HONG KONG COURT DISMISSES APPLICATION FOR FURTHER STAY OF ENFORCEMENT

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

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Contracting with governments: pitfalls, arbitration, sovereign immunity and enforcement

Entering into a contract with an entity owned or controlled by the state poses unique challenges not faced when dealing with a private commercial counterparty. Parties should be aware of certain distinctive features of negotiating with a state entity from the start of any commercial relationship. It is particularly important for parties to consider these implications when conducting business in the Middle East given that:

i. state entities play a major role in the procurement of major projects, particularly in GCC countries; and

ii. the reconstruction of infrastructure and the development of natural resources in countries such as Iraq require significant foreign investment in the form of contracts with state-owned entities.

Determining whether or not a commercial party is dealing with a state entity is not always a straightforward process in the Middle East. As such, parties should take extra care and consider the following factors at the outset:

a) the capacity of the entity to enter into an arbitration agreement;

b) the ability of the state in question to raise a defence of sovereign immunity in the future; and

c) the investment treaty protections that a company may be able to utilise.

In this article, we set out the key factors that parties should consider when negotiating with a state entity in order to maximise the protections available should a dispute arise at a later point.

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Hong Kong Court upholds refusal to stay execution of enforcement order

Overview

The Hong Kong Court of First Instance (CFI) has denied leave to appeal its May 2017 decision in  Israel Sorin (IZZY) Shohat v Balram Chainrai [2017] HKEC 1118. In that decision (see our previous post), Chow J refused to stay execution of the CFI’s order to enforce an arbitral award pending the outcome of the Award Debtor (Mr Shohat)’s claim against Mr Chainrai (Award Creditor) in the Hong Kong High Court (High Court Action).

On 21 July 2017, the Award Debtor applied for leave to appeal Chow J’s decision (Leave Application), and for an interim stay of execution of the enforcement order pending the outcome of its application for leave to appeal (Stay Application).  The court also considered an application by the Award Creditor for payment out of monies that the Award Debtor had paid into court in partial satisfaction of the award (Payment Out Application).

The Court dismissed the Leave and Stay Applications. It granted the Payment Out Application, subject to a 14-day delay to allow for any further application for leave to appeal and interim stay pending appeal.

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New York Convention 1958 to enter force in Angola on 4 June 2017

Angola has become the 157th Contracting State to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. On 6 March 2017, Angola deposited its instrument of accession to the Convention with the UN Secretary General.  Under Article XII(2), the Convention will enter into force in Angola on 4 June 2017, 90 days after the deposit of its instrument of accession. Unlike many states, Angola has not made any declarations, notifications or reservations regarding the application of the Convention.  The most frequently made declarations are to apply the Convention only to: (i) recognition and enforcement of awards made in the territory of another contracting State (the so-called "reciprocity reservation"); and (ii) differences arising out of legal relationships that are considered commercial under the national law (the so-called "commercial reservation").

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