Parties in commercial arbitration are often asked to submit a statement of agreed facts (“Agreed Facts”) early on to create a binding factual record for the arbitral proceedings.
However, could this record inadvertently restrict a party from pleading alternative cases ? What happens if a party strays from these facts midway through the proceedings, or if the Tribunal’s final award deviates from them ?
The Hong Kong Court of First Instance recently addressed these unusual questions in AT & Another v QC & Another [2026] HKCFI 1437, an application to set aside an award under section 81 of the Arbitration Ordinance (Cap. 609).
Background
The underlying cross-border dispute between domestic vendors (Plaintiffs) and overseas investors (Defendants) arose from a multi-million dollar Share Purchase Agreement (“SPA”) and two subsequent supplemental agreements :-
- The SPA & 1st Supplemental Agreement : The Defendants agreed to purchase shares in a Mainland target company (“HR Shares”) for US$110 million (“USD Sale Price”). If the target failed to list by December 2019, the Plaintiffs were required to repurchase the shares upon the Defendants exercising a put option, providing a guaranteed return.
- The 2nd Supplemental Agreement : To expedite the deal, the Defendants paid an equivalent amount in RMB (“the “RMB Sum”) as “Domestic Payment” and received the HR Shares before formal completion. The Defendants promised to use best endeavours to obtain Mainland Overseas Direct Investment approval (“ODI Approval”). Once approved, the Plaintiffs would return the RMB Sum, and the Defendants would pay the USD Sale Price to complete the SPA. If completion failed by January 2020, the Defendants could still exit, and the Plaintiffs would owe a “Return Sum” to the Defendants.
Ultimately, the Defendants paid the RMB Sum and received the HR Shares, but failed to secure ODI Approval. Neither the USD Sale Price, the SPA completion, nor the IPO took place. When the Defendants exercised their put option to exit and claim their returns, the Plaintiffs disputed this, triggering the arbitration.
The Arbitration
The Defendants commenced the arbitration in March 2021 alleging the Plaintiffs’ breach of the redemption obligations under the put option.
The Plaintiffs claimed that they were not obliged to redeem the Defendants under the put option arrangement. They alleged that the Defendants had breached the agreements because the USD Sale Price was never paid and the ODI Approval was never obtained. Following trial in August 2023, the Tribunal made two awards dated 24 September 2024 and 26 March 2025 (the “Awards”), which found in favour of the Defendants on all four grounds of claim, holding that (among others), “based on ordinary contract construction and commercial context of all agreements, the allegation that completion and payment in USD after ODI Approval was a condition precedent for the Plaintiffs’ repurchase obligation to arise was rejected”.
The Set Aside Application to Court
The Plaintiffs applied to the Hong Kong Court to set aside the Awards under Article 34(2) of the UNCITRAL Model Law on the following grounds :-
1st Ground : Procedural Irregularity / Inability to Present Case
Specifically, the Plaintiffs contended that the Agreed Facts for the Arbitration record that the Defendants did not obtain ODI Approval, did not pay the USD Sale Price under the SPA, and there was no completion under the SPA, but that :-
(a) the Defendants had resiled from the agreed position, by claiming in their closing submissions that the Domestic Payment of RMB Sum was actually the share price for the HR Shares and/or was the investment sum;
(b) the Defendants had misleadingly argued that the parties could ignore the ODI Approval requirement and to claim that the Domestic Payment fulfilled the agreements, without SPA completion, to trigger the Plaintiffs’ redemption obligation; and
(c) the Awards were based on the said departures without giving the Plaintiffs the opportunity to address the Tribunal on the Defendants’ alleged new stance and the legal consequence thereof (“Deviation from Agreed Facts”).
2nd Ground : Public Policy Ground
The Plaintiffs also contended that, based on PRC law : (a) the Tribunal’s findings in effect overlooked the PRC ODI rules and regulations which renders enforcement of the Awards (and the “redemption” permitted under the Awards) impossible on the Mainland as being contrary to PRC law; and (b) equating the RMB Sum and USD Sale Price as the same permits an illegal foreign exchange in disguise (“PRC Law Compliance Issue”).
In summary, the Plaintiffs argued that the Tribunal had accepted the Defendants’ case despite the Plaintiffs’ being surprised by the Defendants’ Deviation from Agreed Facts and the deprivation of a fair opportunity to address the PRC Law Compliance Issue.
