1. Introduction[1]
Once an arbitral award is issued, it becomes final and binding. However, the award may contain an error. For example, it may order payment of an incorrect sum or it may have entirely omitted a specific relief sought by a party. Unless the applicable law provides for corrective measures and a party undertakes them in a timely manner, the parties will be bound by the award, even if it contains such errors.
Under Hong Kong law, corrective measures are set out in section 69(1) of the Arbitration Ordinance (Cap. 609) (“AO“) which adopts Article 33 of the 2006 UNCITRAL Model Law (“Model Law“). A party has 30 days from receipt of the award to request an arbitral tribunal to either correct certain errors in the award (Article 33(1)(a)) or make an additional award as to any claims omitted from the award (Article 33(3)).[2] Similar provisions can be found in the arbitration rules of most leading arbitral institutions, such as the rules of HKIAC, ICC, CIETAC and SIAC, as well as the UNCITRAL Arbitration Rules.[3]
A key question regarding these corrective measures is what kind of errors entitle a party to invoke them. In a recent judgment in SC v OE1 and OE2,[4] the Hong Kong Court of First Instance (“Court“) considered this issue in the context of an application for the setting aside of an award.[5]
2. Background
The underlying dispute arose between SC and OE1 and OE2 (together “OE“) under an Original Equipment Manufacturer (OEM) Supply Agreement (“Agreement“). The Agreement provided for HKIAC administered arbitration seated in Hong Kong under the UNCITRAL Arbitration Rules.
In 2016, OE referred the dispute to arbitration. OE sought a perpetual licence and injunctions related to alleged breaches by SC of the Agreement.
On 16 April 2019, the arbitral tribunal issued its final award in favour of OE, declaring that SC had breached the Agreement (“Award“). The tribunal held, among other things, that SC shall pay the costs of the arbitration and that “all other claims and reliefs sought by the Parties are rejected”.
While the tribunal made findings in the main body of the Award on SC’s breaches in relation to OE’s claim for the licence and injunctions, the Award did not grant any license to OE or injunctive relief. OE applied to the tribunal on 26 April 2019 for a correction of the Award under Article 33(1) or an additional award under Article 33(3). SC objected on the basis that the tribunal had already rejected “all other claims and relief sought by the Parties” in the dispositive section of the Award.
The tribunal granted OE’s application and issued an addendum to the Award on 25 June 2019 (“Addendum“). In the Addendum, the tribunal confirmed that it had made a “clerical error” since it had made findings and conclusions of SC’s breaches in the body of the Award. The tribunal also confirmed that it was a “mistaken omission” in not setting out the declaration and summary of findings in the dispositive section of the Award.
SC applied to the Court under section 81 of the AO to set aside the relevant parts of the Addendum. SC alleged that the tribunal was functus officio when issuing the Addendum and that the Addendum was not in accordance with the parties’ arbitration agreement or the Model Law. SC also relied on the ground of public policy. In response, OE applied to the Court for enforcement of (i) the Award as corrected by the Addendum, and (ii) those amended sections of the Award which SC did not challenge.
3. The Court’s findings
The main issues before the Court were whether the tribunal had the power to correct the Award under Article 33(1)(a) or to issue an additional award under Article 33(3).
The tribunal had no power to correct the Award
Article 33(1)(a) of the Model Law provides as follows:
“Within 30 days of receipt of the award, unless another period of time has been agreed upon by the parties: (a) a party, with notice to the other party, may request the arbitral tribunal to correct in the award any errors in computation, any clerical or typographical errors or any errors of similar nature.”
The Court held that the errors and omissions which the tribunal sought to correct in the Addendum did not fall within the scope of Article 33(1)(a):
- Arbitral awards should be final and free from continuing dispute. Since there are strong policy reasons against alterations of an award after it has been made, circumstances in which corrections or interpretations can be made should be narrowly circumscribed due to policy reasons.
- The only errors which can be amended under Article 33(1)(a) must “stem from a mental lapse or a ‘slip of the pen’, not from an error of judgment”. Errors affected are “mainly flagrant mathematical errors or typing errors, which would otherwise complicate the execution of the award”.
- Unlike English legislation,[6] Article 33(1)(a) does not give a tribunal a wider power to correct mistakes that are “accidental slips or omissions”. Therefore, a distinction must be drawn between “clerical” and “accidental” mistakes; mistakes under the latter category cannot be corrected under Hong Kong law.
- The tribunal’s omission to grant the licence and injunctive relief were clearly not “errors in computation” or “typographical errors”. They were also not “clerical” errors which should not involve any mistake or omission in the thought process or analysis.
The tribunal had the power to make an additional award
The Court then considered whether the Addendum constituted an additional award under Article 33(3) which provides as follows:
“Unless otherwise agreed by the parties, a party, with notice to the other party, may request, within 30 days of receipt of the award, the arbitral tribunal to make an additional award as to claims presented in the arbitral proceedings but omitted from the award.”
