HKIAC Arbitration Costs

The Hong Kong International Arbitration Centre (“HKIAC”) is a leading arbitration institution for resolving international disputes. For parties contemplating HKIAC arbitration, a clear grasp of the likely costs, payment schedule, and prospects of cost recovery is essential. Understanding these elements enables businesses and individuals to budget effectively and minimise the risk of unforeseen financial exposure. As is common in arbitration, legal fees usually constitute the largest portion of overall expenses.

An HKIAC arbitration typically includes the following major heads of cost: (1) HKIAC fees; (2) legal fees; (3) expert fees; (4)  hearing costs; and (5) other costs. In most cases, the prevailing party may recover these costs from the losing party.

The typical amounts of each of these cost categories, as well as the timing of their payment, are summarised in the table below:

This note will now examine in depth each of the costs associated with an HKIAC arbitration, particularly one administered under the 2024 HKIAC Administered Arbitration Rules (currently in force) (“HKIAC Rules”) and the 2024 Schedule of Fees, which includes Schedule 1 (Registration and Administrative Fees), Schedule 2 (Arbitral Tribunal’s Fees, Expenses, Terms and Conditions – Based on Hourly Rates), Schedule 3 (Arbitral Tribunal’s Fees, Expenses, Terms and Conditions – Based on Sum in Dispute), and Schedule 4 (Emergency Arbitration Procedures).

Heads of Costs in HKIAC Arbitration

1. HKIAC Fees

According to HKIAC’s updated report on the average costs and duration of an arbitration administered by the HKIAC under the HKIAC Rules, reflecting data from 282 cases in which a final award was issued between 1 November 2013 and 30 April 2023, the median HKIAC fees across these arbitrations amounted to USD 75,458.

This figure concerns the HKIAC registration and administrative fees, which are determined according to the amount in dispute, as well as the tribunal’s fees, which may be calculated either on an hourly basis (Schedule 2) or by reference to an ad valorem fee scale (Schedule 3).

NOTE: This figure excludes the parties’ own legal and expert costs, which typically make up the largest share of total expenditure, and other expenses (such as hearing costs).

The fees charged by the HKIAC are broken down in further detail below:

A. HKIAC Registration Fee

The first cost of an HKIAC arbitration is a non-refundable registration fee of HKD 8,000, which shall be paid by the claimant with its Notice of Arbitration when commencing HKIAC arbitration (Article 4.4).

According to Article 1.2 of Schedule 1, if the registration fee is not paid, the HKIAC will not proceed with the arbitration.

B. HKIAC Administrative Charges

In addition to the one-time registration fee mentioned above, the HKIAC also imposes administrative fees determined in accordance with the amount in dispute, as listed in the following table (Schedule 1, Article 2.1):

The administrative fees can be calculated using the Fee Calculator under the 2024 HKIAC Rules.

The amount in dispute is determined by adding the amounts of both the claimant’s claims and the respondent’s counterclaims, as well as any set-off defences or cross-claims, unless the arbitral tribunal concludes that the set-off defences or cross-claims will not require significant additional work (Schedule 1, Article 2.2). However, any interest claimed by the parties will not be taken into account for the calculation of the amount in dispute (Schedule 1, Article 2.3). Additionally, if a party makes claims in the alternative, only the principal claims will be counted for the amount in dispute (Schedule 1, Article 2.4).

If the amount in dispute is not quantified, the HKIAC will fix the amount of the administrative fees, taking into account the circumstances of the case (Schedule 1, Article 2.6).

The HKIAC operates using Hong Kong Dollars, and any amounts in currencies other than HKD must be converted into HKD at the rate of exchange published by HSBC Bank on the date the Notice of Arbitration is submitted or at the time any new claim, set-off defence, cross-claim, or amendment to a claim or defence is filed (Schedule 1, Article 2.7).

While the registration fee is paid only by the claimant, both the claimant and the respondent are jointly and severally liable for the HKIAC’s administrative fees (Schedule 1, Article 2.8).

C. Arbitral Tribunal’s Fees and Expenses

As already mentioned, under the HKIAC Rules, tribunal fees may be calculated on the basis of either hourly rates under Schedule 2 of the HKIAC Rules or according to an ad valorem fee schedule (based on the amount in dispute) under Schedule 3 of the HKIAC Rules. According to Article 10.1(b) of the HKIAC Rules, the parties shall inform the HKIAC of the chosen method within 30 days of the date on which the Respondent receives the Notice of Arbitration or, if the parties fail to agree on the applicable method, the arbitral tribunal’s fees and expenses shall be determined by default in accordance with the hourly rates in Schedule 2.

