Hong Kong Court Grants Anti-Arbitration Injunction To Protect Enforcement Of Prior Award

• Law Firm: Herbert Smith Freehills
• Subject Matter: Litigation, Mediation & Arbitration, Arbitration & Dispute Resolution
• Author: Ms Kathryn Sanger, Aaron McDonald and Martin Wallace
• Published date: 02 June 2023

The Hong Kong Court of First Instance ('CFI') has taken the rare step of granting an anti-arbitration injunction to restrain claims which sought to undermine the enforcement in Hong Kong of a prior arbitral award (廈門新景地集團有限公司 formerly known as 廈門市鑫新景地房地產有限公司 v. Eton Properties Ltd and Another [2023] HKCFI 1327).

The decision is the latest in the long-running proceedings between Xiamen Xinjingdi Group Co Ltd ('XJ') and Eton Properties Limited and others (together 'EP'), which have been addressed in three of our previous blog posts (see here, here and here).

In the most recent proceedings, XJ (the award creditor) applied for an anti-arbitration injunction to restrain a new Mainland PRC-seated CIETAC arbitration commenced by EP (the award debtor).

The CFI refused to grant a blanket injunction restraining the arbitration in its entirety, even though there were good grounds to find that the arbitration was vexatious, oppressive and abusive. This was because certain claims being advanced for the first time in the new arbitration (which had not been determined or foreclosed by the findings of previous tribunals or courts) fell within the scope of the arbitration agreement.

The CFI did, however, grant an injunction restraining claims in relation to a number of matters which did not fall within the scope of the arbitration agreement and had already been determined by the Hong Kong courts in the context of proceedings to enforce the prior award. The CFI concluded that any arbitration of such claims would seek to attack judgments of the Hong Kong courts and undermine enforcement of the prior award, and would therefore be an abuse of process. The circumstances were therefore sufficiently exceptional to justify the granting of an injunction restraining those claims.

Background

XJ and EP entered an agreement to develop a piece of land in China ('Agreement'). The Agreement was governed by PRC law and contained an arbitration clause providing for CIETAC arbitration seated in the Mainland.

Under the Agreement, XJ was to pay EP for the possession of land held by a subsidiary of EP. XJ would build and sell apartment blocks on the land, and EP would then transfer their shareholding in the subsidiary to XJ. However, before the shareholding was transferred, EP purported to terminate the Agreement and their subsidiary developed the land itself.

XJ commenced arbitration and obtained an award in its favour ('First Award') which ordered, amongst other things, that EP perform their obligations under the Agreement by completing the transfer of the shareholding to XJ.

Unbeknown to the arbitral tribunal and XJ, EP had carried out...