In Chee Cheung Hing & Co Ltd v Zhong Rong International (Group) Ltd (HCA 1454/2015), the Hong Kong Court of First Instance ("CFI") stayed proceedings under s.20 Arbitration Ordinance ("the Ordinance"), which provides for referrals to arbitration where "…an action is brought in a matter which is the subject of an arbitration agreement…". The CFI considered the arbitration agreement to be "prima facie" valid and binding despite the Plaintiff's contention that the underlying contract was not validly formed.
Hong Kong court upholds validity of arbitration agreement in dispute concerning formation of underlying contract
Herbert Smith Freehills partners Justin D'Agostino and Laurence Shore have been appointed to the new Advisory Council of the Australian Centre for International Commercial Arbitration ("ACICA"). D'Agostino, head of the firm's global dispute resolution group, and Shore, a New York-based partner and arbitrator, will each serve a three-year term from 1 March 2016. They are joined on the Council by other leading arbitration practitioners from Europe, Asia, the US and Australia. The Advisory Council is tasked with counselling the Centre on the implementation of its new arbitration rules, which came into effect 1 January 2016. It will also advise on ACICA initiatives and efforts to promote Australia as a seat of arbitration. Professor Richard Garnett, a consultant at Herbert Smith Freehills' Melbourne office, has been appointed to the ACICA Rules Committee.
Sydney Disputes partner Leon Chung, also an arbitration specialist and a director of ACICA, commented: "We are delighted to see the firm's reputation as an arbitration powerhouse recognised by the appointment of two of our partners, as well as a consultant, to advise ACICA. Arbitration is a developing area in Australasia, and both Herbert Smith Freehills and ACICA are committed to remaining at the centre of those developments."
Earlier this month the LCIA released its Registrar's Report for 2015. The report, which is produced annually, gives an overview of the LCIA's casework for the year, providing detailed statistics regarding various facets of the LCIA's caseload, including the nature and subject matter of the contracts out of which its cases arise, and key figures about arbitrator appointments and the frequency of use of different procedures under the LCIA's arbitration rules.
Some of the highlights from this year's report are noted below.
Round 2 to Russia: the battle continues as the largest arbitration awards in history are set aside by the Hague District Court
In a long-awaited decision published yesterday, the Hague District Court ("Court") has set aside the US$ 50 billion awards in favour of the former majority shareholders of Yukos on the basis that the Tribunals lacked jurisdiction to hear the disputes.
The Court accepted the Russian Federation's contention that, pursuant to Article 45 of the Energy Charter Treaty ("ECT"), its decision not to ratify the ECT meant that it was only bound by provisions which were compatible with Russian law. The dispute in question, which concerned relations of a public-law nature, could not be referred to international arbitration under Russian law.
This high-profile decision may have implications on the enforcement proceedings against Russia's assets currently pending in at least seven jurisdictions and also raises questions about the effectiveness of the ECT for investors in Russia.
Gavin v Gaynor: Important further clarification on DIFC court jurisdiction and identifying place of arbitration
On 3 April 2016, the DIFC Court ordered a stay of proceedings on the basis that, in light of the existence of parallel proceedings in the Californian courts on substantially similar grounds, the Claimant's commencement of a claim before the DIFC Court constituted an abuse of DIFC Court process.
However, in reaching its conclusion, the DIFC Court gave further consideration to the application of the jurisdiction gateways provided in Article 5(A) of the DIFC Law No. 12 of 2004 (as amended) (the "Judicial Authority Law") and the Protocol of Jurisdiction between the Dubai Courts and the DIFC Courts, discussed in a different light in our previous bulletins on Bocimar v ETA and DNB Bank. In addition, the decision in Gavin v Gaynor also sets an interesting precedent in respect of the DIFC Court's interpretation of arbitration agreements, including the possibility for the DIFC Courts to imply an agreement settling the seat of arbitration as the jurisdiction with "most connection" to the claim.
Paris Court of Appeal upholds challenge to ICC treaty award and rejects third party intervention in resisting application to set aside
The Paris Court of Appeal has upheld a challenge to an International Chamber of Commerce (ICC) investment treaty award (Cour D'Appel de Paris, Pole 1 – Chambre 1, 15 March 2016, n° 14/19164). This is the latest instalment in the long-standing dispute regarding an insurance claim for damage to a textiles factory during the civil unrest that followed the Madagascan coup of 2009.
The Paris Court of Appeal set aside the sole arbitrator's decision on the grounds that he decided the case based on arguments raised of his own initiative and on which the parties did not have the opportunity to comment (ignoring the adversarial principle applicable under French law). The appeal court also rejected an attempt by an interested third party to intervene in resisting the challenge to the award, on the basis that this would flout the contractual nature of arbitration.
