Hong Kong – Challenging An Arbitral Award Under Schedule 2 Of The Arbitration Ordinance.

15 May, 2018

 

Generally, the Court does not have jurisdiction to set aside or remit an arbitral award on the ground of errors of fact or law on the face of the award, except for the appeal process under Schedule 2 of the Arbitration Ordinance, Cap 609 (AO). Indeed, Section 12 expressly provides that no Court shall intervene except where so provided in the AO.

 

Under the AO, Schedule 2 contains opt-in provisions which provide for application to the Court to challenge an award on the ground of serious irregularity and for appeals to the Court on questions of law (see Sections 4 and 5 of Schedule 2). Unless the parties to an arbitration expressly provide for such challenge to an award in their arbitration agreement or the opt-in provisions being automatically applicable in certain areas, the parties are not allowed to appeal against an arbitral award.

 

The Court under the AO is the Court of First Instance (CFI).

 

Procedure for making an appeal to CFI and further appeal on questions of law or serious irregularity arising out of an arbitral award

 

When dealing with an appeal against an arbitral award on the grounds of errors of law under Schedule 2, Sections 4 or 5, the Court may by order confirm the award (only available for an appeal on a question of law), vary the award, set aside the award or remit the award to the arbitral tribunal.

 

However, a party must obtain leave of the Court or the Court of Appeal for any further appeal from an order of the Court. One should pay special attention to Schedule 2, Section 6(3), whereby the Court must determine an application for leave to appeal without a hearing, unless it appears to the Court that a hearing is required. If the Court determines the application without a hearing, there is no provision for the losing party to request an oral hearing to reconsider the application. This is in contrast with Order 59, rule 2A(7) of the Rules of the High Court for civil appeals to the Court of Appeal, which provides that a party aggrieved by the written determination of the Court of Appeal may request the Court of Appeal to reconsider the determination at an oral hearing inter partes.

 

Under section 6(4) of Schedule 2 to the AO, in order to obtain leave to appeal from the Court, the applicant has to satisfy the following requirements:-

 

(1) The decision of the question will substantially affect the rights of one or more of the parties;

(2) The question is one which the arbitral tribunal was asked to decide; and

(3) On the basis of the findings of fact in the award:-

 

(i) The decision of the arbitral tribunal on the question is obviously wrong; or

(ii) The question is one of general importance and the decision of the arbitral tribunal is at least open to serious doubt.

 

A & Others v Housing Authority

 

In a recent construction case in Hong Kong, A & Others v Housing Authority (HCCT 54/2017), the Court held that to apply to the Court for leave to appeal an arbitral award, one must demonstrate to the Court, quickly and easily, without meticulous legal argument, that the decision of the tribunal simply cannot be right, or that there are serious doubts as to the correctness or reasoning of the Award.

 

In that case, Mimmie Chan J indicated that the legal principles governing applications for leave to appeal against an arbitral award are clear.  Under s.6 (4) of Schedule 2 to the AO, leave to appeal is to be granted only if the Court is satisfied that, on the basis of the findings of fact in the award, the decision of the arbitral tribunal on the question is “obviously wrong”; or the question is one of “general importance” and the decision of the arbitral tribunal is “at least open to serious doubt”.

 

As to which questions are considered to be of “general importance”, Mimmie Chan J found guidance in the Court of Final Appeal’s judgment in Swire Properties Ltd & Others v. The Secretary for Justice (2003), where the Court said that leave should not normally be given in “one off” disputes unless the tribunal’s construction is “obviously wrong”, but that leave can sometimes be given on “standard clause” disputes as long as there is at least a strong prima facie case that the tribunal’s construction is wrong. 

 

As to the meaning of “obviously wrong”, Mimmie Chan J referred to dicta in Pioneer Shipping Ltd v BTP Tioxide Ltd (The Nema) [1982] AC 474 (cited with approval by the Court of Appeal in the Swire Properties case), namely that where a question of law involved is the construction of a “one off” clause, the application of which to the particular facts of the case is an issue in the arbitration, leave should not normally be given, unless it is apparent to the judge upon a mere perusal of the reasoned award itself without the benefit of adversarial argument, that the meaning ascribed to the clause by the tribunal is obviously wrong. If, however, upon such perusal, it appears to the judge that it is possible that argument might persuade him that the tribunal might be right, he should not grant leave and the parties should be left to accept the decision of the tribunal that they had chosen to decide the matter in the first instance.        

 

Mimmie Chan J held that, whether the appropriate test to be applied is “obviously wrong”, or “open to serious doubt”, the threshold is high. It is not sufficient for it to be shown that the decision of the tribunal is arguably wrong, or that it is arguable that the decision is open to some doubt. The decision has to be clearly seen to be obviously, or demonstrably, wrong, or that the correctness of the decision is seriously in doubt.  Leave to appeal would only be granted in exceptional cases, where it can be demonstrated that the arbitrator was plainly wrong. 

 

Some commentators have doubts whether the Nema-Antaios guidelines are still applicable in Hong Kong. We will discuss this in detail in a future article.