Developments in China

As from late 2015, major international arbitration institutions in Asia located outside of China – HKIAC (Hong Kong), ICC (with its office in Hong Kong) and SIAC (Singapore) – have opened representative offices in the Shanghai Free Trade Zone. None of these offices provide case management services in mainland China as they primarily focus their activities on promoting their respective arbitration rules and international arbitration in the region.

On 30 December 2016, China’s Supreme Peoples’ Court issued an Opinion on the Provision of Judicial Support for the Development of Pilot Free Trade Zones (see Fa Far 2016 No. 34). In this opinion, the Supreme Court seems to have broadened the scope of foreign-related disputes by permitting wholly foreign-owned enterprises (WFOEs) incorporated in the Free Trade Zone to refer commercial disputes to foreign-seated arbitration (i.e. arbitration seated outside China).

Third party funding bill in Hong Kong

On 14 June 2017, Hong Kong’s Legislative Council passed an amendment to its Arbitration and Mediation legislation relating to third party funding (‘Third Party Funding Bill’) which abolishes the common law doctrines of champerty and maintenance in relation to third party funding of arbitration found in the previous Arbitration Ordinance (Cap. 609, L.N. 38 of 2011) and Mediation Ordinance (Cap. 620, L.N. 167 of 2012). With this amendment, third party funders are allowed to fund parties in arbitration proceedings in Hong Kong. The Third Party Funding Bill however requires a funded party to provide the tribunal and the other party/parties with certain information, including the existence of a funding agreement and the funder’s identity. This requirement will enable arbitrators to check any potential conflicts of interest with the funder, and to enhance integrity when third party funding is used on the basis of the information provided. The amendments are expected to go into effect later this year, after granting sufficient time for the elaboration of a code of practice, which will apply to third party funders.

Pending appeal on disclosures in Japan

In a recent case, a Japan-seated arbitration award has been set aside on the grounds that the presiding arbitrator breached his disclosure obligation (see Osaka High Court, 28 June 2016, Hanrei Times No. 1431, p. 108). In this case, the presiding arbitrator failed to disclose during the proceedings that his colleague in a different office was representing an affiliate of the claimants in an ongoing matter unrelated to the arbitration. The tribunal rendered an award in favor of the claimants. The respondent sought to set aside the award in the Osaka District Court.

The Osaka District Court dismissed the application (see Osaka District Court, 17 March 2015, Hanrei Jihou No. 2270, p. 74). The Court held that, even if the non-disclosed fact arguably ought to have been disclosed by the presiding arbitrator, such breach was de minimis and the application should be dismissed on discretionary grounds.

On appeal, however, the Osaka High Court overturned the Osaka District Court's decision and ruled that, from the perspective of the applicants, the non-disclosed fact was critical information in deciding whether or not to challenge the presiding arbitrator. Moreover, the presiding arbitrator was subject to a duty to investigate and retrieve information that was readily accessible, such as this non-disclosed fact, which could have been identified easily through a conflict check. According to the Osaka High Court, even if this had no direct effect on the outcome of the arbitration, given that this breach was a grave procedural violation, the award should be set aside under Article 44(1)(vi) of Japan's Arbitration Act (Act No. 138 of 1 August 2003).

The case has been appealed to the Supreme Court.

Philippine Supreme Court confirms extension of the arbitration clause to subsequent contracts

The Philippine Supreme Court, in Bases Conversion Development Authority v. DMCI Project Developers (G.R. No. 173137, 11 January 2016) held that an arbitration clause in a contract may be extended to subsequent contracts executed for the same purpose. The Supreme Court found that the relevant contracts, i.e. the original contract and the subsequent amended contracts, had been executed in order to achieve a single purpose and should thus be treated as a single contract, part of the whole agreement. Under such circumstance, even if an arbitration clause is not included in the amended contract, parties to the amended contract are bound by the arbitration clause provided for in the original contract.

Changes in legislation and rules in the Republic of Korea

First, amendments to the Korean Arbitration Act entered into force on 30 November 2016 (Act No. 14176, 29 May 2016). The new Act revises the previous Act which had been in force since 1999 and adopts the 2006 UNCITRAL Model Law more extensively. Among other things, the revision includes (i) alleviating the ‘writing’ requirement for arbitration agreements, by allowing oral agreements as long as they are recorded, (ii) allowing enforcement of interim measures issued in Korea-seated arbitrations, and (iii) simplifying the recognition and enforcement proceedings of arbitral awards.

Second, the Korean Commercial Arbitration Board amended its international arbitration rules (see KCAB 2016 International Arbitration Rules), and introduced a Code of Ethics for Arbitrators on 1 June 2016.

New rules for arbitration institution in Taiwan

The Chinese Arbitration Association (CAA), a leading international arbitration institution in Taiwan established in 1955, promulgated the Chinese Arbitration Association, International (CAAI) Arbitration Rules 2017, which took effect on 1 July 2017 (available at http://www.arbitration.org.tw/rule.php). Some of the key features include, among others, Mandarin Chinese or English as default languages of arbitration, in the absence of parties’ agreement (Art. 7 ‘Notice for Arbitration’, and Art. 20 ‘Language of Arbitration’), Hong Kong as the default seat of CAAI administered arbitrations (Art. 19), and a continuation of the arbitration by the challenged arbitrators pending CAAI’s decision on the challenge, unless CAAI orders a suspension of the arbitration (Art. 16(4)), hence minimizing the effect of dilatory or frivolous challenges.