Hong Kong Court Refuses To Enforce Award Due To "Grossly Unfair And Unjust" Procedure

• Published date: 30 March 2023
• Subject Matter: Litigation, Mediation & Arbitration, Arbitration & Dispute Resolution
• Law Firm: Herbert Smith Freehills
• Author: Mr Simon Chapman, Kathryn Sanger and Martin Wallace
• topic: Civil Procedure

The Hong Kong Court of First Instance has refused to enforce an arbitral award because the procedure adopted by the tribunal was so "seriously flawed" and "egregious" that due process was denied (CIC v Wu and Ors [2023] HKCFI 700).

The unusual facts of this case underline the high threshold to successfully challenge arbitral awards on due process grounds in Hong Kong, whilst illustrating the willingness of the courts to intervene to prevent injustice in exceptional cases.

Background

The award creditor ("CIC") brought claims under commodity sales contracts against a principal debtor and five individual guarantors, two of whom were named Wu ("Wu").

The arbitration proceedings were bifurcated, such that liability as between CIC and the principal debtor would be determined in part 1 of the arbitration and liability as between CIC and the guarantors (including Wu) would be determined in part 2.

For substantially all of the part 1 proceedings, the principal debtor did not have legal representation and took no part in those proceedings.

After issuing an interim award in favour of CIC, the original arbitrator ("Arbitrator 1") resigned to avoid the appearance of bias in part 2 (essentially because he would have to rule again on the liability of the principal debtor, on which he had already decided in part 1, to come to a decision on the liability of the guarantors in part 2).

A new arbitrator ("Arbitrator 2") was then appointed, and the previously directed procedure for part 2 was followed, including a hearing. Wu did not have legal representation from 10 days before the hearing.

The agreed list of issues put before Arbitrator 2 in advance of the hearing did not include any issues as to whether the interim award was binding as against the guarantors or whether (and if so in what...