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ARBlog International Arbitration News, Trends and Cases

Further confirmation of the pro-arbitration stance of the Hong Kong courts

A Hong Kong court has refused to grant an application to set aside its own order granting leave to enforce an arbitral award, thereby reinforcing the arbitration-friendly approach of Hong Kong courts and clarifying the restricted scope of the courts’ review of an arbitral award rendered in a Member State of the New York Convention.

In the original arbitral proceedings, an arbitral tribunal seated in Kuala Lumpur, Malaysia, had ordered C, the respondent in arbitration, to pay T, the claimant, a sum as damages for breach of contract.  C had applied to the Malaysian courts to have the award set aside and C’s application was denied.  T sought leave to enforce the award in Hong Kong, and the Court of First Instance issued an order granting T leave to enforce on 10 June 2015 (the “Order”).  In a decision dated 14 March 2016, the same Court dismissed C’s application to have the Order set aside.

Relying on s 44 of the now-repealed Arbitration Ordinance Cap 341, which set out the New York Convention grounds according to which a court may refuse to enforce an arbitral award (these grounds are now contained in Section 89 of the Arbitration Ordinance Cap 609 currently in force), the Court found that C had failed to satisfy the Court of any public policy grounds justifying a refusal to enforce.  C had alleged that the original arbitration had been tainted by fraud, and that it would constitute a breach of public policy if an award tainted by fraud was enforced in Hong Kong.

In dismissing C’s application due to lack of evidence of the alleged fraud, the Honorable Justice Mimmie Chan made a number of insightful statements about the notion of “public policy” and reinforced the pro-arbitration stance taken by Hong Kong’s courts.

With respect to public policy, Justice Chan relied on a number of previous Hong Kong decisions in confirming that the public policy ground is to be “narrowly construed”.  Justice Chan stated: “In considering whether or not to refuse enforcement of an award, it is clear that the Court does not look into the merits of the case, nor at the underlying transaction.”  Moreover, Justice Chan went one step further and set out that the notion of public policy in the enforcement context can also be used as a “sword”, stating that “it is in the interests of public policy to uphold an agreement made between parties to submit their dispute to arbitration, and as a matter of comity, to enforce an arbitral award which is binding on the parties and enforceable under and in accordance with the [New York] Convention” [emphasis added].

It is interesting to note that the Court also gave due regard to the decisions made by the arbitral tribunal itself and the Malaysian court on C’s claims of forgery.  Particularly significant is the Court’s statement, relying on the 2012 case of Gao Haiyan v Keeneye Holdings Ltd [2012] 1 HKLRD 627, that “[t]he decision of the Malaysian court, being the supervisory court of the Arbitration, on the existence and the validity of the Contract and the arbitration agreement between the parties, and its refusal to set aside the Award, should be given “due weight” by an enforcement court.”  Such a clear statement concerning the hierarchy between the supervisory courts at the seat of the arbitration and an enforcement court outside the jurisdiction will no doubt add more fuel to the fire in the debate concerning the extent of enforcement courts’ discretion under Article V(1)(e) New York Convention.  Although in the present case, the Court acknowledged the weight to be given to the decision of the court at the seat (an approach also recently followed in England in the case of Malincorp Ltd v Government of the Arab Republic of Egypt [2015] EWHC 361 (Comm)), in some jurisdictions, most notably France, courts seized with the enforcement of arbitral awards do not, as a general rule, accord deference to decisions of courts at the seat.

This most recent decision – the third pro-arbitration decision in Hong Kong in as many weeks  – reaffirms the arbitration-friendly and non-interventionist approach taken by the Hong Kong courts.