After reluctantly issuing an initial stay of enforcement in July 2018, the Hong Kong Court of First Instance recently dismissed an application by China Zenith Chemical Group Ltd (CZ) to further delay the enforcement of an arbitral award in favour of Baosteel Engineering & Technology Group Co Ltd (BS).

Baosteel Engineering & Technology Group Co Ltd v China Zenith Chemical Group Ltd [2019] HKFCI 68

Background

As discussed in our previous blog post, the Court of First Instance issued a six month stay of enforcement, commencing on 11 July 2018, on condition that CZ provide full security or a bank guarantee for an award under which the company and its mainland subsidiary, Heihe Longjiang Chemical Company Ltd (HH), were jointly and severally liable to pay BS RMB 19.44 million. With the six month stay concluding on 11 January 2019, CZ applied for a further stay, arguing that court proceedings between HH and BS are pending. CZ argued that, if HH is successful in its claim for RMB 32.97 million, the amount awarded could be set off against the award in favour of BS. CZ argued that waiting on this outcome would avoid any foreign exchange control issues, as BS or HH, both mainland companies, would not be required to reimburse CZ in Hong Kong.

Decision

Largely repeating the reasons she outlined in her earlier decision, Mimmie Chan J held that:

  1. Any further delay would be unfairly prejudicial to BS’s right to enforce the award;
  2. CZ failed to satisfy any of the grounds for refusing enforcement under s95 of the Arbitration Ordinance. In particular, it had not had the award set aside or suspended by a competent authority, nor demonstrated that such an outcome would be ‘handed down in the fixed foreseeable future’; and
  3. Any considerations arising from pending proceedings between HH and BS were conditional on the success of HH’s claim, and would need to be asserted by HH, should it be successful. However, there could be a significant wait for any trial judgment and appeals to be concluded. Such considerations should not prevent BS enforcing the award against CZ. Issues concerning whether the Hong Kong-based CZ could recover from HH in light of mainland foreign exchange controls, were only speculative.

Discussion

This decision, in conjunction with the previous decision, reflect the Hong Kong courts’ commitment to upholding a party’s right to prompt enforcement of arbitral awards, and recognition that delay can prejudice a successful party’s interests.

 

Kathryn Sanger
Kathryn Sanger
Partner, Hong Kong
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May Tai
May Tai
Partner, Hong Kong
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Simon Chapman
Simon Chapman
Partner, Hong Kong
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Briana Young
Briana Young
Foreign Legal Consultant, Hong Kong
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