Reed Smith Client Alerts

In a judgment published on 17 June 2021 (W v. AW [2021] HKCFI 1707), the Hon. Madam Justice Mimmie Chan (the Judge) dismissed AW’s application for security on the basis that W had a strong case to set aside the “manifestly invalid” arbitral award that AW sought to enforce. The award contained findings inconsistent with an earlier award involving the same parties and a common arbitrator in a parallel arbitration.

Summary of facts

W and AW were parties to a Framework Agreement and a Share Redemption Agreement in relation to the shareholding in AW and were part of a series of transactions leading up to an acquisition. While W and AW were the only parties to the Share Redemption Agreement, the Framework Agreement involved several parties, including W and AW.

Disputes arose between the parties in relation to the Framework Agreement and the Share Redemption Agreement. W commenced arbitration against AW under the Framework Agreement (First Arbitration). In response, AW and the other respondents filed a counterclaim in the First Arbitration. Separately, AW commenced arbitration against W under the Share Redemption Agreement (Second Arbitration). AW’s counterclaim in the First Arbitration and claim in the Second Arbitration concerned identical claims of misrepresentation. AW appointed the same arbitrator in the First Arbitration and the Second Arbitration.

In March 2020, the award in the First Arbitration was handed down, in which the tribunal unanimously ruled in favour of W and dismissed AW’s counterclaim of misrepresentation (First Award). Four months later, however, in July 2020, the tribunal in the Second Arbitration issued an award that unanimously upheld AW’s claim of misrepresentation (Second Award).

W applied to set aside the Second Award on the ground that the Second Award ran contrary to the public policy of Hong Kong. In particular, W argued that the tribunal in the Second Arbitration made findings inconsistent with the findings in the earlier First Award on the same issues between the same parties, despite there being a common arbitrator.

AW subsequently applied for leave to enforce the Second Award and applied for security to be put up by W pending enforcement.