Enter to open, tab to navigate, enter to select
Hong Kong Court of Appeal declines to set aside ICC award
Practical Law UK Legal Update 5-519-7008 (Approx. 4 pages)
Hong Kong Court of Appeal declines to set aside ICC award
by Practical Law
| Published on 31 May 2012 • Hong Kong - PRC |
John Choong (Counsel), Freshfields Bruckhaus Deringer
The Hong Kong Court of Appeal has upheld an appeal against a decision of the Court of First Instance to set aside an ICC award. The Court of Appeal confirmed that, even if there are grounds for setting aside an award under Article 34(2) of the UNCITRAL Model Law, the court still has a residual discretion to refuse to set aside an award, if it is satisfied that the outcome could not have been different.
Background
Article 34(2)(a)(ii) of the UNCITRAL Model Law provides that an award may be set aside where a party was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case.
Article 34(2)(a)(iv) of the UNCITRAL Model Law provides that an award may be set aside where the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the party's agreement.
Both provisions apply in Hong Kong.
Facts
On 24 August 2009, an arbitral award (Award) was made in favour of Grand Pacific Holdings Ltd (GPH) against Pacific China Holdings Ltd (PCH), in relation to a dispute over a loan agreement between the two parties. PCH subsequently applied to the Hong Kong Court of First Instance to set aside the Award, on the basis of Article 34(2)(a)(ii) and/or Article 34(2)(a)(iv) of the UNCITRAL Model Law. PCH contended that the Award ought to be set aside because it was denied an opportunity to present its case before the tribunal.
In particular, PCH claimed that the tribunal:
- Allowed GPH to serve supplemental pre-hearing submissions on an issue of Taiwan law, one working day before an evidential hearing.
- Refused to allow PCH to rely on three foreign law authorities.
- Refused to allow PCH to respond to GPH's submissions on the relevance of Hong Kong law.
On 29 June 2011, the Court of First Instance set aside the Award and concluded that PCH had established a violation of Article 34(2)(a)(ii) and (iv). The Court of First Instance held that:
- PCH was treated unfairly by the tribunal's order which allowed GPH to file its supplemental submissions on the Taiwanese law issue one working day before the hearing (contrary to the agreed procedural timetable relating to the exchange of pre-hearing submissions).
- PCH was prevented from presenting its case by the tribunal's refusal to receive and consider its additional authorities.
- PCH was denied the opportunity to present its case by the tribunal's ruling which prevented PCH from responding to GPH on the Hong Kong law submissions.
GPH appealed to the Court of Appeal.
Decision
The Court of Appeal allowed the appeal and reinstated the Award.
No violation of Article 34(a)(ii) or (iv)
On the first issue, Tang J of the Court of Appeal held that the tribunal was entitled to adopt procedures that were appropriate to the particular case. The tribunal should not be constrained if the agreed procedural timetable turned out to be unworkable. In any event, the lower court should not have questioned the merits of the decision of the tribunal.
On the second issue (the tribunal's refusal to grant leave for PCH's production of three new authorities), the Court of Appeal held that the tribunal had full discretion in deciding case management issues and the lower court should not have interfered with this discretion.
On the third issue, Tang J emphasised that the tribunal was entitled to take the view that PCH had been given the opportunity to make submissions on that particular issue. The tribunal could not be faulted for refusing PCH another opportunity to deal with the issue.
Discretion of the court
The Court of Appeal confirmed that, even if there is a violation of Article 34(2) of the UNCITRAL Model Law, the court still has a residual discretion to refuse to set aside an award, provided that the tribunal could not have reached a different conclusion.
Tang J opined that when exercising the discretion, the court will assess the seriousness of the breach in each particular case. However, he also noted that in some cases, a breach may be so egregious that an award would be set aside even though the result would not have been different.
Comment
Although the precise application of the law will vary depending on the facts of each case, the Court of Appeal's decision to overturn the decision of the Court of First Instance and to refuse to set aside the Award does help confirm that the Hong Kong courts are reluctant to interfere in decisions made by an arbitral tribunal, unless it is fully justified in the circumstances.