Caveat Victor – Hong Kong Court Rejects Late Attempt to Enforce an Arbitral Award (Summary)

Following the decision of the High Court of Hong Kong in CL v SCG [2019] HKCFI 398, the victorious claimant (CL) in Hong Kong arbitration proceedings was left unable to enforce the Award in Hong Kong, because they took too long pursuing enforcement proceedings in Mainland China. Those proceedings proved unsuccessful, and by the time the claimant had returned to Hong Kong, the action had become time-barred under section s. 4 of the Limitation Ordinance.

Section 4 gives parties six years to bring an action on an arbitral Award. The six year time limit runs from the time when the Award debtor fails to honour the implied promise to perform the Award - and not from the date of the arbitration agreement, nor the date of the Award .

CL argued that time only started to run when SCG opposed CL’s application for enforcement of the Award in the Mainland. CL argued that it was this act which manifested a clear and unequivocal intention not to be bound by the Award.

The Court, however, held that the relevant act arose when SCG failed to make payment within a reasonable time of the publication of the Award and a demand being made. A ‘reasonable time for payment’ depended on the terms of the award as well as the facts and circumstances of the case. On the facts of this particular case, the relevant failure occurred less than three months after the Award was published. Since the enforcement application in Hong Kong was made more than 6 years after that date, the action was time-barred.

It would not have been open to the unlucky claimant to commence parallel enforcement proceedings in both Hong Kong and the Mainland. Such action is prohibited by the “Arrangement Concerning Mutual Enforcement of Arbitral Awards Between the Mainland and Hong Kong”. This is perhaps the only drawback to the Arrangement, which otherwise assists parties arbitrating in Hong Kong by providing that Hong Kong awards are automatically recognised in Mainland China.

This case highlights that where (as is not unheard of) enforcement proceedings in Mainland China run on for several years, including appeals, time will continue to run in Hong Kong.

As the Court indicated in the Judgment, successful claimants in Hong Kong arbitration may have to consider withdrawing applications for enforcement on the Mainland, in order to proceed in time in Hong Kong.

Editorial Note: this is a summary of the article “Caveat Victor - Hong Kong Court Rejects Late Attempt to Enforce an Arbitral Award” which was circulated via Hong Kong Lawyer eNewsletter and posted on Hong Kong Lawyer website in May 2019.

Jurisdictions: 

Senior Associate, Lau, Horton & Wise LLP in association with CMS Hasche Sigle, Hong Kong