Hong Kong–Mainland interim relief arrangement to take effect 1 October

The Supreme People’s Court of China and the Department of Justice of Hong Kong SAR announced today that the Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings by the Courts of the Mainland and of the Hong Kong Special Administrative Region will come into effect on 1 October 2019 in both Mainland China and Hong Kong.  The SPC also released an explanatory memo setting out its understanding of key aspects of the Arrangement and its implementation.

The SPC and the DOJ signed the Arrangement on 2 April 2019.  As  reported in our posts of 2 April and 4 April, the Arrangement empowers Mainland Chinese courts  to order interim measures in support of Hong Kong-seated arbitrations, making Hong Kong the only seat outside Mainland China to benefit from such support.

The SPC and DOJ also released a list of “qualified arbitral institutions” in Hong Kong. These are the only institutions whose arbitrations  enjoy the benefit ofthe Arrangement.  They include:

  • Hong Kong International Arbitration Centre
  • China International Economic and Trade Arbitration Commission Hong Kong Arbitration Center
  • International Court of Arbitration of the International Chamber of Commerce – Asia Office
  • Hong Kong Maritime Arbitration Group
  • South China International Arbitration Center (HK)
  • eBRAM International Online Dispute Resolution Centre

Among other things, the SPC memo confirms that the Arrangement will apply to arbitral proceedings commenced prior to, but not yet completed as of, 1 October 2019.  As such, we anticipate that interim relief applications under the Arrangement are likely to emerge soon.

Helen Tang
Helen Tang
Partner, Shanghai
+86 21 2322 2160
Weina Ye
Weina Ye
Senior Associate, Shanghai
+86 21 2322 2132
Stella Hu
Stella Hu
Of Counsel, Hong Kong
+852 2101 4248

Hong Kong court: remission for reconsideration – not an automatic cure for substantial injustice

In P v. M [2019] HKCFI 1864; HCCT 6/2019 (24 July 2019), the Hong Kong Court of First Instance set aside parts of two arbitral awards which were found to be in breach of procedural fairness resulting in substantial injustice.

Background

This is the second of two set aside applications arising from the same underlying arbitration based on a construction contract (Contract) which provided for domestic arbitration in Hong Kong. M had claimed against P for monies to which it was entitled under the Contract. After a first hearing in November 2017, the tribunal issued an interim award against P, ordering it to pay damages for loss and expense (First Award).

Challenge to the First Award

P raised a challenge to the parts of the First Award relating to a sum in respect of site overheads and insurance costs (Disputed Sum).

  • P argued that M’s case on the Disputed Sum was that it was not required to give notice of the claim for the Disputed Sum, or that even if such notice were required, P had waived this requirement or was estopped from asserting M’s failure to do so.
  • While the tribunal had rejected M’s pleaded claims, it nevertheless awarded M the Disputed Sum by finding that certain letters from M to P constituted notice as required by the Contract. P argued that in doing so, the tribunal had exceeded its powers, or had failed to conduct the arbitral proceedings in accordance with the procedure agreed by the parties.
  • P thus sought to impugn certain paragraphs of the First Award pertaining to the Disputed Sum (Challenged Paragraphs), or alternatively, to set aside the First Award on the ground that P had been denied a reasonable opportunity to present its case in the arbitration.

P’s application was heard and granted by Mimmie Chan J.

  • Chan J found that P had been “deprived of the fair opportunity to present its case and to make submissions to the tribunal on the effect and adequacy of the [letters] as proper notices under the Contract”, given that P had not been informed of this argument during the arbitration proceedings.
  • While noting the need for finality of awards, and that only extreme cases would justify the court’s intervention, Chan J found that this was a case where a serious error had affected due process and the structural integrity of the arbitral proceedings, with the result that P had suffered substantial injustice.
  • Since the complaint was that P had been deprived of a fair opportunity to make relevant submissions to the tribunal, Chan J remitted the matter to the tribunal for reconsideration. In addition, she declared that the Challenged Paragraphs would have no effect pending the reconsideration, and ordered the parties to file further submissions to the tribunal on specific issues, including the meaning and effect of the letters and whether they constituted valid notification of claims as required under the Contract.

