The second half of 2013 and the first half of 2014 have been an exciting time of change for the arbitration scene in Hong Kong.
On 1 November 2013, the long-awaited amendments to the Hong Kong International Arbitration Centre (HKIAC) Administered Arbitration Rules came into force. The end result – a truly innovative set of Rules – reflects best practice and the most recent trends in international commercial arbitration, including the incorporation of a series of provisions to deal with multi-party arbitrations, as well as the introduction of emergency arbitration procedures.
Earlier, on 19 July 2013, amendments to the Hong Kong Arbitration Ordinance came into force to deal with the enforcement in Hong Kong of emergency interim relief – whether granted in or outside Hong Kong. This was followed by further amendments, which came into force on 16 December 2013, dealing specifically with the enforcement of Macanese arbitration awards in Hong Kong, in order to implement the Arrangement Concerning Reciprocal Recognition and Enforcement of Arbitral Awards between the Hong Kong Special Administrative Region and the Macao Special Administrative Region which had been signed on 7 January 2013 (the Hong Kong–Macao Arrangement).
The extent of the legislative amendments and the relative speed with which they were finalised by the Department of Justice, introduced into the Legislative Council (LegCo) in Hong Kong and subsequently brought into force are testimony to the Hong Kong government’s firm commitment to the continued development of international commercial arbitration in Hong Kong. Indeed, the government’s increasing focus on international arbitration in Hong Kong was emphasised by the Secretary for Justice, Rimsky Yuen, at a seminar in Vietnam on 20 February 2014, at which he commented:
Capitalising on our robust legal system and legal infrastructure, it is the steadfast policy of the Hong Kong Government, and one of the key priorities of my department (the Department of Justice), to promote Hong Kong as a centre for international legal and dispute resolution services in the Asia Pacific region.
One of our focuses is naturally international arbitration, a mode of dispute resolution which enjoys great popularity amongst the international business community and is gaining more and more momentum in the Asia Pacific region. The reason for this trend is totally understandable. Businessmen normally do not prefer to litigate, still less to litigate in a foreign place and subject to a foreign legal system with which they are not familiar.
At the beginning of 2014, Teresa Cheng SC took over the chair of the HKIAC. Key changes to the HKIAC’s organisational structure followed, described by the HKIAC as being ‘motivated by the principles of independence and expertise and the needs of the users’. The changes were also in response to the amendments introduced by the 2013 Rules and the increased role to be played by the HKIAC in arbitrations administered under those Rules. An Executive Committee1 has been established to serve as the principal body directing the activities of the HKIAC, together with three standing committees: the Proceedings Committee, the Appointments Committee, and the Finance and Administration Committee. The three standing committees are already dealing with matters concerning the business operations of the HKIAC as well as the more specific procedural functions entrusted to the HKIAC under the 2013 Rules and in accordance with its role as appointing authority under the Arbitration Ordinance.
This article discusses the 2013 amendments to the HKIAC’s Rules and the Arbitration Ordinance, and highlights recent case authorities that demonstrate the pro-arbitration approach of the Hong Kong judiciary.
The 2013 Rules – a snapshot
The 2013 Rules – which will be supplemented by practice notes made available on the HKIAC’s website – implement a number of key changes in the following areas:
Scope of the 2013 Rules (article 1)
The 2013 Rules apply where an arbitration agreement provides for arbitration ‘administered by the HKIAC’ or words to ‘similar effect’ (article 1.1). This represents a change from the 2008 Rules, which contained a more restrictive reference to words of the ‘same effect’. The change was introduced to address the situation where arbitration agreements, particularly those drafted in Chinese, indicated that the parties appeared to intend the HKIAC (Administered Arbitration) Rules to apply, but did not expressly say so.
