15 October 2015

Enforcement of Mainland arbitral awards in Hong Kong

This article was written by Doug Schrader (Registered Foreign Lawyer).

Case study: Chan Lui-yu v Ho Chi-lan[1]

Enforcement of Mainland awards refused by Hong Kong Court of First Instance

On 24 April 2015, the Hong Kong Court of First Instance allowed an appeal of its own orders to enforce two Mainland awards, thereby refusing enforcement on the basis of the ineffective service of a Notice of Hearing for Arbitration (Notice). This was despite the Notice having been deemed as served in accordance with the rules of the Guangzhou Arbitration Commission (Guangzhou Arbitration Commission).[2]

Section 92(2)(c) of the Arbitration Ordinance (Cap.609) (HK) (Arbitration Ordinance) provides that the enforcement of a Mainland award may be refused if the person against whom the award is invoked:

  • was not given proper notice of the appointment of the arbitrator or of the arbitral proceedings; or
  • was otherwise unable to present their case.[3]

This case highlights the importance of considering the grounds upon which a party may resist the enforcement of an award in the enforcing jurisdiction, if this is known, and ensuring that an arbitration is conducted in such a way so as to prevent as far as possible an award being rendered unenforceable.

Facts

A dispute arose between the parties in relation to the sale of a property in Guangzhou, China. Under the contract of sale, Ms Ho agreed to sell her property to a buyer, and a real estate agent however sold it to a third party. The buyer and real estate agent subsequently initiated arbitration proceedings against Ms Ho in the Guangzhou Arbitration Commission. 

The Guangzhou Arbitration Commission sent the Notice of Arbitration to Ms Ho at an address in Kowloon, Hong Kong (the Kowloon Property). The Notice of Arbitration was received by Ms Ho on 10 May 2013. According to a Transfer Deed, Ms Ho was the registered owner of the Kowloon Property. However, according to the evidence of Ms Ho, the Kowloon property was not her place of residence in May or July 2013 and she only received the Notice of Arbitration by chance while she was visiting the property. 

The Notice was sent to the Kowloon Property on 8 July 2013 but was subsequently returned to the Guangzhou Arbitration Commission marked with the words “No acknowledgement of Receipt and Return”. Pursuant to the arbitration rules of the Guangzhou Arbitration Commission however, the Notice was deemed to have been effectively served by reason of the successful delivery of the Notice to the Kowloon Property. The Arbitration Hearing was conducted on 11 July 2013 in the absence of Ms Ho.

In August 2013, the tribunal handed down two Mainland awards, one in favour of the buyer and the other, the real estate agent (Mainland Awards).

On 21 March 2014, the Hong Kong Court of First Instance allowed the buyer and real estate agent’s application for enforcement of the Mainland Awards in Hong Kong under Article 92 of the Arbitration Ordinance. One month later, Ms Ho applied to the Intermediate People’s Court of Guangzhou to set aside the Mainland Awards. The Guangzhou Court dismissed the application on the basis that the application was made out of time. 

On 11 June 2014, Ms Ho applied to the Hong Kong Court of First Instance seeking a stay of execution of the enforcement of the Mainland Awards pursuant to section 95(2)(c) of the Arbitration Ordinance.

No proper notice of arbitral proceedings 

In determining Ms Ho’s application, the Court confirmed that when considering the application to resist enforcement of the Mainland Awards, the law of Hong Kong will apply.[4]

The Court held that Notice was not a valid hearing notice for the purposes of section 95(2) of the Arbitration Ordinance by reason of it not having been received by Ms Ho and it having been returned to the Guangzhou Arbitration Commission, which was a fact not in dispute. It followed, therefore, that Ms Ho had not been given proper notice of the arbitral proceedings and the appeal was allowed. The Court also declined to exercise its discretionary power to enforce the Mainland Awards notwithstanding the establishment of a ground for refusal of enforcement as there was not a “sufficient reason” to exercise such discretion. 

Important considerations prior to the enforcement of an award

In this case, the assets against which the enforcing parties sought to enforce the Mainland Awards were located in Hong Kong. The Court’s refusal to enforce the Mainland Awards rendered the awards of no value leaving the enforcing parties with little to show for a least one year of legal proceedings. 

This case serves as a timely reminder of the importance of considering as early as possible where an award may ultimately be enforced and the laws of enforcement in that enforcing jurisdiction. Any grounds upon which enforcement may be resisted in the enforcing jurisdiction must be carefully considered throughout the arbitration to ensure compliance and to avoid the ultimate unenforceability of an award in the jurisdiction where practically it may matter most.


[1] 楼外楼房地产咨询有限公司v Ho Chi-lan (HCMP 3202/2013); Chan Lui-yu v Ho Chi-lan (HCMP 3203/2013).

[2] Article 73 of the Rules of Guangzhou Arbitration Commission.

[3] Section 95(2)(c) of the Arbitration Ordinance. The grounds in section 95(2) of the Arbitration Ordinance mirror section 1(b) of Article V of the New York Convention 1958 (New York Convention).

[4] The Court relied on the decision of Sir Anthony Mason in Hebei Import & Export Corp v Polytek Engineering Co Limited (1999) 2 HKCFAR 111.

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