Hong Kong Court Sets Out Ten Principles of Enforcement

James Rogers and Matthew Townsend, Norton Rose Fulbright, Hong Kong

In denying a challenge to the enforcement of an arbitral award, the Hong Kong Court of First Instance identified ten general principles it will apply in dealing with enforcement of arbitral awards.

The decision which seems set to be much cited in future jurisprudence was handed down by Madam Justice Mimmie Chan on 15 September 2015 in an anonymised case KB v S [2015] HKEC 2042.

The ten principles are as follows:

  • First “the primary aim of the court is to facilitate the arbitral process and to assist with enforcement of arbitral awards”.
  • Second, “[u]nder the Arbitration Ordinance (“Ordinance”), the court should interfere in the arbitration of the dispute only as expressly provided for in the Ordinance”.
  • Third, “the parties to a dispute should be free to agree on how their dispute should be resolved” although this freedom should be subject to “safeguards that are necessary in the public interest”.
  • Fourth, citing the Hong Kong Court of Appeal’s approach in the 2011 PetroChina decision ([2011] 4 HKLRD 604), the “[e]nforcement of arbitral awards should be ‘almost a matter of administrative procedure’ and the courts should be ‘as mechanistic as possible’”.
  • Fifth, following the 2012 Grand Pacific Court of Appeal decision ([2012] 4 HKLRD 1 (CA)), “[t]he party opposing enforcement has to show a real risk of prejudice and that its rights are shown to have been violated in a material way”. In Grand Pacific, the Court of Appeal reinstated an arbitral award that had previously been set aside on the basis of perceived procedural impropriety, on the grounds that the alleged violations were not sufficiently important to justify such steps.
  • Sixth, “the court is concerned with the structural integrity of the arbitration proceedings” and so, once again adopting the Court of Appeal’s approach in Grand Pacific, “the conduct complained of ‘must be serious, even egregious’, before the court would find that there was an error sufficiently serious so as to have undermined due process”.
  • Seventh, “[i]n considering whether or not to refuse the enforcement of the award, the court does not look into the merits or at the underlying transaction”.
  • Eighth, “[f]ailure to make prompt objection to the Tribunal or the supervisory court may constitute estoppel or want of bona fide”. Here, Chan J cited the 1999 Hebei Import case ((1999) 2 HKCFAR 111) in which the Court of Final Appeal upheld enforcement of an award, finding that a party who wishes to rely on non-compliance with procedural rules should do so promptly and not proceed with the arbitration regardless, “keeping the point up his sleeve for later use”.
  • Ninth, again citing the Hebei Import decision, “[e]ven if sufficient grounds are made out either to refuse enforcement or to set aside an arbitral award, the court has a residual discretion and may nevertheless enforce the award despite the proven existence of a valid ground”.
  • Tenth, and finally, the parties to the arbitration have a duty of good faith, as once again found the Hebei Import case.

In the case at hand, Chan J found that the applicant had made the application out of time and failed to identify an applicable ground for setting aside the enforcement order. Accordingly the application was an abuse of court process and breach of the applicants’ duty of good faith. On denying the application, the court awarded Indemnity costs to the Respondent.