Article 1.3, which provides that the 2013 Rules came into force on 1 November 2013 and apply, absent contrary agreement, to all arbitrations commenced on or after that date, is subject to article 1.4. Article 1.4 expressly carves out the consolidation (article 28), single arbitration under multiple contracts (article 29) and emergency relief (article 23.1 and schedule 4) provisions of article 1.3, and provides, absent express contrary agreement of the parties, that those provisions shall not apply to arbitrations arising out of arbitration agreements concluded before 1 November 2013. This approach acknowledges that those provisions will be new to existing users of the 2008 HKIAC Rules and, therefore, will not apply automatically to arbitrations arising from arbitration agreements entered into before the 2013 Rules come into effect, even if the Notice of Arbitration is submitted on or after 1 November 2013. Nonetheless, the parties could agree to opt-in to those provisions in agreements made prior to 1 November 2013.
HKIAC’s power to determine whether an arbitration should proceed (article 19.4)
The HKIAC’s power under article 19.4 to determine whether an arbitration should proceed is an entirely new provision, introduced as a result of the extensive public consultation process that took place prior to the finalisation of the 2013 Rules.
Where, before the tribunal is constituted, there is a dispute between the parties over the existence, validity or scope of the arbitration agreement, or the competence of the HKIAC to administer the arbitration, the HKIAC has the power to decide whether and to what extent the arbitration should proceed. The test is whether the HKIAC is prima facie satisfied that an arbitration agreement under the 2013 Rules exists. If the HKIAC is so satisfied, the arbitration will proceed, and any disputes over the subsequently appointed tribunal’s jurisdiction will be decided by the tribunal itself (pursuant to article 19.1).
Arbitrator fees and appointments (articles 9 and 10, schedules 2 and 3)
Under the 2013 Rules, the HKIAC has maintained two different systems for calculating the fees of the tribunal: by reference to hourly rates (schedule 2); or pursuant to a schedule of fees calculated within a certain range by reference to the amount in dispute (schedule 3).
Pursuant to articles 9 and 10 of the 2013 Rules, the designation of an arbitrator shall be confirmed by the HKIAC on the terms of either schedule 2 or schedule 3, and subject to the corresponding fee system: hourly rates as prescribed by schedule 2 or in accordance with the fee schedule set out in paragraph 6.1 of schedule 3.
Where the parties are unable to agree on the method of determining the fees and expenses of the tribunal – and inform the HKIAC of this within 30 days from the respondent’s receipt of the Notice of Arbitration – the default position is that the tribunal’s fees and expenses will be calculated by reference to hourly rates and schedule 2. So far, this tracks the 2008 Rules.
However, two important changes have been introduced by the 2013 amendments.
The first change is the introduction of an hourly fee cap for arbitrators, currently set at HK$6,500.2 Higher rates can only be charged by express written agreement of all the parties, or if the HKIAC so determines in ‘exceptional circumstances’.3
The second change is the introduction of standard arbitrator terms of appointment, which are set out in schedule 2 and schedule 3. The same terms of appointment apply to both schedules, but have been set out in each schedule to aid users and to enable each schedule and fee system to stand alone. As with the fees, the standard terms can only be varied with the agreement of all the parties or by the HKIAC, where the HKIAC considers any changes to be appropriate (article 9.2).
The uniformity created by these two features is aimed at facilitating negotiations around the appointment of arbitrators, and the streamlining of this process and the commencement of the substantive arbitration proceedings. Feedback received to date is encouraging and demonstrates that users have embraced the certainty that prescribed standards and fee caps have introduced.
Multi-party arbitrations (articles 27, 28 and 29)
Some of the most innovative changes implemented by the 2013 Rules relate to provisions dealing with multi-party situations, being: article 27 (Joinder of Additional Parties), article 28 (Consolidation of Arbitrations) and article 29 (Single Arbitration under Multiple Contracts).
Provisions dealing with multi-party arbitrations are becoming more relevant as a larger number of claims raised are subsets of the same dispute, and involve multiple parties and multiple contracts.
The specific changes are discussed in more detail below.
The joinder provisions have been strengthened and expanded. In summary:
- the HKIAC has been given an express power to join an additional party to the arbitration proceedings where the request for joinder is received before the tribunal is constituted (article 27.8); and
- the tribunal has the power to allow an additional party to be joined to the arbitration provided that such additional party is bound by an arbitration agreement under the 2013 Rules giving rise to the arbitration. Article 27.1 confirms that this includes any arbitration under article 28 or article 29.
