Challenging Arbitration Awards: The Pacific China Case

Summary

The circumstances in which an arbitration award may be challenged in court have recently been the subject of an important decision by the Hong Kong Court of Appeal1.

The decision confirms Hong Kong as an "arbitration-friendly" jurisdiction, with a strong policy of judicial support for the enforcement of arbitration awards.

Introduction

In general, no appeal can be brought to overturn the award of a Hong Kong arbitration tribunal, the only exception being under the Arbitration Ordinance's "opt-in" provisions. The absence of an appeal to the court preserves the autonomy of arbitration, as well as avoiding the time and costs which are involved in an appeal process.

This is not to say that an arbitration tribunal has carte blanche to conduct the arbitration proceedings in any way it chooses. The court still retains a supervisory role to ensure that due process is followed: an aggrieved party may apply to set aside an award on the grounds set out in article 34 of the UNCITRAL Model Law. The grounds concern the procedural aspects of the tribunal's management of the case, as opposed to a review of the award on the merits.

The Pacific China case

Whilst there are judicial checks and balances on the arbitration process, it is rare for the courts to interfere with an award. The Pacific China case was unusual in that the Court of First Instance was persuaded to set aside the award under article 34(2) of the Model Law on grounds that (1) the applicant had been unable to present its case, and (2) the arbitral procedure was not in line with the agreement of the parties.

However, the Court of Appeal allowed the appeal, and reinstated the tribunal's award. The court emphasised that article 34 is concerned with "the structural integrity of the arbitration proceedings". The remedy of setting aside was not an appeal, so the court would not analyse the substantive merits of the dispute, or the correctness of the award in terms of fact or law.

Procedural violations

In arguing that it had been unfairly denied an opportunity to present its case, the applicant alleged that the tribunal had violated its rights in three respects:

the tribunal had departed from an agreed procedural timetable which required the parties to exchange submissions. By instead permitting sequential filing of submissions, the other side was given the advantage of seeing the applicant's submissions before preparing its own; the tribunal refused to consider additional legal authorities...