While value-based schedules like those in Schedule 3 offer greater predictability, they may be less closely aligned with the actual complexity and workload of a given case, as with an hourly model like Schedule 2. The HKIAC thus gives the parties the opportunity to choose which model best suits them and their dispute, unlike other arbitral institutions, which simply employ one approach or the other.

If the parties choose to use Schedule 2 to determine the arbitrators’ fees, according to Article 10.2 of the HKIAC Rules, the hourly rate of remuneration for the arbitrators must be agreed upon:

• The rate for each co-arbitrator must be agreed between the co-arbitrator and the designating party (Article 10.2(a)).
• The rate for a sole arbitrator or a presiding arbitrator designated by the parties or the co-arbitrators must be agreed between the arbitrator and the parties (Article 10.2(b)).

Should the parties and the arbitrators fail to agree on the rate, the HKIAC will set it (Article 10.2).

If the parties choose to use Schedule 3 to determine the arbitrators’ fees, the HKIAC will fix them in accordance with the following table, which shows the amount paid to one arbitrator (Schedule 3, Article 6.1):

If the parties have agreed to have their dispute decided by more than one arbitrator, they should keep in mind that this will significantly increase the tribunal’s fees, but the maximum fees may not normally exceed three times the fees of a sole arbitrator (Article 10.3(b)).

According to Article 10.3(a) of the HKIAC Rules, the HKIAC must also bear in mind that the fees of the tribunal must be reasonable in amount, taking into account the amount in dispute, the complexity of the subject matter, the time spent by the arbitral tribunal and the arbitral secretary, and any other circumstance, such as settlement.

D. Tribunal Secretary’s Fees and Expenses

Tribunals sometimes appoint a tribunal secretary to help them with the practical administration of the arbitration case (for instance, sending correspondence on behalf of the tribunal, keeping track of deadlines, and the procedural history of the arbitration) (Article 13.4).

In HKIAC arbitrations, the fees of the tribunal secretary also depend on the fee schedule selected by the parties.

Under Schedule 2, the fees and expenses of the tribunal secretary are to be determined by the arbitral tribunal and charged separately from the arbitral tribunal’s fees, but the hourly rate paid to the secretary may not exceed HKD 2,500/hour (Schedule 2, Article 6).

Under Schedule 3, the fees of the tribunal secretary shall form part of the arbitral tribunal’s fees, as determined by the amount in dispute.

2. Legal Fees

In addition to the above institutional costs, parties must also budget for the legal fees incurred for the work of counsel and their teams, which typically represent the most significant portion of total costs, as a well-fought arbitration case can take over 1,000 hours of work by a party’s legal team.

Aceris Law, valuing transparency and predictability in costs, has made available online its own Arbitration Legal Fee Calculator, based on the amount in dispute. Aceris Law offers reasonable, capped legal fees for legal representation in international arbitrations, ensuring that clients benefit from high-quality advocacy with clear and upfront cost expectations.

3. Expert Fees

Expert evidence is frequently used in international arbitration. Experts are appointed by parties to give their independent opinion on issues beyond the arbitral tribunal’s expertise, such as quantum, delays, and foreign law, often in the form of expert reports and expert testimony at the final hearing, thereby assisting the arbitral tribunal in its decision-making process.

Therefore, if such evidence is necessary, parties choose the expert they wish to appoint and pay for his/her fees and expenses. However, the fees of a party-appointed expert cannot be linked to the outcome of the case in order to preserve the impartiality and independence of the expert.

4. Hearing Costs

Hearings are an integral part of most arbitrations, and parties must also plan for hearing-related expenses, though this represents only a small portion of the overall arbitration costs.

The factors that play a role in determining the hearing costs include:

• Whether the hearing is hosted virtually or in person.
• If it is in person, what venue will be reserved and during what period of the year.
• The length of the hearing.
• The number of people attending (tribunal, party representatives, legal teams, experts, witnesses, etc.).
• The cost of a court reporter (which may include travel and lodging).
• The cost of lunch and coffee breaks for the participants.
• Whether translation services will be required.
• The travel and hotel costs for the party, its legal team, and the arbitral tribunal.
• Other costs, such as printing fees or fees for electronic data-hosting services.

Further, if an arbitration case is bifurcated, the parties may have to fund two hearings – one on the preliminary issues and, if the arbitration proceeds, one final hearing on the merits of the dispute.

Typically, hearing costs are split equally between the parties, but they can then be recovered in the award.

5. Other Costs to Consider

Parties must also consider that other minor, discrete costs may arise throughout the arbitration process.

