ENFORCEMENT OF MAINLAND PRC AWARD REFUSED IN HONG KONG DUE TO CONDUCT OF ARBITRATOR ATTENDING BY VIDEO CONFERENCE

The Hong Kong Court of First Instance has refused to enforce a Chengdu Arbitration Commission award on public policy grounds, due to "serious irregularities" in the conduct of an arbitrator who attended the hearing by video conference which resulted in a lack of apparent justice and fairness (Song Lihua v Lee Chee Hon [2023] HKCFI 2540).

Background

Video evidence reviewed by the court showed that the arbitrator in question spent much of the hearing (when the parties' lawyers were adducing and challenging the evidence and the other tribunal members were asking questions) "wandering around" from room-to-room without appearing to use headphones or an earpiece, at times talking and gesturing to others, and frequently "looking into the distance" instead of watching the proceedings.  At one point he walked outside into an open public area, and at another point he was seen inside a vehicle.  The arbitrator went offline a number of times, his video image repeatedly froze, and on at least two occasions he failed to answer or even acknowledge questions from the other arbitrators and the tribunal secretary.

Decision

In refusing enforcement of the award, Mimmie Chan J emphasised that it was imperative not only for justice to be done but for justice to be seen to be done (citing the classic example provided by the English case of Stansbury v. Datapulse [2003] EWCA Civ 1951, in which an employment tribunal member fell asleep), and that the first role of the arbitrator was to preside over and hear the case.

If the remotely attending arbitrator was not concentrating or hearing the proceedings, an objective observer would have reasonable doubts as to whether he had already made up his mind before hearing the parties, and whether his decision could be supported by the evidence.  There was no apparent justice when a member of the tribunal was not focused on and hearing the parties in the course of the trial.

The court rejected the suggestion that any objection to the conduct of the hearing had been waived because no complaint had been made at the hearing.  It could be expected that an advocate would be focused on presenting their case rather than observing the image of the remote arbitrator on the video screen.  The failure to object at the hearing could not fairly be considered to be a full waiver of the serious irregularities in the arbitrator's conduct.  Moreover, and regardless of whether any objection had been raised at the hearing, the court was in any event entitled to refuse enforcement if it considered that giving effect to the award would be contrary to public policy.

The court also rejected an argument by the award creditor that the supervisory court in Mainland China had not set the award aside and had permitted its enforcement, despite the award debtor's complaints as to the conduct of the hearing.  Hong Kong as the enforcement court had to apply its own standards and law when deciding whether it would be contrary to the public policy of Hong Kong to enforce the award, notwithstanding the decision of the Mainland court.

In light of the evidence, the court reached the "clear conclusion" that enforcement of the award would "violate the most basic notions of justice in our forum", and should therefore be refused on the ground of public policy under section 95(3) of the Hong Kong Arbitration Ordinance.  Various other complaints by the award debtor in relation to alleged irregular service of documents, inability to nominate an arbitrator and non-receipt of supplemental submissions were either rejected or did not need to be determined in light of the court's decision on the "most serious complaint" in relation to the conduct of the remotely attending arbitrator.

Comment

This decision underlines the independence of the Hong Kong courts, including their willingness in appropriate cases to reach conclusions which differ from those of courts in other jurisdictions (including Mainland China) in relation to the same issues.

As noted in our earlier blog, the court previously refused an application by the award debtor to compel the remotely attending arbitrator to give evidence on relevant events, on the basis that arbitrators are entitled to immunity from such compulsion.  The decision to refuse enforcement illustrates that the appropriate recourse in respect of arbitrator misconduct will generally be to challenge the award, and that the impact on challenge proceedings of arbitrators' immunity from compulsion to give evidence is likely to be very limited (since it should generally be possible to prove or disprove the relevant matters on the basis of other evidence without the testimony of tribunal members).

The fact that enforcement was refused on the basis of the conduct of a single (remotely attending) tribunal member, in the absence of any complaints about the conduct of the other tribunal members (who were physically present in person at the hearing), deserves consideration.  The understandable impulse of parties and their lawyers will often be to press ahead and make the best of the situation when one member of a three member tribunal is not properly engaged, and to avoid raising formal complaints in order to avoid antagonising the tribunal.  This case raises important questions as to whether that will always be the best policy, and whether, for example, the delay and inconvenience of postponing and rescheduling a hearing might be a price worth paying, in appropriate cases, to reduce the vulnerability of the ultimate award to challenge.

Finally, it is important to emphasise that this decision is not a reflection of the attitude of the Hong Kong courts to virtual hearings.  As noted in our previous blog, in Sky Power Construction Engineering Limited v Iraero Airlines JSC [2023] HKCFI 1558 the Court of First Instance ruled that the holding of a fully virtual hearing despite the opposition of one of the parties did not provide a ground for refusal of enforcement of the resulting award.  In the present case, enforcement was not refused because one of the tribunal members attended the hearing remotely, but rather because of the "serious irregularities" in that arbitrator's conduct whilst attending remotely.