Article 28 is entirely new. Article 28 gives the HKIAC the power to consolidate two or more arbitrations at a party’s request and after consulting with all parties. The factors which the HKIAC must take into consideration in deciding whether to consolidate are similar to the joinder criteria, with an additional ground provided by article 28.1(c), namely where ‘the claims are made under more than one arbitration agreement, a common question of law or of fact arises in both or all of the arbitrations, the rights to relief claimed are in respect of, or arise out of, the same transaction or series of transactions, and the HKIAC finds the arbitration agreements to be compatible’.
The timing of the application will be relevant – see article 28.3. Thus, a request for consolidation will have more chance of success when the constitution of the tribunals of the different arbitrations being considered for consolidation is at an early stage.
Single arbitration under multiple contracts
Article 29 is also entirely new,4 and highly relevant in the modern world of international commercial arbitration. It provides that claims arising out of or in connection with more than one contract may be made in a single arbitration where the conditions set out in article 29.1(a) to (d) are met. Again, these conditions are similar to the criteria for consolidation, except that article 29.1(a) expressly provides that all the parties to the arbitration must be bound by each arbitration agreement giving rise to the arbitration.
The 2013 Rules include two important waivers within the multi-party provisions.
The first relates to the appointment of arbitrators and the express waiver by the parties of their right to appoint an arbitrator. This waiver is particularly important and has been included to address the inherent conflict between the effective management of multi-party disputes and the otherwise equal right of parties in arbitration proceedings to appoint arbitrators, brought into sharp focus by the Dutco case.5In the context of joinder, article 27.11 provides, therefore, that where an additional party is joined to the arbitration before the tribunal is confirmed, all parties to the arbitration shall be deemed to have waived their right to designate an arbitrator, and the HKIAC may revoke the appointment of any arbitrators already designated or confirmed and proceed to appoint a new tribunal. Similarly, in the context of consolidation, Article 28.6 provides that where the HKIAC decides to consolidate two or more arbitrations, the parties thereto shall be deemed to have waived their right to designate an arbitrator, and the HKIAC may revoke the appointment of any arbitrators already designated or confirmed and proceed to appoint a new tribunal in respect of the consolidated proceedings.
The second waiver is equally important and relates to the enforcement of arbitral awards that arise out of multiparty proceedings. In all cases of joinder (article 27.13), consolidation (article 28.8) or single arbitrations under multiple contracts (article 29.2), the parties expressly waive6 any objection to the validity or enforcement of any award made by the tribunal in the arbitration on the basis of joinder, consolidation or the commencement of a single arbitration, as the case may be.
Expansion of expedited procedure (article 41)
Consistent with the trend of enabling more arbitration proceedings to be fast-tracked when it would be appropriate to do so, the 2013 Rules have also expanded the application of the expedited procedure. In addition to increasing the monetary threshold for the application of the expedited procedure from US$250,000 (article 38.1 of the 2008 HKIAC Rules) to HK$25 million (approximately US$3.2 million as at May 2014), the expedited procedure will also apply where the parties agree and in cases of exceptional urgency (to be determined by the HKIAC after considering the views of the parties).
The HKIAC’s expedited arbitration proceedings have the following features:
- the appointment of a sole arbitrator (unless the arbitration agreement provides for a tribunal of three arbitrators, in which case the HKIAC will invite the parties to agree to refer the case to a sole arbitrator) (article 41.2(a) and (b));
- the ability of the HKIAC to shorten both the time limits provided for in the Rules, as well as any time limits which it has set (article 41.2(c));
- the presumption that the tribunal shall decide the dispute on the basis of documentary evidence only and the tribunal will only have oral hearings if it considers it appropriate to do so (article 41.2(e)); and
- the award shall be rendered within six months from the date when the HKIAC transmitted the file to the tribunal. The HKIAC retains the power to extend this deadline, but will only do so in exceptional circumstances (article 41.2(f)).
