The case of X Chartering v Y, HCCT 20/2013, 3 March 2014, demonstrates once again that Hong Kong Courts are pro-enforcement when it comes to arbitration awards. X Chartering (“X”) had obtained an arbitration award (“the Award”) against Y, in arbitration proceedings in London (“the Arbitration”).
Y applied for leave from England's High Court, the court of supervisory jurisdiction, to appeal against the Award, on the ground that the Tribunal had erred in its calculation of damages. The Court dismissed the application.
X obtained an order (“the Order”) from the Hong Kong Court granting it leave to enforce the Award in Hong Kong, as a judgment of the Hong Kong Court.
Y now applied to set aside the Order, on the grounds that:-
- it had been unable to present its case in the Arbitration on the calculation of damages and it would be contrary to public policy to enforce the Award in Hong Kong;
- the Tribunal had made errors in its calculation of damages and the arbitral procedure was therefore not in accordance with the agreement of the parties or with English law; and
- there was a conflict of interest because X's solicitors, Richards Butler (now Reed Smith Richards Butler (“RSRB”)) had previously acted for Y (and therefore had confidential information concerning Y's operations business activities and financial position) and this amounted to a fundamental procedural irregularity which was contrary to English law and tainted the propriety and fairness of the whole arbitration proceedings, such as to render it contrary to public policy to enforce the Award.
The court dismissed Y's application for the following reasons:-
Whether unable to present case
- The conduct complained of must be sufficiently serious, or egregious, so that one could say a party has been denied due process, before a court can find that a party was unable to present his case. Accordingly, a party who has had a reasonable opportunity to present his case would rarely be able to establish that he has been denied due process. Further, the Court may refuse to set aside the award if satisfied that the arbitral tribunal could not have reached a different conclusion.
- It was clear that counsel for both parties had been fully able to present their factual and expert evidence at the Arbitration and, accordingly, that X had had a reasonable opportunity to present its case.
The alleged error of law
- An error of law has never been recognized as a ground for setting aside or refusing enforcement of an arbitral award. The court will not address itself as to the substantive merits of the dispute, or correctness or otherwise of the award, whether concerning errors of fact or law. It will address itself to the process.
- Public policy itself leans towards the enforcement of foreign arbitral awards. The parties agreed to resolve their disputes by arbitration rather than by the court and by choosing arbitration, must be deemed to have undertaken the risk that an arbitrator might get matters wrong in his decision. An error (whether of law or fact) by an arbitrator in an award cannot by itself counterbalance the public policy bias towards enforcement.
- Y had not shown to the court's satisfaction that the arbitration procedure was not in accordance with the parties' agreement or in accordance with English law.
The alleged conflict of interest
- The court adopts a narrow approach in the construction of what constitutes “public policy”. It must not be seen as a catch-all provision to be used wherever convenient. It is limited in scope and is to be sparingly applied. The term has been held by the Court of Final Appeal to mean “contrary to the fundamental conceptions of morality and justice” of the forum. If the public policy ground is to be raised, there must be something more, i.e. a substantial injustice arising out of an award which is so shocking to the court's conscience as to render enforcement repugnant.
- Here, Y had not identified any actual breach of confidentiality on RSRB's part or any actual disclosure or misuse by them of Y's information and there was therefore no error or defect in the legal representation of X in the Arbitration that had undermined due process, or was contrary to law. The fact of RSRB having acted for X against Y in the Arbitration did not constitute such substantial injustice which could be described as shocking to the court's conscience, or contrary to the fundamental conceptions of morality and justice, so as to render enforcement of the award in Hong Kong repugnant.
- Even if a case of public policy, or a case of the arbitration procedure not being in accordance with the law, is made out, the court has a residual discretion to enforce the Award. Here, the Court was not satisfied that it was material to the Award in the sense that the outcome of the dispute in the Arbitration could have been affected by RSRB's breach of duty.