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Interpretation of CIETAC Award

A dispute between Shandong Hongri Acron Chemical Joint Stock Co. Ltd and PetroChina International (Hong Kong) Co. Ltd was determined by an arbitral tribunal of the China International Economic and Trade Commission (CIETAC). The arbitral award required Shandong Hongri to return a specified volume of sulphur to PetroChina and PetroChina to return the payment it had received for the sulphur. The award was silent as to the time for delivery of the sulphur by Shangdong Hongri, but specified that payment should be made by PetroChina within 30 days.

The issue before the Hong Kong courts, from which leave to enforce the arbitral award was sought, was whether Shandong Hongri's obligations to return the sulphur was concurrent (used in the sense of "independent of") with PetroChina's duty to return payment, or whether the payment was subsequent to and conditional upon the return of the sulphur in its original state.

The Court of Appeal (CA) said that there are two different stages in the enforcement of arbitral awards. After an award is converted into a judgment (the recognition stage), it is enforced (the execution stage). The CA said that the task of the enforcing court should be "as mechanistic as possible" and it is not entitled nor bound to go behind the award, explore the reasoning of the arbitral tribunal or second guess its intention. Therefore under Section 2GG(1) of the old Arbitration Ordinance (which continues to apply to arbitrations commenced before 1 June 2011), if an award is entered as a judgment then it has to be entered "in terms of the award". Overturning the Court of First Instance's decision, the CA held that it could not impose the delivery condition on PetroChina's payment obligations because it was plain that the award did not say that the payment obligations were conditional or dependent on the return of the sulphur. The CA said that to do otherwise would be to alter, rather than enforce, the award, which is something the enforcement court is not entitled to do.

Key Contacts

Kwok Kit (KK) Cheung

Partner | Litigation and Dispute Resolution

Email or call +852 2825 9427

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