Pursuant to article 41.3, however, and even where the monetary claims fall under the HK$25 million threshold, the expedited procedure will not apply to any proceedings consolidated under article 28 or to any arbitration commenced under article 29 of the 2013 HKIAC Rules, unless the parties expressly agree otherwise.
Confidentiality (article 42)
The confidentiality provisions have also been clarified and now expressly reflect section 18 of the Arbitration Ordinance.
Article 42.2 confirms that the obligations of confidentiality also apply to the HKIAC, the tribunal (and any tribunal secretary), any emergency arbitrator appointed, and any expert or fact witness.
Article 42.5 retains the HKIAC’s power to publish awards.7 Specifically, an award will only be published (whether in full form, summary form or by way of an extract) where a request has been made to the HKIAC, the parties’ names have been deleted from the award and no party to the award has objected to such publication within the time limit set by the HKIAC. This is an important function and there was overwhelming support for its retention in the 2013 Rules, but the parties similarly retain the power of veto should they wish to keep the award entirely confidential.
Interim measures (articles 23 and 24)
The tribunal’s power to order interim measures of protection is dealt with under article 23. This mirrors to a large extent sections 35, 36, 39, 40, 41 and 42 of the Arbitration Ordinance, which in turn implement articles 17, 17A, 17D, 17E, 17F and 17G of the UNCITRAL Model Law.
Article 23.3 of the 2013 Rules, however, expressly allows an interim measure to be given in the form of an order (as well as an award or other form). It also provides that the types of interim measure listed in article 23.3 (a) to (d) – for example measures to maintain or restore the status quo pending determination of the dispute – are given only by way of ‘example and without limitation’. This contrasts with article 17 of the UNCITRAL Model Law (which is given effect by section 35 of the Arbitration Ordinance), which contains an exhaustive list of interim measures of protection.
The tribunal’s power to award security for costs, which mirrors section 56(1)(a) of the Arbitration Ordinance, is contained in article 24 of the 2013 Rules, reflecting a request from market participants for this power to be included within a separate provision and thus identified clearly.
Emergency relief procedures (article 23.1 and schedule 4)
The 2013 Rules also allow a party to seek urgent interim or conservatory relief (referred to as ‘emergency relief’) from an ‘emergency arbitrator’ prior to the constitution of the tribunal. The introduction of emergency arbitrator procedures again reflects the most recent trends in international commercial arbitration, and offers ‘fast-track’ options to parties requiring urgent relief prior to the constitution of the tribunal. Similar procedures can be found in the ICC Rules, SCC Rules, Swiss Rules, the SIAC Rules and, most recently, the Japan Commercial Arbitration Association Rules, which came into force on 1 February 2014.
Paragraph 22 of schedule 4 emphasises that the emergency relief procedures are in no way intended to replace or exclude the role of the courts in providing interim protection in appropriate circumstances. Indeed, certain types of interim relief (for example, ex parte applications for freezing injunctions) are, for obvious reasons, likely to remain the domain of the national courts. Nonetheless, statistics from institutions8 that have implemented emergency relief provisions demonstrate that parties are increasingly taking advantage of the ability to invoke the assistance of an emergency arbitrator and this avenue of relief can in many circumstances (and for many varied reasons) be more attractive than seeking the same relief from the national courts.
The primary power of the parties to apply for such emergency relief is contained in article 23.1 and the substantive procedure is set out in schedule 4.
