Fraud Unravelling All ' Case Update On High Court Of Hong Kong Approach To Stays In Arbitration

• Published date: 04 August 2023
• Law Firm: Wikborg Rein
• Author: John Xavier Butler and Leah Rutley

The High Court of Hong Kong has ruled that a party seeking a stay of proceedings in favour of arbitration must demonstrate at least a prima facie case that an arbitration agreement exists. This was in the case of Haller v Vestey International and CMC (overturned on other grounds on appeal), where the Plaintiff had argued that the tripartite agreement was a forgery. If a party cannot demonstrate this, the court may refuse to grant a stay and resolve the issue itself.

It is a well-established principle in international arbitration that an arbitral Tribunal may rule on its own jurisdiction. This doctrine (known as kompetenz-kompetenz) is enshrined, for arbitrations seated in England, by s30(1) of the Arbitration Act 1996. This includes ruling on the question of whether or not there is in fact a valid arbitration agreement (see s30(1)(a)).

However, in practice, a claimant party who takes the view that there is no arbitration agreement at all, and is unlikely therefore to establish an arbitral tribunal simply to confirm that fact, will bring its claims to court. The party seeking to rely on the agreement will challenge that action - ordinarily by applying to stay the proceedings in favour of the alleged arbitration agreement. This power (to stay proceedings in favour of arbitration) is arbitration's first line of defence. In England this is reflected in s9(1) of the Arbitration Act. Article 8 of the UNCITRAL Model Law, as incorporated into the national legislation of several jurisdictions overseas, provides the same power to courts.

As a matter of English law, it will then be a defence to that stay application to show to the court's satisfaction that the arbitration agreement is "null and void, inoperative, or incapable of being performed" (per...