In CNG v G [2024] HKCFI 575, CNG sought to set aside an arbitral award made in G’s favour, on the grounds that the tribunal had failed to consider key issues and to give reasons for its decisions in relation to certain of CNG’s defences. Complaints were also directed against how the tribunal handled certain matters procedurally, which CNG said resulted in it being unable to present its case. The court dismissed CNG’s application. It said that this case was a typical example of a party which had agreed to submit its contractual disputes to the final and binding determination of an arbitral tribunal, but being aggrieved with the award against it, makes all attempts to find loopholes and problems in the award. The court reminded parties that arbitration is a consensual process of final dispute resolution to which they voluntarily agree, with whatever inherent defects and risks there may be, and there are only limited avenues of appeal and challenge to the award. The limited recourse parties have under the Arbitration Ordinance (AO), the court said, is not intended to afford them with an opportunity to ask the court after the event to go through the award with a fine-tooth comb, to look for defects and imperfections under the guise that the tribunal had failed to act in accordance with its remit or the agreed procedure. Nor was any party entitled to rehearse once again before the court, arguments already made before the tribunal, or to have different counsel reargue its case with a different focus, in the hope that the court may be persuaded to come to a different conclusion.
The court in dismissing CNG’s application, emphasized the exceptional nature of challenging arbitral awards, as follows:
- The court does not sit on appeal against the tribunal’s findings of fact or law and it must not only respect the autonomy of the tribunal, but also leave the tribunal free to decide the dispute with the proper exercise of its case-management powers, when the tribunal is clearly in the best position to manage its own proceedings and procedure in the light of the issues put before it, the complexities of the case, and time-table which best suits the tribunal, the parties and their legal representatives, with the aim of achieving a speedy resolution without unnecessary legal expense. Matters which should have been raised with the tribunal, on procedure, pleadings, and timing, but were not so raised or objected to, should not be brought before the court as a matter of complaint at the time of resistance to enforcement or by way of setting aside of the award.
- Reminders from the courts have somehow not been effective in discouraging parties from embarking on expensive and time-consuming proceedings by way of unwarranted challenges to an award. Costs have routinely been awarded on an indemnity basis for unsuccessful challenges to arbitral awards, but in cases where awards are for very substantial sums, or where the parties are particularly obstinate or unreasonable, these costs orders have not been effective as deterrence, as hoped. The court can only look to and trust legal professionals to carry out their duties to the court and to act responsibly when advising their clients on whether an award can be properly challenged, bearing in mind that public resources are involved when judicial time is taken up by lengthy, but at the root, unmeritorious applications. Unfortunately, it appears that arbitration and litigation have become a game of buying time and competing in resources.
- The aims, objectives and principles of the AO are clearly set out in s.3, and Hong Kong has long been striving to establish and uphold a policy of being supportive of arbitration agreements and awards. It is high time that legal professionals play a much more vigilant role in this regard, at the same time being cognizant of their duties under RHC Order 1A to assist the court in furthering the underlying objectives of the rules of the court. Legal professionals should be aware of the exceptional nature of challenges made under s.81 of the AO. They should only prepare papers for such applications to the court and raise issues in them which have merit, instead of irresponsibly “massaging” a case to fall within the limbs of s.81.
In the present case, as regards the tribunal’s alleged failure to deal with key issues, the court held that objectively reading the Award, in the context of the claims made in the arbitration and all matters disputed between the parties, it could not be said that the tribunal had failed to deal with the key issues arising in the arbitration or that it had failed to give reasons for its decision on the matter. It said:
- The tribunal had clearly set out its findings on the key issues for determination, and adequately explained the decisions reached. As regard’s CNG’s emphasis on the fact that “only” 24 paragraphs of the total 163 paragraphs of the Award were devoted to the tribunal’s reasoning for its decision on the Share Transfer Claim, a long, prolix judgment or award does not mean that it must contain sound reasoning or analysis of an issue or the decision made and a short document likewise cannot indicate that there is no good reasoning or answer to the issues raised for decision.
- An agreed list of issues submitted by the parties helpfully frames issues which they agree to be relevant to the tribunal’s consideration for the determination of the dispute submitted to arbitration. However, the list cannot dictate how the tribunal deals with the issues raised in the award, or how it is to structure the award when deciding on the dispute.
- The tribunal does not have to set out each step by which it reaches its conclusion, and a failure to deal with an argument or a submission made on or relating to an issue is not equivalent to a failure to deal with an issue. The tribunal is not required to deal with each issue seriatim, as it can deal with a number of issues in the composite disposal of them.