Some of the key features of the emergency relief procedure set out in schedule 4 are:
- the application for emergency relief can be filed concurrently with, or following, the filing of the Notice of Arbitration, but prior to the constitution of the tribunal (paragraph 1);
- the applicant must pay the application deposit stipulated by the HKIAC on its website, consisting of the HKIAC’s administrative expenses and the emergency arbitrator’s fees and expenses (paragraphs 1 and 6);
- the emergency arbitrator’s hourly rate is capped at the same rate applicable to the tribunal, although the HKIAC has the power to increase the emergency arbitrator’s fees and its own expenses taking into account the nature of the case and the work performed by the emergency arbitrator (paragraph 6);
- if the HKIAC determines that it should accept the application, it must seek to appoint an emergency arbitrator within two days after receipt of the application and the ‘Application Deposit’ (paragraph 5). For these purposes, the HKIAC has established a separate subset of more experienced arbitrators who have agreed, where appropriate, to act as emergency arbitrators for the HKIAC;9
- after appointment of the emergency arbitrator, the HKIAC must notify the parties and transmit the file to the emergency arbitrator (paragraph 7);
- the emergency arbitrator has complete discretion to conduct the emergency relief proceedings in any manner which he or she considers appropriate (paragraph 11);
- the emergency arbitrator may give emergency relief in the form of a decision, order or award (Emergency Decision), and such relief must be given within 15 days from when the HKIAC transmitted the file to the emergency arbitrator, subject to this period being extended by agreement of the parties or by the HKIAC in appropriate circumstances (paragraph 12);
- any Emergency Decision shall have the same effect as an interim measure granted pursuant to article 23 of the Rules (paragraph 16);
- a party can apply to the emergency arbitrator or the tribunal (once constituted) for a modification, suspension or termination of an Emergency Decision (paragraph 18);
- any Emergency Decision ceases to be binding if the emergency arbitrator or the tribunal so decides, upon the tribunal giving a final award (unless the tribunal expressly decides otherwise), upon the withdrawal of all claims or the termination of the arbitration, or if the tribunal is not constituted within 90 days from the date of the Emergency Decision (paragraph 19). Although this latter period can be extended by agreement of the parties, or the HKIAC in appropriate circumstances, the parties should keep a close watch on this time period to ensure that the Emergency Decision does not expire before the tribunal is constituted;
- the emergency arbitrator’s powers cease upon the constitution of the tribunal (paragraph 20), save that an Emergency Decision may be made even if the file has been transmitted to the tribunal (paragraph 13). Moreover, an emergency arbitrator cannot act as arbitrator on the tribunal, unless otherwise expressly agreed by all the parties to the arbitration (paragraph 21); and
- in all matters not provided for in schedule 4, the emergency arbitrator is to act in the spirit of the 2013 HKIAC Rules (paragraph 24). This provision mirrors article 13.7 and is important, not least because it grants wide powers to the emergency arbitrator to deal with situations not expressly contemplated by the Rules.
Amendments to the Hong Kong Arbitration Ordinance
Enforcement of emergency interim relief
In conjunction with the drafting of the emergency relief procedures, the HKIAC worked closely with the Hong Kong Department of Justice to draft complementary amendments to the Arbitration Ordinance to ensure that emergency relief granted by an emergency arbitrator (whether in or outside Hong Kong) would be enforceable in Hong Kong.
The Arbitration (Amendment) Bill 2013 was introduced into LegCo in April 2013 and passed in July 2013. The amendments introduced a new part 3A into the Arbitration Ordinance entitled ‘Enforcement of Emergency Relief’. Part 3A came into force on 19 July 2013.
Part 3A comprises two sections: section 22A (Interpretation) and section 22B (Enforcement of emergency relief granted by emergency arbitrator).
Under section 22A, an ‘emergency arbitrator’ is defined as an ‘emergency arbitrator appointed under the arbitration rules (including the arbitration rules of a permanent arbitral institution) agreed to or adopted by the parties to deal with the parties’ applications for emergency relief before an arbitral tribunal is constituted’.
Section 22B(1) then permits the enforcement of emergency relief granted by an emergency arbitrator both inside and outside Hong Kong. Enforcement is possible with leave of the court, in the same manner as an order or direction of the court that has the same effect.
Section 22B(2) adds a proviso to the effect that the court will only grant leave to enforce emergency relief granted outside Hong Kong if it is satisfied that the emergency relief is of a nature which could have been granted in Hong Kong. Section 22B(2) (a) – (f) sets out an exhaustive list of interim measures recognised under the Arbitration Ordinance, taken from sections 35, 40 and 56 of the Arbitration Ordinance This proviso was added simply as a matter of policy, and mirrors section 61 of the Arbitration Ordinance dealing with the enforcement of a tribunal’s orders or directions.
