ENFORCEMENT OF CIETAC AWARD IN HONG KONG STAYED, BUT NOT FOR LONG

Summary

In a further decision in the long-running G v X matter (see our previous blog post here), the Hong Kong court has decided to stay enforcement of a CIETAC award pending a challenge to the award at the seat of arbitration in Beijing.  The stay was granted in deference to the jurisdiction of the supervisory Court, but only for a short, three-month period.  After this temporary stay, G can apply again for immediate enforcement of the award.

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G (the Claimant) had obtained an award in a CIETAC arbitration against X, the Respondent. The Court's latest decision was in respect of G's application for leave to enforce the award. X's position was that the award should not be enforced at all, or at the very least enforcement proceedings should be stayed pending the determination of a set aside application at the seat of the arbitration in Beijing.

X's primary case resisting enforcement was that:

• It had been deprived of the opportunity to present a case on certain revisions made by G's claim, and on the formula used by the tribunal for calculation of damages.
• Due to the consolidation of disputes under 8 different agreements, the award dealt with matters beyond the scope of the arbitration.
• Enforcement of the award would be contrary to public policy.

The Court rejected the first argument finding that X had enjoyed a reasonable opportunity to present its case. On the second argument, it decided that the Beijing Court was in the best position to decide on the scope of the arbitration agreement and on PRC law.  It therefore stayed enforcement of the award until the decision of the Beijing Court, while also emphasising that the stay could be subject to conditions that the Beijing Court considered to be "just and necessary in the circumstances of the case".

In these circumstances, the Court ordered that the stay would only be granted for a short period of three months.  After this time, G would be at liberty to apply for an order for immediate enforcement. If the Beijing Court's decision on the set aside application was handed down earlier, the parties could apply for a hearing before the end of the three months.

Comment

The Court's analysis will help address concerns regarding so-called "due process paranoia" – the perception that arbitrators should show maximum deference to procedural concerns raised during an arbitration in order to be sure that the ultimate award cannot be challenged before the domestic courts.

In this context, the Hong Kong Court referred to the English decision in Terna Bahrain Holding Company WLL v Bin Kamil Shamsi & Others, where the court noted that even though legislation "requires a party to be given a reasonable opportunity of addressing his opponent's case, that does not mean that the tribunal is acting unfairly in deciding the case on the point to which the party raising it does not give any great emphasis, or which is not the subject matter of any great exposition".  Arbitral tribunals therefore need not be overly worried about allowing parties excessive opportunities to make submissions in order to be satisfied that the parties have had a reasonable opportunity to present their case.

The overall decision also shows that while Hong Kong Courts will show some deference to the decision of a supervisory court on set aside matters, this cannot be used as a basis for extensive delay – in this case by setting an ultimate time limit on how long it would wait before allowing an application for immediate enforcement of the award.

For more information, please contact Simon Chapman QC, Partner, Jacob Sin, Associate, or your usual Herbert Smith Freehills contact.

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