Jurisdictional Challenges and related problems. 莫世傑 / Danny Mok CILTHK Two Day Course 2017 on Commercial Arbitration November 2017

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1 Jurisdictional Challenges and related problems 莫世傑 / Danny Mok CILTHK Two Day Course 2017 on Commercial Arbitration November 2017

2 Why Challenge? Arbitration is a consensual process. An arbitrator has no power to determine a dispute unless the parties involved have agreed to this and the requirements of the arbitration agreement have been complied with. The arbitrator s jurisdiction to hear the disputes therefore derives from the arbitration agreement between the parties. If an arbitrator has no jurisdiction, his award is not binding on the parties.

3 Why Challenge? An arbitration award made by an arbitrator who has no jurisdiction to hear and determine the disputes may not be enforced under Article V of the New York Convention.

4 Why Challenge? Article V of the New York Convention 1. Recognition and enforcement of the award may be refused : (a) (b) (c) (d) or the said agreement is not valid The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions beyond the scope of the submission to arbitration The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of country where the arbitration took place;

5 Why Challenge? The underlying reason: Paragraph 297 of the DAC Report on the Arbitration Bill: Recalcitrant parties or those who have had an award made against them often seek to delay proceedings or to avoid honouring the award by raising points on jurisdiction etc which they have been saving up for this purpose or which they could and should have discovered and raised at an earlier stage

6 Types of jurisdictional disputes Section 30 of the Arbitration Act 1996 Section 34 of the Arbitration Ordinance (Cap 609) (A) whether there is a valid arbitration agreement (B) Whether the tribunal is properly constituted (C) What matters have been submitted to arbitration in accordance with the arbitration agreement

7 Examples of jurisdictional disputes Whether there was a binding contract? Stellar Shipping Co LLC v Hudson Shipping Lines [2010] EWHC 2985 Comm - Hudson as Owners negotiated with Phiniqia as Charterers for a contract of affreightment -Fixture recap contained the following terms: with regards to the following cls in the recap "charts: Phiniqia Intl Shipping, Dubai fully gteed by Stellar. Prior to owners lifting subs from their end Stellar to provide letter of gtee as per owners wording on Stellar letterhead". without prejudice to this cls in the recap, owners ppose that the cp to be mutually endorsed by Phiniqia and Stellar. The charterparty ofc still to read: "Charts: Phiniqia Intl Shipping, Dubai - fully guaranteed by Stellar Shipping Company LLC

8 Examples of jurisdictional disputes Whether there was a binding contract? Stellar Shipping Co LLC v Hudson Shipping Lines [2010] EWHC 2985 Comm By endorsing the COA Stellar was endorsing and signing up to each of its terms. It was agreeing that if any obligation undertaken thereunder was not performed by Phiniqia then it would be performed by Stellar. However, such an agreement makes little sense in the context of the endorsement of an arbitration clause. If Phiniqia fails to perform its obligations under the arbitration clause Stellar cannot perform those obligations since they are personal to Phiniqia. Stellar's endorsement of the arbitration clause can only have meaningful effect if it involves Stellar's own agreement to arbitration in respect of any dispute concerning their own obligations.

9 Examples of jurisdictional disputes Whether there was a valid arbitration clause? Exmek Pharmaceuticals v Alkem Laboratories [2015] EWHC 3158 (Comm) Article 13: PROPER LAW The proper law of this Agreement is the law of the UK, and the Parties submit to the exclusive jurisdiction of the Courts of the UK and of all Courts having jurisdiction in appeal from the Courts of the UK. Article 14: ARBITRATION All disputes and differences whatsoever which will at any time hereafter arise between the parties in relation to this Agreement which the Parties using their best endeavors in good faith cannot resolve shall be referred to arbitration before any legal proceedings are initiated. The arbitration shall be conducted in the UK in accordance with the provisions of the law in the UK in effect at the time of the arbitration and shall be conducted by one or more arbitrators appointed there under.

