Hong Kong court upholds anti-suit injunction granted by arbitrator

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).

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HONG KONG COURT REMITS AWARDS TO ARBITRATOR FOLLOWING CHANGE IN LAW OF ILLEGALITY DEFENCE

The Hong Kong Court of First Instance (“CFI”) has suspended set-aside proceedings in respect of two HKIAC awards on liability and quantum and remitted the matter to the arbitrator (G v. N [2023] HKCFI 3366).

The decision centred on the arbitrator’s denial of relief to the claimant due to the illegality of the underlying transaction, based on English authority which had ceased to be good law in Hong Kong only a few days before the arbitrator’s decision.

Mimmie Chan J emphasised that any error of law on the issue of illegality was not subject to review, but that the court had the power and duty to consider whether the denial of relief to the claimant rendered the awards contrary to the public policy of Hong Kong “as at today”.

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MILESTONE ARBITRATION JUDGMENT FROM HONG KONG’S HIGHEST COURT BRINGS GREATER CERTAINTY FOR COMMERCIAL CONTRACTS

Herbert Smith Freehills has secured a landmark judgment from the Hong Kong Court of Final Appeal, with significant practical implications for thousands of commercial contracts.

In C v D [2023] HKCFA 16, the CFA confirmed that arbitrators, not the courts, should have the final say on whether a party has complied with an escalation clause – a common contractual mechanism pursuant to which parties agree (for example) to negotiate, or mediate, before commencing arbitration.

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Hong Kong Court of Appeal rules on landmark case regarding escalation clauses

Herbert Smith Freehills has secured an important judgment from the Hong Kong Court of Appeal, C v D [2022] HKCA 729, regarding escalation clauses – contractual provisions which require negotiation or mediation before either party can begin formal proceedings.

These clauses are intended to promote the efficient resolution of disputes, but often lead to costly litigation. In particular, where the dispute is ultimately referred to arbitration, an argument about compliance with the escalation mechanism can derail proceedings, leaving any decision of the arbitrators vulnerable to challenge in the courts.

The Court of Appeal has now resolved this issue by finding that any dispute about escalation clauses should generally be resolved by the arbitrators chosen by the parties, not the courts. Findings made by the arbitral tribunal on these issues should be final and binding, and cannot be used as a basis to challenge the final award save for in exceptional circumstances.

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