Challenge to the Second Award

Following Chan J’s decision, the parties filed further submissions and the tribunal issued a second interim award (Second Award), which reinstated the Challenged Paragraphs in the First Award. P then raised a challenge to the Second Award on the same grounds as its first challenge.

  • P again argued that the tribunal had exceeded its powers and/or failed to conduct the proceedings in accordance with the procedure agreed by the parties or as directed by Chan J by, among others:
    • summarily rejecting P’s submissions on “threshold issues” that injustice arising from matters not raised in the substantive arbitration could not be rectified by further submissions on remission in the absence of a further evidentiary hearing;
    • taking into account submissions made by M which were not “in reply” to P’s submissions on remission and had not been pleaded or dealt with in evidence in the arbitration;
    • directing further submissions on matters which could not properly and fairly be addressed by a further evidentiary hearing;
    • embarking on its own enquiry and making findings that were not contended by M.
  • P submitted that it was denied an opportunity to address such matters, of which P had had no prior notice.
  • P further submitted that there was no benefit in remitting such matters to the tribunal again.

Decision on the Second Award

Coleman J first canvassed the principles applicable to the challenge, which he regarded as “reasonably well-settled”:

  • it is for the applicant to establish both serious irregularity and substantial injustice. The test of a serious irregularity giving rise to substantial injustice requires a high threshold to be met, so as drastically to reduce the extent of intervention by the Court in the arbitral process;
  • the Court is concerned with the structural integrity of the arbitration proceedings, and not with the substantive merits of the dispute;
  • a balance has to be drawn between the need for finality of the award and the need to protect parties against unfair conduct in the arbitration. Therefore, only an extreme case will justify the Court’s intervention;
  • the effect of setting aside an award or declaring an award, or part thereof, to be of no effect is that the award, or the relevant part, is a nullity. The arbitration can revive or carry on as necessary to deal with the matters that were set aside or declared to be of no effect;
  • following a remission, the tribunal’s revived authority extends only to the matters that are so remitted; it cannot go beyond the scope of the revived jurisdiction.

On the evidence, Coleman J agreed with P that there had been a serious irregularity leading to substantial injustice.

  • Coleman J opined that “once it [was] identified and directed that parties are bound by their pleaded cases, and by the evidence already traversed at the arbitration hearing, and by the findings of fact made on that evidence, then there was really only one proper conclusion which the [tribunal] could have reached” – that the claim must fail.
  • If M had wished to advance a case on the suggestion of the tribunal that the letters constituted the required notice, then “it could only properly have done so by making an application to amend its pleadings, which if allowed would almost certainly have required re-opening the evidentiary hearing.”
  • While the tribunal was mindful of Chan J’s decision, and sought to provide proper opportunity for P to present its case by giving P the “final right of reply”, the defects “have not been cured, and could not have been cured, by the route taken by the Arbitrator”.
  • The Court had in fact already considered that intervention in this arbitration is justified and necessary. Despite the remission for reconsideration, the serious irregularity warranting intervention has not been cured.

Coleman J thus proceeded to set aside the paragraphs in the First Award that had been impugned by Chan J, as well as the relevant paragraphs of the Second Award that exceeded M’s pleaded case.

Conclusion

While Hong Kong courts are slow to set aside arbitral awards, they will do so where they consider that the high threshold of serious irregularity resulting in substantial injustice has been met. To avoid challenges based on serious procedural irregularities, arbitrators must resist any temptation to look beyond the case as set out in the parties’ pleadings.

 

May Tai
May Tai
Managing Partner, Greater China
+852 2101 4031
Simon Chapman
Simon Chapman
Partner, Hong Kong
+852 2101 4217
Kathryn Sanger
Kathryn Sanger
Partner, Hong Kong
+852 2101 4029
Briana Young
Briana Young
Foreign Legal Consultant (England & Wales) / Professional Support Consultant
+852 2101 4214

Herbert Smith Freehills – SMU Asian Arbitration Lecture

This year marks the ninth edition of the Herbert Smith Freehills – SMU Asian Arbitration Lecture Series.

