HONG KONG COURT FINDS THAT DEFENDANT WAIVED RIGHT TO CHALLENGE JURISDICTION

Israel Sorin Shohat, the Third Defendant in proceedings commenced by Mr Balram Chainrai, sought to challenge the jurisdiction of Hong Kong courts to hear a matter related to an Israeli arbitral award issued in 2013. The court held that, while the deadline for challenging jurisdiction had not passed, Shohat had ultimately taken steps which indicated that he had submitted to the jurisdiction of the Hong Kong courts and therefore waived his right to challenge.

Balram Chainrai v Kushnir Family (Holdings) Ltd [2019] HKCFI 234

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Be on time to preserve your right to Active Remedies – the Singapore High Court considers a party’s duty to apply promptly when challenging the jurisdiction of an arbitral tribunal

In Rakna Arakshaka Lanka Ltd (“RALL“) v Avant Garde Maritime Services (Private) Limited (“AGMS“) [2018] SGHC 78, the Singapore High Court dismissed an application to set aside an award on jurisdiction, on the basis that the applicant had failed to challenge the tribunal’s preliminary ruling on jurisdiction within the deadline stipulated under section 10(3) of the International Arbitration Act (“IAA“) and Article 16(3) of the UNCITRAL Model Law. The decision provides guidance on the distinction between active and passive remedies in the context of applicable deadlines when seeking to set aside an award on grounds of jurisdiction, and resisting enforcement on the same basis.

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Tribunal awards India first BIT case win, dismissing claims of French investor

An UNCITRAL arbitral tribunal has reportedly dismissed a US$36 million claim by a French investor, Louis Dreyfus Armateurs SAS (“LDA“), against India under the 1997 France-India bilateral investment treaty (“BIT“). The award is not public at this time, but press reports state that LDA has also been ordered to pay approximately US$7 million in respect of India’s substantial legal expenses.

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English Court holds that arbitration clauses in individual sales contracts govern the disputes arising from corrupt arrangement to induce the contracts when an “umbrella agent agreement” is silent about dispute resolution

In a decision dated 24 April 2018, the English Commercial Court (the “Court“) dismissed  challenges brought under s67 and s32 of the English Arbitration Act 1996 (the “Act“) by Dreymoor Fertilisers Overseas PTE Ltd. (“Dreymoor“).

The case concerned the construction and application of arbitration clauses to disputes arising out of a complicated business structure with multiple contracts between Eurochem Trading GMBH (“ECTG“), a fertiliser seller, and Dreymoor, an international trading company. Dreymoor sought to challenge the jurisdiction of tribunals constituted in two arbitrations (one LCIA and one ICC) commenced against it by ECTG, arguing (1) for a narrow interpretation of an LCIA arbitration clause to exclude non-contractual claims brought against it by ECTG; and (2) that there was no agreement to arbitrate between ECTG and Dreymoor in respect of the ICC arbitration.

The Court followed the liberal interpretation propounded in Fiona Trust & Holding Corporation v Privalov [2007] UKHL 40. The LCIA arbitration clause covered “any dispute or claim arising out of this Contract“. Those words were wide enough to cover the non-contractual disputes which ECTG had referred to LCIA Arbitration and the s67 challenge was dismissed. In respect of the ICC arbitration, the Court again held that the terms of the arbitration clause were very wide and sufficient to cover the disputes referred under it against Dreymoor. The s32 action therefore also failed.

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Dawood Rawat v Mauritius: Dual-national claim dismissed based on treaty context interpretation

On 6 April 2018, a Tribunal constituted under the UNCITRAL Arbitration Rules rendered an Award on Jurisdiction in the case Dawood Rawat v. The Republic of Mauritius (PCA Case 2016-20).  Following a thorough analysis of the interpretation of the 1973 Investment Protection Treaty between the Republic of France and Mauritius (the “France-Mauritius BIT” or the “Treaty”), the Tribunal denied protection of the relevant investment protection treaty to a dual national – a French-Mauritian businessman – despite the treaty was silent on its application to dual nationals.  This approach was contrary to prior investment treaty decisions, such as Serafín García Armas and other v Venezuela, in which tribunals have rejected jurisdictional objections brought by respondent states where relevant the bilateral investment treaty (“BIT”) was silent on the exclusion of dual nationals.

