What constitute sufficient reasons for an arbitration award?

In the recent case, Arima Photovoltaic & Optical Corporation v Flextronics Computing Sales and Marketing (L) Ltd, CACV 194/2012, 4 June 2014, the Court of Appeal dismissed an appeal by the Plaintiff seeking to set aside an arbitral award on the basis that the arbitral tribunal’s ruling did not constitute a reasoned award and therefore breached Articles 34(2)(a)(iii) and (iv) and 34(2)(b)(ii) of the UNCITRAL Model Law on Arbitration which was given the force of law by the old Arbitration Ordinance (Cap.341).

At the arbitration, although the Plaintiff succeeded in its claim, it was held liable to the Defendant on some of the Defendant’s counterclaims. The Plaintiff sought to set aside the award in respect of the quantum of the Defendant’s counterclaims on the basis that the award was not reasoned i.e. it had not disclosed the basis on which the quantification of the Defendant’s losses in respect of the counterclaim was arrived at. The Court of First Instance dismissed the Plaintiff’s application and the Plaintiff then appealed to the Court of Appeal, which upheld the decision of the Court of First Instance, holding as follows:-

1. When considering the sufficiency or adequacy of a short reason given by the tribunal, one should have regard to the circumstances of the arbitration, and in particular the manner in which the matter under consideration was dealt with by the parties to the proceedings. The parties can be expected to know how the issue had been approached by them, and the nature of such arguments as they may have put forward in relation to it. In the present case,  the Plaintiff must have been well aware that it had advanced no case contrary to what was being claimed by the Defendant, had put forward no contrary evidence of its own, had not sought to challenge the evidence put forward by cross-examination of the Defendant’s witness who had given evidence about the losses, and had made no positive submissions about the case.  
2. The nature and extent of the challenge to the Defendant’s case was highly relevant to the question of what needed to be done by the arbitrators in dealing with a particular aspect of the case. In the present case, the response of the arbitrators was entirely adequate. 
3. Given that the form of the arbitration involved an adversarial process, in the absence of any challenge to the matters put forward by the Defendant, whether by way of drawing attention to deficiencies or unsatisfactory aspects of the case being advanced, the arbitrators were entitled to conclude that the Defendant’s case was made out. Here, the documents which did not support the Defendant’s case were not put to the Defendant’s witness or referred to at all before the arbitrators, whose attention was never drawn to them. As such, the evidence of the Defendant’s witness, having been set out in his witness statement and adopted as his evidence in chief at the hearing before the arbitrators, formed part of the evidence before them on which they could rely in coming to their award.

This is another case where the Court in Hong Kong rejected a party’s challange to enforcement of an arbitral award and ordered them to pay indemnity costs. Where a party challenges the sufficiency of reasons given by the arbitral tribunal for its decision, it is clear that the Court will not consider those reasons in a vacuum and will instead have regard to the manner in which the matter was dealt with at the arbitration. Here, where the form of the arbitration involved an adversarial process, with statements of case, evidence, cross-examination and submissions from both sides, in the absence of any challenge by the Plaintiff to matters put forward by the Defendant, the arbitrators were entitled to conclude that the Defendant’s case was made out.