HKIAC reports record amount in dispute for 2023

The HKIAC's recently released statistics for 2023 reveal that the institution had a record-breaking year measured by the amount in dispute, underscoring the appeal of Hong Kong and the HKIAC to international parties as well as their unique role in facilitating the resolution of PRC-related disputes.

The interim measures arrangement between Hong Kong and the mainland PRC continues to be popular with parties and a significant advantage of Hong Kong arbitration for PRC-related transactions.  PRC courts have preserved more than US$ 2 billion of assets under the arrangement since it came into effect in 2019, with nearly 95% of applications being granted.

There are also indications that parties and their lawyers are beginning to adopt outcome-related fee arrangements (often referred to as "success fees") for Hong Kong arbitrations after these were permitted for the first time in December 2022.

Caseload and amount in dispute  

• The total amount in dispute in all arbitration cases hit a record high of HK$ 92.8 billion (approximately US$ 12.5 billion), more than double the figure for 2022 and 35% higher than the previous record in 2020.
• The average amount in dispute in arbitrations administered by the HKIAC was HK$ 467.6 million (approximately US$ 60.1 million), more than 2.5 times the figure for 2022.
• Total case numbers remained broadly level, with 500 new cases submitted in 2023 versus 515 in 2022.
• There was an increase in domain name disputes both in absolute terms (209 new cases versus 161 in 2022) and as a proportion of the total (42% versus 31% in 2022), while there was a decrease in arbitration cases (281 new cases versus 344 in 2022, representing 56% of the total, down from 67% in 2022).

 International appeal

• Three quarters of all arbitrations and nearly 90% of all administered arbitrations submitted to the HKIAC in 2023 were international in nature (i.e. at least one party was not from Hong Kong).
• Parties from 63 jurisdictions participated in the arbitrations submitted in 2023.  The top five geographical origins were Hong Kong, the mainland PRC, the British Virgin Islands, the Cayman Islands and Singapore (unchanged from 2022).  Russian parties entered the top 10 for the first time (placing at number seven, behind the USA at six and ahead of South Korea at eight).
• 14 different governing laws were applicable, down slightly from 16 in 2022.  Hong Kong law and English law retained first and second place respectively, with PRC law moving up to third in place of Jersey law.
• 83% of the administered arbitrations commenced in 2023 were conducted in English.

PRC-related disputes

• Parties from the mainland PRC featured in 39.5% of all arbitrations, underscoring Hong Kong's continuing role as a leading venue for resolving PRC-related disputes.
• Bilingual English/Chinese arbitrations made up a small but growing proportion of the total (5%, up from 1.6% in 2022).  The proportion of Chinese-language arbitrations was essentially steady at 12%.

 Arbitrator nationalities

• Arbitrators with the nationalities of 17 named jurisdictions, plus dual nationals, were appointed in 2023.
• Arbitrators with Hong Kong, UK, Australian and dual nationality appeared most frequently, comprising approximately 75% of all arbitrators appointed by the HKIAC and 73% of arbitrators designated by the parties or co-arbitrators under the HKIAC Rules.
• The proportion of arbitrators with mainland PRC nationality doubled to 6.4% (up from 3.2%) of all arbitrators appointed by the HKIAC and nearly quadrupled to 6.3% (up from 1.6%) of arbitrators designated by the parties or co-arbitrators under the HKIAC Rules.

 Diversity in appointments

• Female arbitrators made up just over one third (34.9%) of all appointments made by the HKIAC, up from 27% in 2022.  This is the highest level since the HKIAC first started publishing female appointment figures in 2017 (when the figure was 15%).
• There was also an increase in the proportion of female arbitrators designated by co-arbitrators under the HKIAC Rules, albeit only to 19.2% from 11.4%.  However, only 12.8% of arbitrators designated by the parties under the HKIAC Rules were female (down from 18.9%).
• Arbitrators not previously appointed over the last three years (whose appointments can arguably be viewed as a rough proxy for diversity more generally) made up 34.3% of all appointments made by the HKIAC (up from 30.2%), 19.2% of designations by co-arbitrators under the HKIAC Rules (down from 48.6%) and 16.3% of designations by parties under the HKIAC Rules (down from 34.4%).
• These figures suggest that, while some progress is being made in relation to the diversity of appointments, particularly in the case of appointments by the HKIAC and to a lesser extent by co-arbitrators, diversity considerations are having a limited impact on parties' choices of arbitrators in the majority of cases.  Parties are therefore continuing to miss out on the potential "diversity dividend" which greater diversity in appointments could deliver (see our previous blog here).

 Challenges of arbitrators

• Only five challenges to arbitrators were submitted in 2023 (down from 11 in 2022), with three still pending as of the end of 2023.  One resulted in the resignation of the challenged arbitrator and the other was withdrawn.
• Of nine challenges which were still pending as of the end of 2022, one was upheld, one resulted in the resignation of the challenged arbitrator, five were dismissed by the HKIAC and one was rejected on other grounds.  Accordingly, only two challenges (22%) resulted in the removal or resignation of the challenged arbitrator.

Interim measures

• The HKIAC processed 19 applications to 13 different mainland PRC courts under the interim measures arrangement between Hong Kong and the mainland PRC.  In response to those applications, the mainland PRC courts issued orders to preserve RMB 544 million (approximately US$76.1 million) of assets in 2023.
• The HKIAC has processed a total of 105 applications since the arrangement came into force in 2019.  The HKIAC is aware of 70 decisions issued by mainland PRC courts up to 2023, of which 66 granted the applications (a success rate of 94%) and preserved assets worth a total of RMB 15.8 billion (approximately US$ 2.2 billion).

Expedited procedure and early determination

• There were 24 applications for the expedited procedure under the HKIAC Rules (up from 20 in 2022), of which 15 (63%) were granted.  This was the second highest number in any year for which figures are available (with the previous high having been in 2020, when there were 28 applications).
• Five applications for early determination were submitted, up from two in 2022 and the highest number in any year for which data is available since the procedure was introduced in 2018.  Two were granted, two were rejected and one was pending as of the end of 2023.

Funding of arbitrations

• Disclosures of third party funding (which has been permitted for arbitration in Hong Kong since a new legal regime came into force on 1 February 2019) were made in only one arbitration in 2023 (down from 73 arbitrations in 2022).
• Disclosures of outcome-related fee structure agreements between clients and their lawyers were made in three cases. 2023 was the first full year in which such arrangements have been permitted for arbitration in Hong Kong, after changes to the law came into effect on 16 December 2022.

Virtual hearings

• Of the 101 hearings hosted by the HKIAC during 2023, 44 were fully or partially virtual (43% of the total, compared with 81% in 2022, when pandemic-related restrictions continued to apply in Hong Kong).  This may suggest that parties and tribunals recognise the convenience and efficiency which virtual hearings can offer in appropriate circumstances even in "normal" times, although it is probably too early to assess the extent to which they will continue to be utilised as travel and communication practices readjust to the post-pandemic environment.