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Amendments to the Singapore International Commercial Court Regime to strengthen Singapore as an international arbitration seat of choice

On 9 January 2018, amendments were passed to the Supreme Court of Judicature (Amendment) Act (“SCJA “) which clarify that the Singapore International Commercial Court (“SICC“) has jurisdiction to hear proceedings relating to international commercial arbitration.  The amendments also abolish the pre-action certificate procedure for applications to the SICC.

Established in 2015 as the ‘international’ division of the Singapore High Court, the SICC has gone from strength to strength in a short span of time, gaining a reputation for the quality and speed of judgments rendered. Since its establishment the SICC has heard 17 cases on matters ranging from construction, investment, banking and finance, and shipbuilding, all of which are high value cases involving international parties and counsel.

These latest amendments, along with the addition of four new esteemed international jurists to the SICC bench, are intended to further increase the popularity and usage of the SICC, and Singapore as a preferred seat of international arbitration. Continue reading

Has the pendulum swung back in favour of the DIFC courts? Two new decisions of the Judicial Tribunal

We recently reported on three decisions of the Judicial Tribunal (please click here) following our commentary on the Judicial Tribunal’s controversial first decision in Daman v Oger and the effect on the Banyan Tree jurisdiction (click here). We concluded that, notwithstanding the absence of detailed reasoning in individual decisions, it was possible to piece together the Judicial Tribunal’s approach from its decisions taken as a whole. The two new decisions shine further light on that approach. Continue reading

Hong Kong Court rules on staying execution of arbitral enforcement order

Overview

In Israel Sorin (IZZY) Shohat v Balram Chainrai [2017] HKEC 1118, the Hong Kong Court of First Instance considered that enforcement of arbitral awards should be subject to the same regime as governs the stay of execution of an ordinary court judgment, and ruled that the Court had jurisdiction to stay execution of an arbitral award enforcement order.

However, in the circumstances of this case, the Court refused to grant a stay of execution, despite a pending action commenced by the respondent before the High Court.

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Background

The Applicant, a businessman resident in Israel (Applicant), regularly introduced the Respondent, a businessman from Hong Kong (Respondent), to business ventures in Israel.  One business venture involved loans advanced by the Respondent to Kushnir Family (Holdings) Ltd (Borrower), for the latter's purchase of a 35% shareholding in Nachushtan Investment Company Limited. The loan was secured by a pledge of the shares by the Borrower to the Respondent (Share Pledge).

In December 2007, the Applicant sought a declaration from the Israeli courts that he was entitled to a half interest in the loan and a lien of half the shares under the Share Pledge. In its counterclaim, the Respondent argued that the Applicant had breached its fiduciary duties as a trustee of the Respondent's funds and investments regarding other joint ventures between them.

In May 2011, the parties agreed to convert the legal proceedings before the Israeli courts into an arbitration. The arbitrator upheld the Applicant's claim and dismissed the Respondent's counterclaim. On 2 February 2016, the Applicant applied to the Hong Kong court to enforce the award as a judgment of the court, pursuant to Section 87 of the Arbitration Ordinance and Order 73, rule 10(1) of the Rules of the High Court. In the meantime, however, the Respondent had commenced legal proceedings in the Hong Kong High Court, claiming damages for negligence and breach of fiduciary duties against the Applicant (High Court Action).

On 3 May 2016, the Applicant applied to strike out the High Court Action, on the basis that the Respondent was seeking to relitigate the "same issues and subject matter". The Applicant argued this constituted an abuse of process.

On 15 September 2016, with the court's decision on the strike out application still pending, Justice Mimmie Chan rendered an enforcement order (Enforcement Order) "granting leave to the Applicant to enforce the [a]ward in the same manner as a judgment of the court". As the Respondent did not apply to set aside the Enforcement Order, the Court of First Instance considered the Enforcement Order valid and binding on the Respondent.

The legal issue that arose was whether, considering that the award was enforceable in the same manner as a court judgment, the Court had the same discretion to grant a stay of execution of the award as it would have for a court judgment, and whether, in the circumstances, it should do so.

Counsel for the Applicant submitted that there had been no application to set aside the Enforcement Order, and that the application for stay was therefore misconceived. He also argued that, because the award itself had not been challenged, the general policy of facilitating the enforcement of arbitral awards should prevail and prevent delaying the enforcement of the award.

