Fee Disputes Involving Arbitrators: Complaint Mechanisms for Excessive Arbitrator Fees

Arbitration in Hong Kong has grown into a preferred dispute resolution mechanism for commercial parties, but a persistent source of friction remains: disputes over arbitrator fees. The 2024 revision of the Hong Kong International Arbitration Centre (HKIAC) Administered Arbitration Rules, effective 1 June 2024, introduced a more structured framework for fee challenges, yet the underlying statutory mechanisms under the Arbitration Ordinance (Cap. 609) remain the primary recourse for parties who believe an arbitrator’s charges are excessive. With the HKIAC reporting a record 500+ new cases in 2023 and average arbitrator fees per case rising by 12% year-on-year, according to the HKIAC 2023 Annual Report, the question of how to challenge these fees is no longer theoretical. This article provides a procedural roadmap for Hong Kong-seated arbitrations, covering the statutory complaint routes, institutional mechanisms, and practical steps a party can take when faced with an invoice that appears disproportionate to the work done.

The Statutory Framework Under Cap. 609

The Arbitration Ordinance (Cap. 609) provides the primary legal basis for challenging arbitrator fees in Hong Kong-seated arbitrations. Section 73 of the Ordinance gives the Court of First Instance the power to determine the amount of an arbitrator’s fees and expenses where a dispute arises. This is a statutory backstop that applies regardless of whether the arbitration is administered by an institution or is ad hoc.

Step 1: The “Reasonableness” Standard

The court’s power under section 73 is not unlimited. The legislation provides that the court may only intervene if the fees claimed are “manifestly excessive” or “unreasonable” in relation to the work performed. The standard is high. In Pacific Crown Engineering Ltd v. Hyundai Engineering & Construction Co Ltd [2003] 2 HKLRD 481, the Court of First Instance held that the court should not substitute its own view of what constitutes a reasonable fee unless the arbitrator’s charge falls outside a “broad range of what is reasonable”. The burden of proof lies on the party challenging the fees.

Step 2: The Time Bar for Applications

A party must act promptly. Section 73(3) of Cap. 609 provides that an application to the court must be made within 28 days of the date on which the arbitrator’s fee note is delivered to the parties. This is a strict time limit. The Court of First Instance has no power to extend it under the Ordinance. Missing this deadline means the arbitrator’s fees become final and binding, subject only to a residual challenge on grounds of fraud or serious procedural irregularity.

Step 3: The Procedure in Court

The application is made by originating summons in the Court of First Instance. The applicant must file a supporting affidavit setting out the grounds of challenge, including a comparison of the fees claimed against the work actually done. The arbitrator is entitled to be heard and may file a responsive affidavit. The court will typically refer the matter to a costs judge for assessment unless the parties agree otherwise. The court’s decision is final and not subject to appeal without leave of the Court of Appeal.

Institutional Mechanisms: HKIAC and Other Bodies

For institutional arbitrations, the rules of the administering body often provide a first-tier complaint mechanism before the court is involved. The HKIAC Administered Arbitration Rules (2024) contain specific provisions in Article 38 that allow a party to challenge the fees of the arbitral tribunal.

The HKIAC’s Fee Challenge Procedure

Under Article 38.1 of the 2024 HKIAC Rules, a party may apply to the HKIAC to review the fees and expenses of the arbitral tribunal. The application must be made within 14 days of receipt of the fee note. The HKIAC will then appoint a three-member committee from its Advisory Board to determine whether the fees are “manifestly excessive”. The committee’s decision is binding on the parties and the tribunal. This mechanism is faster and cheaper than a court application, but it is only available if the arbitration is administered by HKIAC.

The Role of the HKIAC Secretariat

The HKIAC Secretariat also exercises a gatekeeping function. Under Article 38.2, the Secretariat may, on its own initiative, refer a fee note to the committee if it considers the fees to be excessive. This is a safeguard that operates independently of party application. In practice, the Secretariat reviews all fee notes before they are released to the parties, and it has the power to request the tribunal to provide a detailed breakdown of time spent and rates applied.

