Introduction
Can a losing party raise a procedural matter in a subsequent Court application to set aside an arbitration award which matter was not properly raised or addressed during arbitration ?
Generally speaking, the parties to an arbitration are often reluctant to “rock the boat” or raise robust complaint to the tribunal about how the arbitration process is playing out during the arbitration proceedings. Understandably, this is to avoid any actions that may adversely affect or delay the tribunal’s decision making or simply to reserve their rights as to any perceived procedural irregularity until after the outcome of the arbitration is known. As illustrated in a recent judgment of the Hong Kong High Court in V v M [2026] HKCFI 1530, the wait-and-see approach could potentially harm a losing party’s chances of successfully setting aside the award in the Courts or result in a costly indemnity costs order.
A. Shanghai Arbitration Background
In August 2018, V (the respondent) and M (the applicant) entered into an asset purchase agreement (“APA”) where V agreed to buy one-sixth of M’s 80% interest in an Australian mining project and related rights (“Target”) for a consideration of AUD6,250,000. The Target was held by M and X in each holding 80% and 20% interests respectively.
On 3 March 2022, when the APA failed to complete after V’s payment, V commenced arbitration proceedings at the Shanghai International Economic and Trade Arbitration Commission (“SHIAC”) under the SHIAC Arbitration Rules (“Shanghai Arbitration”) pursuant to the APA.
In gist, V claimed that M failed to obtain the necessary consent from X regarding the transfer in breach of Article 5 of the APA, and M claimed that V refused to pay the capital gains tax.
M made two (unsuccessful) applications in the course of the arbitration :–
(a) in May 2024 for a stay of the arbitration pending the conclusion of a court action in Australia (in which M sued for declaratory reliefs against X in connection with the disputed transfer under the APA) (“Australian Litigation”).
(b) in October 2024 to submit a new valuation report (“M’s New Report”) in reply to V’s valuation report dated in March 2018 and for another hearing based on M’s New Report.
On 2 December 2024, the Tribunal’s award (“Award”) found in V’s favour that the APA was deemed terminated with effect from 19 March 2022, and that M is required to, inter alia :-
(a) return the APA consideration (AUD6,250,000) and upfront fee (AUD118,540); and
(b) pay to V AUD26,414,792.53 in damages for V’s loss of profits under the APA.
B. Hong Kong Court Set Aside Proceedings
After the Court granted leave to V (as applicant) to enforce the Award as a judgment of the Court (“Enforcement Order”), M applied to set aside the Enforcement Order (“Set Aside Summons”) (under Section 95(2) of the Arbitration Ordinance, Cap 609 (“AO”)) on the grounds that :–
(a) Ground 1 : The Award “will be set aside” given M’s intended application to the Shanghai First Intermediate People’s Court to set aside the Award (“Shanghai Court Application”);
(b) Ground 2 : M was unable to present its case in the Shanghai Arbitration;
(c) Ground 3 : The arbitral procedure was not in accordance with the agreement of the parties and / or the laws of the PRC; and/or
(d) Ground 4 : It would be contrary to public policy to enforce the Award.
On 29 April 2025, V applied to dismiss the Set Aside Summons or, alternatively, for payment of security.
C. Court Dismissed the Set Aside Summons
The Court ultimately dismissed M’s application on all grounds as follows.
Ground 1 – Pending Shanghai Court Application (AO Section 95(2)(f))
The Court held that there is “absolutely no basis to refuse enforcement of the Award”. The above AO section applies where an award “has not yet become binding on the parties”, or “has been set aside or suspended” by a competent authority of the PRC under the law of the PRC, and does not apply if the “applicant intends to apply to the PRC Court to set aside the award” etc. Besides, the Shanghai Court Application reviews were all dismissed. The Court held that findings of the Shanghai Court “are highly relevant to this Court’s determination of the same grounds relied upon in” the Set Aside Summons (the APA and the Shanghai Arbitration being governed by PRC law). The Court also dismissed M’s complaints that the Tribunal failed / refused to appoint experts on loss of profit and on Australian tax, to grant another hearing on M’s New Report and to suspend the arbitration given the Australian Litigation
Ground 2 – M’s Inability to Present Case (AO Section 95(2)(c)(ii))
The Court found that the Tribunal’s exercise of its case-management powers did not justify intervention by the Court :-
(a) Ample reasonable opportunity had been given to both sides to present their case in the arbitration (eg. various rounds of written submissions and oral hearings).
(b) The number of hearings is a matter for the Tribunal (not “easily interfered with unless there is a serious denial of natural justice”).
(c) The Shanghai supervisory court found that the Tribunal had discretion (under SHIAC Rules) on whether (1) an expert is to be appointed and (2) to grant any suspension of the Shanghai Arbitration pending the Australian Litigation or any further hearing. The “parties had been given full opportunity to address the Tribunal on the two valuation reports and on quantum generally”.
(d) A party only has the right to have a reasonable opportunity to present its case, as opposed to a “full opportunity”.
(e) Both sides accepted “documentary” arbitration without calling live witnesses.
Ground 3 – Arbitral procedure not in accordance with parties’ agreement or PRC law
In rejecting this complaint, the Court was not satisfied that the refusal to “hold a further hearing (despite holding two oral hearings already) could amount to a serious denial of natural justice” nor that M’s argument had merit – that the Tribunal allegedly failed to follow the agreed arbitral procedure and PRC law (as the law of the seat) regarding further rounds of submissions or oral hearing on the valuation issue, giving “due regard and weight” to the Shanghai court decision on the finding of no breach of the SHIAC Rules in the Arbitration.
Ground 4 – Violation of public policy
The Court dismissed this public policy ground as it was linked to the various grounds above, which had been rejected.
Purported Additional Ground – “Lack of reason” for Tribunal’s refusals against M
Whilst the Court rejected this ground as it was not properly made, the Court commented that this ground had no merit. M had not identified that there is “any legal requirement (whether under PRC law or Hong Kong law) for reasons to be given” for procedural orders and decisions”. Among others, the Court held, on alleged lack of reasons for finding M’s breach of APA Clause 5 (lack of consent to M for the transfer) : “it is clear that this objection is an attack on the fact finding of the Tribunal” rather than “lack of reason.”
Key Takeaways
This Hong Kong Court judgment demonstrates the potential obstacles faced by a losing party when applying to the Court to set aside an adverse award. A losing party has to overcome a relatively high threshold designed to protect the integrity of the arbitration, and prevent the losing party from conducting a “nitpicking” exercise and unfairly hindering the winning party’s right to enforce the award.
The judgment underscores the importance of being properly legally represented in the arbitration process to ensure issues and risks are identified and handled at the outset of the arbitration. Insightfully, the Court stated, “It is obviously too late now, for M to complain about the agreed procedure after realizing that the Tribunal had made adverse factual findings against it” and that “M only has itself to blame for not addressing the Tribunal on any fallback position”.
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