BY MARIEL DIMSEY
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now-repealed Arbitration Ordinance Cap 341, which set out the New York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.
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