Arbitration Ordinance (Cap 609): Lapse of Automatic Opt-In Provisions on 1 June 2017

The Arbitration Ordinance (Cap 609) came into effect on 1 June 2011. It replaced the old Arbitration Ordinance (Cap 341). Under the old Cap 341, there were two distinct arbitration regimes – one for domestic arbitrations (based largely on UK arbitration legislation) and another for international arbitrations (based on the UNCITRAL Model Law). Under Cap 609, that distinction is basically abolished and there is a single regime based on the Model Law.

As a result of consultation, particularly with stakeholders in the construction industry, who wanted to keep some of the features of the old domestic regime, a Schedule 2 was included in Cap 609 which retains some of the provisions of the old domestic regime and which parties (in both domestic and international arbitrations) can opt into or (which in some circumstances) will automatically apply, unless the parties opt out. 

Section 100 of Cap 609 provides that the Schedule 2 provisions will automatically apply (unless the parties expressly opt out) to an arbitration agreement which provides that the arbitration under the agreement is a “domestic arbitration” and the agreement is entered into: 

• before the commencement of Cap 609 i.e. before 1 June 2011; or
• within 6 years after commencement of Cap 609 i.e. from 1 June 2011 to 31 May 2017.

For construction contracts, there is an additional provision in Cap 609, namely section 101, which provides that the opt-in provisions also apply to arbitration agreements (if any) under subcontracts, if the main construction contracts contain an arbitration agreement to which the opt-in provisions automatically apply. Section 101 only applies to local subcontractors and not to non-local ones, to avoid the opt-in provisions being imposed on unwary non-local subcontractors.    

The 6 years referred to in Section 100 of Cap 609 will expire on 31 May 2017, which means that parties entering into an arbitration agreement on or after 1 June 2017 who wish the provisions in Schedule 2 to apply must now expressly state in the arbitration agreement that they opt-in to those provisions.      

Schedule 2 includes very important provisions, including: 

• arbitration by a sole arbitrator in the absence of agreement (section 1);
• consolidation of arbitrations by the court (section 2);
• determination of a preliminary question of law by the court (section 3);
• the right to challenge an arbitral award on the grounds of serious irregularity (section 4);
• the right to appeal against an arbitral award on a question of law (section 5);
• application for leave to appeal against an arbitral award on a question of law (section 6); and
• supplementary provisions on challenge to or appeal against an arbitral award (section 7).

Given the importance of the provisions in Schedule 2, it is crucial that parties entering into an arbitration agreement on or after 1 June 2017 who want (any or all of) those provisions to apply to their arbitration EXPRESSLY STATE in their arbitration agreement that they are opting into those provisions, pursuant to section 99 of Cap 609. Section 99 provides that an arbitration agreement may expressly provide that any or all of the provisions in sections 1-7 of Schedule 2 are to apply to the arbitration.