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Covid-19 Hong Kong: Online Scheme - Details and Rules Released: small and medium-sized construction disputes

  • Market Insight 24 July 2020 24 July 2020
  • Asia Pacific

  • Projects & Construction

Covid-19 Hong Kong: Online Scheme - Details and Rules Released: small and medium-sized construction disputes

In an earlier article "Covid-19 Hong Kong: Online Scheme - Way forward for small and medium-sized construction disputes?" we covered the Hong Kong Department of Justice ("DOJ")'s 13th April 2020 announcement of an Online Dispute Resolution Scheme to resolve small and medium-sized COVID-19 related disputes ("Scheme").  At the time of the announcement, there were still further details that remained to be published, including the time frames and mechanisms for the appointment of third party neutrals or arbitrators in the absence of parties' agreement.

On 29th June 2020 the DOJ announced that the Scheme had been launched[i]. The Hong Kong based eBRAM International Online Dispute Resolution Centre (eBRAM)[ii] has been appointed as the provider of the Online Dispute Resolution ("ODR") and related services (e-negotiation, e-mediation, and e-arbitration services)("Platform")  under the Scheme, and will operate the Platform independently.

The "eBRAM Rules for the Covid-19 ODR Scheme" ("Rules") have also been published[iii] which shed light on how the disputes will be administered and governed on the Platform and show just how quickly the fast-track Scheme is intended to operate.

In summary, a dispute will be eligible:

  1. if the dispute arises out of or in relation to COVID-19 directly or indirectly;
  2. in cases where the claim amount is HK$500,000 or less; and
  3. in cases where either one of the parties to the dispute is a Hong Kong resident , Hong Kong company or sole proprietor or partnership registered in Hong Kong,

in which case, the parties to such a dispute wishing for it to be resolved pursuant to the Scheme will be required to enter into an online agreement through the Platform, and all communications must be conducted online and through the Platform.

The process is in 4 principal stages:

  1. the commencement of proceedings, submission of a claim and response (and counterclaim and response (if any));
  2. the negotiation stage;
  3. the mediation stage; and
  4. the arbitration and award stage

which are all dealt with in brief detail below. The language can be in Cantonese, Mandarin, or English and eBRAM determines the language(s) taking into account the parties' preferences.

Making a Claim

The Claimant and Respondent shall enter into the ODR Agreement which the Claimant shall upload to eBRAM together with the grounds of claim (and all documents and evidence as far as is possible) as well as proposed solutions to resolve the dispute. The parties shall pay the online registration fees (currently HK$200 per party) and proceedings are commenced when the parties have been notified by eBRAM that the ODR Agreement is available on the Platform.

It should be noted that either party may be represented by another person/s and their details and authority should be lodged in eBRAM and communicated to the other party.

Response by the Respondent (within 3 calendar days)

Within 3 calendar days, the Respondent must upload its response and grounds (and all documents and evidence as far as is possible). If the Respondent has a counterclaim, notice must be given together with the response together with the grounds of the counterclaim (and all documents and evidence as far as is possible). In the circumstances of a counterclaim, the Claimant has 3 calendar days thereafter to respond to the counterclaim with its response and supporting documents/evidence.

Negotiations (maximum 3 calendar days)

If there is no counterclaim, negotiations via the Platform commence upon uploading of the response and notification to the Claimant. Otherwise negotiations commence upon notification of the Claimant's response to the counterclaim to the Respondent.

If the parties haven't settled their dispute by negotiation within 3 calendar days (or within another time period they may agree – subject to there being a one-time extension only and for a maximum of 3 days), the mediation stage of the proceedings shall commence immediately.

Mediation Stage (maximum 3 calendar days)

Upon commencement of mediation, eBRAM generates a list of five names for the parties to choose from to agree a mediator. If the parties don't agree on a choice within 3 calendar days, eBRAM shall appoint the mediator. Following appointment, the mediator will communicate with the parties through the platform to attempt to reach settlement. If reached, the parties execute the settlement agreement electronically. An original copy of the agreement certified by eBRAM can be requested if needed.

