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Overview
In K v. JX [2026] HKCFI 2854 (20 May 2026) and K v. JX [2026] HKCFI 4344 (31 July 2026), the Hong Kong Court of First Instance set aside an order enforcing a Mainland arbitral award on public policy grounds, and subsequently granted leave to appeal in the public interest despite finding no reasonable prospect of success. The court found that a settlement agreement containing the arbitration clause had been signed by a former employee without authority and in circumstances of collusion, and that the award creditor had turned a blind eye to the representative’s lack of authority. Enforcement of the resulting award was held to be contrary to the public policy of Hong Kong as it would be “grossly unjust” and contrary to fundamental conceptions of morality and justice. The decisions provide important guidance on the circumstances in which courts may examine evidence of fraud and collusion at the enforcement stage, the duty to verify a representative’s authority, and the balance between the finality of arbitral awards and public policy against serious wrongdoing.
Background
The dispute arose out of a cooperation agreement dated 15 November 2012 between JX (a PRC company holding land investments), K (an experienced land developer), and others for the joint development of two pieces of land in Fuzhou. The cooperation eventually broke down, with JX alleging that K had conspired with other contracting parties to misappropriate the lands and their proceeds. JX commenced proceedings in Hong Kong (HCA 737/2020) claiming damages in excess of RMB 160 million, with an alternative claim for loss of profits of RMB 2,400 million.
On 6 January 2021, a settlement agreement was signed in the names of K and JX. The settlement agreement, inter alia, required JX to discontinue HCA 737, contained an admission that JX’s claims therein were inconsistent with the objective facts, and included an arbitration clause providing for disputes to be resolved by the Beijing Arbitration Commission. The settlement agreement was made by C on behalf of JX, with C described as JX’s “actual controller”. However, C was a former employee who had already resigned from JX on 30 October 2020, i.e., prior to the date of the settlement agreement. He was neither a director nor the legal representative of JX. Further, the settlement agreement was affixed with JX’s old seal even though JX had adopted and begun using a new company seal as early as March 2013.
In June 2022, K commenced arbitration against JX for its failure to discontinue HCA 737 in accordance with the settlement agreement. JX did not challenge the tribunal’s jurisdiction or the validity of the arbitration clause during the arbitration. The tribunal found that although there was no evidence suggesting that C was JX’s actual controller or had express authority to act on JX’s behalf, K had reason to believe that C had been duly authorised by JX (i.e., C had apparent authority) based on JX’s concurrent use of its old and new company seals. The tribunal made its award on 29 November 2023, ordering JX to discontinue HCA 737 in accordance with the settlement agreement and pay K damages of RMB 15 million.
On 31 May 2024, K obtained leave to enforce the award in Hong Kong. JX applied to set aside the enforcement order on the basis that (i) there was no valid arbitration agreement and (ii) enforcement of the award would be contrary to public policy. In its application, JX relied on evidence that the settlement agreement had been signed by C without JX’s knowledge or authority and in circumstances involving collusion between C and K and the alleged bribery of C by K, matters which had emerged only after the award was issued.
Hong Kong court’s decision and analysis
No valid challenge to tribunal jurisdiction
The court rejected JX’s argument that there was no valid arbitration agreement. Since the arbitration agreement was severable from and independent of the underlying settlement agreement, and JX had expressly confirmed the tribunal’s jurisdiction and the validity of the arbitration clause at the commencement of the arbitration without raising any challenge, JX could not now claim that the tribunal had no jurisdiction or that there was no valid arbitration agreement.
Public policy: the court’s power to examine new evidence of fraud
A fraud challenge at the enforcement stage must satisfy two conditions: (1) the evidence establishing the fraud was not available at the time of the hearing before the tribunal; and (2) there is a prima facie case of fraud sufficient to overcome the extreme caution of the court when invited to set aside an award on public policy grounds.
The court held that it could and should examine JX’s claims of collusion and bribery at the enforcement stage. The critical distinction was that the evidence of collusion and bribery had only emerged after the award and had never been submitted to or considered by the tribunal. This was not a case of the court reopening findings made by the tribunal because there were no findings on collusion or bribery to be “overturned”.
The court emphasised that whilst it never condones attempts by parties to reargue a case or reopen findings made by a tribunal under the guise of public policy, the court does not turn a blind eye when serious claims of fraud, corruption, and bribery of witnesses are made.
Turning a blind eye to lack of authority
In light of the serious nature of the claims made by JX, the court ordered that oral evidence be given by the deponents of the affirmations before the court could determine the claims made by the parties. Having heard oral evidence from Y (JX’s beneficial owner), K, and WP (K’s employee and risk control director, who conducted the negotiations), the court found that K and WP had no reason to believe that C had authority to enter into the settlement agreement. Key factors included:
- C was neither a director nor a legal representative of JX, and had already resigned before the settlement agreement was signed.
- Notwithstanding C’s previous dealings with K in relation to the negotiation and enforcement of the cooperation agreement, the settlement agreement involved the compromise and withdrawal of substantial claims, an exceptional matter outside the ordinary course of a company’s usual business that would require proper authorisation from JX.
- WP, a trained lawyer and risk control director, accepted that under PRC law only a legal representative has statutory authority to act for and bind a company, yet took no steps to verify C’s authority.There were no written records of negotiations, despite the significance of the transaction and the existence of live litigation.
- There were no written records of negotiations, despite the significance of the transaction and the existence of live litigation.
- The settlement agreement contained terms personally beneficial to C (dealing with and compromising his personal loans from the project companies), which should have alerted K and WP to a potential conflict of interest.
The court held that where the information actually known to K and WP indicated a want of authority, they were not entitled to proceed regardless without inquiry. The evidence overall suggested that K and WP were “turning a blind eye” to the question of whether C had any authority to act for JX.
Enforcement contrary to public policy
The court concluded that the settlement agreement was made by C without the knowledge or authority of JX, and that it would be grossly unjust to enforce the award, which gave effect to the settlement agreement and required JX to withdraw HCA 737. Enforcement would be contrary to “fundamental conceptions of morality and justice” (Hebei Import & Export Corp v. Polytek Engineering Co Ltd (1999) 2 HKCFAR 111), making it contrary to the public policy of Hong Kong. As a result, the enforcement order was set aside in the first instance.
Leave to appeal: granted in the public interest
In its subsequent decision on leave to appeal ([2026] HKCFI 4344), the court found that K’s grounds of appeal had no reasonable prospect of success. It rejected K’s arguments that the court had impermissibly reopened the tribunal’s findings or distorted JX’s case on public policy, as the evidence of collusion and bribery had never been raised before or considered by the tribunal.
However, the court granted leave to appeal on the basis that the exercise of the court’s discretion to refuse enforcement of an award on the ground of public policy is “a matter in the public interest”, and that the Court of Appeal should have the opportunity to consider the question and the court’s approach.
Comment and practical implications
These decisions reinforce the principle that the public policy ground may, in exceptional circumstances, be invoked to resist enforcement of arbitral awards. Hong Kong courts will examine serious allegations of fraud, collusion, and bribery at the enforcement stage, and may, where necessary, receive oral evidence from deponents and permit cross-examination where such evidence was not and could not have been placed before the tribunal for determination in the arbitration.
Following the grant of leave to appeal, it remains to be seen whether the Court of Appeal will affirm the decisions or otherwise clarify the boundaries of judicial inquiry at the enforcement stage.
Client Alert 2026-163
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