Update: Arbitration in Hong Kong
A Hong Kong court has rejected a Mainland China arbitration award, saying that one of the arbitrators did not meaningfully participate throughout a hearing and violated the rules of natural justice.
Author: Michael Poon, Associate Solicitor
In Song Lihua v Lee Chee Hon  HKCFI 2540, in upholding the fundamental principle that recognized rules of natural justice must be observed in arbitration, the court refused to enforce an arbitral award made by the Chengdu Arbitration Commission on the Mainland.
The three-member arbitral tribunal, one of whom attended by video conference, made an award against the respondent for the payment of approximately RMB340 million due under a contract. The respondent complained that the arbitrator appearing via video conference, who was moving from one location to another throughout the hearing, did not meaningfully participate, thereby depriving him of the right to be heard.
Mimmie Chan J found that throughout the hearing the arbitrator in question had clearly moved from one location in the room to another, at times talking to and / or gesturing to others in the room, and infrequently looking at the screen and video of the proceedings. The evidence further showed that at various occasions the arbitrator had not spoken to other arbitrators or the secretary of the tribunal attending the hearing when asked if they could be heard by him or any indication through gesture that he had heard the questions. Throughout the hearing, the arbitrator disconnected at various times from the video conference – on one occasion – only to re-appear in a private car sitting in the front seat and adjusting his seatbelt.
In refusing enforcement of the award on the basis that it would be contrary to public policy, the court, citing Paklito Investment Limited v Klockner East Asia Limited  2 HKLRD 39, reiterated the basic principle in Hong Kong that where public policy is relied upon to resist enforcement of an award, it is the domestic policy of that enforcement court which is relevant. While a party faced with an award made under the New York Convention may either apply to the courts of the country where the award is made to set the award aside or take no steps until enforcement of the award and oppose it under an established ground of the New York Convention, a party is not obliged to first set aside the award in the jurisdiction where it was made as a condition of opposing enforcement. A party therefore has a choice of remedies.
In carrying out the quasi-judicial role of an arbitrator to conduct proceedings with appropriate care, skill and professional integrity, the fundamental rule that not only must justice be done, but it must also be seen to be done is necessary to avoid a miscarriage of justice. The court found that the conduct of the arbitrator, appearing via video conference, impaired or appeared to impair his ability to consider the facts and contrary argument presented fairly, undermining confidence from the perspective of an objective observer that it could be said that the respondent’s case had been heard or considered at all.
While the supervisory court on the Mainland had ruled that the award was valid and the award had been permitted enforcement on the Mainland, the court in Hong Kong must apply its own standards as to whether it would be contrary to public policy in Hong Kong. In light of the evidence, enforcement of the award in Hong Kong would violate the “most basic notions of justice”. Accordingly, its enforcement was refused under section 95(3) of the Arbitration Ordinance.
While Hong Kong courts are generally known for its pro-arbitration stance, the courts in Hong Kong expect the standards of fairness and impartiality to be recognized, and in arriving at its own conclusion as to the standard and law when deciding whether it would be contrary to the public policy of Hong Kong to enforce the award, this decision underscores the independence of the judiciary.
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