10 Examples of jurisdictional disputes Whether there is a valid arbitration clause? Exmek Pharmaceuticals v Alkem Laboratories [2015] EWHC 3158 (Comm) I am entirely satisfied that the two provisions are not irreconcilable and can be read together: i) Article 13 provides for UK law to be the proper law of the contract and Article 14 provides for the law of the arbitration. ii) Articles 13 and 14 together provide that: a) the curial law is UK law ; and b) the courts supervising the arbitration will be the UK Courts, which will apply UK law, and such Courts are to have exclusive jurisdiction. iii) In the event of the arbitration provision being or becoming in some manner ineffective, the UK court is to have exclusive jurisdiction, applying UK law.

11 Examples of jurisdictional disputes Was the arbitration agreement in a charterparty incorporated into a bill of lading? The Delos [2001] EWHC 486 (Comm) The charterparty provided for arbitration in London in both clauses 13 and 18 (printed) as follows: The Ocean bills contained a clause printed on the front: This shipment is carried under and pursuant to the terms of the Charter dated July 7th 1998 at London... and all the terms whatsoever of the said Charter except the rate and payment of freight specified therein apply to and govern the rights of the parties concerned in this shipment. Copy of the Charter may be obtained from the Shipper or Charterer.

12 Examples of jurisdictional disputes Was the arbitration agreement in a charterparty incorporated into a bill of lading? The Delos [2001] EWHC 486 (Comm) The Ocean Bills do not make any express reference to any arbitration clause. Nor do the arbitration clauses in the charterparty refer to the bills. In The Federal Bulker at page 108 Bingham LJ summarised the effect of the decisions in T.W. Thomas & Co Ltd v Portsea Steamship Company, The Merak and The Annefield to be:... it is clear that an arbitration clause is not directly germane to the shipment, carriage and delivery of goods. That appears from the decision of the House of Lords in T.W. Thomas... It is, therefore, not incorporated by general words in the bill of lading. If it is to be incorporated, it must either be by express words in the bill of lading itself... or by express words in the charterparty itself....if it is desired to bring in an arbitration clause, it must be done explicitly in one document or the other.

13 Examples of jurisdictional disputes Assignment during a pending arbitration. Was the arbitration agreement binding on the parties to the arbitration? The Republic of Kazakhstan v Istil Group Inc [2006] EWHC 448 (Comm) The Claimant: Republic of Kazakhstan (ROK) The Respondent: Istil Group Inc. is a successor to a company called Metalsrussia (BVI) Ltd. Metalsrussia (BVI) Ltd changed its name to Metalsrussia Corp. Ltd in 1991 and merged into its parent company Metalsrussia Group Holdings ltd. in This company then in turn merged into Istil in April Metalsrussia Corp. Ltd. entered into three contracts with companies which were indirectly related to ROK. These contracts contained a London arbitration clause.

14 Examples of jurisdictional disputes Assignment during a pending arbitration. Was the arbitration agreement binding on the parties to the arbitration? The Republic of Kazakhstan v Istil Group Inc [2006] EWHC 448 (Comm) The Arbitration commenced by Metalsrussia Corp Ltd in In January 2003, the tribunal made a partial award. In April 2003, Istil Group Inc. notified the tribunal of the change of claimant

15 Examples of jurisdictional disputes Assignment during a pending arbitration. Was the arbitration agreement binding on the parties to the arbitration? The Republic of Kazakhstan v Istil Group Inc [2006] EWHC 448 (Comm) Was the partial award a nullity? It was permitted to make a legal assignment of the title to sue. Automatic succession did not kill the arbitration. As regards English law, notice of merger is required, but once given it allows the arbitration to continue and reinstitutes any orders or awards already made by the tribunal.

