4 April, 2016
The Arbitration Ordinance (Cap. 609) (AO) recognizes and provides that final and binding arbitral awards made outside of Hong Kong may be enforced in Hong Kong with leave of the High Court of Hong Kong. The scope of this section encapsulates arbitral awards obtained in another state or territory that is party to the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the Convention). As a result of the Mainland having extended its membership in the Convention to Hong Kong, these Convention awards are directly enforceable in Hong Kong.
Enforcement may be conducted either by (a) commencing a fresh action in Court or (b) obtaining the leave of the Court to enter judgment on the terms of the award by summary enforcement. An application for leave to enforce a Convention award may be made ex parte but the Court hearing the application may direct a summons to be issued, bringing the action to the notice of the other parties. If leave is granted, the Court will enter judgment in terms of the award and the award to be enforced in Hong Kong shall be treated as binding for all purposes on the parties and may accordingly be relied on by any of them by way of defense, set-off or otherwise in any legal proceedings in Hong Kong.
Grounds for Refusal
The Courts have a strong presumption in favor of enforcement of Convention awards, unless the party against whom enforcement is being sought can successfully establish any one of the exhaustive grounds for refusal of enforcement set out under section 89 of the AO. In brief, the Court will not grant leave if the opposing party can convince the Court that:
- it was under some incapacity;
- the arbitration agreement was not legally valid;
- it was not given proper notice of the appointment of an arbitrator or the arbitration proceedings, or was otherwise unable to present its case;
- the award deals with a difference or contains decisions which are beyond the scope of the terms of the submission to arbitration;
- the procedure of the arbitration or the composition of the arbitral authority was not in accordance with the arbitration agreement or the law of the seat of arbitration; or
- the underlying dispute is not capable of settlement by arbitration under the law of Hong Kong and it would be contrary to public policy to enforce the award.
If uncontested, enforcement proceedings are typically simple, do not involve substantial costs and may be concluded in a matter of months. Due to the strong presumption in favor of enforcing Convention awards in Hong Kong, prospective applicants will find enforcement actions to be particularly valuable against defendants with assets in Hong Kong. Whether such assets can still be located after a Court order is obtained is another matter.
For further information, please contact:
David Hall-Jones, Partner, Winston & Strawn