Recently in CNG v G and Another [2024] HKCFI 575,[1] The Honourable Madam Justice Mimmie Chan of the Court of First Instance dismissed an application to set aside an award. At the outset, Chan J has made yet another effort to summarise the important principles set out in many of the Courts’ decisions on challenges to awards or their enforcement:
- Arbitration is a consensual process of final dispute resolution to which parties voluntarily agree, with whatever inherent defects and risks there may be, and there are only limited avenues of challenge to the award.
- The limited recourse parties have under the Arbitration Ordinance is not intended to afford them with an opportunity to ask the Court after the event to go through the award with a fine-tooth comb, to look for defects and imperfections under the guise that the tribunal had failed to act in accordance with its remit or the agreed procedure. Nor is any party entitled to rehearse once again before the Court arguments already made before the tribunal, or to have different counsel reargue its case with a different focus, hoping that the Court may be persuaded to come to a different conclusion.
- The Court does not sit on appeal against the tribunal’s findings of fact or law. The Court must not only respect the autonomy of the tribunal, but also leave the tribunal free to decide the dispute with the proper exercise of its case management powers. The tribunal is clearly best placed to manage its own proceedings and procedure considering the issues put before it, the complexities of the case, and the timetable which best suits the tribunal, the parties and their legal representatives, with the aim of achieving a speedy resolution without unnecessary legal expense.
- Matters which should have been raised with the tribunal, on procedure, pleadings and timing, but were not so raised or objected to, should not be brought before the Court as a matter of complaint at the time of setting aside the award or resisting enforcement.
To Chan J’s dissatisfaction, reminders of these important principles have not been effective in discouraging parties from embarking on expensive and time-consuming proceedings by way of unwarranted challenges. Chan J observed in particular that the court’s efforts to discourage unmeritorious applications by imposing indemnity costs orders have not been effective, especially where the awards are for very substantial sums or the parties are “particularly obstinate or unreasonable”.
The Court was therefore left to look to legal professionals to carry out their duties to the court and to act responsibly when advising their clients on whether an award can be properly challenged, bearing in mind that public resources are involved when judicial time is taken up by unmeritorious applications.
Chan J reminded legal representatives of the aims, objectives and principles of the Arbitration Ordinance and that Hong Kong has long been striving to establish and uphold a policy of being supportive of arbitration agreements and awards. Chan J considered it high time that legal professionals play a much more vigilant role in this regard. In particular, they should be aware of the exceptional nature of challenges to awards and should only prepare papers for such applications to the Court and raise issues therein which have merit, instead of irresponsibly “massaging” a case to fall within the exhaustive grounds to set aside an award under section 81 of the Arbitration Ordinance.
Factual Background
The case concerned a shareholder dispute. In 2014, CNG, a wholly-owned subsidiary of a PRC SOE, entered into a Shareholders’ Agreement with the “G Parties”, members of a US-based commodities trading house.
In 2020, typical disputes arose as to the rights and obligations under the Shareholders’ Agreement. The G Parties asserted that CNG failed to honour a right of first refusal and to obtain the unanimous approval of the board of one of the G Parties before shutting down certain operations of the underlying project. On 13 November 2020, the G Parties referred these disputes to HKIAC arbitration in Hong Kong.
On 8 February 2023, an “esteemed” tribunal issued an award finding against CNG on certain issues. On 27 April 2023, CNG applied to the Court of First Instance to set aside the award on various grounds.
Chan J found no merit in CNG’s complaints and dismissed the application, making the usual indemnity costs order against CNG.
Chan J gave the reasons for her decision on 24 February 2024. General principles can be derived from her findings which provide helpful and practical guidance in considering whether to challenge an award or to resist enforcement in Hong Kong on grounds similar to those raised in this case.
Failure to deal with issues and/or to give reasons
CNG’s first complaint was that the tribunal had failed to deal with key issues in the list of issues and certain evidence, and failed to give reasons for certain decisions.
