Court Upholds Enforcement of ICC Award, Reinforcing Its Pro-Enforcement Attitude

In U v A (unrep., HCCT 34/2016, 23 February 2017 per Mimmie Chan J), the Court of First Instance dismissed an application to set aside an order granting leave to enforce an ICC arbitral award, in the process dismissing arguments that (i) the Respondents (“A”) in the arbitration had been unable to prevent their case; (ii) the award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration; and (iii) it would be contrary to public policy to enforce the award.

The case, in which the authors acted for the Claimant (“U”) in the arbitration and before the Court, illustrates the much vaunted pro-enforcement approach of the Hong Kong courts. In line with this approach, the exhaustive grounds set out in s. 86 of the Arbitration Ordinance (Cap. 609) by which the Court may refuse enforcement are to be narrowly construed, enforcement should be “almost a matter of administrative procedure” and the Court should be “as mechanistic as possible” (see KB v S, reported previously in Hong Kong Lawyer, November 2015).

Background

The parties had entered into an agreement (the “PAC”) for inter alia U’s purchase of majority shareholdings in a PRC joint venture company (the “JV”), the transfer of certain assets from the 2nd Respondent to the JV, and effecting changes to the JV’s board composition. Disputes arose in respect of the latter two issues. U commenced ICC arbitral proceedings (seated in Hong Kong) as a result and, having prevailed, U was awarded specific performance, damages and costs.

In September 2016, U obtained an Order granting it leave to enforce the award; in October, A applied to set aside the Order on the grounds stated above.

Decision and Key Take-Aways

Mimmie Chan J emphasised inter alia as follows in respect of the grounds relied upon by A:

The conduct complained of must be sufficiently serious, such that due process is undermined or the structural integrity of the award is in doubt, before a court could find that a party was unable to present his case. So long as the parties were able to make representations in respect of any decision that might affect the arbitration, whether procedurally or substantively, they will have been afforded due process and given a fair hearing. On such basis, Her Ladyship rejected A’s contention that they were unable to present their case because the arbitrator had refused to admit into evidence a PRC court judgment which was purportedly relevant to the validity of the PAC. She held that the arbitrator was entitled to impose timetables for the filing of evidence in the proper exercise of case management and procedural discretion, and in any event, A had been given fair and full opportunity to address the arbitrator on the validity of the PAC.

The phrase “a difference not contemplated by or not falling within the terms of the submission to arbitration” should only catch issues clearly unrelated to or not reasonably required for the determination of the arbitration. Her Ladyship therefore rejected A’s contention that the issue of whether U is entitled to appoint the chairman of the JV is not within the scope of the arbitration. She held that, on the whole, A had been given fair and ample notice of U’s claim that it is entitled to appoint the chairman, and full opportunity to prepare and answer such claim.

The phrase “contrary to public policy” means contrary to the fundamental conceptions of morality and justice of Hong Kong, and must not be a catchall provision to be used whenever convenient. Her Ladyship rejected A’s contention that it is contrary to public policy to enforce the award in Hong Kong as the PAC is purportedly invalid for lack of registration and approval by PRC authorities. She held that A was essentially arguing that the arbitrator had made an error of law in holding that the PAC is valid, but it is not for the Court to review the correctness of the arbitrator’s decision.

The decision demonstrates once again the Hong Kong courts’ reluctance, absent compelling grounds, to set aside arbitral awards. Parties should give careful thought before bringing such applications, particularly given the courts’ practice of imposing indemnity costs against an unsuccessful applicant.

Jurisdictions: 

Peter Yuen & Associates (in association with Fangda Partners), Legal Manager

Matthew Townsend has represented clients in arbitration proceedings in a number of jurisdictions under a variety of different arbitration rules, principally in the energy, infrastructure, construction and technology sectors. He also has experience appearing as advocate in arbitration hearings.

Associate, Peter Yuen & Associates in Association with Fangda Partners