifurcation of responsibilities between TIAC and HKIAC makes the Rules more challenging to navigate, and parties – or rather their counsels – will have to pay closer attention than usual to ensure that communications and requests are sent to the correct institution.
Much of the risk of disputes created by the Rules can, however, be mitigated if the cooperation and communication between TIAC and HKIAC proves smooth and efficient. Effective coordination and collaboration between the two institutions will both make the novel cross-institutional structure easier to navigate for parties and minimize the risk of disputes, thus proving to parties that even with its cost-effectiveness, the cross-institutional framework does not create hindrances and should not be a cause for concern. Close and effective collaboration between TIAC and HKIAC will likely prove essential for the success of the Rules. The working relationship between the two institutions must be much like that of a secretariat and a deciding body within any other institution.
It will be interesting to see whether TIAC and HKIAC follow through on this and whether the cross-institutional model presented in the Rules will consequently be welcomed by the market and opted for by parties. Should it prove successful, it will be similarly interesting to see whether other arbitral institutions, on the heels of the many other recent cross-institutional initiatives, will follow suit and issue similar cross-institutional, targeted sets of rules that allow them to establish themselves and attract business in regions other than those they usually cater to, making the Rules a model for the future.
ABOUT THE AUTHORS:
Jenny Zhang is an associate at Ashurst. Her work focuses on commercial arbitrations in the energy, infrastructure, and construction sectors. She has represented commercial entities in arbitration proceedings under the rules of the ICC, LCIA, DIFC-LCIA, and DIAC. She has also represented clients in expert determinations in accordance with the ICC Expert Rules, and she has litigation experience in front of the DIFC Courts. Prior to joining Ashurst’s London office, she worked in Ashurst’s Hong Kong and Dubai offices.
Katrine Tvede is an associate at Ashurst. She specializes in international arbitration and public international law and has acted as counsel for both corporate and sovereign clients. Katrine has experience with disputes relating to the provision of financial services, energy, oil and gas, mining, TMT, pharmaceuticals, and the sale of commodities under the rules of the ICC, SCC, ICDR, ICSID, and DIS, as well as the UNCITRAL Rules. Prior to joining Ashurst, Katrine was part of the international arbitration practice group at another international law firm.
