In a previous article we reported on the decision in P v M  HKCFI 2280, whereby the Court held that the arbitral tribunal had failed to comply with section 46(3)(b) of the Arbitration Ordinance by not giving a party a fair and reasonable opportunity to present its case and remitted the award (First Award) back to the tribunal for reconsideration (the Judgment). The Court declared the relevant paragraphs of the First Award to be of no effect, pending the tribunal’s further order. After further submissions from the parties, the arbitrator made his second award (Second Award) in which he maintained his decision in respect of the amount in dispute, but for different reasons to those in the First Award and reinstated the relevant paragraphs in the First Award. P now applied to challenge parts of the Second Award, also on the ground of serious irregularity ( HKCFI 1864).
P’s grounds for challenging Second Award
P argued that:
The arbitrator exceeded his powers and/or failed to conduct the proceedings in accordance with the procedure agreed by the parties or directed by the Court in the Judgment in:
P was denied a reasonable opportunity and/or was unable to present its case in that the arbitrator wrongly entered into his own assessment, referring to matters not raised by either P or M in their submissions on remission (or in the substantive arbitration) and wrongly proceeded on his own to develop and expand their submissions by adding material findings of fact not suggested by M at any time and of which P had no notice.
New points raised by M on remission were beyond the scope of the matters remitted as M had not pleaded, advanced them in submissions or by way of evidence in the substantive arbitration and P was therefore denied a reasonable opportunity to adduce its own evidence and cross-examine M’s witnesses on those matters.
The Court referred to the following applicable principles:
The Court set aside the parts of First Award and Second Award as sought by P and declared them to be of no effect. It said:
The Court said that since the reconsideration by the tribunal had failed to cure the substantial injustice caused by the serious irregularity, which continued, it was inappropriate to again remit the matter back to the tribunal for reconsideration. The Court said that the effect of its decision was that M’s claims in question were bad and could not now be resurrected. When the matter was remitted to the arbitrator, it had been open to M to apply to amend its case, but it chose not to.
This judgment is a reminder of the very high threshold that has to be met to challenge an arbitral award on the basis of serious irregularities and that the Courts will only intervene in the arbitral process in extremely limited circumstances. However, as the Court said, it is just as important for the maintenance of integrity in the arbitration process for the court to intervene in appropriate cases, as it is for the court not to intervene when the high threshold for doing so has not been reached. The judgment also highlights the importance of the arbitrator complying with the remission procedure and not exceeding his powers upon remission. Whilst theoretically speaking the effect of setting aside parts of an award, rather than remitting it back to the arbitrator, may mean that there is no award formally pronounced on those parts of the claims and that there might be another arbitration to determine such claims, the Court may nevertheless hold that such claims are bad with no basis to be resurrected.
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