Hong Kong constitutionality challenge – leave to appeal denied

The Hong Kong Court of Appeal (CA) has rejected an application for leave to appeal to the Hong Kong Court of Final Appeal from its previous judgment that upholds the constitutionality of s.81(4) of the Arbitration Ordinance (Cap. 609), under which a party who wishes to appeal a Court of First Instance (CFI) decision on setting aside an arbitral award must obtain leave to appeal from the CFI.

In its 18 December judgment (HCMP2472/2014), the CA decided that it is not reasonably arguable that section 81(4) of the Arbitration Ordinance is unconstitutional.  It did not regard itself as wrong to have had regard to the alternative scheme in Schedule 2 of the Arbitration Ordinance and the existence of the residual jurisdiction in assessing the proportionality of section 81(4).  The CA repeated that, viewed in light of the overall statutory scheme of the Arbitration Ordinance, section 81(4) clearly comes within the range of reasonable options to achieve the legitimate aims of the Arbitration Ordinance.

This judgment confirms the limited rights of appeal in arbitration cases and the constitutionality of the relevant provisions. It is now clear that there will be only one chance for a losing party in an application to set aside an arbitral award to apply for leave to appeal, subject to the residual jurisdiction of the CA to review the process of the CFI in refusing leave (which will be rarely invoked).

Herbert Smith Freehills acted for the successful Respondent in the arbitration and court proceedings.

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Hong Kong Court of Appeal upholds Arbitration Ordinance limits on rights of appeal

The Hong Kong Court of Appeal has rejected a challenge to the constitutionality of s.81(4) of the Arbitration Ordinance (Cap. 609), under which a party who wishes to appeal a Court of First Instance (CFI) decision on setting aside an arbitral award must obtain leave to appeal from the CFI.

Article 82 of the Basic Law, which operates as Hong Kong’s constitutional document, vests the power of final adjudication in the Court of Final Appeal (CFA). The Applicant in China International Fund Limited v Dennis Lau & Ng Chun Man Architects & Engineers (HK) Limited v Secretary for Justice argued that s.81(4) of the Arbitration Ordinance is unconstitutional, in that it disproportionately restricts the CFA’s power of final adjudication under the Basic Law.

In its 12 August judgment, the Court of Appeal confirmed that, although s. 81(4) constitutes a restriction of the power of final adjudication vested in the Court of Final Appeal, such restriction is no more than is necessary to achieve legitimate aims, and hence is proportionate and constitutional. The Court of Appeal further held that, notwithstanding the apparent finality of s.81(4), it retains a residual jurisdiction to supervise the process in the CFI in cases of refusal of leave, and to provide redress, but that this jurisdiction will be invoked only in extreme situations.

The Court of Appeal ordered costs on the indemnity basis, as is now the norm for arbitration-related cases in Hong Kong.

This is a significant decision, and likely to be the authority on the constitutionality of the relevant statutory provisions of the Arbitration Ordinance and the Court of Appeal’s residual jurisdiction in the appeal process in arbitration cases.

Herbert Smith Freehills acted for the successful Respondent in the arbitration and court proceedings. Continue reading