Conflicting Awards In Parallel Arbitral Proceedings

• Published date: 07 October 2021
• Subject Matter: Litigation, Mediation & Arbitration, Arbitration & Dispute Resolution
• Law Firm: Bryan Cave Leighton Paisner LLP
• Author: Mr Horace Pang and Glenn Haley

Summary

In W v AW [2021] HKCFI 1707 (date of decision: 17 June 2021), a case described by the court as "highly unusual", an arbitral award was held to be manifestly invalid.

The award in question contained findings that were inconsistent with the findings made in an earlier award, on the same issues, and in a parallel arbitration proceeding between the same parties. Material to the court's decision was that there was a common arbitrator in the two sets of arbitral proceedings, and who had made contradictory findings, failed to deal with or explain the inconsistency, and failed to give the parties an opportunity to be heard before making the inconsistent findings against them.

THE UNDERLYING CONTRACTS AND THE CONFLICTING AWARDS

W and AW were parties to two related agreements (a framework agreement and a share redemption agreement) that formed part of a series of transactions designed to pave way for an acquisition. The acquisition was not completed.

After a series of disputes arose between the parties, two arbitrations were commenced. The earlier arbitration was commenced by W and PY (W's sole shareholder and director) under the framework agreement against AW and other parties to that agreement ("Arbitration 1"). Subsequently, AW commenced an arbitration under the share redemption agreement against W ("Arbitration 2"). Different tribunals of three arbitrators were constituted in Arbitration 1 and Arbitration 2 ("Tribunal 1" and "Tribunal 2" respectively), but there was one common arbitrator and that common arbitrator was nominated by AW.

Tribunal 1 and Tribunal 2 handed down their respective awards in March and July 2020 ("Award 1" and "Award 2" respectively). Both awards turned on misrepresentation claims made by AW against W and (in Arbitration 1) PY, based on identical representations made by PY through W. While Tribunal 1 (in Award 1) dismissed AW's misrepresentation claims, Tribunal 2 (in Award 2) found in favour of AW's misrepresentation claims. Both Award 1 and Award 2 were unanimous decisions.

W AND AW'S RESPECTIVE APPLICATIONS TO THE COURT

W applied to the court to set aside Award 2 on, among other grounds¹ , the ground that Award 2 was contrary to the public policy of Hong Kong. Invoking the doctrine of issue estoppel, W argued that Tribunal 2 was bound by the findings on the common issues already determined in Award 1, and that it was contrary to principles of fairness, due process and justice for Tribunal 2 deliberately to ignore Tribunal 1's...