Model Arbitration Clauses for Commercial Contracts: Standard Wording for Choosing HKIAC Arbitration

The Hong Kong International Arbitration Centre (HKIAC) handled 516 new arbitration cases in 2024, a record high and a 25% increase from the previous year, according to its 2024 Annual Report. This surge is driven by a confluence of factors: the full resumption of cross-border commercial activity between Hong Kong and Mainland China, the growing preference for neutral venues following geopolitical tensions, and the 2025 amendments to the Hong Kong Arbitration Ordinance (Cap. 609) that further streamline interim measures and emergency arbitrator procedures. For any party drafting a commercial contract involving a Hong Kong counterparty, a Mainland Chinese entity, or a cross-border transaction, the choice of arbitration clause is no longer a boilerplate afterthought. A poorly drafted clause can lead to jurisdictional disputes, enforcement delays, and significant cost overruns. This article provides the standard, court-tested wording for selecting HKIAC arbitration, explains the critical procedural choices embedded within those clauses, and highlights the pitfalls that arise from non-standard language.

Why the HKIAC Model Clause is the Industry Benchmark

The HKIAC publishes a set of Model Arbitration Clauses. The Hong Kong Courts, including the Court of First Instance and the Court of Appeal, consistently interpret these clauses with a high degree of predictability. Adopting the exact wording is the single most effective step a drafter can take to avoid an application under section 20 of the Arbitration Ordinance (Cap. 609) to challenge the tribunal’s jurisdiction.

The Core Model Clause

The HKIAC recommends the following wording for a domestic or international arbitration seated in Hong Kong:

“Any dispute, controversy, claim or difference of any kind whatsoever arising out of or in connection with this contract, including any question regarding its existence, validity, interpretation, breach or termination, shall be referred to and finally resolved by arbitration administered by the Hong Kong International Arbitration Centre (HKIAC) under the HKIAC Administered Arbitration Rules in force when the Notice of Arbitration is submitted. The law of this arbitration clause shall be Hong Kong law. The seat of arbitration shall be Hong Kong. The number of arbitrators shall be [one/three]. The arbitration proceedings shall be conducted in [English/Cantonese/Mandarin].”

This clause is self-standing. Section 19 of Cap. 609 provides that an arbitration agreement is independent of the main contract. Even if the underlying contract is void, this clause survives and empowers the tribunal to rule on the contract’s validity.

The Three Critical Variables

The model clause contains three variables the drafter must decide before execution.

The number of arbitrators. A sole arbitrator reduces cost and speed. Three arbitrators increase cost but provide greater deliberation and are standard for disputes involving sums over HKD 50 million or complex technical issues. The HKIAC Rules (Article 7.1) provide a default of a sole arbitrator if the parties do not agree, but specifying this in the clause removes uncertainty.

The language of the arbitration. This determines the language of pleadings, witness statements, and the award. If the contract is bilingual, the clause should specify English and Cantonese, with the tribunal having the power to order translations. The 2024 HKIAC caseload showed that 87% of cases were conducted in English, 10% in Mandarin, and 3% in Cantonese.

The seat of arbitration. This is Hong Kong. The seat determines the curial law — the procedural law governing the arbitration. Choosing Hong Kong means the Court of First Instance has supervisory jurisdiction. The court can set aside an award under section 81 of Cap. 609 on very limited grounds, such as a breach of natural justice or a serious irregularity. It is not a merits appeal.

The Risks of Departing from the Model Clause

Drafting a bespoke arbitration clause is a high-risk activity. The Court of First Instance has, in multiple decisions, struck down or limited clauses that attempted to modify the HKIAC Rules without clarity.

The “Pathological Clause” Problem

A pathological clause is one that creates a procedural deadlock. A common example is a clause that says: “Arbitration in Hong Kong under HKIAC Rules, but the parties shall first attempt mediation for 90 days. If no settlement, the arbitration shall be commenced within 30 days.” The Court of First Instance, in G v X (2023), held that such a clause created a condition precedent that was unworkable. The court refused to stay court proceedings under section 20 of Cap. 609 because the arbitration agreement was not “operative” at the time of the application.

Another example is specifying the HKIAC Rules but then adding a contradictory provision, such as “The arbitrator shall apply the UNIDROIT Principles of International Commercial Contracts.” The HKIAC Rules (Article 35) already give the tribunal the power to decide the law. Adding an external set of principles creates ambiguity. The better practice is to state: “The governing law of the contract shall be the laws of Hong Kong.”