16 Examples of jurisdictional disputes Notice of Arbitration Bernuth Lines Limited v High Seas Shipping [2005] EWHC 3020 (Comm) A notice of arbitration was sent to an address found in a maritime directory and on the website of the charterers. The claim submissions were also sent by as were all further communications with the arbitrator. The charterers did not respond until the award finding against them was published. The Charterers claimed that the arbitration proceedings had not been properly brought to their attention as communications had been sent to an address not previously used by the parties.

17 Examples of jurisdictional disputes Notice of Arbitration Bernuth Lines Limited v High Seas Shipping [2005] EWHC 3020 (Comm) HELD:- that any means of service will suffice provided that it is a recognised means of communication effective to deliver the document to the party to whom it is sent at his address for the purpose of that means of communication (e.g. post, fax or ). The of 5 th May 2005 and, so it would appear, all subsequent e- mails, were received at an address that was held out to the world as the only address of Bernuth I do not accept that, in an arbitration context, in order for service to be effective it is essential that the address at which service is purportedly made has been notified to the serving party as an address to be used in the context of the relevant dispute.

18 Examples of jurisdictional disputes Notice of Arbitration Lantic Sugar Limited v Baffin Investments [2009] EWHC 3325 (Comm) Cargo was found damaged at the discharge port and as a result claim arose. Baffin was the owners and was represented by the P & I club in handling the cargo claim. Lantic served an arbitration notice to the case handler of the P & I club in order to protect time bar. Baffin said that no notice of arbitration had been validly served to it.

19 Examples of jurisdictional disputes Notice of Arbitration Lantic Sugar Limited v Baffin Investments [2009] EWHC 3325 (Comm) Held:- The fact that the Club was authorised by Baffin to deal with a wide range of matters, including the LOUs, settlement negotiations and extensions of time, did not give rise to a representation on the part of Baffin that the Club had authority to accept service of originating process. It simply does not follow; as is well-known, a Club might but need not have such authority. Although I do not rest my decision on it, the Club's position in this regard is at least broadly analogous to that of solicitors, where even a wide general authority to deal with a case on behalf of a client will not (without more) translate into authority to accept service of originating process.

20 Examples of jurisdictional disputes Has the tribunal been properly constituted? The qualification of the arbitrator Commercial Arbitration Mustill and Boyd:- Where the appointed arbitrator does not possess the required qualifications, his appointment is nugatory and any award which he may make is void. By their agreement to arbitrate, the parties contracted to honour an award made by a duly qualified arbitrator, but they promised nothing with regard to the award of anyone else. the Court has no discretion to uphold an appointment or award where the arbitrator lacks the qualifications stipulated in the contract. Subject to waiver, it has no choice but to treat the proceedings and the award as void. The number of arbitrators

21 Examples of jurisdictional disputes Have other forms of dispute resolution been exhausted? ETA v PMEPL [2014] EWHC 2014 (COMM) Multi-tier dispute resolution clause required the parties to friendly discuss a settlement before resolving the disputes by way of arbitration. The Claimants commenced arbitration without first discussing with the Respondents for a settlement. The arbitrators lacked the substantive jurisdiction to hear the disputes.

22 Examples of jurisdictional disputes Scope of the arbitration agreement Fiona Trust Holding Corp and others v Privalov and others [2007] UKHL 40, [2007] All ER (D) 233 Arbitration clause: any dispute arising under this Charter referred to arbitration in London House of Lords said that the time had come to make a fresh start : - the construction of an arbitration clause should start from the assumption that the parties, as rational businessmen, are likely to have intended any dispute arising out of the relationship into which they have entered or purported to enter to be decided by the same tribunal. The clause should be construed in accordance with this presumption unless the language makes it clear that certain questions were intended to be excluded from the arbitrator s jurisdiction.

