The Hong Kong Court of First Instance has dismissed a challenge to an interim order granted by an arbitrator to restrain court proceedings in mainland China against non-parties to the underlying arbitration agreement (G v. N [2024] HKCFI 721).

The decision turned upon the important distinction between arbitral awards which finally dispose of substantive issues (which can be challenged before the courts, albeit on limited grounds) and interim orders made pursuant to the procedural discretion of the arbitral tribunal (which the court generally cannot and will not interfere with).

Background

This decision is the latest development in a dispute on which we previously reported here. In summary:

  • G and N concluded a securities purchase agreement in 2020 for a share placement pursuant to which G, an existing shareholder in N, would receive additional shares in return for consideration of approximately US$147 million.
  • The share placement was ruled to be void by a BVI court in March 2021.  G then commenced HKIAC arbitration against N in Hong Kong, seeking repayment of funds paid to N under the invalidated placement.  The arbitrator rendered two partial awards on liability and quantum both in favour of N, dismissing G’s claim and allowing N’s counterclaim on the basis that the placement had been illegal.
  • The awards were subsequently remitted to the arbitrator by the Court of First Instance (in a decision which has since been appealed) in order to allow him to consider the implications of a change in the illegality defence under Hong Kong law which had taken effect only a few days before he rendered the first partial award on liability.

Separately, and of direct relevance to the present case, after the arbitration commenced, G had initiated court proceedings in Shenzhen against both N (which was party to the HKIAC arbitration agreement in the securities purchase agreement) and N’s subsidiaries (which were not), seeking a declaration of ownership over shares in the subsidiaries based on the funds paid by G to N under the invalidated SPA placement.  N challenged the jurisdiction of the Shenzhen Court, which dismissed the proceedings against N but not the subsidiaries.

N then applied to the arbitrator for urgent relief to restrain the Shenzhen court proceedings against N’s subsidiaries.  The arbitrator issued an interim order requiring G to take all necessary steps to dismiss the Shenzhen proceedings.  N obtained leave from the Court of First Instance to enforce the interim order granted by the arbitrator.  G then applied to set aside the enforcement order, relying on the grounds for setting aside arbitral awards set out in section 81 of the Hong Kong Arbitration Ordinance (giving effect to Article 34 of the UNCITRAL Model Law).

Decision

Mimmie Chan J dismissed G’s application to set aside the enforcement order and refused to interfere with the arbitrator’s exercise of his procedural discretion to grant the interim order.  There were three broad reasons for the court’s decision.

Interim order not an award

First (and most fundamentally), the arbitrator’s interim order was not a final award but an anti-suit injunction granted as an interim measure pursuant to section 35 of the Arbitration Ordinance (giving effect to Article 17 of the UNCITRAL Model Law).  Accordingly, the grounds for setting aside arbitral awards set out in section 81 of the Arbitration Ordinance (on which G relied) were not applicable to the arbitrator’s interim order.

In reaching this conclusion, the court applied the factors set out in the English case of ZCCM Investments Holdings v. Kansanshi Holdings [2019] 1 CLC 770 for classifying a tribunal’s decision as an award or an interim order, including (among others):

  • Whether the decision is final in the sense that it disposes of the matters submitted to arbitration so as to render the tribunal functus officio, either entirely or in relation to that issue or claim.
  • Whether the decision deals with substantive rights and liabilities or procedural issues.
  • The tribunal’s own description of the decision, which would be relevant but not conclusive.

Applying those factors, the court found that:

  • The arbitrator’s interim order was in substance an anti-suit injunction, which the drafters of the UNCITRAL Model Law regarded as interim orders and which Hong Kong courts had treated as interim measures in relation to and in aid of arbitral proceedings.
  • The arbitrator’s interim order did not in substance decide any of the parties’ rights under the SPA, and did not render the arbitrator functus officio.
  • The arbitrator himself expressly described the interim order as an “interim order in the form of an injunction”.