Hong Kong–Macao Arrangement
Amendments to the Arbitration Ordinance in 2013 also included the addition of a new Division 4 of Part 10 (Enforcement of Macao Awards) which came into force on 16 December 2013 in order to implement the Hong Kong–Macao Arrangement.
The Hong Kong–Macao Arrangement has been eagerly awaited and facilitates the enforcement of Macao arbitral awards in Hong Kong, and vice versa, on terms more or less the same as the similar Arrangement between Hong Kong and the Mainland, which in turn was premised on the New York Convention 1958.
The limited grounds to refuse enforcement of a Macao award are set in new section 98D of the Arbitration Ordinance and replicate10the grounds for refusing to enforce:
- Hong Kong and non-Convention awards (see section 86);
- Convention awards (see section 89); and
- Mainland awards (see section 95).
The pro-arbitration stance of the Hong Kong judiciary
Pacific China Holdings Ltd (in Liquidation) v Grand Pacific Holdings Ltd  HKEC 248
In the Hong Kong chapter of The Asia-Pacific Arbitration Review 2012, the author discussed the controversial first instance decision of Pacific China Holdings Ltd (in Liquidation) v Grand Pacific Holdings Ltd (2011) HKLRD 611, in which Saunders J11 set aside an ICC award under (as was then) article 3412 of the UNCITRAL Model Law. Grand Pacific Holdings Ltd appealed to the Court of Appeal. At the time of writing the 2013 edition of The Asia-Pacific Arbitration Review, the Court of Appeal’s decision had not yet been handed down. A decision was handed down on 9 May 2012, when the Court of Appeal unanimously overturned the first instance decision, to much applause from the local arbitration community. In particular, the Court of Appeal stressed the high threshold – namely, that any breaches of article 34 (2) must be of a ‘serious’ or ‘egregious’ nature – which a party must meet in order to succeed in having an award set aside on grounds of due process.
On 19 February 2013, the Hong Kong Court of Final Appeal refused leave to appeal against the Court of Appeal’s judgment and dismissed Pacific China Holdings Ltd’s application, thereby endorsing the Court of Appeal’s ruling on this issue.
Then, on 16 August 2013, the Appeal Committee of the Court of Final Appeal rejected an second application by Pacific China Holdings Ltd for leave to appeal against the Court of Appeal separate decision on costs given on 23 July 2012. In that costs decision, the Court of Appeal had cited with approval case law to the effect that where a party applies unsuccessfully to set aside an award, it should expect – in the absence of special circumstances – to pay costs on a higher basis than normal (ie, the indemnity basis).
Po Fat Construction Company Limited v The Incorporated Owners of Kin Sang Estate HCCT 23 of 2013
In this case, in her Reasons for Decision dated 6 November 2013, Chan J13 dismissed the applications of Po Fat Construction Limited (inter alia) for leave to appeal on questions of law and to set aside a domestic arbitral award made against it. Citing the Court of Appeal’s threshold discussed in the Pacific Holdings case, Chan J held that she did not agree that the conduct of the arbitrator was ‘so serious or egregious [...] as to justify the Award being set aside.’14
Chan J also found15 that the authorities16 were clear that even had there been a serious procedural irregularity or error undermining the due process of the arbitration, the court still would not exercise its discretion to set aside an arbitral award where it is not satisfied that the outcome of the dispute would have been affected thereby, or where the court is satisfied that the tribunal could not have reached a different conclusion.
Finally, on the question of costs, Chan J followed the Court of Appeal in the Pacific China case and held that this was an ‘appropriate and obvious’ case for Po Fat Construction Limited to pay the costs of the incorporated owners of Kin Sang Estate on an indemnity basis, with certificate for two counsel.
X Chartering v Y HCCT 20 of 2013
Similarly, in the case of X Chartering v Y, in her decision dated 3 March 2014, Chan J dismissed Y’s application to set aside an Order granting leave to X Chartering to enforce two London arbitration awards as judgments of the Hong Kong court. Again, in giving her decision, Chan J referred to the clear principles governing applications to resist enforcement of awards as cited by the Court of Appeal in the Pacific China case.
