Instalment Arrangements for Hong Kong Arbitration Costs: Negotiating Payment Plans with Arbitration Institutions

The Hong Kong International Arbitration Centre (HKIAC) published its 2024 Case Statistics in May 2025, revealing that the total sum in dispute for all administered cases reached HKD 106.4 billion, a single-year record. This figure reflects a sustained increase in both the value and complexity of arbitration in Hong Kong. For a commercial party facing a six-figure or seven-figure arbitration bill, the obligation to pay the institution’s administrative fees and the arbitral tribunal’s deposits in a single upfront sum can create acute cash-flow pressure. The HKIAC’s own Schedule of Fees, effective 1 January 2025, sets the Administrative Fee at a non-refundable portion of HKD 8,000 to HKD 388,000 depending on the amount in dispute, plus a Case Deposit that is typically set at a percentage of the estimated total costs. No published rule explicitly prohibits a phased payment arrangement, yet no standard template for instalment plans exists either. This gap leaves parties, particularly SMEs and respondents in high-value claims, uncertain about how to negotiate payment terms without risking the continuation of the arbitration. The legislation provides the framework — the Arbitration Ordinance (Cap. 609) — but it does not address payment mechanics. The practical solution lies in direct negotiation with the institution, supported by clear procedural strategy.

Why Instalment Plans Matter in 2025-2026

The Rising Cost of Institutional Arbitration

The HKIAC’s 2024 statistics show that the average amount in dispute for HKIAC-administered cases was HKD 372 million. At this scale, the Case Deposit alone — typically set at 50% of the estimated tribunal fees plus the full Administrative Fee — can exceed HKD 1 million. The institution calculates the Administrative Fee on a sliding scale: for a dispute of HKD 50 million, the fee is HKD 218,000; for HKD 500 million, it rises to HKD 388,000. These figures do not include the tribunal’s fees, which are agreed upon at the constitution of the arbitral tribunal and can range from HKD 5,000 to HKD 15,000 per hour per arbitrator. A three-member tribunal hearing a complex commercial case over two weeks may generate fees in excess of HKD 3 million.

The Cash-Flow Problem for Respondents

A respondent served with a Notice of Arbitration must file a Response within 30 days under HKIAC Rules (Article 5). The institution typically requests payment of the full Administrative Fee and a deposit toward the tribunal’s fees before proceeding with the appointment of arbitrators. For a company that did not budget for litigation, this demand can arrive at a time when cash reserves are already strained by the underlying dispute — a breach of contract, a shareholder deadlock, or a construction delay. The Arbitration Ordinance (Cap. 609, s. 59) empowers the tribunal to order interim measures, but it does not grant the tribunal power to waive or reschedule institution fees. The institution holds the administrative lever.

The Regulatory Silence

The HKIAC Rules (2024 Edition) do not contain a provision expressly permitting or prohibiting instalment payments. Article 41 states that the institution may fix the amount of deposits “in its discretion” and that “the parties shall pay the deposit in equal shares.” The word “deposit” in the rules implies a single payment, but the institution’s practice notes do not preclude a written request for phased payment. The Singapore International Arbitration Centre (SIAC) and the International Chamber of Commerce (ICC) similarly lack explicit instalment provisions. This silence creates a negotiation space, not a prohibition.

Step 1: Assess the Institution’s Fee Structure and Your Rights

Identify the Exact Amounts Due

The court procedure is not engaged here — the institution administers the process. The first step is to obtain a written fee estimate from the HKIAC Secretariat. The institution will provide a breakdown: the Administrative Fee (based on the sliding scale), the tribunal’s estimated fees (based on the agreed hourly rate and estimated hearing days), and any additional costs such as hearing room rental or transcription. The legislation provides that the HKIAC’s Schedule of Fees is published on its website and updated annually. For 2025, the Administrative Fee is capped at HKD 388,000 for disputes exceeding HKD 1 billion. You must confirm the exact figure in writing before negotiating.

Understand the Consequences of Non-Payment

The HKIAC Rules (Article 41.4) state that if the required deposit is not paid in full within 30 days of the request, the Secretary-General may suspend the proceedings. If payment remains outstanding after a further 15 days, the institution may terminate the proceedings. This is a binary outcome — no partial payment triggers a partial suspension. The institution treats the deposit as a single obligation. A party that cannot pay its share risks the entire arbitration being halted, which may prejudice its position in the underlying dispute.

Distinguish Between Administrative Fees and Tribunal Deposits

The Administrative Fee is non-refundable once paid (HKIAC Schedule of Fees, Note 2). The Case Deposit for tribunal fees is refundable in part if the arbitration concludes earlier than estimated or if the final costs are lower than the deposit. This distinction matters for instalment planning: a party may request to pay the Administrative Fee in full but spread the Case Deposit over two or three payments. The institution has more flexibility with deposits because they are held in a trust account and applied against actual fees as they accrue.

Step 2: Draft a Formal Instalment Request

Timing and Form of the Request

The request must be made in writing to the HKIAC Secretariat before the payment deadline. The institution’s practice is to send a Payment Request Letter with a 30-day deadline. You should respond within 14 days to allow time for negotiation. The letter should be addressed to the Case Manager assigned to the arbitration, copied to the Secretary-General. The tone should be professional and factual — do not frame the request as a refusal to pay. State the total amount due, propose a payment schedule (e.g., 50% in 30 days, 25% in 60 days, 25% in 90 days), and explain the reason (e.g., “the respondent’s cash reserves are currently tied up in the subject matter of the dispute”).

