In A Company v The Bank [2026] HKCFI 3169, the Hong Kong Court of First Instance held that foreign sanctions risk will not justify refusal of enforcement of an arbitral award on public policy grounds, regardless of whether a real risk of prosecution is established.
Background
A Russian company (the Applicant) obtained a London Court of International Arbitration award against a Canadian bank (the Respondent) for approximately €30 million under certain guarantees issued in connection with a contract for engineering and technical services at a metallurgical plant in Russia.
The Respondent refused to honour the award on the basis that payment would breach the Special Economic Measures Act of Canada and related sanctions regulations imposed against Russian entities and individuals. The Respondent further argued that payment would expose it and its employees to criminal prosecution under Canadian law, particularly in light of correspondence from Global Affairs Canada indicating that the Applicant was deemed to be owned by a sanctioned individual and that a permit to authorise payment had been refused.
On this basis, the Respondent applied in Hong Kong to set aside or stay enforcement of the award, arguing that enforcement would be contrary to Hong Kong public policy.
The court’s decision
Mimmie Chan J dismissed the Respondent’s application and allowed enforcement of the award.
The court held that the Respondent had not established a real risk of prosecution under Canadian law:
- Correspondence from Global Affairs Canada was not a judicial determination of illegality and amounted only to a regulatory view, falling short of proving criminal liability.
- The court also declined to revisit the arbitral tribunal’s findings, which held that the payment was not caught by the sanctions regime and the Respondent had not established illegality under Canadian law.
- Further, the alleged risk of prosecution was undermined by the availability of alternative enforcement mechanisms which would not contravene foreign sanctions and the Respondent’s bona fide and genuine efforts in engaging with regulators.;
Even assuming a real risk of prosecution was established, the court held that enforcement would not violate Hong Kong public policy.
- The court reaffirmed that Hong Kong adopts a narrow and restrictive approach to public policy, which applies only in exceptional cases where enforcement would “shock the conscience” of the court or violate fundamental notions of morality and justice.
- The court emphasised Hong Kong’s pro-enforcement policy and that it should look at the public policy of Hong Kong and not the foreign and public policy of another jurisdiction in this regard.
- Hong Kong has a public policy to (i) recognise and enforce final and binding arbitral awards as a party to the New York Convention and (ii) uphold parties’ consensual arbitration agreement.
- Hong Kong’s public policy is not dictated by foreign sanctions, given the limits of the court’s ability to adjudicate on matters of foreign affairs and foreign policy under Articles 13 and 19 of the Basic Law. Comity does not require the court to refuse enforcement.
- The fact that the Respondent is subject to contradictory obligations in its global banking business is part of the commercial realities and risks of its business, which does not automatically entitle it to refuse compliance.
The court also refused to grant a stay for an indefinite and uncertain period, emphasising that a judgment creditor should not be deprived of the fruits of successful litigation or arbitration.
Key takeaways
This is a welcome decision as it provides helpful guidance to parties involved in cross border disputes, in particular those disputes being resolved by arbitration. It enshrines the certainty, efficiency and stability of Hong Kong’s arbitral enforcement regime.
Multinational parties are expected to navigate and manage conflicting legal obligations (including compliance with different sanctions regimes) as part of the commercial realities and risks of international trade and banking activities. Attempts to avoid enforcement of an arbitral award or judgment in purported reliance on risk of prosecution under a foreign sanctions regime will be closely scrutinised by the Hong Kong courts.
Acknowledgements to Trainee Solicitor Elaine Ng for research and contribution to this article.
For further information, please contact:
Richard Keady, Partner, Dentons
richard.keady@dentons.com
