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Authored by: KK Cheung
The Defendant (D), the Main Contractor for reclamation works, engaged the Plaintiff (P) as Sub-contractor. P claimed that D breached the Sub-Contract, leading to P’s acceptance of repudiation to bring the Sub-Contract to an end. P claimed substantial damages. The Sub-Contract contained an arbitration agreement (Clause 31) providing that Sub-Contract Disputes shall be referred to arbitration and that a Sub-Contract Dispute would be deemed to arise when either party served on the other a Notice of Dispute, but that such Notice of Dispute shall only be raised after the completion certificate was issued under the Main Contract.
P referred the dispute to arbitration, but D objected on the basis that it was premature because the completion certificate had not been issued. The arbitrator, by way of Interim Award (Award), ruled that he did not have jurisdiction, on the basis that on the proper construction of Clause 31, the purported commencement of arbitration was premature. P applied to set aside the Award under s.81 of the Arbitration Ordinance (AO).
The court held that the arbitrator’s decision was one of admissibility rather than jurisdiction and was therefore not reviewable by the court. It said thata typical jurisdictional challenge concerns the existence, scope and validity of an arbitration agreement. The answer to such a challenge is a binary one; the tribunal either has jurisdiction or has no jurisdiction. The lack of jurisdiction is permanent, and parties cannot cure the defects by entering into an arbitration clause ex post facto or to rewrite the clause to bring the dispute within its ambit.
In comparison, the court said, an allegation that the commencement of arbitration is premature does not entail a permanent bar to arbitration. The bar is a temporary one. The bar could be removed once the parties have complied with the contractually agreed pre-arbitration requirements. An attempt to enforce pre-arbitration procedures is a positive affirmation of the existence of a valid arbitration agreement, instead of the denial of the agreement. This, the court said, puts a prematurity objection at the opposite side of a conventional jurisdictional challenge.
D relied heavily on the judgment in C v D  HKCFI 1474 in which G Lam J (as G Lam JA then was) carefully surveyed the judicial approach towards non-compliance with pre-arbitration procedural requirements in the UK, Singapore and US, as well as in academic writings from leading scholars in the area. In C v D, the arbitration agreement provided that parties should refer a dispute to the CEOs of both companies for resolution first, before going to arbitration. The court held in that case that compliance with procedural pre-arbitration requirements is a question that should be left to be decided by the arbitral tribunal, since it is a question that goes to the admissibility of the claim, rather than the arbitral tribunal’s jurisdiction. In other words, the court has no power under section 81 of the AO to re-assess the arbitral tribunal’s decision on this matter and to set aside the award. The court clarified that in approaching applications to set aside arbitral awards, the court must confine itself to true questions of jurisdiction.
The court in the present case, said that drawing together strands from G Lam J’s thorough survey, it can be seen that:
C v D was recently referred to by Mimmie Chan J in Kinli Civil Engineering Limited v Geotech Engineering Limited  HKCFI 2503, where she endorsed the view that non-compliance with pre-arbitration procedures or conditions goes to admissibility of the claim and a tribunal’s decision in this regard is not reviewable by the court. The court in the present case, agreed with this.
The court added that the parties are not of course prevented from agreeing that pre-arbitral procedural requirements should go to the tribunal’s jurisdiction, but such an agreement in an arbitration clause would require clear and unequivocal language.
The court said that if the court is the master of its own procedural rules, so should the arbitral tribunal be. It is logically sound that a tribunal’s decision on parties’ compliance or non-compliance with pre-arbitration procedures or conditions should be final and non-reviewable by the court.
The court’s finding that the characterisation of the question of compliance or non-compliance with pre-arbitration procedures is an admissibility issue – not a true jurisdictional challenge – meant that the decision in the Award was one on admissibility and not subject to review.
This decision basically follows the analysis of the differences between admissibility and jurisdictional challenge in C v D and the conclusion of Coleman J is unsurprising. It also confirms the comment in our article on C v D, that failure to comply with the pre-arbitration procedure is outside the scope of section 34, leaving the losing party with no avenue for reviewing the tribunal’s decision in that respect.
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