In particular, Chan J confirmed that the court is concerned with the process of the arbitral proceedings and not the substantive merits of the dispute or the correctness of the award, and that any conduct complained of must be so serious or egregious that one could say a party had been denied due process.
Further, on the question of public policy, Chan J confirmed that the court adopts a narrow approach. She referred with approval to the 2009 case of A v R (Arbitration: Enforcement)  3 HKLRD 389 where Reyes J observed:
If the public policy ground is to be raised, there must be something more, that is, a substantial injustice arising out of an award which is so shocking to the court’s conscience as to render enforcement repugnant.17
On the facts before her, Hon Chan J was satisfied that Y had had a reasonable opportunity to present its case, that due process had not been denied, and that there was no breach of public policy. Moreover, she confirmed the court’s residual discretion to enforce an award in any event, and held that she would anyway have exercised this discretion in favour of enforcement. Y’s application was dismissed, and an order was made for Y to pay X Chartering’s costs on an indemnity basis.
Guo Shun Kai v Wing Shing Chemical Co Ltd HCCT 35 of 2012
In the case of Guo Shun Kai v Wing Shing Chemical Co Ltd, G Lam J dismissed (inter alia) Wing Shing’s application to set aside an order granting leave to enforce a CIETAC award against Wing Shing and ordered Wing Shing to pay Guo Shun Kai’s costs on an indemnity basis.
G Lam J held that the mere fact that Wing Shing had applied to the Shenzhen Intermediate People’s Court for the dismissal or setting aside of the award did not mean that the award had been ‘suspended by a competent authority of the Mainland or under the law of the Mainland’ for the purposes of section 95(2)(f)(ii) of the Arbitration Ordinance.
Shanghai Fusheng Soya-Food Co Ltd v Pulmuone Holdings Co Ltd  HKEC 825
In the case of Shanghai Fusheng Soya-Food Co Ltd v Pulmuone Holdings Co Ltd, Chan J again dismissed Shanghai Fusheng’s application to set aside an ICC Hong Kong arbitral award on the ground that the award was in conflict with the public policy of Hong Kong. Referring to the cases of Hebei Import, Grand Pacific Holdings, and A v R (Arbitration: Enforcement), Chan emphasised again the narrow construction given to the term ‘contrary to public policy’ and the fact that the court is concerned only with the structural integrity of the arbitration proceedings, and not the substantive merits of the dispute or the correctness or otherwise of the award.
In this case, which related to disputes arising out of a joint venture between the parties, the applicant argued that the ICC tribunal had failed or refused to take note of a Shanghai court judgment given in respect of proceedings commenced by the respondent on behalf of the joint venture company against the applicant. The applicant argued that the Shanghai court judgment had decided the same issues that had been canvassed before the arbitral tribunal and, therefore, bound the parties. The applicant claimed that the award was contrary to Hong Kong public policy because there should be finality in the resolution of disputes and re-litigation on the same issues should be prevented.
Chan J disagreed. She held that there was ‘nothing shocking to the court’s conscience, nothing offensive to [Hong Kong] notions of justice and morality, to permit the Respondent to enforce the Award.’
In particular, Chan J found that the applicant had participated in both the court and the arbitration proceedings, and had been given the opportunity to make relevant submissions in the arbitration to the tribunal, and had in fact done so. The tribunal had decided that the issues raised in the Shanghai proceedings had no relevance to or effect on the arbitral award. As a result, Hon Chan J held that there had been no serious breach which undermined due process, that the applicants had had a fair opportunity to present their case on all the issues raised in the arbitration, and that she could find no injustice as a result of the existence or effect of the Shanghai court judgment. She dismissed the application to set-aside and ordered the applicant to pay the respondent’s costs on an indemnity basis.
These recent rulings confirm the Hong Kong judiciary’s long-standing support for arbitration, and reluctance to interfere with the arbitral process. In addition, they serve as a warning to parties that meritless and frivolous challenges to arbitration awards are likely to be penalised in costs.
