In MB v HB [2026] HKCFI 4437, the Hong Kong Court ordered a Mainland Chinese company to provide security of 50% of a US$70.3 million ICC arbitral award, as a condition for adjourning Hong Kong enforcement proceedings, pending the outcome of proceedings in Paris (where the arbitration was seated) to annul the arbitration award. The decision reinforces the Court’s pro-arbitration approach and willingness to protect award creditors’ interests where challenges to enforcement appear weak on a preliminary examination.
Arbitral Award
The dispute arose from a Contract for the design and construction of a cement plant in Mongolia between MB (Applicant), a Mongolian cement producer, and HB (Respondent), a Mainland Chinese company listed in both Shanghai and Hong Kong. Following an ICC arbitration seated in Paris (Arbitration), the Tribunal issued an Award, ordering HB to pay MB damages of US$70.3 million odd plus interest for breach of contract relating to defective steel structures and foundations.
Paris Annulment Proceedings
HB applied to the Paris Court of Appeal to annul the Award (Paris Annulment Proceedings), on two principal grounds:
- Tribunal Composition Ground: HB alleged undisclosed ties between two Tribunal members, including prior service together in four arbitrations, former membership of the same chambers and co-authorship of books and a “personal friendship”.
- Annex H 11 Ground: HB claimed the Tribunal improperly excluded Annex H11 of the Contract (containing Chinese construction standards) from evidence, preventing HB from properly presenting its case.
Hong Kong Enforcement Proceedings
MB applied to the Hong Kong Court for leave to enforce the Award. HB applied to adjourn that application, pending determination of the Paris Annulment Proceedings. MB applied for security in the event of an adjournment.
Security Application
In determining whether security should be granted, the Court considered the apparent merits of HB’s challenge to the Award made to the Paris Court and its opposition to enforcement of the Award in Hong Kong. The Court explained that a preliminary examination of the merits is for the purpose of considering whether the application to the Paris Court was bona fide, and had at least a realistic prospect of success. The Court applied the well-established principles in Soleh v Boneh International Ltd v Government of the Republic of Uganda [1993] 2 Lloyds Rep 208, namely if the Award is manifestly invalid, there should be an adjournment and no order for security. If it is manifestly valid, there should either be an order for immediate enforcement, or else an order for substantial security. The court must also consider the ease or difficultly of enforcement and whether it will be rendered more difficult if enforcement is delayed. If that is likely, the case for security is stronger. If, on the other hand, there are and always will be insufficient assets within the jurisdiction, the case for security must necessarily be weakened.
Court’s Preliminary View
Tribunal Composition Ground
On a brief consideration of the matter, the Court had “grave reservations” about the Tribunal Composition Ground. It found the evidence said to establish a duty of disclosure, or to create reasonable doubt in the mind of the reasonable objective observer as to the independence and impartiality of the arbitrators, “tenuous to say the least.” Four of the arbitrations in which two of the arbitrators had sat together had all been closed before commencement of the Arbitration. The arbitrators had ceased being members of the same Chambers since 2015. The fact they had expressed being good friends and colleagues and had-authored books, could not, the Court said, be evidence of such closeness or association which would lead to their decision-making process being influenced, or lacking in independence. The objective fair-minded and informed observer would not conclude in all the circumstances and from failure of disclosure of the alleged relationship, that there was any real possibility that the arbitrators were not independent or impartial.
Annex H11 Ground
On a brief consideration of the matter, the Court was certainly not persuaded that the Award was manifestly invalid by reason of the irregularity claimed. It concluded that HB was itself to blame for failing to produce the Annex until after the substantive hearing, the material contents of Annex H11 had been extensively referenced throughout the arbitration and the Tribunal had expressly stated it would have reached the same conclusion, even applying the Chinese standards contained in the Annex.
Adjournment Granted and Security Ordered
Despite its preliminary views on the merits of the challenge to the Award and its enforcement in Hong Kong, the Court exercised its discretion under section 89(5) of the Arbitration Ordinance (Cap 609) to adjourn the enforcement proceedings on the basis that the Paris supervisory court was in the best position to decide the merits of the Paris Annulment Proceedings and the Hong Kong Court (as the court of enforcement) had to give “due weight” to its decision on the validity of the Award. The Court considered it prudent to adjourn the Hong Kong enforcement proceedings pending the supervisory Paris Court’s determination of the Paris Annulment Proceedings, to avoid inconsistent results.
The Court considered whether MB would be prejudiced by the inevitable delay caused by the adjournment, acknowledging that there would be an unsatisfactory and long period of delay of approximately 11 months from MB’s application for leave to enforce, until a decision in the Paris Annulment Proceedings. The Court said that the case authorities emphasized that the Court must compare the creditor’s position under the award, if it was allowed to enforce it immediately, and its position if enforcement was to be delayed as a result of an adjournment, pending determination by the supervisory court. The Courts have also recognised that where there is a very large award (as here), delay without security is inherently likely to prejudice the award creditor.
Having considered all relevant factors and given its views on the merits (of lack thereof) of the challenge to the Award, the Court ordered HB to provide security of 50% of the Award (approximately US$35.15 million) by payment into court or provision of bank guarantee, as a condition for adjourning the enforcement proceedings in Hong Kong.
Takeaway
This decision demonstrates how the Court will balance the interests of an award creditor in prompt enforcement, against a debtor’s pending challenge to a foreign award in the supervisory court.
An award debtor seeking an adjournment of Hong Kong enforcement proceedings (to await the outcome of annulment proceedings in the seat of arbitration) will ordinarily be required to provide security as a condition of any adjournment of enforcement where its challenge appears weak on a preliminary examination. More importantly, a pending annulment application in the seat of arbitration will not, by itself, shield assets from the reach of the Hong Kong enforcement process without cost.
For award creditors, this decision is significant: it confirms the Hong Kong Court’s willingness to protect an award creditor’s position, where enforcement challenges appear weak on a preliminary examination.
For further information, please contact:
Joseph Chung, Partner, Deacons