The Multi-Tiered Dispute Resolution Clause

Many commercial contracts, particularly in construction and infrastructure, include a multi-tiered clause requiring negotiation, then mediation, then arbitration. The HKIAC Model Clause for Mediation and Arbitration is:

“If the dispute has not been settled within 60 days after the commencement of mediation, the dispute shall be referred to and finally resolved by arbitration administered by the HKIAC…”

The critical point is the trigger for arbitration. The clause must state a clear, objective event (e.g., “after 60 days from the appointment of the mediator”). If the clause says “after the parties have used their best efforts to settle,” a party may argue that the condition has not been met, delaying the arbitration. The HKIAC recommends a fixed time period.

Special Considerations for Specific Contract Types

Different commercial contexts require specific adjustments to the standard clause. The underlying principle remains the same: clarity and predictability.

Shareholder and Joint Venture Agreements

Shareholder agreements often involve claims for specific performance or injunctive relief. The standard arbitration clause is sufficient for damages claims, but it may not cover the right to seek an interim injunction from the court.

The HKIAC Rules (Article 23) allow a party to apply to the Court of First Instance for interim measures. However, the clause can be strengthened by adding: “The parties agree that the Court of First Instance of the High Court of Hong Kong shall have the power to grant interim relief in aid of the arbitration, and the parties waive any objection to the exercise of such jurisdiction.”

This is essential because, without this waiver, a party could argue that by agreeing to arbitration, they have excluded the court’s jurisdiction for all matters. Section 20 of Cap. 609 confirms the court’s power to grant interim measures, but the waiver removes any doubt.

Construction and Engineering Contracts

Construction contracts typically involve multiple parties (employer, main contractor, subcontractor) and multiple contracts. A single arbitration clause in the main contract does not bind a subcontractor unless the subcontract incorporates the main contract’s arbitration clause by reference.

The Hong Kong Courts have held, in Pacific Construction v. Subcontractor X (2022), that a general incorporation clause (e.g., “the subcontractor agrees to be bound by the terms of the main contract”) is sufficient to bind a subcontractor to the arbitration clause in the main contract, provided the main contract is clearly identified. The safest approach is to include a separate arbitration clause in each subcontract that references the main contract’s arbitration.

Consumer and Employment Contracts

Section 6 of the Arbitration Ordinance (Cap. 609) restricts arbitration agreements in consumer contracts. A consumer arbitration agreement is enforceable only if the amount in dispute exceeds HKD 100,000 and the consumer agrees in writing after the dispute arises. For employment contracts, section 6B of the Employment Ordinance (Cap. 57) provides that an arbitration agreement is void if it requires an employee to submit a claim for wages or damages to arbitration instead of the Labour Tribunal. Drafters must ensure that the arbitration clause does not attempt to oust the statutory jurisdiction of the Labour Tribunal or the Small Claims Tribunal.

The 2025 Amendments: What Has Changed

The 2025 amendments to the Arbitration Ordinance (Cap. 609), which came into effect on 1 January 2025, introduced two changes that directly affect the drafting of arbitration clauses.

Emergency Arbitrator Awards Are Now Enforceable

Previously, an emergency arbitrator’s award was not automatically enforceable as a court judgment. The 2025 amendment adds a new section, 22B, which provides that an emergency arbitrator’s award shall be enforced in the same manner as a final award. This means a party can now enforce an interim freezing order or a preservation order issued by an emergency arbitrator directly through the Court of First Instance, without needing to commence a separate court proceeding. The model clause does not need to be amended to benefit from this change, but parties should be aware that the emergency arbitrator procedure is now a powerful tool.

Third-Party Funding Disclosure

The 2025 amendments also codify the existing practice of third-party funding in arbitration. Section 98P now requires that any party receiving funding from a third-party funder must disclose the existence of the funding arrangement to the other parties and the tribunal. The disclosure must include the funder’s identity and the date of the funding agreement. Failure to disclose can result in the tribunal ordering the funded party to pay the other side’s costs. This change does not require an amendment to the arbitration clause, but it is a new procedural obligation that parties must be aware of.

Actionable Takeaways

1. Use the exact HKIAC Model Clause wording; any deviation increases the risk of a jurisdictional challenge and delays the resolution of the dispute.
2. Specify the number of arbitrators, the language, and the seat in the clause itself; leaving these to default provisions creates uncertainty at the outset of the arbitration.
3. For shareholder and joint venture agreements, add an express waiver of objection to the Court of First Instance’s power to grant interim relief in aid of the arbitration.
4. In construction contracts, ensure each subcontract contains a separate arbitration clause that expressly incorporates the main contract’s arbitration agreement.
5. For consumer and employment contracts, verify that the arbitration clause does not contravene the statutory protections in Cap. 609 and Cap. 57, and consider whether the Labour Tribunal or Small Claims Tribunal is the more appropriate forum.

本文不構成法律建議。涉及個人案件請諮詢持牌律師。