The Court’s Decision
For the reasons outlined below, the Court dismissed the Plaintiff’s application to set aside the Awards.
(1) Set Aside Awards on Inability to Present Case
(a) The Court found that the Plaintiffs’ arguments were premised on their misreading of the Defendants’ case and of the Defendants’ arguments made to the Tribunal. The Awards were not made on the basis of any disregard of the “joint position agreed and accepted by the parties” ie. the Agreed Facts. The Defendants’ case in the Arbitration never departed from the Agreed Facts, which recorded the true position eg. non-completion under the SPA.
(b) Based on the Awards, the Court held that the Tribunal had proceeded on the basis that there was no completion under the SPA, the Defendants’ exercise of the option requiring repurchase of the shares was at the stage “before completion”, the deadline for listing had not yet expired then, but that there were no developments in obtaining ODI Approval, and the Defendants still had the right under the 1st Supplemental Agreement to seek repurchase “in the absence of completion”. Also, the Awards were made on the basis that the Defendants did not have to equate RMB Sum payment with USD Sale Price.
(c) The Court held among others that the Defendants had “adequately pleaded their case and the Plaintiffs did have the fair and reasonable opportunity to present their case and make their arguments” (despite the outcome). Also, while the “Domestic Payment was the same in commercial nature as the USD Sale Price”, the “Tribunal did not conflate the Domestic Payment and the USD Sale Price”.
(d) Also, the Court rejected the Plaintiffs’ complaint about the Tribunal’s dismissal of their application to adduce expert evidence because the Tribunal was “in the best position to decide in the exercise of its discretion” (following Grand Pacific Holdings Ltd v Pacific China Holdings Ltd (in liq) (No 2) [2012] 4 HKLRD 1 (CA)). The Court will not lightly interfere with such decisions “unless they can be shown to be a serious denial of justice” (COG v ES [2023] HKCFI 294).
(e) Besides, the Court held the outcome of the arbitration would have been the same irrespective of the Plaintiffs’ inability to present their case because the Tribunal found for the Defendants on other independent grounds pleaded in the Arbitration.
(2) Set Aside Awards on Public Policy
(f) Applying the public policy ground under Article 34(2)(b)(ii) of the UNCITRAL Model Law and adopting a narrow construction, the Court rejected the Plaintiffs’ complaint based on the public policy ground, namely that the Tribunal’s order requiring the Plaintiffs to perform their obligations under the redemption obligations constituted enforcement of a contract that would be illegal under the laws of Mainland China (where the Awards are required to be performed).
(g) The Court rejected the contention that enforcement of the Awards would offend the most basic notions of morality and justice in Hong Kong. Any control on cross-border payments under PRC law does not apply to Hong Kong. That said, the Court clarified that the substantive merits of an award (in a set aside context) are not part of the review.
In summary, the Plaintiffs’ application was dismissed with indemnity costs ordered against them.
Key Takeaways
The judgment adds to the body of cases in Hong Kong showing the Courts’ pro-arbitration approach and finality of arbitral awards. It offers some useful practical and legal pointers.
- First, the judgment highlights the practical benefits of Agreed Facts in arbitration to help establish a “factual foundation” for the pleadings, witness statements and expert evidence, especially in narrowing issues and mitigating unnecessary costs.
- Second, it is imperative for the parties to have a proper grasp of the facts and issues to avoid misplaced perceptions about the other side’s actual case (ie. Deviation from Agreed Facts). A robust peer review of pleadings and submissions would help mitigate the risks of one side’s “misreading” of the other party’s case and prevent the resulting costly set aside application.
- Third, setting aside applicants carry the burden of proving the “egregious procedural irregularity” that has undermined due process and the structural integrity of the arbitral process, which cases have shown to be a relatively high bar.
- Fourth, the Tribunal’s case management discretion will normally be respected (unless for example serious denial of justice is proved).
- Fifth, the Court can decide not to set aside an award where the outcome would have been the same, ie. even if inability to present the case is shown.
- Finally, the merits of the award are not amenable to review in such applications.
If you have any questions regarding the above eNews or legal queries generally, experienced lawyers in our Litigation and Dispute Resolution team will be happy to assist you.