We are delighted that The Honourable Justice Judith Prakash will deliver the lecture on Wednesday 2 October, on the topic “The Court’s role in arbitral proceedings: regulator or promoter?”

The Herbert Smith Freehills-SMU Asian Arbitration Lecture Series was established in 2010 through funding from Herbert Smith Freehills, and promotes collaborative forms of dispute resolution and access to justice. It also aims to promote Singapore as a leading centre for dispute resolution in Asia, particularly in arbitration and mediation. Each year, a distinguished jurist delivers the lecture, which is also published in a leading global arbitration journal.

Date:      Wednesday, 2 October 2019

Time:      4:30pm – Registration

5:00pm – Lecture

Cocktail Reception to follow

Venue:   Singapore Management University

Administration Building

Mochtar Riady Auditorium, Level 5

81 Victoria Street

Singapore 188065

Click here to register

The lecture will be a SILE accredited CPD activity.

Hong Kong Court of Appeal ends 12-year Xiamen v Eton Properties saga

As discussed in this post, Xiamen Xingjingdi Group Co Ltd (XJ) and various co-defendants affiliated with Eton Properties Ltd (together, EP) have been involved in a long-running dispute in multiple fora, including a PRC-seated CIETAC arbitration and several Hong Kong court proceedings. The case appears now to have come to an end, with the Court of Appeal (Court) confirming its position on common law actions to enforce arbitral awards and rejecting both parties’ applications for leave to appeal the Court’s 15 April 2016 judgment.

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Herbert Smith Freehills appoints Christian Leathley US Head of International Arbitration

Herbert Smith Freehills has appointed Christian Leathley to the role of US Head of International Arbitration in New York.

Christian, who is also the Head of the firm’s Latin America Group, is based in Herbert Smith Freehills’ New York office, where he has been based since 2015. Prior to relocating to the New York office Christian was based in the firm’s London office.

A highly-regarded international arbitration specialist with nearly 20 years of experience, Christian focuses his practice on international commercial and investment arbitration servicing clients’ interests in all countries throughout Latin America. He also regularly appears as an advocate before all major international arbitration tribunals, with particular experience in the practice of public international law.

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INTERNATIONAL ARBITRATION INTERNSHIP (HONG KONG): APPLICATIONS NOW OPEN

Herbert Smith Freehills is accepting applications for short-term internships with the firm’s international arbitration group in Hong Kong. Three to four paid internship positions are open for three to four months each (not extendable), beginning in or around January, May and September 2019.

Interns will work alongside our Greater China international arbitration team. They will have a varied workload, including assisting with current arbitrations and other client work; arbitration-related research; writing blog posts and articles; producing arbitration-related internal know-how, and similar projects.

For more detail, please refer to the Herbert Smith Freehills Careers page (click “Apply Now” and search Hong Kong openings).

https://careers.herbertsmithfreehills.com/cn/grads/international-arbitration-internship

Applications must be submitted via the Careers page on or before 31 August 2018.

Join us in Singapore to celebrate 60 years of the NY Convention

Enforcement of arbitration awards in SE Asia

This year marks the 60th anniversary of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958, commonly referred to as the “New York Convention”.  As one of the most successful international treaties of the 20th century, and a primary tool in the promotion of arbitration worldwide, the Convention established a regime to facilitate international enforcement of arbitration awards in 159 countries.

This event will discuss the impact of the Convention in Southeast Asia, and whether its objectives have been successful in practice.  Following a keynote address by Justice Anselmo Reyes of the Singapore International Commercial Court, a series of presentations and panels will discuss the history of the Convention; how it shapes the day-to-day conduct of international arbitration; practical experience of enforcement in ASEAN states (with data from a new survey); and future prospects for similar regimes that aim to support international litigation and mediated settlements.

