Victory for enforceability of arbitral awards in Hong Kong

On 21 February, the Hong Kong Court of Final Appeal (CFA) published its decision in the matter of Pacific China Holdings v Grand Pacific Holdings. The CFA denied Pacific China’s application for leave to appeal the May 2012 judgment of the Court of Appeal reinstating a US$55 million ICC award issued against it in August 2009 and ordering that Pacific China bear the costs of the proceedings on an indemnity basis. The Court of Appeal’s earlier decision has been touted as one of the most important judgments pertaining to arbitration in 2012, and the CFA’s decision stands as the definitive statement on the law of the jurisdiction, further evidencing Hong Kong’s well-settled pro-enforcement position and signalling to parties that they must undertake challenges to arbitral awards with great caution.

An unprecedented set-aside

Pacific China first sought to have the ICC award set aside in an action brought before the High Court of Hong Kong. It argued that certain purported procedural irregularities entitled it to challenge the award pursuant to articles 34(2)(ii) and (iv) of the UNCITRAL Model Law on International Commercial Arbitration, which is also codified in Hong Kong’s Arbitration Ordinance. In short, Pacific China argued that it had been unable to present its case and that the arbitral procedure was not in accordance with the agreement of the parties.

Notwithstanding the very high threshold required to establish appropriate grounds to set aside an arbitral award, the High Court nevertheless found that unfairness had arisen due to certain aspects of the tribunal’s case management, and therefore Pacific China was entitled to recourse against the award. The Court of Appeal disagreed.