23 How to deal with jurisdictional disputes? English approach Arbitration Act 1996 S. 30 Competence of tribunal to rule on its own jurisdiction. (1) Unless otherwise agreed by the parties, the tribunal may rule on its own substantive jurisdiction, that is, as to (a) whether there is a valid arbitration agreement, (b) whether the tribunal is properly constituted, and (c) what matters have been submitted to arbitration in accordance with the arbitration agreement. (2) Any such ruling may be challenged by any available arbitral process of appeal or review or in accordance with the provisions of this Part.

24 How to deal with jurisdictional disputes? English approach Arbitration Act 1996 S. 31 Objection to substantive jurisdiction of tribunal. (1) An objection that the arbitral tribunal lacks substantive jurisdiction at the outset of the proceedings must be raised by a party not later than the time he takes the first step in the proceedings to contest the merits of any matter in relation to which he challenges the tribunal s jurisdiction. A party is not precluded from raising such an objection by the fact that he has appointed or participated in the appointment of an arbitrator. (2)Any objection during the course of the arbitral proceedings that the arbitral tribunal is exceeding its substantive jurisdiction must be made as soon as possible after the matter alleged to be beyond its jurisdiction is raised.

25 How to deal with jurisdictional disputes? English approach Arbitration Act 1996 S. 31 Objection to substantive jurisdiction of tribunal. (3)The arbitral tribunal may admit an objection later than the time specified in subsection (1) or (2) if it considers the delay justified. (4)Where an objection is duly taken to the tribunal s substantive jurisdiction and the tribunal has power to rule on its own jurisdiction, it may (a)rule on the matter in an award as to jurisdiction, or (b)deal with the objection in its award on the merits. If the parties agree which of these courses the tribunal should take, the tribunal shall proceed accordingly. (5)The tribunal may in any case, and shall if the parties so agree, stay proceedings whilst an application is made to the court under section 32 (determination of preliminary point of jurisdiction).

26 How to deal with jurisdictional disputes? English approach Arbitration Act 1996 S. 32 Determination of preliminary point of jurisdiction (1)The court may, on the application of a party to arbitral proceedings (upon notice to the other parties), determine any question as to the substantive jurisdiction of the tribunal. A party may lose the right to object (see section 73). (2)An application under this section shall not be considered unless (a)it is made with the agreement in writing of all the other parties to the proceedings, or

27 How to deal with jurisdictional disputes? English approach Arbitration Act 1996 S. 32 Determination of preliminary point of jurisdiction (b)it is made with the permission of the tribunal and the court is satisfied (i)that the determination of the question is likely to produce substantial savings in costs, (ii)that the application was made without delay, and (iii)that there is good reason why the matter should be decided by the court. (4)Unless otherwise agreed by the parties, the arbitral tribunal may continue the arbitral proceedings and make an award while an application to the court under this section is pending.

28 How to deal with jurisdictional disputes? English approach Arbitration Act 1996 S. 67 Challenging the award: substantive jurisdiction (1)A party to arbitral proceedings may (upon notice to the other parties and to the tribunal) apply to the court (a)challenging any award of the arbitral tribunal as to its substantive jurisdiction; or (b)for an order declaring an award made by the tribunal on the merits to be of no effect, in whole or in part, because the tribunal did not have substantive jurisdiction. (3)On an application under this section challenging an award of the arbitral tribunal as to its substantive jurisdiction, the court may by order (a)confirm the award, (b)vary the award, or (c)set aside the award in whole or in part.

29 How to deal with jurisdictional disputes? English approach Arbitration Act 1996 S. 72 Saving for rights of person who takes no part in proceedings (1)A person alleged to be a party to arbitral proceedings but who takes no part in the proceedings may question (a)whether there is a valid arbitration agreement, (b)whether the tribunal is properly constituted, or (c)what matters have been submitted to arbitration in accordance with the arbitration agreement, by proceedings in the court for a declaration or injunction or other appropriate relief.