What to Include in the Proposal

The proposal must contain three elements: (1) the total amount you propose to pay, (2) the specific dates or intervals for each payment, and (3) a commitment to pay the full amount by a final date that does not exceed the estimated duration of the arbitration. The institution will not accept a schedule that extends beyond the first procedural hearing, because the tribunal needs the deposit to confirm its appointment. A realistic proposal would be: “50% within 30 days, 25% within 60 days, and the remaining 25% within 90 days, with the full amount paid before the case management conference.”

The Institution’s Likely Response

The HKIAC does not have a published policy on instalment requests, but anecdotal reports from practitioners indicate that the Secretariat will consider requests on a case-by-case basis. The institution’s primary concern is ensuring that the deposit is fully paid before the tribunal incurs significant fees. If the other party agrees to the instalment plan, the institution is more likely to approve it. If the other party objects, the institution may insist on full payment from the objecting party and then seek reimbursement from the other party later. The legislation provides no appeal mechanism against the institution’s decision on payment terms.

Step 3: Negotiate with the Other Party

The Role of Consent

The HKIAC’s standard practice is to require both parties to pay their respective shares of the deposit in equal amounts. If one party proposes an instalment plan, the other party must either consent or pay the shortfall. Article 41.3 of the HKIAC Rules provides that if one party fails to pay its share, the other party may pay the entire deposit to keep the arbitration alive. This creates a strategic lever: a respondent who cannot pay may ask the claimant to pay the full deposit and then seek reimbursement through a costs award. The tribunal has power under section 74 of the Arbitration Ordinance (Cap. 609) to allocate costs, including the cost of deposits paid by one party on behalf of another.

The Costs Risk

A party that pays the other side’s share of the deposit takes a financial risk. If the paying party loses the arbitration, the tribunal may order the losing party to reimburse the deposit as part of the costs award, but enforcement of that award is a separate process. The legislation provides that a costs award is enforceable as a judgment of the Court of First Instance (Cap. 609, s. 74(6)). The paying party should obtain a written undertaking from the non-paying party to reimburse the deposit within 30 days of the final award, or alternatively, seek a consent order from the tribunal confirming that the deposit will be treated as a costs advance.

The Settlement Opportunity

An instalment negotiation can open a broader settlement dialogue. The HKIAC’s 2024 statistics show that 23% of administered cases settled before the final hearing. A party that cannot pay the deposit may have a stronger incentive to explore mediation or direct settlement. The HKIAC’s Mediation Rules (2024 Edition) allow for concurrent mediation and arbitration. A party can request a stay of the arbitration for 30 days to pursue mediation, during which the deposit deadline may be extended. The institution has discretion to grant such extensions under Article 41.5.

Step 4: Alternative Funding Structures

Third-Party Funding

The Arbitration Ordinance (Cap. 609, Part 11A) expressly permits third-party funding of arbitration in Hong Kong, subject to certain conditions. A funded party must disclose the funding arrangement to the tribunal and the other parties (section 98U). A third-party funder may pay the arbitration deposit on behalf of the funded party. The funder typically charges a percentage of the award or a multiple of the funded amount. For a party facing a large deposit, third-party funding can convert an upfront cost into a contingent liability. The HKIAC’s 2024 statistics do not track the prevalence of third-party funding, but industry surveys (e.g., the 2023 Burford Litigation Finance Survey) estimate that 30% of commercial arbitration users in Asia have considered third-party funding.

Security for Costs

A respondent who cannot pay the deposit may apply to the tribunal for an order that the claimant provide security for costs. The tribunal has power under section 59 of the Arbitration Ordinance (Cap. 609) to order interim measures, including security for costs. The tribunal will consider the claimant’s ability to pay a costs award if it loses. If the tribunal grants the order, the claimant must pay a sum into a joint account as security. This sum can be used to cover the respondent’s share of the deposit if the respondent defaults. The procedure is not a direct instalment plan, but it achieves the same result — the respondent avoids an upfront payment.

Ad Hoc Arbitration as a Cost-Saving Alternative

If the institutional fees are prohibitive, the parties may agree to convert the arbitration from institutional to ad hoc. The HKIAC Rules (Article 44) permit the parties to agree in writing to modify the rules. If both parties consent, they can agree to remove the HKIAC’s administration and proceed under the UNCITRAL Arbitration Rules with the HKIAC acting only as appointing authority. This reduces the Administrative Fee to a fixed appointment fee (HKD 8,000 as of 2025) and eliminates the Case Deposit requirement. The tribunal’s fees are then paid directly by the parties under a separate fee agreement. This option requires mutual consent and is unlikely to be granted if the other party objects.

Actionable Takeaways

1. Request a written fee breakdown from the HKIAC Secretariat before the payment deadline — the institution will provide a detailed estimate of Administrative Fees and tribunal deposits upon request.
2. Submit a formal instalment proposal within 14 days of receiving the Payment Request Letter, and include a specific schedule with dates and amounts that guarantees full payment before the case management conference.
3. Seek the other party’s consent to the instalment plan; if consent is refused, offer to pay the other party’s share of the deposit and seek reimbursement through a costs award under section 74 of the Arbitration Ordinance (Cap. 609).
4. Consider third-party funding as a structured alternative to an instalment plan — the Arbitration Ordinance (Cap. 609, Part 11A) expressly permits this, and disclosure to the tribunal is mandatory.
5. If institutional fees remain unmanageable, propose conversion to ad hoc arbitration under the UNCITRAL Rules with the HKIAC as appointing authority only — this eliminates the Case Deposit and reduces the Administrative Fee to HKD 8,000.

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This does not constitute legal advice. Consult a solicitor for your specific case.