Facing cybersecurity head on: the arbitration community develops guidance on how to tackle this difficult issue

There is an emerging consensus among the arbitration community that parties, arbitral institutions and tribunals in individual arbitration matters must give greater attention to cybersecurity in order to minimise the risks of a successful attack.

International arbitrations can involve parties that are prominent targets or potential targets of cyberattacks.  As part of the arbitral process, those parties may share material which is not in the public domain and access to which may have the potential to influence individuals, employees, share prices, corporate strategies and government policy.  Similarly, the outcome of an arbitration can have significant repercussions in the financial markets, meaning that obtaining draft forms of arbitral awards could be very lucrative for cybercriminals. As such, the arbitral process is a prime target for cyberattacks, particularly if hackers can identify a weak link in the chain of custody.

Over the last year several tools have become available to assist stakeholders in the arbitral process address issues of cybersecurity, including the draft Cybersecurity Protocol produced by a working group from International Council for Commercial Arbitration (ICCA), the New York City Bar Association (NYC Bar) and the International Institute for Conflict Prevention and Resolution (CPR) (see here), and the International Bar Association’s (IBA) Cybersecurity Guidelines (see here).

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ISDA releases Arbitration Guide

On 9 September 2013, the International Swaps and Derivatives Association (ISDA) published its long-awaited Arbitration Guide. The Guide comprises an explanatory memorandum which provides an overview of arbitration, together with model arbitration clauses (and guidance notes) for use with the ISDA 2002 Master Agreement and ISDA 1992 Master Agreement (Multicurrency – Cross Border). The model clauses are designed to be included in the Schedule to new Master Agreements, but are readily adaptable for use when amending an existing Maser Agreement to provide for arbitration.

The model clauses provide for a number of different combinations of arbitral rules/institution and seat of arbitration, including the ICC Rules (London, New York or Paris seat), LCIA Rules (London seat), AAA-ICDR Rules (New York seat), HKIAC Rules (Hong Kong seat), SIAC Rules (Singapore seat), Swiss Chambers’ Arbitration Institution Rules (Zurich or Geneva seat), and PRIME Finance Rules (London, New York or The Hague seat). In each case, the governing law of the Master Agreement will be either English or New York law.

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Hong Kong passes amendments to Arbitration Ordinance

On 10 July, the Legislative Council of Hong Kong passed the Arbitration (Amendment) Bill 2013 (click here for our earlier post on the Bill).

The Arbitration (Amendment) Ordinance 2013 introduces a number of changes to the 2011 Arbitration Ordinance (Cap. 609), aimed at ensuring Hong Kong remains at the forefront of modern arbitral practice.

The amendments to the Arbitration Ordinance include:

  • New provisions allowing Hong Kong courts to enforce relief granted by an emergency arbitrator, whether made in or outside Hong Kong.
  • Implementation of the Arrangement Concerning Reciprocal Recognition and Enforcement of Arbitral Awards between the Hong Kong SAR and the Macao SAR, signed in January 2013.
  • Amendments to the provisions for taxation of arbitration costs by the Hong Kong courts.
  • Inclusion of five new New York Convention signatories in the relevant Schedule

The amendments took effect on 19 July 2013, with the exception of the Hong Kong/Macao mutual enforcement arrangements, which will come into force at a later date, to be notified in the Hong Kong Government Gazette.

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The 2013 HKIAC Administered Arbitration Rules Released

The Hong Kong International Arbitration Centre (“HKIAC“) has published the 2013 revisions to the HKIAC Administered Arbitration Rules (“2013 HKIAC Rules“). Justin D’Agostino and Briana Young of Herbert Smith Freehills in Hong Kong have been on the HKIAC Rules Revision Committee and involved in the revision process from beginning to end. The new 2013 HKIAC Rules will come into force on 1 November 2013.

After a major review of its Administered Arbitration Rules, the HKIAC has introduced significant changes aimed at creating greater efficiency and bringing the HKIAC to the forefront of modern arbitral practice. Many of the changes clarify, but do not modify, the substance of HKIAC administered arbitration. Some of the key changes in the 2013 HKIAC Rules include:

  • Improved provision for joinder by expanding the Tribunal’s ability to join additional parties to an arbitration upon the request of one of the existing parties and also allowing third parties to submit requests to join an arbitration. In both cases the additional parties must be bound by a valid arbitration agreement under the 2013 HKIAC Rules giving rise to the arbitration. The HKIAC also obtains a prima facie power to join an additional party if a request for joinder is submitted prior to the Tribunal’s constitution. Under the current Administered Arbitration Rules, there is a limited joinder provision, where the Tribunal could join an additional party to an arbitration only with the consent of both parties.
  • New provisions to allow the HKIAC, in certain circumstances, to consolidate two or more arbitrations at a party’s request or to allow claims arising out of or in relation to multiple contracts to be raised in a single proceeding. Under the current Administered Arbitration Rules, there is no express provision on consolidation.
  • New provisions on emergency arbitrators.
  • An arbitrator’s agreed hourly rate shall not exceed a fee cap (HKD 6,500 per hour) established in the Rules, subject to a contrary agreement by the parties.

By building upon the success of the current Administered Arbitration Rules, the 2013 revisions ensure that they continue to be modern and reflective of best practice in international arbitration, in keeping with HKIAC’s status as one of the world’s pre-eminent arbitration institutions. Along with the continued support of parties and professionals, the 2013 HKIAC Rules should also ensure that arbitration in Hong Kong continues to thrive.

A copy of the 2013 HKIAC Rules are now available on the HKIAC’s website (click here for a copy).

Herbert Smith Freehills is also hosting a breakfast briefing in Hong Kong on the 2013 HKIAC Rules on Thursday, 3rd October 2013 (click here for an invitation).

Justin D'Agostino
Justin D'Agostino
Partner, head of Greater China international arbitration
+852 2101 4010
Briana Young
Briana Young
Registered Foreign Lawyer, Professional Support Lawyer
+852 2101 4214