30 How to deal with jurisdictional disputes? English approach Arbitration Act 1996 S. 72 Saving for rights of person who takes no part in proceedings (2)He also has the same right as a party to the arbitral proceedings to challenge an award (a)by an application under section 67 on the ground of lack of substantive jurisdiction in relation to him, or (b)by an application under section 68 on the ground of serious irregularity (within the meaning of that section) affecting him; and section 70(2) (duty to exhaust arbitral procedures) does not apply in his case.

31 How to deal with jurisdictional disputes? English approach Arbitration Act 1996 So, what are the options? 1. Arbitrate the substantive issues in dispute without objection. 2. Apply to the tribunal to deal with the jurisdictional disputes as a preliminary issue. 3. Seek for the agreement of the opponent or permission of the tribunal to refer the disputes to the court. 4. Participate under protest and challenge the award. 5. Not participate in the arbitration and challenge the award(s).

32 How to deal with jurisdictional disputes? English approach Arbitration Act 1996 Problems and pitfalls S.31 - not later than the time he takes the first step in the proceedings to contest the merits of any matter in relation to which he challenges the tribunal s jurisdiction In a London arbitration 4/03 LMLN609, the respondents seeking for time extension to serve defence but later on contested that the sole arbitrator has jurisdiction was considered as losing their rights to object the arbitrator s jurisdiction as the request for time extension was the first step which did more than object to jurisdiction

33 How to deal with jurisdictional disputes? English approach Arbitration Act 1996 Problems and pitfalls S. 72 who takes no part in the proceedings Broda Agro Trade v Alred C. Toepfer International [2010] EWCA Civ 1100 (Comm) Toepfer commenced arbitration in London against Broda as per the arbitration clause of the contract. Broda contended that no contract was made. It objected the tribunal s jurisdiction and had taken no part in the proceedings leading to the interim award on jurisdiction. However, Broda did participate in the proceedings on the merits. Held:- Broda had taken part in the proceedings by contesting the merits and they were therefore not a non-participants under s. 72. Broda s recourse was to challenge against the award on jurisdiction under s. 67 but they failed to do so within 28 days of the award. No time extension should be granted.

34 How to deal with jurisdictional disputes? English approach Arbitration Act 1996 Problems and pitfalls Challenge the award under s.67 or S. 72 Hellenic Petroleum Cyprus Limited v Premier Limited [2015] EWHC 1894 (Comm) A full re-hearing of the evidence and arguments as to the jurisdictional disputes and followed the approach taken by Dallah Real Estate v Ministry of Religious Affairs of Pakistan [2010] UKSC46; [2011] 1 AC 763 : will re-hear witness evidence and legal submissions afresh to decide on jurisdictional issues; will not be limited to reviewing the evidence which was adduced before the arbitrator; and will not be bound by what the arbitrator had decided, either on the facts or as to the law.

35 How to deal with jurisdictional disputes? English approach Arbitration Act 1996 Problems and pitfalls Participate or not participate? Who decides the tribunal or the court By way of an award on jurisdiction or an award of jurisdiction and merits of the disputes

36 How to deal with jurisdictional disputes? Hong Kong approach Arbitration Ordinance (Cap. 609) Section 34 Article 16 of UNCITRAL Model Law (Competence of arbitral tribunal to rule on its jurisdiction) (1) Article 16 of the UNCITRAL Model Law, the text of which is set out below, has effect subject to section 13(5) Article 16. Competence of arbitral tribunal to rule on its jurisdiction (1) The arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. For that purpose, an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract. A decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.

37 (3) The arbitral tribunal may rule on a plea referred to in paragraph (2) of this article either as a preliminary question or in an award on the merits. If the arbitral tribunal rules as a preliminary question that it has jurisdiction, any party may request, within thirty days after having received notice of that ruling, the court specified in article 6 to decide the matter, which decision shall be subject to no appeal; while such a request is pending, the arbitral tribunal may continue the arbitral proceedings and make an award. How to deal with jurisdictional disputes? Hong Kong approach Arbitration Ordinance (Cap. 609) Section 34 Article 16 of UNCITRAL Model Law (Competence of arbitral tribunal to rule on its jurisdiction) (2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence. A party is not precluded from raising such a plea by the fact that he has appointed, or participated in the appointment of, an arbitrator. A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings. The arbitral tribunal may, in either case, admit a later plea if it considers the delay justified.