If the parties haven't settled their dispute by mediation within 3 calendar days of being notified of the appointment of the mediator, the arbitration stage of the proceedings shall commence immediately, subject to the dispute being arbitrable. If it is not, the parties may elect to terminate the proceedings. If the arbitrability of the claim is unclear, the proceedings continue to arbitration, with the arbitrator who is appointed to conduct the arbitration proceedings determining the issue, during the arbitration stage.

Arbitration and Award Stage (Submissions within 1 month of arbitrator's appointment, award within 7 calendar days of last submissions)

Similarly, and as with mediation, upon commencement of the final arbitration stage, eBRAM generates a list of five names for the parties to choose from to agree an arbitrator. If the parties don't agree on a choice within 3 calendar days, eBRAM shall appoint an arbitrator. Following appointment, the arbitrator shall notify the parties of a deadline (no later than 1 month from the arbitrator's appointment) by which all communications and submissions should be made.  The arbitrator shall resolve matters of jurisdiction and arbitrability (if any) and shall resolve the dispute on the information provided by the parties and render a final and binding award (taking into account the terms of the contract, relevant facts, circumstances and/or the usage of trade or industrial practice, and applying the rules of law designated by the parties (or in the absence of any rules, those which the arbitrator determines are appropriate)). The award (with brief reasons upon which the award is based) shall be rendered within 7 calendar days from the filing of the last submissions. If the parties have not determined the seat of arbitration it shall be Hong Kong, unless eBRAM otherwise decides it should not be Hong Kong based on the circumstances of the case. The award is final and binding on the parties and there is no avenue of appeal.

Award Correction (request within 5 calendar days of award, correction within 2 calendar days of request)

Any clerical/typographical/calculation error/omission etc. must be requested to be corrected within 5 calendar days, and if justified, the arbitrator will correct within 2 calendar days of receipt of request. The arbitrator, may, within 5 calendar days, make such corrections on his or her own initiative.

Settlement

Settlement at any stage, if reached, can be uploaded to the Platform and will have the effect of terminating the proceedings, and if necessary the Neutral (defined in the Rules as the mediator or arbitrator appointed to conduct the Proceedings at the relevant time) can draw up the settlement agreement for enforcement.

The Rules allow the Neutral to decide on his/her jurisdiction and require the Neutral to be impartial and independent. The rules also give the Neutral the power to conduct the proceedings as he/she sees fit (and extend any time frames), but with the overriding principle to avoid delay, unnecessary expense and ensure the process is fair. Within this ambit of operation, the Neutral is also empowered to request additional documents/evidence/exhibits within a time frame that he/she may determine.

Costs

The costs (which are limited to the arbitration stage of the proceedings and being reasonable costs of expert advice/assistance required by the Neutral, and reasonable legal and other costs incurred by the parties during the arbitration) are, in principle, borne by the losing party, with the proviso that the Neutral has the power to apportion costs when considering the circumstances of the case.

Summary

The parties, if they agree to opt into the Scheme (irrespective of their contractual provisions), will engage with a system that strongly encourages negotiation and settlement (particularly by the imposition of strict deadlines and very limited opportunity for the parties to delay the process, which is in stark contrast to existing dispute resolution methods, such as litigation or arbitration), but provides the certainty of a binding arbitral award should the case go that far. Each of the tiers is an increasing level of seriousness of dispute resolution which the DOJ hopes will focus the parties' minds on settlement at an early stage.

The DOJ states its intention of the Scheme as being "… to offer a speedy and cost effective means to resolve disputes among parties, avoiding disputes and differences from being entrenched, thereby helping to build and reinforce a harmonious society. It may help relieve the court's caseload in civil claims and have the benefit of job creation and job advancement for the legal and dispute resolution sector. Moreover, the Scheme will utilise an ODR platform thereby strengthening Hong Kong's lawtech capability. "

This is a welcome initiative, which is in line with the DOJ's objectives "to enhance and promote Hong Kong’s status as an international legal hub for deal-making and dispute resolution" and "help consolidate Hong Kong's position as an international business and financial centre", and provides a fast-track system for settlement disputes online for amounts less than HK$500,000 arising out of COVID-19.

If you wish to discuss this article or other construction related issues, please contact Chris Short or Vivian Wong.

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