Court refuses to set aside enforcement order on basis of fully virtual arbitration

View PDF

Authored by: Stanley Lo

In Sky Power Construction Engineering Ltd v Iraero Airlines JSC, [2023] HKCFI 1558, the court refused to set aside an enforcement order on the basis that the arbitration was held on a fully virtual basis. 

The Applicant had been granted leave to enforce (as a judgment of the court) an arbitral award made in an arbitration seated in London and conducted under the London Court of International Arbitration (LCIA) Rules (Enforcement Order). The Respondent applied out of time (8 days late) to set aside the Enforcement Order on the ground that the procedure stipulated in the arbitrator’s Procedural Order was altered by the tribunal on the Applicant’s initiative, despite the Respondent’s objections, and instead of the parties all convening at one location in Moscow, the hearing of the arbitration took place on  a “fully virtual basis”, with the parties,  counsel and tribunal engaging in the hearing from their respective locations, the Respondent, its witnesses and representatives attending in Moscow, the arbitrator sitting in London, and the Applicant’s witnesses and legal representatives attending in Irkutsk.

In deciding whether to grant the Respondent an extension of time to apply to set aside the Enforcement Order, the court considered the merits of the setting aside application and concluded that such application had no merit because:

• There was clearly no basis for the Respondent to claim that the tribunal did not have power, in the absence of the Respondent’s agreement, to direct a virtual hearing.

• The tribunal is given wide discretion and powers under the Arbitration Act 1996 and LCIA Rules in relation to the conduct of the arbitration, and there is nothing which constrains the tribunal when the parties cannot agree on the procedure. Otherwise, an arbitration will be unnecessarily delayed and hampered whenever the parties cannot agree, when the whole purpose and objective of arbitration is for the tribunal to resolve disputes between parties. 

• Nor was there any basis to claim that in reaching her decision on the form of the hearing, the arbitrator had failed to act fairly and impartially. If there was any inconvenience as a result of the virtual hearing being conducted in the way it was, such inconvenience was suffered by both parties, and each party was subjected to the same risks and difficulties.

• Remote hearings were commonplace in court proceedings as well as arbitrations even before the pandemic and are more so after it.

• Whether it is appropriate in any particular case to permit factual witnesses to give evidence at the hearing remotely, whether the effectiveness of cross-examination can be or was undermined, whether appropriate measures are required or were put in place to ensure the security of the process, are all matters for the consideration and final decision of the tribunal.

• The arbitrator in this case had duly considered the difficulties and delay caused by the global pandemic, the need for a speedy resolution of the arbitration without further postponements in the face of the changing situation and the evolving health regulations and travel restrictions, when she decided on the timing and format of the hearing. 

• As reflected in the arbitral award, the arbitrator was obviously satisfied with the manner in which the virtual hearing was conducted, and the parties were not seen to have voiced any concern in the course of the remote hearing.

• In any event, the arbitrator made the final award on the basis of the contractual and contemporaneous documents, construction of the documents, and legal issues raised.

• On the materials available, there was no real injustice or prejudice to the Respondent, in the sense that the outcome of the arbitration could have been different, if the hearing had not been conducted on a fully virtual basis.

Accordingly, the court concluded that there was no permissible ground to set aside the Enforcement Order and refuse recognition of the Award.  Whilst the merits of challenging an award made in similar circumstances will be fact specific, this case provides a useful indication of the Court’s attitude towards challenges relating to virtual hearings.

Key Contacts

Stanley Lo

Consultant | Litigation and Dispute Resolution

Email or call +852 2826 5395