The Court held that the Tribunal was entitled under Article 33(3) to make an additional award to deal with OE’s claims for the licence and injunctions as relief. Reading the Award in its proper context, the Court found that the objective intent was not to dismiss or reject these claims, but that the tribunal had not dealt with these claims:
- OE’s claims were properly presented as issues in the arbitration, so the question was whether the tribunal had already “dealt with” these claims when it purported to reject “all other claims and reliefs sought by the Parties” in the Award.
- In determining whether these claims were dealt with, the Award had to be read in its proper context. A claim is dealt with in an award if it has been finally determined; the whole of the award must be considered, with the dispositive part to be considered in the context of the written reasons.[7]
- The licence was automatic and self-executing, and should be granted due to SC’s breach of the Agreement (which the tribunal had found in the Award) and by operation of the relevant clause. Since the Award did not in any way deal with OE’s claims for the licence and injunctive relief, the rejection of “all other claims and reliefs sought by the Parties” was not the true objective intent of the earlier sections of the Award.
- It follows that the claims had “obviously slipped the minds of the arbitrators” and not had been dealt with by the tribunal. Consequently, the tribunal was entitled to make an additional award under Article 33(3) to deal with these claims. Conversely, how the tribunal dealt with these claims, whether its manner of disposal (as set out in the Addendum) was right or wrong in law or on the facts, and whether the claims had been properly analysed and reasoned, are not open to review by the court.
Accordingly, the Court dismissed SC’s setting aside application, with costs to OE on an indemnity basis.[8] The Court granted leave to enforce the Award as amended by the Addendum, and did not consider it necessary to deal with OE’s partial enforcement application (although SC’s opposition was dismissed with costs also on an indemnity basis).
4. Takeaway points
Any party may face the fate of the parties in this case. Arbitral tribunals can make mistakes, especially if the dispute is complex and involves extensive documentation and submissions requiring the award to deal with them in detail. The Court’s decision is a welcoming judgment because it confirms Hong Kong’s pro-arbitration approach regarding recourse against an award in circumstances where a tribunal has inadvertently omitted relief. It also serves as helpful guidance to avoid pitfalls under Article 33.
Parties to a Hong Kong seated arbitration should bear the following in mind:
- To minimise the risk of inadvertent omissions in the award and to assist the tribunal, parties should strive to present their case and reliefs sought as succinctly as possible. However, parties should ensure that all of their claims and reliefs sought in the notice of arbitration and pleadings are covered in their submissions presented in the arbitration as well as in any terms of reference and list of issues.
- It is imperative to carefully and promptly review the award and, if it contains mistakes, the available corrective measures, so that an application to seek a correction or an additional award can be made timely. Notably, Articles 33(1)(a) and 33 allow parties to agree on a different period to seek corrective measures.
- A tribunal may only correct errors of a computational, clerical or typographical nature. Other types of errors, such as mistakes in the tribunal’s thought process or analysis, cannot be corrected, even if merely accidental. Notably, section 69(2) of the AO empowers the tribunal to make other changes to an award which are necessitated by or consequential on the correction of any error in the award.
- A tribunal may make an additional award for an omitted relief if the applicant has sought the relief regarding a claim presented, but the tribunal has not “dealt with” by the relief; whether this requirement is met will be determined by reading the award as a whole and in its proper context, so as to ascertain its true objective intent.
As long as the tribunal exercises its power to amend an error or to make an additional award under the AO within the specified timeframe, it will not be functus or acting in excess of its jurisdiction when correcting the error or making an additional award.
[1] The authors would like to thank Harrods Wong for his contribution to the preparation of this article. At the time of writing, Harrods is a trainee in Baker McKenzie’s Dispute Resolution Group in Hong Kong.
[2] References to Articles are references to Articles of the Model Law, unless indicated otherwise.
[3] See Articles 38 and 40 of the 2018 HKIAC Rules; Article 36 of the 2017 ICC Rules; Article 53 of the 2015 CIETAC Rules; Article 33 of the 2016 SIAC Rules; and Article 38 of the 2013 UNCITRAL Arbitration Rules.
[4] SC v OE1 and OE2 [2020] HKCFI 2065 (heard together with OE1 and OE2 v SC)
[5] The Court also considered the “choice of remedies” doctrine and waiver where a party seeks to rely on grounds for the refusal of enforcement which it has not raised in a setting aside application that was made before the same court. This article does not deal with this part of the judgment.
[6] See sections 17 of the Arbitration Act 1950 and 57(3)(a) of the Arbitration Act 1996.
[7] See Cadogan v Turner [2013] 1 Lloyd’s Rep 630.
[8] For the general principle, see A v R [2009] 3 HKLRD 389.