For example, arbitration often involves a document production phase, in which a party may request that the opposing party produce documents relevant to the case. In some cases, this may require a party to wade through a great number of documents to produce the specific category requested, which can take time and lead to the generation of additional expenses.

As another example, in some instances, tribunals may request that submissions be made both electronically and in hard-copy format or via flash drive. In these cases, parties must also pay for printing and/or the necessary equipment, as well as courier services, in order to fulfil the tribunal’s request.

Additionally, if documentary evidence referred to in the arbitration is in a language other than that of the arbitration or if witnesses speak different languages, parties should plan to spend additional funds on translations.

Thus, parties must always be ready for additional unforeseen costs that may arise throughout the arbitration process.

Timing of Payments in HKIAC Arbitration 

The HKIAC does not require full payment of the HKIAC fees upfront. Instead, parties pay several deposits as the case progresses.

With regard to the timing of these payments, as soon as practicable after the Respondent has received the Notice of Arbitration, the HKIAC will request the parties each to deposit an equal amount as an advance for the fees of the arbitral tribunal, the reasonable travel and other expenses of the arbitral tribunal, the reasonable costs of expert advice and other assistance required by the arbitral tribunal and the HKIAC’s administrative fees (Article 41.1). Throughout the course of the arbitration, the HKIAC might then also request that the parties make supplementary deposits (Article 41.3).

If a party fails to pay the required deposits within 30 days from the request, the HKIAC will then ask the other party to pay the non-paying party’s share. If, on the one hand, the payment is still not made, the tribunal, or where the tribunal has not yet been constituted, the HKIAC, may order the suspension or termination of the arbitration (Article 41.4).

On the other hand, if a party does pay the deposits on behalf of another party, the paying party may request that the tribunal make an award for reimbursement of that amount (Article 41.5).

If the amounts deposited end up being higher than the fees paid, any unexpended balance will be returned to the parties according to the shares in which it was paid by them (Article 41.6).

With regard to legal and expert costs, these are typically paid on a schedule agreed between the party and its counsel or experts. This often involves the payment of an initial retainer upon engagement of the lawyers or experts, followed by monthly or periodic invoicing.

Hearing costs are generally paid at the time of the hearing or earlier, when the venue, hotels, etc., are being reserved.

Allocation of the Arbitration Costs by the Arbitral Tribunal

Pursuant to the HKIAC Rules, the tribunal has the power to determine the proportions in which the parties shall bear the costs of the arbitration, which include (Article 34.1):

1. the fees of the arbitral tribunal;
2. the reasonable travel and other expenses incurred by the arbitral tribunal;
3. the reasonable costs of expert advice and of other assistance required by the arbitral tribunal, including fees and expenses of any tribunal secretary;
4. the reasonable costs of legal representation and other assistance, including fees and expenses of any witnesses and experts, if such costs were claimed during the arbitration;
5. the costs of the Emergency Relief proceedings (if any); and
6. the Registration Fee and Administrative Fees payable to HKIAC and any expenses payable to HKIAC.

The arbitral tribunal has a great deal of discretion when awarding the costs, as Article 34.3 of the HKIAC Rules provides that the arbitral tribunal may apportion all or part of the costs of the arbitration between the parties, so long as it determines that the apportionment is reasonable.

When conducting this reasonability analysis, Article 34.4 of the HKIAC Rules provides arbitrators with more guidance on the types of factors that they should consider. These include:

1. the relative success of the parties;
2. the scale and complexity of the dispute;
3. the conduct of the parties in relation to the proceedings;
4. any third-party funding arrangement;
5. any outcome-related fee structure agreement; and/or
6. any adverse environmental impact arising out of the parties’ conduct in the arbitration.

Conclusion

Understanding the cost structure of HKIAC arbitration is essential for parties to make informed decisions and budget effectively. While the institution’s flexibility, particularly the choice between hourly and ad valorem tribunal fees, offers valuable adaptability, careful financial planning remains crucial. By anticipating the likely registration, administrative, tribunal, legal, expert, and hearing costs, parties can avoid unexpected expenses and ensure smoother proceedings. Ultimately, as costs are generally recoverable from the losing party, maintaining a well-documented and strategic approach to costs throughout the arbitration can have a direct impact on the outcome.

Parties must keep in mind that even after obtaining an HKIAC award, parties might also have to budget for potential enforcement proceedings, if the losing party fails to comply.

If you are considering starting an HKIAC arbitration or have had an HKIAC arbitration brought against you and have further questions about the costs, please feel free to contact Aceris Law for more information.