HONG KONG COURT REFUSES LEAVE TO APPEAL RARE SUCCESSFUL CHALLENGE TO AWARD

The Hong Kong Court of First Instance has rejected an attempt by an award creditor to appeal against a rare successful challenge to an arbitral award.

In CIC v Wu and Ors [2023] HKCFI 700, Mimmie Chan J had refused to enforce the award because the "grossly unfair and unjust" procedure adopted by the tribunal amounted to an egregious denial of due process (see our previous blog post for further details).  The decision arose from unusual facts and illustrated the readiness of the Hong Kong courts to intervene to prevent injustice in truly exceptional cases.

The Court has now refused leave to appeal that ruling on the ground that an appeal would have no reasonable prospects of success (CIC v Wu and Ors [2023] HKCFI 1055).

Legal principles

Mimmie Chan J summarised the relevant legal principles as follows:

• The decision to refuse enforcement was an exercise of discretion by the Court which involved the assessment and weighing of different factors.
• Leave to appeal would not be granted unless the Court had misunderstood the law or evidence or the exercise of discretion was plainly wrong.
• It was necessary to read in its proper context the observation of the Court of Appeal in China International Fund v Dennis Lau & Another [2015] 4 HKLRD 609 that the threshold for seeking leave to appeal (namely, a reasonable prospect of success) "is not a very high threshold". The Court of Appeal had highlighted the aims of recognising the finality of arbitral awards and limiting appeals, and the fact that the first instance judge would be more familiar with the case and the arguments of the parties.
• The Court of Appeal would not interfere in the exercise of discretion by a first instance judge so long as the decision was "within the degree upon which different judges can legitimately differ."

Decision

Applying those principles, the Court was not satisfied that there were reasonable prospects of the appeal succeeding.

In particular, the Court rejected the contention that it had erred in reviewing the correctness of the award.  Enforcement had been refused because there were defects in the structural integrity of the arbitral process and not because of any errors of law made by the tribunal.  The issue was not the correctness of the tribunal's decision, but rather the tribunal's failure to give the award debtors a reasonable opportunity to present their case.

The application for leave to appeal was therefore dismissed, with indemnity costs ordered against the award creditor.

Limited appeal rights

Where leave to appeal from an enforcement decision is refused by the Court of First Instance, that will generally be the end of the road for the disappointed party.  Section 84(3) of the Hong Kong Arbitration Ordinance (Cap. 609) provides that the leave of the Court of First Instance is required for any appeal from such a decision.  There is no right to seek leave directly from the Court of Appeal (subject to the residual jurisdiction of the Court of Appeal to review the process in the Court of First Instance in refusing leave, which will be invoked only in extreme situations).

This provision of the Arbitration Ordinance, and others like it, reflect a deliberate policy of limited appeal rights which is intended to safeguard the finality of the arbitral process.  The constitutionality of section 81(4) of the Arbitration Ordinance, which is the equivalent provision dealing with leave to appeal from decisions on the setting aside of awards, was expressly upheld by the Court of Appeal in China International Fund v Dennis Lau (mentioned above and covered by our blog here).  Herbert Smith Freehills acted for the successful party in that case.

For further information, please contact Simon Chapman KC, Partner, Kathryn Sanger, Partner, Martin Wallace, Professional Support Consultant, or your usual Herbert Smith Freehills contact.