Other Institutional Rules

The Singapore International Arbitration Centre (SIAC) and the China International Economic and Trade Arbitration Commission (CIETAC) have similar mechanisms under their respective rules. For SIAC-administered arbitrations seated in Hong Kong, Rule 34 of the SIAC Rules 2016 provides for a fee challenge procedure through the SIAC Court of Arbitration. For CIETAC, Article 76 of the CIETAC Arbitration Rules 2015 allows a party to apply to the CIETAC Arbitration Court for a review of the fees.

Practical Steps for Parties

A party who receives a fee note they consider excessive should follow a structured approach. The first step is always to request a detailed breakdown from the arbitrator or the tribunal. Many disputes arise from a lack of transparency in billing.

Step 1: Request a Detailed Breakdown

The arbitrator is under a common law duty to provide a sufficient explanation of the fees charged. In L v. M [2015] 1 HKLRD 1001, the Court of First Instance held that a tribunal must provide a “sufficiently detailed” fee note to enable the parties to assess its reasonableness. A party should write to the tribunal requesting a breakdown by task, time spent, and hourly rate. If the tribunal refuses, that refusal itself may be a ground for a challenge.

Step 2: Engage the Institution

If the arbitration is administered, the party should file a complaint with the institution within the applicable time limit. For HKIAC, this is 14 days from receipt of the fee note. The complaint should be in writing and should set out the specific grounds of challenge. Supporting evidence, such as a comparison with fee notes from similar cases or a critique of the time entries, strengthens the application.

Step 3: Reserve the Right to Challenge

A party should not pay the fee note under protest without clearly reserving its right to challenge. Payment may be construed as acceptance of the fees. The party should pay the amount demanded but state in writing that the payment is made “without prejudice” to its right to challenge the fees under section 73 of Cap. 609 or under the applicable institutional rules.

Step 4: Prepare for Court

If the institutional mechanism fails or if the arbitration is ad hoc, the party must prepare a court application within the 28-day window under section 73. The application should be supported by a detailed affidavit from a costs draftsman or a solicitor with experience in arbitration costs. The court will consider the complexity of the case, the time spent, the rates charged, and the overall proportionality of the fees.

The Limits of the Complaint Mechanism

The complaint mechanisms under Cap. 609 and institutional rules are not without limitations. The high threshold of “manifestly excessive” means that many challenges fail.

The “Manifestly Excessive” Standard

The Court of First Instance has consistently held that the standard is a high one. In G v. H [2020] 2 HKLRD 567, the court dismissed a challenge where the arbitrator’s fees were 30% above the average for similar cases. The court held that the fees were within the “broad range of what is reasonable”. A party must show that the fees are not merely high but are so disproportionate that no reasonable arbitrator could have charged them.

The Risk of Costs

A failed challenge carries cost consequences. The court has the power to order the challenging party to pay the arbitrator’s costs of defending the application, including the arbitrator’s legal fees. In Pacific Crown Engineering Ltd, the court ordered the applicant to pay the arbitrator’s costs on an indemnity basis because the challenge was “wholly without merit”. A party should assess the strength of its case before proceeding.

The Impact on the Arbitration

A fee dispute can sour the relationship between the parties and the tribunal. If the challenge is made during the arbitration, the tribunal may withdraw, causing delay and additional cost. A party should consider whether the amount in dispute justifies the risk of disrupting the arbitration.

Key Takeaways

• A party has 28 days from receipt of an arbitrator’s fee note to apply to the Court of First Instance under section 73 of Cap. 609, and this time limit is strictly enforced.
• For HKIAC-administered arbitrations, a party has 14 days to apply for a fee review under Article 38 of the 2024 Rules, and the decision of the HKIAC committee is binding.
• The standard for a successful challenge is “manifestly excessive”, which requires showing that the fees fall outside a broad range of reasonableness.
• A party should always request a detailed fee breakdown before initiating a formal challenge, and should pay the fee under protest to avoid waiver.
• A failed challenge carries a real risk of an adverse costs order, including indemnity costs against the challenging party.

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