The Respondent submitted that he was entitled to obtain a stay of execution, relying on the fact that the Respondent had paid the equivalent of HKD 33.5 million into court pursuant to the Enforcement Order as a condition for granting an interim stay of execution. Counsel for the Respondent also referred to the fact that the Respondent was likely to have to face difficulty enforcing the Hong Kong court's judgment in Israel.  

Decision

In its decision of 26 May 2017, the Court reiterated that it had discretion to grant a stay of execution of an ordinary judgment where the circumstances would justify such a stay. In light of the fact that the effect of the Enforcement Order is to enable enforcement of the award in the same manner as a judgment of the court, Justice Anderson Chow felt that as a matter of principle, there was no reason why the court would lack jurisdiction to grant a stay in the execution of the award. Chow J considered conflicting English decisions on this matter, but considered that he was not bound by these authorities.

Addressing the Applicant's argument on the "ethos of enforcement of awards", Chow J made a distinction between enforcement of arbitral awards on the one hand, which indeed should be an inexpensive and expeditious procedure, and the question whether to stay execution of the Enforcement Order. He concluded that the enforcement of the arbitral award should be subject to the same regime as governs the stay of execution of a court judgment. Therefore, the Court had jurisdiction to grant a stay of execution of the Enforcement Order.

In deciding whether to stay execution of the Enforcement Order, the Court considered Burnett v Francis Industries Plc [1987] 1 WLR 802, in which the Court listed a number of factors relevant to stay of execution of a court judgment. These are: the nature of the claim, the strength of the cross-claim, the size of the claim relative to the size of the cross-claim, any delay before the cross-claim will be disposed of, the extent of the prejudice to the creditor if it is denied the fruits of the judgment until the cross-claim is determined and the risk of prejudice to the debtor if it makes payment under the judgment.

Chow J considered certain circumstances to be particularly relevant in the case at hand. First, the Applicant had an award for a substantial sum of money against the Respondent; second, the Respondent had, at most, an "arguable" claim against the Applicant before the High Court; and third, there would be a significant delay before the Respondent's action would be finally disposed of.

In light of these, Chow J refused to grant the stay of execution of the Enforcement Order sought by the Respondent.

He ordered the Respondent to pay costs on the indemnity basis, "in accordance with the Court's usual practice regarding unsuccessful applications to challenge the enforcement of arbitration awards", a practice which is extended yet further by this decision.  

Comment

The Hong Kong Court has indicated that it will apply a flexible interpretation of section 84 Arbitration Ordinance and Order 73, rule 10(1) Rules of the High Court, bringing the regimes applicable to the stay of execution of awards and court judgments closer. While the flexibility is welcome, this decision also extends the scope of the court's powers to delay enforcement of an arbitral award. However, it is likely that the power will be exercised sparingly, in keeping with Hong Kong's usual practice of encouraging enforcement and the arbitral process overall.

 

Should I stay or should I go? Singapore High Court declines to stay arbitration pending review of jurisdictional ruling

Overview

In a recent ex tempore judgment in the case of Loblaw Companies Limited v Origin & Co Ltd & Another [2017] SGHC 59 ("Loblaw v Origin"), the Singapore High Court declined to exercise its discretion under s10(9) of the International Arbitration Act ("IAA"), and refused to stay an arbitration pending final determination by the Singapore courts of a separate application by Loblaw to review the Tribunal's finding on its jurisdiction.

In its decision the High Court acknowledged the lack of authority on when and how a court shall exercise its discretion under s10(9) of the IAA, finding that "[u]ltimately, very much depends on the unique facts and circumstances of each case". However, an applicant would generally be required to show "special circumstances" justifying a stay, over and above the (alleged) merits of the jurisdictional objection or the obvious risk of wasted time and costs.

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High Court confirms UNCITRAL Tribunal Award on jurisdiction

The High Court has confirmed an UNCITRAL Tribunal's Award on Jurisdiction, which rejected jurisdiction under an investment contract (Contract) and the 1994 Kazakh Law on Foreign Investment (FIL).

The Court placed particular emphasis on expert evidence of the principles of contractual interpretation under the Civil Code of the Republic of Kazakhstan.  It was not prepared to depart from these principles, which required a literal interpretation of the Contract and FIL.

Whilst the Court's reasoning differed in some respects from that of the Tribunal, it was broadly consistent with the Award on Jurisdiction. 

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