This decision is a rare example of a successful challenge to an arbitral award in France. It provides a helpful reminder of the Court of Appeal's supervisory role over French-seated arbitrations and its ability to annul an award where the tribunal has exceeded the scope of its powers and duties (in particular, where the tribunal failed to comply with due process and based its conclusions on arguments not raised by the parties). The judgment also shines a light on the limitations of the ICC scrutiny process.
On 4 April 2016, Singapore tabled the Choice of Court Agreements Bill (the Bill) paving the way for ratification of the Hague Convention on Choice of Court Agreements (the Convention).
In our previous article, we discussed Singapore's signing of the Convention on 25 March 2015 and the likely effect this would have on the Singapore International Commercial Court (SICC) and Singapore's profile as a regional and global centre for dispute resolution. Last week, Singapore took the first step towards joining the European Union and Mexico as the third signatory to ratify the Convention.
Hong Kong Court rejects allegation of fraud as basis for resisting enforcement of award: re-affirms high evidentiary threshold required to be satisfied in such cases.
Following a steady line of authority emphasising the high hurdle to be surmounted in applying for awards to be set aside on grounds of public policy, the Hong Kong Court of First Instance (CFI) has dismissed an application to set aside an order granting leave to enforce an arbitral award (Order) where the applicant alleged fraud on the part of the award creditor (T v C  HCCT 23/2015).
On the allegation of fraud, Mimmie Chan J applied the threshold test confirmed in Karaha Bodas Co LLC v Perusahaan Pertambangan Minyak Dan Gas Bumi Negara (2009) 12 HKCFAR 84, which requires the applicant to show that it has a "real prospect of success" in persuading the judge to find that the award had been obtained by fraud.
In this short video in our Observations on Arbitration series, Mathias Wittinghofer, Partner in our International Arbitration practice, considers the role of the state courts at different stages of an arbitration. Mathias discusses how the courts can support the arbitral process in various ways, including in relation to appointing or challenging arbitrators. He also considers the role of the court in jurisdictional challenges and on enforcement of an award.
Separability and public policy: selecting law of arbitration agreement does not disapply conflicting non-mandatory provisions of English Arbitration Act 1996 and “fresh evidenceā¦is particularly important” for challenging an Award on public policy grounds
An arbitration agreement is understood in most, but not all, jurisdictions to be a separable or distinct agreement from the contract or agreement of which it forms part. This is confirmed in s7 of the English Arbitration Act 1996 (the Act).
In National Iranian Oil Company (NIOC) v Crescent Petroleum Company International Ltd (CP) & Crescent Gas Corporation Ltd (CG), the English Court rejected NIOC's challenge to an award issued in a London seated arbitration on grounds of jurisdiction and public policy.
NIOC argued that the contract – which was governed by Iranian law – was procured by corruption and therefore invalid. It also argued that this meant that the arbitration agreement was also invalid (such that the tribunal had no jurisdiction) because: (i) Iranian law applied to the question of whether the arbitration agreement was separable; and (ii) Iranian law did not recognise the separability of the arbitration.
The Court rejected this argument. As the arbitration was seated in London, s7 of the Act applied unless it was disapplied by the parties by "agreement to the contrary". While s7 is not a mandatory provision, the Court commented that an "agreement to the contrary" in relation to the specific provision is required to disapply it. The choice of Iranian law as the proper law of the contract was not an agreement to the contrary in relation to separability. Furthermore, the parties' arbitration agreement made clear that the issue of validity of the contract was to be determined by the tribunal. The challenge to the award under s67 was rejected.
The Court also struck out NIOC's challenge based on public policy (which it brought under s68(2)(g) of the Act). NIOC argued that, whilst the tribunal found that the contract was not procured by corruption, the Court, considering English public policy, might take a different view. NIOC was found to have no reasonable prospect of succeeding in its challenge because: (i) the arbitrators had made "a very careful analysis" of the issue in question "after full consideration and evidence"; (ii) NIOC had provided no "fresh evidence"; and (iii) this was not a case of "very exceptional circumstances" that would justify the Court intervening with the arbitrators' decision.
This is a robust, pro-arbitration decision from the English court. In practical terms, it serves as a useful reminder for parties to analyse at the transactional stage the interplay between the different laws that might apply to their disputes and the impact that any conflicting provisions of those laws might have on the procedure for quickly and effectively resolving those dispute. Where potential issues are identified, they should be addressed in the drafting of the dispute resolution provisions. The case further highlights the need to disapply non-mandatory provisions of the Act in clear and specific terms.