Hong Kong Court Refused to Enforce Mainland Award Due to Arbitrator Misconduct

In the recent case of Song Lihua v Lee Chee Hon [2023] HKCFI 2540, the Court of First Instance (the “CFI“) has refused to enforce an arbitral award in an arbitration by the Chengdu Arbitration Commission in Mainland China as it would be contrary to public policy to enforce the award, pursuant to section 95(3)(b) of the Arbitration Ordinance (Cap. 609).

In that case, the Respondent sought to set aside the enforcement order on the grounds that, inter alia, in the second hearing of the arbitration, one of the three arbitrators who attended the hearing by video conference did not meaningfully participate in it. It was observed that during the course of the hearing, the arbitrator was:-

(i). moving from one location to another, indoors and outdoors,

(ii). travelling in a car,

(iii). appearing offline from time to time,

(iv). talking to someone else in his room,

(v). looking into the distance instead of focusing on the screen, and

(vi). giving no response to the questions from the chairman of the tribunal.

In light of the above, the CFI held that the conduct of the arbitration lacked due process and fell short of the high standards expected by Hong Kong courts for a fair and impartial hearing. While acknowledging the pro-arbitration and pro-enforcement stance of Hong Kong courts, the CFI reiterated the fundamental principle that no person shall be judged without a fair hearing in which each party is given the opportunity to respond to the evidence against it and to be heard on its case. The CFI emphasized that not only must justice be done, but it must also be seen to be done. In the circumstances of the case, enforcement of the award would violate the most basic notions of justice in Hong Kong and thus should be refused.

The significance of this case is twofold. Firstly, although the Applicant relied heavily on the fact that the supervisory court in Mainland China had not set aside the award and had allowed its enforcement in Mainland China, Hong Kong courts are prepared to apply their own standards and law when deciding whether enforcement would be contrary to the public policy of Hong Kong. Secondly, it highlighted the importance of due process and compliance with recognized rules of natural justice, which is quite often a precondition to recognizing and enforcing an arbitral award.

It is also worth mentioning that around the same time, the English High Court handed down the judgment of The Federal Republic of Nigeria v Process & Industrial Developments Limited [2023] EWHC 2638 (Comm), setting aside the arbitral awards pursuant to section 68(2)(g) of the Arbitration Act 1996 on the ground that they were obtained by fraud and contrary to public policy. Misconduct committed during the arbitration included bribing the other side’s staff, providing to the arbitral tribunal evidence which was known to be false, and improperly retaining and misusing the other side’s documents which were subject to legal professional privilege. The English court was of the view that such conduct represented the most severe abuses of the arbitral process which could not lead to a just result.

These recent enforcement related decisions in Hong Kong and the UK  serve as a helpful reminder that in relation to misconduct on the part of the arbitrator or the opposing party, one would sometimes have a potential last recourse to court by challenging the arbitral award.

11 December 2023