As demonstrated by the recent developments highlighted in this chapter, Hong Kong is a significant player in the international arbitration arena. It has a long and well-established track record as an arbitration venue, not only for China-related arbitrations – for which it has for a long time been the seat of first choice – but also for disputes involving parties from all over the world.
The HKIAC’s 2013 ‘best practice’ Rules and the latest amendments to the Hong Kong Arbitration Ordinance – unmatched in any jurisdiction in terms of the enforcement regime implemented for emergency relief – further enhance Hong Kong’s reputation, and demonstrate the Hong Kong government’s commitment to supporting international commercial arbitration in Hong Kong.
This, coupled with the strong support of a robust judiciary, means that Hong Kong is well-placed to secure a lion’s share of international arbitration work going forward.
- Members of the Executive Committee are: Teresa Cheng GBS SC JP (Chair of HKIAC); Lord Goldsmith QC (Newly Appointed Vice Chair of HKIAC); John Budge (Newly Appointed Vice Chair of HKIAC); Matthew Gearing QC; Justin D’Agostino and Kathryn Sanger.
- Approximately US$840 or £560 as at July 2013. This compares with the LCIA’s current hourly rate of £450 (effective 30 March 2013). Pursuant to paragraph 9.4 of schedule 2, an arbitrator may increase his or her hourly rate by up to 10 per cent on each anniversary of the confirmation of his or her appointment. It should be borne in mind that this is a maximum sum, and that many arbitrators arbitrating under the 2013 HKIAC Rules will charge below this cap.
- Paragraph 9.5, schedule 2.
- Article 29 is similar to article 9 of the 2012 ICC Rules.
- Siemens AG and BKMI Industrienlagen GmbH v Dutco Consortium Construction Company Ltd.
- To the extent such waiver can validly be made.
- See article 38.3 of the 2008 HKIAC Rules.
- In its 2013 Annual Report, SIAC reported that it had received, and accepted, 19 applications for emergency arbitration relief in 2013. This took the total of emergency relief applications accepted by SIAC since the emergency relief procedures were first introduced in July 2010 to 30. Informal reports confirm that as at May 2014, that number had increased to 36.
- The emergency arbitrators designated as such by HKIAC are all on HKIAC’s Panel of Arbitrators, and are identified by an asterisk ‘*’ against their names.
(i) subject to (ii) below, the grounds for refusing to enforce an award differ only in sections 86(1)(f)(ii) (Hong Kong and non- Convention awards), 89(2)(f)(ii) (Convention Awards), 95(2)(f)(ii) (mainland awards) and 98D(2)(f)(ii) (Macao awards). Sections 86(1)(f) and 89(2)(f) follow the fifth ground of refusal of recognition and enforcement under article V of the New York Convention, being where the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made. Sections 95(2)(f) and 98D(2)(f) following the respective arrangements with the mainland and Macao, and refer only to the situation where the award has been set aside or suspended by a competent authority, or under the law, of the mainland or Macao, as the case may be;
(ii) Section 95 of the arbitration Ordinance dealing with the grounds for refusal to enforce a Mainland award does not contain the equivalents of sub-sections 86 (4) and (5), section 89 (5) and (6) and section 98D (5) and (6). These sub-sections each provide that:
• if an application for setting aside or suspending the relevant award has been made to a competent authority the enforcement court may, if it thinks fit, adjourn the enforcement proceedings and may, on the application of the party seeking to enforce the award, order the respondent to provide security; and
• any decision or order of the award in this regard is not subject to appeal.
- The judge then specialising in arbitration matters.
- Now section 81 of the Arbitration Ordinance, which gives effect to article 34 of the UNCITRAL Model Law.
- The current judge specialising in arbitration matters.
- Reasons for Decision, para. 28.
- Ibid, para. 29.
- Citing Brunswick Bowling & Billiards Corp v Shanghai Zhonglu Industrial Co Ltd  1 HKLRD 707 and Grand Pacific Holdings Ltd v Pacific China Holdings Ltd (in Liquidation) (No. 1) 4 HKLRD 1.
- Para. 23 of Reyes J’s judgment.