This event is jointly hosted by Singapore Management University (a premier university, internationally recognised for world-class research in the field of international arbitration); Singapore International Dispute Resolution Academy (a non-profit organization supported by the Ministry of Law, and Asia’s global thought leader for learning and research in negotiation and dispute resolution); and Herbert Smith Freehills (one of the world’s leading law firms, with a global reputation for international arbitration).

The event will be a SILE accredited CPD activity.

For more information on the programme and speakers, please click here.
Date:     Tuesday, 12 June 2018
Time:     Registration: 4:30pm
Event: 5:00pm to 7:30pm, followed by a cocktail reception
Venue:
NTUC Centre,
1 Marina Boulevard
Level 7, Stephen Riady Auditorium @ NTUC
Singapore 018989

Please click here to view map
RSVP: To respond to this e-invitation, click here

Please RSVP by Tuesday, 29 May 2018 to secure your seat. Spaces are limited and will be offered on a first come, first served basis.
 

Herbert Smith Freehills’ Global Arbitration Practice Ranked Top Three in the World for the Third Year Running

Global Arbitration Review (GAR) has unveiled its annual ranking of the world’s leading international arbitration practices, with Herbert Smith Freehills ranked in the top three for the third year in a row.

The firm’s GAR 30 ranking appears in the 11th edition of the GAR 100, which was revealed last night at the eighth annual GAR Awards ceremony at the Four Seasons George V hotel in Paris.

Highlighted again by the publication as a “force to be reckoned with”, GAR reports that the firm has seen an “influx” of high-value work “on the back of some high-profile results”. GAR reveals that the firm’s portfolio of pending investment treaty work is “as large as it’s ever been” – with nine cases worth more than US$1 billion (including one worth US$18 billion).

The firm also achieves a large number of peer-recognised specialists across the global network, having a total of 13 people featured in ‘Who’s Who Legal’.

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Hong Kong judge defers to arbitration in dismissing winding up petition

In a recent Court of First Instance case before Harris J, Southwest Pacific Bauxite (HK) Ltd (Company) sought to strike out a winding-up petition issued against it by Lasmos Ltd (Petitioner). The ground of insolvency relied on by the Petitioner was a statutory demand of US$259,700.48 (Debt), arising out of a management services agreement (MSA) between the Company and the Petitioner (Parties). The Company disputed the Debt.

The issue in this case was the impact of the arbitration clause in the MSA on the exercise of the court’s discretion to make a winding-up order.
Lasmos Ltd v Southwest Pacific Bauxite (HK) Ltd [2018] HKCFI 426

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HKIAC signs cooperation agreement with Russia’s IMA

On 6 March 2018, the Hong Kong International Arbitration Centre (HKIAC) and the Institute of Modern Arbitration of the Russian Federation (IMA) signed a Cooperation Agreement that aims to support and promote the development of international arbitration and other dispute resolution options in Russia and Hong Kong.

This is a further development in HKIAC’s on-going efforts to meet growing demand in the Russian market for disputes to administered by established Asian arbitration institutions, such as HKIAC and the Singapore International Arbitration Centre (SIAC), which has signed a similar cooperation agreement with IMA.

In recent years, HKIAC has built up a panel of 30 Russian-speaking arbitrators, translated the HKIAC rules into Russian, and hosted and participated in a number of events in Russia. HKIAC has also announced that it is developing a new set of Administered Arbitration Rules, with innovative features “that will bring a new level of arbitration experience to users in Russia and other parts of the world”.

According to a recent survey by the Russian Arbitration Association, Russian users have indicated that Asian centres including SIAC, HKIAC and CIETAC are viable alternatives to the more traditionally-used European arbitral institutions such as ICC, SCC, LCIA and the International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation (ICAC). In addition, the survey indicates that Singapore and Hong Kong are increasingly popular seats, and the laws of these jurisdictions are respectively the sixth and seventh most popular choices among the survey respondents.