INTRODUCTION TO ARBITRATION

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Elijah Gordon
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1 Faculdade de Direito da Universidade Nova de Lisboa INTRODUCTION TO ARBITRATION THE JUDGEMENT OF THE HONG KONG COURT OF APPEAL IN GRAND PACIFIC HOLDING LTD. V. PACIFIC CHINA HOLDINGS LTD. OF 9 MAY 2012 Jenny Spencer Medina (002870)

2 The facts Grand Pacific Holdings Ltd ("GPH"), a company incorporated in Hong Kong, celebrated a loan agreement with and Pacific China Holdings Ltd ("PCH"), a BVI company: PCH agreed to pay GPH US$40 million on 31 May 2006, with interest at 10% per annum payable in arrears in consideration of the transfer by GPH to PCH of all of GPH's interest in certain Joint Venture Interests described in the loan agreement. Clause 12: the agreement should be construed and governed by the laws of the State of New York. Clause 14: any dispute or claim should be finally settled by arbitration in Hong Kong under the Rules of Conciliation and Arbitration of the International Chamber of Commerce ("the ICC Rules") as in force at the time of any such arbitration. On 21 March 2006 GPH filed a Request for Arbitration

3 The Award The Tribunal unanimously ordered PCH to pay the sum of US$55,176,170.48, forthwith to GPH as well as interest at a rate of 5% per annum from 1 June 2009 until the award is satisfied or judgment is entered on it by a court, whichever occurred first. The Tribunal also unanimously dismissed the counterclaim by PCH that the loan agreement was unenforceable and that it was entitled to reimbursement of US$9,717, plus interest paid to GPH. PCH was also ordered to pay costs. On 8 March 2010, PCH applied recourse to the Court of First Instance (CFI) of the High Court of Hong Kong to set aside the award, in accordance with Article 34(2)(a)(ii) and (iv) of the UNCITRAL Model Law

4 The violations 'Permitted (GPH) to serve expert evidence on foreign law one working day before an evidential hearing in December 2007, to serve its pre-hearing written submissions zero working days before the hearing, and to review the pre-hearing submissions of (PCH) before it served either, thereby denying PCH an opportunity to present its case. It did this despite an agreed procedural timetable requiring the parties to exchange pre-hearing submissions simultaneously, and strangely relied on the proximity of Thanksgiving a holiday which is not recognized in Hong Kong to justify its approach, Subsequently refused to allow PCH to rely on three foreign law authorities, because it thought that requiring GPH to review them within the three weeks remaining before an evidential hearing in May 2008 was 'unfair', once again denying PCH an opportunity to present its case. In this respect, the Tribunal appears not to have remembered that only a few weeks previously it had thought nothing of requiring PCH to address 50 authorities referred to in GPH s evidence in the space of one working day, and Yet again denied PCH an opportunity to present its case by refusing to allow it to respond to GPH s submissions on the relevance of Hong Kong law, and on New York law, and then, when holding against PCH, not only relied on the self-same submissions of GPH, but also on new authorities which it had not shared with either party.'

5 Article 34 provides: "(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: (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 (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; " Article 18: The parties shall be treated with equality and each party shall be given a full opportunity of presenting his case.

6 The Hong Kong Court of Appeal (May 2012) The CA unanimously reversed that decision, giving a judgment in which it: Found that no breaches of Article 34(2) had occurred. In making this finding, the CA highlighted the wide case management powers of arbitral Tribunals which are a cornerstone of the arbitral process. Held that, in order for an arbitral Award to be set aside on due process grounds, it must be shown that any breaches of Article 34(2) were of a serious or even egregious nature. Accepted in obiter comments that the Hong Kong courts have a discretion not to set aside awards even where a violation of Article 34(2)(a) is established (Article 34(2) refers to the circumstances in which an Award may be set aside), if it is satisfied that the result could not have been different. Held that the burden is on the applicant wishing to set aside an Award to show that it had been, or might have been, prejudiced by the conduct of the Tribunal.

7 The Court of Final Appeal PCH then applied directly to the CFA for leave pursuant to Section 22(1) of the Hong Kong Court of Final Appeal Ordinance, arguing that it was entitled to appeal both as of right and because the case involved questions of great general or public importance. CFA did not accept that Pacific China was entitled to be granted leave to appeal and dismissed the application.

Grand Pacific Holdings Ltd and Pacific China Holdings Ltd (in liq) (No 1) (Court of Appeal) (Civil Appeal No 136 of 2011)

Grand Pacific Holdings Ltd and Pacific China Holdings Ltd (in liq) (No 1), Kwan and Fok JJA 6 8 March, 9 May 2012 (Court of Appeal) (Civil Appeal No 136 of 2011) Arbitration arbitration award application