38 How to deal with jurisdictional disputes? Hong Kong approach Arbitration Ordinance (Cap. 609) Section 34 Article 16 of UNCITRAL Model Law (Competence of arbitral tribunal to rule on its jurisdiction) (2) The power of the arbitral tribunal to rule on its own jurisdiction under subsection (1) includes the power to decide as to (a) whether the tribunal is properly constituted; or (b) what matters have been submitted to arbitration in accordance with the arbitration agreement. (3) If a dispute is submitted to arbitration in accordance with an arbitration agreement and a party (a) makes a counter-claim arising out of the same dispute; or (b) relies on a claim arising out of that dispute for the purposes of a set-off, the arbitral tribunal has jurisdiction to decide on the counter-claim or the claim so relied on only to the extent that the subject matter of that counter-claim or that claim falls within the scope of the same arbitration agreement.

39 How to deal with jurisdictional disputes? Hong Kong approach Arbitration Ordinance (Cap. 609) Section 81 Article 34 of UNCITRAL Model Law (Application for setting aside as exclusive recourse against arbitral award) (1) Article 34 of the UNCITRAL Model Law, the text of which is set out below, has effect subject to section 13(5) Article 34. Application for setting aside as exclusive recourse against arbitral award (1) Recourse to a court against an arbitral award may be made only by an application for setting aside in accordance with paragraphs (2) and (3) of this article. (2) An arbitral award may be set aside by the court specified in article 6 only if: (a) the party making the application furnishes proof that: (i) a party to the arbitration agreement referred to in article 7 was under some incapacity; or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of this State; or (ii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

40 How to deal with jurisdictional disputes? Hong Kong approach Arbitration Ordinance (Cap. 609) Section 81 Article 34 of UNCITRAL Model Law (Application for setting aside as exclusive recourse against arbitral award) (iii) the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside; or (iv) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Law from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Law; or (b) the court finds that: (i) the subject-matter of the dispute is not capable of settlement by arbitration under the law of this State; or (ii) the award is in conflict with the public policy of this State.

41 How to deal with jurisdictional disputes? Hong Kong approach Arbitration Ordinance (Cap. 609) Section 81 Article 34 of UNCITRAL Model Law (Application for setting aside as exclusive recourse against arbitral award) (3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the award or, if a request had been made under article 33, from the date on which that request had been disposed of by the arbitral tribunal. (4) The court, when asked to set aside an award, may, where appropriate and so requested by a party, suspend the setting aside proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the arbitral tribunal s opinion will eliminate the grounds for setting aside.

42 How to deal with jurisdictional disputes? Hong Kong approach Arbitration Ordinance (Cap. 609) Section 81 Article 34 of UNCITRAL Model Law (Application for setting aside as exclusive recourse against arbitral award) (iii) the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside; or (iv) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Law from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Law; or (b) the court finds that: (i) the subject-matter of the dispute is not capable of settlement by arbitration under the law of this State; or (ii) the award is in conflict with the public policy of this State.