- A tribunal does not fail to deal with an issue if it does not answer every question that qualifies as an issue. It can deal with an issue where that issue does not arise in view of the tribunal’s decision on the facts or its legal conclusions. A tribunal may deal with an issue by so deciding a logically anterior point such that the other issue does not arise. If the tribunal decides all those issues put to it that were essential to be dealt with for the tribunal to come fairly to its decision on the dispute, it will have dealt with all the issues. So long as a decision on one argument suffices to resolve an essential issue, the tribunal does not have to consider all arguments canvassed upon the issue. Although awards often respond to parties’ submissions, such submissions do not dictate how the tribunal is to structure the disposal of the dispute referred to it. A list of issues is not an exam paper with compulsory questions for the tribunal to answer them all.
- It is essential to bear in mind the policy of minimal curial intervention, and the court’s approach to read an award generously, remedying only meaningful and readily apparent breaches of the rules of natural justice which can cause actual prejudice, rather than to comb an award in order to assign blame or to find fault in the process. Any inference, that an arbitrator had missed one or more important pleaded issues, can only be drawn if it is shown that the inference is “clear and virtually inescapable”.
- It has to be borne in mind that the court is not concerned with whether the tribunal had come to the right decision, for the correct reasons, or whether there was evidence to support its findings in the decision. The grounds for setting aside and refusal of enforcement of an award are to be construed narrowly, and the applicant has to show that the error complained of is egregious to warrant the setting aside of the award.
- It is clear from the authorities, that in considering the important question of whether a tribunal has dealt with an issue, the approach is to read the award in a “reasonable and commercial way expecting, as is usually the case, that there will be no substantial fault that can be found with it”. It has to be borne in mind that the parties to the arbitration to whom the award was issued were aware of and understood how the issues had been presented to and argued before the tribunal. The tribunal is not bound to structure the Award in the same way as the List of Issues is framed. The Award is to be read and understood in the context of how the case was argued before the tribunal.
As regards CNG’s procedural complaints of an “unfairly compressed timetable”, inequality of time afforded to it to put forward its evidence, and last-minute ambushes made by G, all of which according to CNG, constituted serious or egregious conduct on the tribunal’s part or in the conduct of the arbitration, which effectively deprived CNG of the ability to present its case, the court held that there was no substance in such as:
- The tribunal is the master of its procedures and has the full discretion to decide on the timetable for and on management of the arbitration. A tribunal’s case management decision is not a decision which the court should highly interfere with, in the absence of what the court can find to be a serious denial of justice. Nor is it the court’s function on an application to set aside the award to descend to a level of reviewing the minutiae of the procedure, in order to examine the correctness or otherwise of case management decisions and orders made by the tribunal. The tribunal is obviously in the best position to decide on the most appropriate and fair manner of proceeding with the arbitration in accordance with the principles of the AO and the time available to the parties, their legal representatives and members of the tribunal.
- No party can claim the right to have all the time it needs to prepare for the hearing. Article 34(2)(a)(ii) of the Model Law permits the court to set aside an award if a party was “unable to present” its case. What the courts seek to enforce and protect is a standard of due process which can satisfy basic minimum requirements and are generally accepted as essential to a fair hearing. In this context, it is relevant to note that s.46 of the AO requires the arbitral tribunal to give the parties “a reasonable opportunity” to present their cases and to deal with the cases of their opponents and reflects that a party’s right is to have a reasonable opportunity, as opposed to a “full opportunity” to present its case, and that such a right is not unlimited in scope and breadth, to entitle a party to make unreasonable demands and to ignore other relevant principles and aims of efficiency and speedy resolution of the dispute.
- Despite CNG’s complaints in the course of the arbitration, CNG was able to comply with all procedural deadlines and it never sought to apply for an adjournment of the evidentiary hearing. Both sides had a large and sophisticated team of lawyers working on disclosure, evidence preparation and submissions, and the case took 1.5 years to come to the evidential hearing. There were no unusual features for an international arbitration of this scale, and there was nothing to which the court had been referred which could constitute serious and egregious errors.
Comments
This judgment is helpful in providing parties, especially the losing party to arbitration, with a better understanding of the difficulties in challenging an arbitral award. Arbitration is often chosen by the parties not for saving legal costs but for its finality and enforceability internationally.
For further information, please contact:
Justin Yuen, Partner, Deacons
justin.yuen@deacons.com