No express grounds to refuse enforcement of interim measures

Second, there were limited circumstances in which the court could refuse to enforce an interim measure and there was no right of appeal against a decision to grant enforcement.  The court observed that:

  • Section 44 of the Arbitration Ordinance disapplies Article 17I of the UNCITRAL Model Law, which contains specific grounds whereby recognition or enforcement of an interim measure may be refused.
  • The enforcement regime of interim measures ordered by an arbitrator is governed by section 61 of the Arbitration Ordinance, which imposes “a far more restrictive regime” and does not provide any express grounds to refuse enforcement of interim measures.
  • All that is expressly required is that, for an interim measure made outside Hong Kong to be enforced by the court, the order or direction sought to be enforced should belong to a type or description of order or direction that can be made by a Hong Kong-seated arbitral tribunal (section 61(2) of the Arbitration Ordinance).  It should be noted that this requirement was not relevant in the present case, since the interim measure was granted in support of a Hong Kong-seated arbitration.
  • Moreover, the court’s decision to grant or refuse leave to enforce an order or direction of an arbitrator is not subject to appeal (section 61(4) of the Arbitration Ordinance).  This is consistent with the object of the Arbitration Ordinance to facilitate the fair and speedy resolution of disputes by arbitration without unnecessary expense.

The court noted that the Singapore courts adopt the same approach to the recognition of interim orders of a tribunal, as illustrated by the case of CXG v. CXH [2023] SGHC 244 in which it was stated (amongst other things) that:

  • Procedural and interim measures issued by a tribunal are “exempt from the usual judicial oversight which applies to awards”.
  • Limiting challenges only to awards that decide the substantive merits of the case would reduce the risk of delay and prevent tactical attempts to obstruct the arbitration process by bringing challenges on interim orders.
  • This was also consistent with the principle that “procedural issues fall directly within the province of the arbitral tribunal and should be decided solely by the tribunal.”

Application without merit even if interim order treated as an award

Third, even if the section 81 grounds for setting-aside awards were applicable to the arbitrator’s interim order, G’s application to set aside the order for enforcement of the interim order was still without merit.

G contended that it was impermissible for the arbitrator to require it to dismiss proceedings against non-parties to the arbitration agreement without expert evidence on PRC law suggesting they would be bound by the arbitration agreement or the result of the arbitration.  The court held this to be tantamount to saying that the arbitrator did not have sufficient evidence to support the granting of the interim order, which was not a ground to set aside any award.

G also argued that, in making the interim order, the arbitrator had overlooked or failed to address G’s submissions on a key issue, causing substantial injustice to G, such that it would either be contrary to public policy to enforce the interim order or the interim order contained decisions on matters beyond the scope of the submission to arbitration.  The court emphasised the high threshold that an applicant faces when it claims that a tribunal has failed to deal with an issue in an award (see our recent post here for a recent Hong Kong authority) and found that the arbitrator had in fact considered and dealt with the submissions in question.

Comment

This decision is a helpful reminder of the important distinction between final awards and interim orders (with the court’s application of factors from the ZCCM case providing a useful analytical framework), as well as the implications this has for the extent to which the Hong Kong courts may intervene in tribunal decisions.

While the grounds on which final awards can be challenged are limited and successful challenges are relatively rare, it is possible to set aside or resist enforcement of awards on certain procedural, jurisdictional and public policy grounds set out in the Arbitration Ordinance (specifically, section 81 in relation to set-aside and sections 86, 89, 95 and 98D in relation to refusal of enforcement).  A decision of the Court of First Instance in relation to an award challenge may also be appealed, albeit only with the leave of the court (pursuant to sections 81(4) and 84(3) of the Hong Kong Arbitration Ordinance).

In contrast, interim measures like anti-suit injunctions granted by a tribunal will generally be considered to be interim orders falling within the procedural discretion of the tribunal and therefore not susceptible to review by the Hong Kong courts.  Interim orders are moreover enforceable under section 61 of the Arbitration Ordinance without the same grounds for resisting enforcement that are available in relation to arbitral awards, and decisions of the Court of First Instance under section 61 are not subject to appeal.

The decision also underlines the power of Hong Kong-seated arbitral tribunals to grant interim orders restraining parallel proceedings (a potentially useful tool in arbitrations involving complex corporate structures and multiple proceedings) and the readiness of the Hong Kong courts to enforce such orders without reviewing the merits of the tribunal’s procedural decisions.

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