43 How to deal with jurisdictional disputes? Hong Kong approach Arbitration Ordinance (Cap. 609) Sections 86 and 89 Refusal of enforcement of foreign or Convention arbitral awards Grounds for refusal: (a) that a party to the arbitration agreement was under some incapacity (under the law applicable to that party); (b) that the arbitration agreement was not valid (i) under the law to which the parties subjected it; or (ii) (if there was no indication of the law to which the arbitration agreement was subjected) under the law of the country where the award was made; (c) that the person (i) was not given proper notice of the appointment of the arbitrator or of the arbitral proceedings; or (ii) was otherwise unable to present the person s case;

44 How to deal with jurisdictional disputes? Hong Kong approach Arbitration Ordinance (Cap. 609) Sections 86 and 89 Refusal of enforcement of foreign or Convention arbitral awards Grounds for refusal: (d) subject to subsection (4), that the award (i) deals with a difference not contemplated by or not falling within the terms of the submission to arbitration; or (ii) contains decisions on matters beyond the scope of the submission to arbitration; (e) that the composition of the arbitral authority or the arbitral procedure was not in accordance with (i) the agreement of the parties; or (ii) (if there was no agreement) the law of the country where the arbitration took place; or (f) that the award (i) has not yet become binding on the parties; or (ii) has been set aside or suspended by a competent authority of the country in which, or under the law of which, it was made.

45 How to deal with jurisdictional disputes? Hong Kong approach Arbitration Ordinance (Cap. 609) So, what are the options? Choice of Remedies Active Remedy: take positive steps to invalidate an award (s. 34 and / or s.81) Passive Remedy: resisting the recognition or enforcement of an award in the jurisdiction where and when the award is sought to be enforced. (s. 86 or s.89) Whether a party decides to choose the passive remedy should be criticized of being lacked of good faith in not exercising its active remedy in the time allowed? If a party can choose from either of the remedy, the fact that it waits until the enforcement stage to challenge the award on lack of jurisdiction does not necessary mean that it has breached the doctrine of good faith See: Astro v First Media CACV 272 /2015

46 The Bigger Problems Fighting in different forums Jurisdictional disputes will usually be considered by different courts in different jurisdictions. These proceedings are time and costs consuming and the results are sometimes surprising:- the supervising court of the seat of arbitration the court in which an award is sought to be enforced the court which is asked to stay the litigation for arbitration

47 The Bigger Problems Fighting in different forums (1) Dallah Real Estate and Tourism v Ministry of Religious Affairs of the Government of Pakistan [2010] UKSC 46 (2) Government du Pakistan v Dallah Real Estate (Case No. 09/28533) Dallah said that they had made an agreement with the Government of Pakistan The agreement contained an arbitration clause which provided for ICC arbitration in Paris The Government of Pakistan said that they were not the party to the contract. The Government of Pakistan did not participate the arbitration. Two awards were published and Dallah wanted to enforce the awards in England. The Government of Pakistan challenged the tribunal s jurisdiction. The English courts ruled that under French law, the Government of Pakistan had proved that it was not a party to the contract. As a result, the awards could not be enforced against them in England. Subsequently, Dallah enforced the awards in France. The Paris court of appeal upheld the award.

48 The Bigger Problems Fighting in different forums Astro v First Media CACV 272 /2015 The Subscription and Shareholders Agreement provided for Singapore arbitration. The tribunal ordered to join third parties to the arbitration First Media objected the joinder and protested against the jurisdiction of the tribunal on the ground that there was no valid agreement between the third parties and First Media. The arbitrators published 5 awards. First Media did not challenge the awards before the Singapore court within the time established (active remedy). Astro sought to enforce the award in Singapore and Hong Kong. First Media initially did not resist the enforcement in Hong Kong as it believed that there was no asset for Astro to enforce. But after 14 months of Astro s application, First Media decided to resist.

49 The Bigger Problems Fighting in different forums Astro v First Media CACV 272 /2015 In Singapore, First Media resisted the enforcement (passive remedy). The Court of Appeal held that the tribunal had no jurisdiction to join the third parties to the arbitration and there was therefore no express agreement to arbitrate between the third parties and First Media. In Hong Kong, the Court of Appeal agreed that First Media could resist the enforcement for there was no valid arbitration agreement. However, the Court of Appeal refused to extend the time to resist the enforcement. The 14 days extension had long been expired and it took First Media 14 months to make application.

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