In K v JX [2026] HKCFI 2854, the court granted JX’s application to set aside an Enforcement Order by which K was granted leave to enforce a Mainland arbitral Award. In K v JX [2026] HKCFI 4344, K sought leave to appeal that judgment, arguing that the court erred in law by reviewing the arbitral tribunal’s findings on the validity of a Settlement Agreement and substituting its own public policy analysis for K’s case. Although the court found that K’s grounds of appeal had no reasonable prospect of success, it held that the exercise of the court’s discretion to refuse enforcement of an award on public policy grounds is a matter of public interest and in the interests of justice, it would grant K leave to appeal, so that the Court of Appeal could consider the question and the approach of the court to the Award.
Mainland Arbitration Proceedings
The dispute between K and JX arose from a Cooperation Agreement and led to JX commencing Hong Kong court proceedings against K and other parties (HCA). A Settlement Agreement was signed by C, purportedly as JX’s “actual controller”, providing for discontinuance of the HCA and payment of certain sums. The Settlement Agreement was governed by PRC law and contained an arbitration clause referring disputes to the Beijing Arbitration Commission.
JX failed to discontinue the HCA and K commenced arbitration proceedings, seeking performance and damages for breach. JX’s defence in the arbitration was that the Settlement Agreement and arbitration agreement were invalid, because C was neither JX’s legal representative nor authorized to enter into the Settlement Agreement and was an employee who had resigned from JX prior to the date of the Settlement Agreement.
The tribunal found no evidence that C had actual authority to enter into the Settlement Agreement, or was the “actual controller” of JX, but that there was reason for K to believe that C was duly authorized by JX and under PRC law, it was sufficient for the person relying upon the act of a purported agent to show he had reason to believe the person had authority as agent. The Award required JX to discontinue the HCA and pay K damages for breach of contract.
K’s Hong Kong Enforcement Order and JX’s application to set it aside
The Hong Kong court granted K leave to enforce the Award (Enforcement Order), but subsequently set aside the Enforcement Order on JX’s application.
JX’s set aside application relied on two grounds: the arbitration agreement was not valid (and hence the tribunal lacked jurisdiction) and it would be contrary to public policy to enforce the Award because the Settlement Agreement (containing the arbitration clause) was signed by C without JX’s authority, due to collusion and bribery involving C and K.
The court rejected JX’s challenge to the tribunal’s jurisdiction, as there had been no such challenge by JX in the arbitration itself. Further, the arbitration agreement was severable and independent of the underlying agreement, so that a challenge of and dispute as to the underlying contract submitted to the tribunal for determination did not amount to a challenge to the arbitration agreement or jurisdiction of the tribunal itself. There can be voluntary submission to the tribunal’s jurisdiction, the court said, and here, JX had by conduct accepted and expressly agreed to the dispute relating to the validity of the Settlement Agreement, and C’s authority, being submitted to the tribunal for determination.
As regards the public policy ground, as evidence of collusion and bribery was only revealed to JX after the Award, which had not been submitted to, considered or decided on by the tribunal, the enforcement court could and should examine the claims of such. The court therefore examined the evidence (by way of oral testimony of Y (JX’s beneficial owner), WP (K’s lawyer/Assistant) and K and concluded that there was no reason for K and WP to believe that C had authority to act for JX and sign the Settlement Agreement and they had simply turned a blind eye to this question. Accordingly, the Settlement Agreement was made by C without JX’s knowledge or authority and it would be grossly unjust to enforce the Award which gave effect to the Settlement Agreement and required JX to withdraw the HCA, and remedies sought in those proceedings. Enforcement, the court held, would be contrary to the fundamental conceptions of morality and justice and it therefore set aside the Enforcement Order.
K’s Appeal
K sought leave to appeal, arguing that the court had erred in law and on fundamental principles by reviewing the tribunal’s findings as to the validity and binding effect of the Settlement Agreement, and substituting its own case on public policy for the case advanced by K. The court rejected this argument- it had not reopened findings of fact and law made by the tribunal.
The court said the deciding factor in resolving whether the question of illegality, or corruption, or other serious wrongdoing universally recognized as abhorrent, can be “re-opened” by a court at the enforcement stage is whether the question had been put to, considered and determined by the tribunal and the courts have to balance the public policy in favour of finality and that against illegality. Here, JX’s case had always been that the evidence of collusion and bribery only surfaced after the Award was made and the tribunal had therefore never considered, made findings or any determination on such.
The court noted the seriousness of the allegations and that a prima facie case of collusion had been established which had justified cross-examination of the witnesses, so that the claims could be properly considered by the court, before any finding on public policy could be made. This, the court said, reflected the serious approach taken by the court, before setting aside or refusing enforcement of any award on the ground of public policy.
The court said that whilst it never condones attempts to reargue a case, and reopen a tribunal’s findings in the arbitration under the guise of public policy, it does not turn a blind eye when serious claims of fraud, corruption and bribery of witnesses are made. The court should at least consider the merits of such a claim made, on a preliminary inquiry, before allowing or dismissing it. Here, admissions of collusion and bribery were made by the protagonist, witnesses were called and heard on the issue which had never been raised before the tribunal and there was no finding by the tribunal on such evidence, and accordingly no finding to be “overturned” by the court.
Having heard the witnesses and considered the totality of new evidence, the court found that the circumstances of the execution of the Settlement Agreement rendered enforcement of the Award, which was founded on the Settlement Agreement, to be contrary to public policy, so as to warrant the exercise of the court’s discretion to refuse enforcement of the Award.
Although the court’s view was that K’s appeal had no prospect of success, it nevertheless granted K leave to appeal on the basis that the exercise of the court’s discretion to refuse enforcement of an award on the ground of public policy is a matter of public interest and in the interests of justice the Court of Appeal could consider the question and the approach of the court to the Award.
Takeaway
Hong Kong courts will refuse to enforce an arbitral award on public policy grounds where genuinely new post-award evidence of collusion, fraud, or bribery shows the award was founded on a tainted settlement – but they will not reopen issues the arbitral tribunal actually determined, ensuring the public policy exception remains a serious, evidence-based and narrow safeguard rather than a backdoor to re-litigation.
For a party seeking to enforce an award, it is a warning that an award grounded on a tainted settlement procedure is fragile: Hong Kong courts will meet serious integrity allegations with a hearing rather than defer to the arbitration’s finality.
Also, the court’s decision to grant leave to appeal despite finding no reasonable prospect of success signals that the Court of Appeal is being positioned to settle the definitive test for when the public policy discretion may be exercised over fresh illegality evidence – making this a case to monitor closely for the development of Hong Kong’s approach to enforcement and public policy.