The Court found that the tribunal had clearly dealt with and considered the key issues in dispute and had given adequate reasons for its decisions:
- An agreed list of issues frames the parties’ agreed issues relevant to the tribunal’s determination of the dispute. But the list or the parties’ submissions cannot dictate how the tribunal deals with the issues raised in the award, or how to structure the award. Unless expressly agreed, a list of issues is not “an exam paper” with compulsory questions for the tribunal to answer them all. The tribunal will have dealt with all the issues if it decides on all issues put to it that were essential to be dealt with for the tribunal to come fairly to its decision. So long as a decision on one argument suffices to resolve an essential issue, the tribunal does not have to consider all arguments canvassed upon the issue.
- The tribunal does not have to set out each step by which it reaches its conclusion, and a failure to deal with an argument or a submission does not mean a failure to deal with an issue. Neither is the tribunal required to deal with each issue seriatim; it can deal with a number of issues in a composite manner. A tribunal does not fail to deal with an issue if it does not answer every question that qualifies as an issue. It can deal with an issue where that issue does not arise in view of the tribunal’s decision on the facts or its legal conclusions. A tribunal may deal with an issue by so deciding a logically anterior point such that the other issue does not arise.
- The Court adheres to a policy of minimal curial intervention. In line with this principle, the Court will read an award generously and only remedy meaningful and readily apparent breaches of natural justice which can cause actual prejudice. It will not comb an award to assign blame or to find fault in the process.
- In considering whether a tribunal has dealt with an issue, the approach is to read the award in a “reasonable and commercial way” expecting there to be no substantial fault. The Court will also bear in mind that parties to the arbitration were aware of, and understood how, the issues had been presented to and argued before the tribunal.
- Any inference that a tribunal had missed one or more important pleaded issues can only be drawn if it is shown that the inference is “clear and virtually inescapable”.
- The Court’s decision to set aside the award does not turn on whether the tribunal had evidence to support its decision and findings, or whether it correctly construed the contractual terms. What matters is that it is clear from the award that the tribunal had dealt with the relevant issue and adequately explained the reasons for its finding.
A tribunal’s procedural decisions and a party’s inability to present its case
CNG’s second complaint was that it had been denied due process. It asserts that the Tribunal imposed an unfairly compressed timetable, gave CNG unequal time to put forward its evidence, and allowed “last-minute ambushes”. CNG argued that these matters constitute serious or egregious conduct which deprived it of the ability to present its case.
The Court found no substance in CNG’s “bemoanings and gripes”:
- The tribunal is the master of its procedures and has the full discretion to decide on the timetable and management of the arbitration. The tribunal’s case management decision is not one which the Court should highly interfere with, unless there is a serious denial of justice.
- The tribunal is in the best position to decide on the most appropriate and fair manner of proceeding with the arbitration according to the principles of the Arbitration Ordinance and the time available to the parties, their legal representatives and tribunal members. It is not the Court’s function to review the minutiae of the procedure, in order to examine the correctness of the tribunal’s case management decisions and orders.
- No party can claim the right to have all the time it needs to prepare for the hearing. What the Court seeks to enforce and protect is a standard of due process which can satisfy basic minimum requirements and are generally accepted as essential to a fair hearing. Section 46 of the Arbitration Ordinance requires the tribunal to give the parties a reasonable opportunity to present their cases (as opposed to a full opportunity) and to deal with their opponents’ cases. This is not an unfettered right and it does not entitle a party to make unreasonable demands and ignore other relevant principles and aims of efficient and speedy resolution of the dispute.
Takeaways
Our three takeaways from the decision in CNG v G are:
- In line with other recent decisions dismissing setting aside applications or applications opposing enforcement of awards, this decision demonstrates that the Hong Kong courts maintain their robust approach towards enforcing arbitration agreements and awards.
- The Court’s dismissal of an application by a Chinese SOE in favour of US parties further demonstrates that there remains a level playing field in Hong Kong: the courts continue to adopt the same approach and attitude when disposing of such applications against Chinese SOEs or other Chinese or Hong Kong Government entities, or Chinese parties generally.
- Legal representatives advising their clients on challenging awards or their enforcement on grounds similar to the those relied on in CNG v G should review the entire decision as it helpfully illustrates how the courts will approach and deal with such challenges.
